HOUSTON – (By Dale King, Realty News Report) – When much of Houston’s turf slipped under lakes of murky flood waters left by Hurricane Harvey last year, it was difficult for anyone to predict when the city’s real estate market would begin to crank out statistics worth boasting about.
Apartment occupancy jumped after that colossal storm as Houstonians sought temporary shelter because their houses flooded. Houston’s multifamily market continues showing signs of improvement.
Just one example. Berkadia’s Q1 2018 Multifamily Market Report ranks the region as the third best metro area for apartment absorption in the U.S., just behind Dallas-Fort Worth and New York City.
Demand outpaced deliveries by more than two-to-one, the document says, with renters newly occupying 2,971 apartment units in the first quarter of this year, just shy of the Dallas-Fort Worth rate of 4,340 and New York City’s absorption of 3,148 units.
“Houston is really exceeding expectations and outperforming many other multifamily markets across many metrics,” said Ryan Epstein, senior managing director of Berkadia Houston. “Investment activity reflects these more healthy dynamics, and we anticipate this trend to continue as the Houston area economy keeps seeing growth.”
“There continues to be a lot of capital in the market looking for deals. While interest rates are rising, they are still historically low and Houston is well-priced relative to other major markets,” added Tucker Knight, senior managing director of Berkadia. “As a result, we anticipate continued investor interest and deal activity in the year to come.”
The influx of new inventory facilitated steady leasing activity as Dallas-Fort Worth and New York led annual absorption, along with Houston, says the report. Nationwide, 396,496 net units were absorbed during the last four quarters.
Another sign that renting remains an attractive option for residents as existing single-family home sales, which moderately advanced 1.8% year over year through February 2018, compared to a 5.4% increase in sales during the preceding year.
The report from Berkadia says Houston is not only a national leader in apartment absorption, but it is also ahead of the curve in metro-wide hiring, outperforming the national average of 1.5% as employment accelerated 2.2% in Houston and its environs.
Driving factors in Houston’s employment growth leading to increased demand include the completion of Amazon.com Inc.’s $135 million fulfillment center in the Pinto Business Park along with the 420,000-square-foot fulfillment center in Katy scheduled to be operational in the first half of 2018. Together, these centers will add 3,500 jobs in the metro area, solidifying Houston’s place as a region with strengthening multifamily and employment fundamentals.
The increase in demand and slow-down in new deliveries resulted in a 4.6% increase in rents year over year, nearly 2% higher than the national average. This makes Houston one of the cities with the fastest growing rents in the country, ranking 7th nationwide, according to Berkadia.
Other highlights of the report include:
Houston saw 1,242 new apartments units delivered in Q1 2018, or 7,547 since March 2017.
Houston’s occupancy rate reached 89.7% – an increase of 1.4% since Q1 2017.
Effective rent this quarter stands at $1,022, an increase of 4.6% over Q1 2017.
Occupancy was highest in the FM 1960 East/IAH Airport Submarket at 95% as no new inventory came online.
The Highland Village/Upper Kirby/ West U submarket saw rent advance a metro-leading 9.5% annually to $1,738 per month in March 2018.
Metro annual rent share of wallet is at 19 percent, lower than the national average of 26.3 percent.
Berkadia, a commercial real estate firm, is a joint venture of Berkshire Hathaway and Leucadia National Corporation, offering a variety of services to multifamily and commercial property clients.
May 14, 2018 Realty News Report Copyright 2018