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This Submarket is the New Queen of Apartment Development in Houston

The multifamily construction pipeline is picking up in Katy. The city has more than 4,200 units underway, which is the biggest chunk of the nearly 20,000 apartments headed to the Greater Houston area.

However, multifamily developers and experts are not worried. They believe Katy has proven, time and time again, the ability to absorb new product and maintain a healthy occupancy rate, currently at 89.6%.

“It is hard to bet against Katy,” McGrath Real Estate Partners Chief Investment Officer Barrett Kirk said.

McGrath is developing Crawford at Grand Morton at the Grand Parkway and Morton Ranch. The 336-unit apartment complex, which broke ground in Q3 2018 and will begin to lease up in October, is among the 13 projects under construction and eight proposed in Katy, according to

Over the last 10 to 15 years, Kirk has considered a number of sites in Katy. He had always passed on the opportunity to invest. Not this time, he said.

What changed? Crawford at Grand Morton is adjacent to the new headquarters for SABIC, an international chemical company based in Saudi Arabia. The closeness to the employment hub made the site more attractive, Kirk said. The new office at 23500 Franz Road will house 1,000 employees, according to Community Impact. The expansion is slated to take up to four years.

Job and population growth are the main drivers of the apartment demand in Katy, President Bruce McClenny said.

Employment expansion is supported by an increasing number of healthcare, energy and service jobs in Katy. Rising home values, high household income and a top-rated school district also make the submarket appealing.

“It fits into the bigger Houston narrative,” McClenny said. “People are moving here in greater quantities. Houston is turning the corner of the economic slowdown in the oil downturn and is getting through [Hurricane] Harvey. Katy has always been a leader in the area and is continuing to do so.”

Multifamily expansion in Katy has historically happened in waves, JLL Managing Director Greg Austin said. Those waves have picked up the pace recently: 40% of the apartments were built since 2014.

There was a bump in groundbreakings between 2006 and 2008 that slowed due to the Great Recession. Activity improved in 2013 then cooled off in early 2015 in response to depressed oil prices, which had ripple effects across Houston.

In 2018, Hurricane Harvey jump-started the apartment market again, Dosch Marshall Real Estate principal Tom Dosch said. Residents relocated to apartments while their flooded homes were repaired, while others moved permanently. Coupled with a strong economy and rising population, the apartment market absorbed the available units, which drove demand for more units.

The Grand Parkway expansion also unlocks Katy to all parts of Houston, which is another reason developers are flocking to the area, Dosch said. The land broker has sold six sites within a 1-mile radius of the Grand Parkway in the last 18 months. That builds on strong earlier activity; there are 90 complexes already.

Oden Hughes purchased a 28-acre site from CHI St. Luke’s Health near Kingsland Boulevard and Cobia Drive, Dosch said. The apartment community will be developed in two phases. The first phase, dubbed St. Luke, is underway and will feature 382 units. The second phase is projected to include 300 units.

The Austin-based company also acquired an 11-acre site for Grand Crossing, a 330-unit project at 23515 Western Centre Drive. Dosch said the developer will deliver a high-end, Class-A complex similar to nearby projects it delivered, Parkside Grand Parkway and Lenox Trails. He also represented the developer in those land deals in 2015 and 2016.

South of Grand Crossing, Encore, a Dallas-based developer, has tapped Oden Hughes to construct an apartment complex on a 6.5-acre site. Dosch said the project has begun the permitting process.

The six deals closed by Dosch represent the last remaining sites big enough for an apartment community in Grand Crossing, a master-planned development at Interstate 10 and the Grand Parkway, Dosch said.

He expects the future flow of expansion to move north along the Grand Parkway from I-10 to Highway 290, specifically north of Clay Road.

“All of that land is going to trade hands,” he said. “We are going to see all type of developments come in between Interstate 10 and Highway 290 over the next five to 10 years. It is happening right now. But, there is a lot of land.”

July 9, 2019

Tierra Smith

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