There are 58 self storage projects under development in Houston, Texas, representing the potential for a roughly 6% increase in supply, according to STR.
“Houston was a hot topic during quarterly earnings calls because of performance deceleration in the market and an overlying interest in development in Texas,” said Anne Hawkins, STR’s executive VP. “The self storage industry has been trying to gauge the impact of new supply on performance for quite some time, and this interest level has heightened in Houston.”
STR expects 41 self storage facilities to be completed and begin operating in the Houston market during the next year. Harris County has the most development activity with 21 projects, and Fort Bend County ranks second with 11 new projects.
“The potential 6% increase in new facilities is actually lower than the other markets that we are tracking nationwide,” Hawkins said. “But when considering all development projects, Houston faces a potential supply increase of 3.8 million net rentable square feet (NRSF), or a little more than half a net rentable square foot per person. That growth would outpace historic population growth rates (approximately 2.5%), thus raising concern over how much new supply the Houston market can absorb.
“Right now, several factors are likely in play when it comes to Houston’s relative underperformance—mainly the decrease in oil prices and the resulting dislocation from that phenomenon. It is unclear what role new supply entering this MSA plays in performance.”
“The new supply in Houston is satisfying demand that was created by population growth, as well as lack of development, over the past several years before the oil and gas market downturn,” said Bill Brownfield, a real-estate expert with self storage brokerage firm Argus. “It is possible that certain submarkets will be overbuilt and see some occupancy declines by mid-2017, but we do not believe that we have witnessed this to date. But stay tuned for 2017.”
Listings of facilities under development and existing facilities in markets across the United States are available for purchase by contacting STR at firstname.lastname@example.org.
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