TEXAS SNAPSHOT, JUNE 2006

Galveston Multifamily Market

A recent trend in Galveston, Texas, has been the conversion of many apartment complexes into condominiums, especially those on the seawall overlooking the Gulf of Mexico, according to Vincent J. Tramonte, president of Galveston-based Joe Tramonte Realty. “No new plans for large apartment complexes are on the books as far as I know,” he says.

The vast majority of multifamily development is taking place on the west end of the island, which is the largest area of undeveloped land. “Out-of-state and out-of-the-country developers state that Galveston Island has some of the least expensive coastline real estate in the country,” Tramonte says. The eastern end of the island currently has three major developments underway: Palisade Palms, Emerald by the Sea and Beachtown Galveston.

Beachtown Galveston, which is being developed by Beachtown Galveston Corporation, will feature 320 single-family homes, 200 lofts, 270 townhomes, 400 condominiums and apartments and 150 retirement units on 125 acres at 406 East Beach Drive. Construction is already underway.

The Randall Davis Companies is developing Emerald by the Sea at Fifth Street and Seawall Boulevard. The 5-acre development will feature 113 condominium units ranging in price from $300,000 and up. Completion is scheduled for April 2007.

Palisade Palms is an approximately 16-acre condominium development underway at 801 East Beach Drive between Galvestonian and Islander East. Being developed by The Falcon Group and built by Brasfield & Gorrie in two phases, the project will feature 288 condominium units in its first phase. Completion of Phase I is scheduled for spring 2008. Phase II will be under construction in fall 2007.

Several developers are new to the Galveston market, many of which come from Houston. Tramonte also sees many developers from California, Florida, Colorado and Canada working in the area.

Many tenants in the Galveston area are from the University of Texas Medical Branch, which has more than 11,000 employees. “The students at the medical school, school of nursing, and the Shriner’s Burn Hospital are mostly concentrated on the eastern end of the island,” Tramonte says. “Because of our rich history, many people enjoy the small homes, duplexes, triplexes and four-plexes in the historic areas.”

Monthly rents can range from $295 to $2,000 for the larger homes and condominiums in the Galveston market. “Occupancy rates are right at 80 percent, and it fluctuates with the change of the school year,” Tramonte says. “We have schools from University of Texas Medical Branch, Texas A&M Galveston, and Galveston College who move to the island at various times of the year.”

Even with the fluctuation, Galveston’s multifamily growth has been stable, according to Tramonte. “We have had a large inventory during the year with tenants becoming buyers because of the lower interest rates,” he says. “With the condominium conversion of many of the apartment complexes, those remaining tenants are occupying existing available rentals.”

In the future, the Galveston market will continue to maintain the absorption of the remaining vacancies. “People are now purchasing more properties to rehab into rental homes and duplexes,” Tramonte says. “People like the smallness of the neighborhoods and the availability of gardens and yards that they can find in Galveston.”

— Vincent J. Tramonte is president of Joe Tramonte Realty in Galveston, Texas.

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