2 Multifamily Developers Pick 6 Favorite Submarkets
In advance of Bisnow’s 6th annual Multifamily Summit (starting at 7:30am on Aug. 26 at the Houstonian), Morgan COO Stan Levy and Allied Orion CIO Ricardo Rivas broke down the submarkets they love to build in.
Midtown is already one of the most dynamic and appealing parts of town to live in, and Stan says upcoming projects are set to transform it even further. Morgan has four communities completed, underway or planned there. Pearl Midtown delivered last June and its 154 units quickly filled up (averaging 33 leases a month, Stan tells us) and have stayed that way. Midtown gets a lot of activity from energy employees, Stan says, but so far it hasn’t impacted leasing at all, perhaps thanks to employment diversity from Downtown and the Med Center. That could also be because it’s a tight submarket—it’s hard to pull together a site to develop, and people love living there because it’s so walkable and flush with amenities. Pictured, Stan’s with his wife, Melanie, and kids Drew and Morgan on this year’s summer vacation in Lake Tahoe.
Morgan’s underway with Pearl at the Mix, a 196-unit community that’ll open in Midtown in Q1 ’16. It’s within walking distance of the only project Morgan will likely start in Houston next year: the buzzed-about mixed-use community at Smith and Elgin that’s being built over a Whole Foods. Stan tells us the southwest side of Midtown is becoming more vibrant thanks to these two communities, the Superblock (including Camden’s McGowen Station but especially the park inside) and the Whole Foods.
2. Washington Avenue
Morgan has completed a couple of properties along Washington over the years (they always do very well, Stan says), and will open the 322-unit Pearl Washington Avenue in Q2 ’16. Stan loves the design of this one—the pool is elevated on a podium and opens up to the street scene. Similar to Midtown, Morgan’s Washington/TC Jester location is fun and dynamic for Millennials. It’s near major Downtown employment, walkable to restaurants, clubs and shopping, and is close to the very popular Memorial Park.
3. Sugar Land
Allied Orion CIO Ricardo Rivas is pleased to be leasing up a rare development in Sugar Land, a hard place to build multifamily. Because there are so few comps, it was hard to get investors to understand the project, but it’s doing very well. Retreat at Riverstone started leasing in January and is 56% full. (Lately it’s been averaging close to 30 leases a month.) Rents there are $1.67/SF, he tells us, the second-highest in the market. That’s 30% above pro forma, but Ricardo says they had been hoping for more; although the oil slowdown hasn’t impacted activity, it has cut down on the massive 10% rent bumps that multifamily owners have enjoyed the past few years. Check out the flag over Ricardo’s shoulder—it was flying over the US Capitol the day the native Venezuelan became a US citizen in 2011.
Ricardo says the Pearland area could be the second-hottest in Houston right now. (See below for his surprise favorite.) “New Pearland“ around 288 and 518 is the best spot, and that’s where Allied Orion broke ground on its 328-unit community called Southfork Lake two months ago. Pearland has 880 units under construction (none of which are delivering in 2015) and 400 proposed.
Three weeks ago, Allied Orion broke ground on Block 384 in Downtown. It’s largely funded with EB-5 capital, with the balance capitalized by Allied’s private equity fund. The project (unnamed at this stage) is a participant in the Downtown Living Initiative program. Ricardo tells us the project is 242 units, and will have an amenity/pool deck on the eighth floor.
6. City Centre
Millennials like living in City Centre’s walkable retail and dining environment. But Stan says this is also a great fit for families who want to be in the desirable Memorial school district. That’s why Morgan beefed up the unit size and mix in the Residences at Pearl CityCentre. Its 148 units average 1,500 SF, and three-bedrooms go up to 2,250 SF. It includes custom home finishes and wine refrigerators. Morgan’s simultaneously developing a sister community (Pearl CityCentre, 311 units); both will deliver in Q4 of this year.
Ricardo says accounting for all variables, the hottest market now is one no one is building in: Baytown. It garnered 13% rent growth year-over-year (Allied Orion manages a property down there, which is topping $1.50/SF) and has nothing in its development pipeline. He says the strength may not be sustainable, but it’s certainly caught his eye. He won’t be planning anything there soon, though—Ricardo tells us Allied Orion has a very positive outlook on Houston, but it’s taking a pause to deliver its ongoing developments and see how things play out.
Morgan’s delivering Pearl Woodlake in Westchase around the end of this year. Stan tells us it’s a great submarket that gives residents easy access to work in the Energy Corridor and play in the Galleria or City Centre. There aren’t many new, high-end multifamily properties in the area, and he says Morgan’s 376-unit property will be a real trendsetter with top quality finishes and air-conditioned corridors.