Multifamily activity in the first quarter highlighted a Houston market with a slowdown in occupancy due in part to residents returning home after Hurricane Harvey, yet consistent job growth playing a role in achieving supply/demand equilibrium. Those findings were part of Berkadia’s recently released first quarter 2019 multifamily market report.
Development is now focusing on the downtown/Montrose/River Oaks submarket, with developers still tapering deliveries this year across the region, exemplified by what may be considered a low 681 units year to date. Demand remains strong even as Houston’s multifamily market continued pace to reach equilibrium between its inventory of more than 685,000 units and the demand for apartments.
“Tapered deliveries will increase Houston’s competitiveness, as capital continues to chase deals in an area with solid fundamentals,” Tucker Knight, Berkadia senior managing director tells GlobeSt.com. “Even with interest rates remaining unchanged or possibly rising, Houston’s job growth will maintain the flow of capital into the multifamily market for some time to come.”
Specifically, employment figures continue to increase, growing 2.5% annually since January 2018, up from 1.5% the year before. With continued job creation and a decrease in deliveries, operators have also increased effective rents to $1,088, a 1.5% increase since first quarter 2018.
“Regardless of a decrease in absorption figures and lower occupancy rates, Houston will remain a compelling area for investment because of the labor market’s continued growth,” Ryan Epstein, Berkadia senior managing director tells GlobeSt.com. “With a strong employment outlook, subsequent demand will bring equilibrium in a region that just recently had an oversupply of units coming online.”