Hines betting on apartment development

National trend

Vilas Bhuchar, Feb 07, 11.

Houston-based Hines, one of the largest real estate companies in the world, has formed a Multifamily Division and will focus on developing apartments in response to current market conditions, according to CultureMap Houston.

While the company does not have any proposed Houston apartment projects ready to be started soon, Hines will probably look to eventually develop infill projects inside the loop instead of in the suburbs, said Charles Baughn, executive vice president of Hines, notes the story:

Finding sites where old, small commercial buildings can be torn down to render a prime apartment location will be a priority for Hines.

Expect to see Hines developing four-story apartments with parking garages in urban locations, as opposed to two-story garden apartments on far-flung suburban land.

Hines’ leadership believes apartment industry veteran Alan Patton, hired to lead the firm’s new division, can help Hines penetrate the multifamily market, adds the story:

“We think Hines can become a very successful player in multifamily, especially with someone of Alan’s specialized knowledge and experience base on our team,” says Hines president and CEO Jeff Hines. “The multifamily sector is poised for near-term growth, and we are seeing strong interest among our investors.”

Patton was formerly president of The Morgan Group, a Houston-based multifamily developer.

Finally, Hines’ shift to apartment development reflects a national trend, adds the story, which notes that a slowdown in apartment construction over the last few years and expected employment growth are key drivers behind current and future development opportunities:

Sharon Dworkin Bell, senior vice president of the National Association of Home Builders, says America has a “shortage” of apartments.

“We are going to have a supply/demand imbalance and we will have rental increases,” Bell says.

The nation’s apartment development fell to barely more than 100,000 new apartment units starts in 2009 and again in 2010. That’s not enough to keep up with the natural population growth. The huge Generation Y generation is maturing and leaving home and getting their own apartments. More Americans turned 18 years old in 2010 than in any prior year.

The home builders association is projecting a 16 percent increase in apartment construction in 2011, followed by a 53 percent increase in 2012.

With employment growth recovering as the economy revives, the demand for apartments will rise significantly.

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Photo credit: Zach K

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