As Some States Face the Heat of Construction Oversupply, Texas Keeps its Cool

In the last three years, the hype surrounding ground-up construction has increasingly led to concerns about oversupply, which occurs when there are an excessive number of developments that are not occupied or used at an acceptable percentage. While many cities across the country are now left with dozens of complexes with no one to fill them, Texas has managed to avoid oversupply backlash.

Since 2014, nearly 4,000 apartment complexes have opened across the U.S. Cities with high levels of job growth, such as Dallas and Houston, have seen successful in meeting the increased demand. While in Chicago, where job growth is low and rent is declining, developers are having trouble fighting the already established complexes for tenants to fill their open spaces.

Job growth seems to correlate with population growth. In Detroit and Chicago, where thousands have lost their jobs, mainly in the manufacturing industry, we’ve seen a massive decrease in populations by nearly 30 percent. Texas, on the other hand, has introduced nearly 2.1 million jobs in the past decade resulting in cities like Frisco and Mckinney to have population increases in the double digits.

By 2050, it’s projected that the population of Texas could be at a staggering 50 million. With a higher population, the need for apartment communities grows as the absorption rate decreases and filling units becomes easier. Cities with shrinking populations are left with empty developments and no new tenants to fill them.

While a vast majority of Texas cities has been able to steer clear of construction oversupply, some areas have seen the repercussions of over building. Decreasing oil prices have caused a slight dip in development in Houston and other cities near the coast. Fortunately, the long-term outlook still appears strong and continues to flourish compared to most cities in the midwest.

While the concern for multifamily oversupply is on the rise nationally, construction hasn’t come to a halt. Though it is prevalent that supply growth has begun to outpace demand in certain markets across the U.S., smart developers are avoiding over building by carefully taking the location and the needs of potential tenants into consideration before construction begins.

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