Texas Construction

Apartment construction starts are plunging across the major metros in Texas. The pronounced slowdown in additional multifamily properties entering the building pipeline during 2023’s second quarter points to a sharp decline in future delivery volumes beginning in 2025. In turn, the new supply-driven downward pressure on rent growth seen in today’s market is likely to be temporary.

Renter demand facilitated the absorption of over 17,000 apartments in the major metros of Texas during the first half of 2023, rebounding from net moveouts last year. Strengthening sentiment and household formation could further bolster absorption, spurring more notable rent growth as early as the spring 2024 leasing season, when it will be more obvious that future supply is being reduced. At the latest, rent growth above the long-term norm seems likely to return in early 2025.

During the interim, the flow of new completions should create a competitive leasing environment, especially for luxury properties in the neighborhoods that are adding the most product.