Apartments in the Houston Area: Post Ike

October, 6, 2008 -- In the aftermath of Hurricane Ike, The Greater Houston Area has seen a unique pattern in demand for apartment units.

Only one week after Ike, there was virtually no short term or corporate housing available in the Houston area. Apartments and apartment locators were flooded with requests for corporate housing and tenants wanting lease terms under 3 months.

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Most of the initial demand for temporary housing was a result of permanent gulf coast (e.g. Galveston Island, Clear Lake, Texas  City) residents anticipating damaged homes being ready for move in within 3 months.

While consumers underestimated the initial damage and repair time to homes, national insurance companies correctly assessed damage amounts and occupancy time frames at 6 months. The net effect of consumer demand and corporate insurance demand for units resulted in very tight demand for lease terms 0-6 months in length.

Apartments without damage in the Clear Lake, Friendswood, and Pearland areas saw the greatest increase in demand.  Apartments in these areas leased on average fifteen units immediately upon opening after Ike (Apartments in these areas may lease 6 units per week during the busy leasing season).

Properties in Houston proper were less affected outside of immediate demand for short  term and corporate leases, and did not see an increased demand for 12 month leases.  Almost all management companies are hesitant to lease a substantial amount of units for short term leases. Best management practices require properties to stagger lease terms across units for diversity of lease expiration risk.

Moving forward, the Southeast Houston area will likely follow post Katrina occupancy patterns.  Properties that over extended themselves with 3 month and 6 month leases will see large vacancy 3 to 6 months out.  These vacancies will subject certain apartment properties to operating losses, increased leasing costs, and lower rental rates.  Prospective occupants will likely find values on units in this time period.