Yardi Matrix: Houston’s Energy Angst
After years of outperforming its peers, Houston’s energy-driven economy is being shaken by low oil prices.
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After years of outperforming its peers, Houston’s energy-driven economy is being shaken by low oil prices. Although the economy has diversified in recent years, the precipitous drop in the price of crude oil has dealt a reverberating blow that has flattened job growth and dampened the apartment market.
The news isn’t all bad: The metro has a first-rate healthcare system that is adding skilled workers and there is growth in the hospitality, education and government sectors. The metro remains a target for international investment, healthcare expansion, international trade and industrial investment. Projects such as the Texas 288 tollway, a $2.1 billion public-private partnership between the Texas Department of Transportation and Blueridge Transportation Group, will offer easy access to major employment centers such as the Texas Medical Center, covering a 10-mile stretch from U.S. 59 to the Harris County line. Still, the energy sector will continue to challenge Houston’s economy, as recovery is not expected to begin until 2017.
The outlook for multifamily fundamentals is uncertain, as the metro recorded negative growth on a trailing three-month basis, caused by a dip in Lifestyle rents. The large amount of construction will pressure rent growth, although Yardi Matrix forecasts 4.7 percent growth. Meanwhile, the investment market is beginning to sour on Houston, with deal flow and pricing starting to slip.
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