HOUSTON – Houston apartment occupancy has reached 91 percent, close to historical high, as strong job growth has fueled the multifamily market, according to the CBRE real estate firm.
Leasing activity is very brisk and the net absorption is outpacing the deliver of new units, according to Ryan Epstein, multifamily specialist and executive vice president at CBRE.
The apartment market is also being driven by a decline in homeownership, Epstein said at the CBRE 2015 Market Forecast event in Houston this week.
The homeownership rate in Houston reached almost 67 percent in 2008 and it has dropped to almost 58 percent this year. Young professionals and the Millennial generation have demonstrated a strong demand for multifamily housing.
Houston has been leading the nation in job growth, with 119,400 new jobs created over the last 12 months.
In 2009, Houston lost 100,000 jobs and apartment occupancy dipped below 84 percent, CBRE reports. But as employment has grown, occupancy and rental rates have escalated.
Epstein was among the speakers at the Houston Country Club for CBRE’s 2015 national forecast series, “Moving Up the Risk Curve,” which includes forecasts for ten U.S. cities.
Other highlights from that event:
The tech and energy sectors will continue to be primary economic drivers for the foreseeable future and job growth will continue for at least four more years, according to CBRE’s Chief Global Economist, Richard Barkham, PhD MRICS who addressed an audience of more than 300 as the event’s keynote speaker.
“The global recovery will continue in 2015 with the U.S. in the driver’s seat,” said Dr. Barkham. “The global economy will be volatile but will post good growth driven by the U.S., sustained recovery in the Eurozone and the transformation of China into a consumer society.”
Other highlights from Dr. Barkham’s presentation included:
- There is no inflation pressure so interest rates will rise only slowly over the next three years, and the peak of the next rate cycle will be lower than the last
- Capitalization rates will gently decline over the next three years, due to strong investor demand, but the majority of value growth will come from rental increases
- Total returns from real estate investment will be between six percent and eight percent with much less volatility than the stock market
In addition to Dr. Barkham’s global and U.S. forecast, local experts provided insight into what to expect in 2015 across all property types in Houston. CBRE Senior Managing Director, Mark Taylor, moderated two local market panels on products and capital markets, featuring nine CBRE experts.
Highlights from the local panels included:
- Houston multifamily is firing on all cylinders as U.S. and Houston home ownership rates are trending down from the peak, while Houston’s population continues to grow. According to CBRE Research, Houston multifamily occupancy rates are at a historical high of 91%.
- New office construction projects have slowed significantly, but job growth and absorption remain strong, boding well for the Houston office market in 2015.
- After several years of higher than average retail investment sales due to portfolio trades and recapitalizations, Houston-area retail investment sales will cool.
- Retailers across all categories are expanding in Houston including, grocers, restaurants, big box retailers, entertainment companies, financial services and medical facilities.
- The hotel market is in its sweet spot with occupancies and rates at record highs. According to PKF Consulting, a CBRE Company, approximately 6,000 new hotel rooms will be delivered to the Houston market between 2014-2017, while numerous demand drivers will help normalize the markets.