Houston Multifamily Report – Spring 2019
Years of robust development are raising concerns about overbuilding, with occupancy in stabilized properties down 140 basis points year-over-year as of February.
Houston rent evolution, click to enlarge
Underpinned by rebounding employment gains and a robust demographic expansion, Houston’s multifamily market preserves its potential. Following three years of substantial deliveries, the metro’s rent growth is on a downward trajectory. At 92.4 percent as of February, down 140 basis points year-over-year, Houston’s occupancy in stabilized properties as of February reflected a sluggish demand, leading to remounting fears of overbuilding.
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Houston added 72,600 jobs in the 12 months ending in February, with manufacturing and professional and business services accounting for almost half of the gains. A NextDecade liquefied natural gas export project might create 5,000 jobs in Cameron County, which could lead to a shortage of skilled workers. Education and health services added 11,800 positions and the sector is likely to perform well going forward, as Medistar plans to develop a 48-story mixed-use tower in the Texas Medical Center.
Houston sales volume and number of properties sold, click to enlarge
A cycle peak of $5 billion in multifamily assets traded last year in the metro. Investors had a slight preference for Renter-by-Necessity assets, with rents increasing by 1.7 percent. Roughly 14,000 units were under construction as of March, with more than 85 percent of them geared toward high-income residents. As deliveries are likely to top out at 6,150 units for the year, we expect the metro’s average rent to rise 2.2 percent in 2019.
