Multifamily Musings: Q&A with Camden’s Laurie Baker

Though the Houston multifamily market has been a challenge, apartment REIT Camden Property Trust anticipates things should start stabilizing in 2018. Laurie Baker, Camden’s Senior Vice President of Fund and Asset Management, and a panelist at the upcoming Connect Texas Multifamily on Aug. 24 in Dallas, spoke with Connect Media about factors driving the apartment market in Houston, Dallas and Austin.

Q. What is your take on the Texas multifamily market?
A. Camden has 19,000 units in Texas, which is 36% of our portfolio. More than 8,000 of those units are in Houston, so for the past two years we have felt the impact of the anemic job growth due to the decline in oil prices. Initially, everyone was wondering if all of Texas would be impacted by a weakening energy sector, and I think it surprised people when it didn’t. Dallas, Austin and Houston are vastly different markets, and even Houston has dramatically diversified since the 1980s. If there hadn’t been so much apartment supply in Houston, the narrative there wouldn’t have been as negative.

The Houston apartment market is still challenging, with new supply exceeding demand. However, we expect the market to stabilize during 2018 as excess inventory starts to clear, setting Houston up for rent growth again. In fact, we just announced that we are moving forward with the development of a downtown Houston high-rise project, with a construction start in the fourth quarter of 2017. Houston has a long history of strong recoveries following a down market, so we are excited to be seeing some signs of improvement.
Meanwhile, Dallas has good, overall operating conditions. Market conditions are stable, occupancy levels are stable, as are rental rates and we continue to grow top line rents in our Dallas portfolio despite the onslaught of new supply. In Austin, we’ve seen a slight decrease in recent rental rates, but market conditions remain strong there.

Q. What seems to be driving the sector?
A. There continues to be a very robust, younger population interested in apartments. We continue to be impressed with really good multifamily fundamentals in Texas and across our portfolio; people are delaying the decision to marry and have children. There’s a demographic shift where millennials don’t want to be tied down to a house. Some of it relates to what happened during and after the Great Recession, when the single-family housing market suffered, and families couldn’t move to where the jobs were because they couldn’t get out of their mortgages or sell their homes. I think the younger generation saw that, and maybe doesn’t want to be a part of it.

Q. What’s in store for Camden in the rest of 2017, and into 2018?
A. We have one of the strongest balance sheets in the multifamily sector and are looking for acquisition opportunities in our current footprint, but it’s tough to make the numbers work today, particularly with sellers expecting to see premiums in their values, and cap rates remaining low. There is a lot of interest in multifamily, particularly foreign capital looking to place safe bets. We thought Houston might present opportunities due to distress in the market or with merchant builders anxious to get equity out of their projects. But we never saw that, there haven’t been bargains. Recently a downtown (Houston) deal ended up trading at a sub-4% cap rate.

So, we want to buy. We’re interested in deploying capital in developments and acquisitions, but we’ve been playing more in the development side where we are seeing yield that makes sense. We’re also doing a lot of redevelopment/repositioning of our own properties.

For comments, questions or concerns, please contact Amy Sorter