Houston Multifamily Market Stabilizes After 2016's Delivery Explosion
For the first time since developers delivered 21,000 units in 2016, the Houston multifamily market total occupancy rate reached 90% in Q3.
"It is no coincidence this comes at a time when demand is now exceeding the current dwindling apartment delivery supply," JLL wrote in its quarterly multifamily report.
Apartment unit deliveries this year are about 75% less than two years ago, with about 5,400 units coming online. JLL expects up to 2,500 more units to be added by year-end, but the deliveries will still be much lower than the 13,700 units in 2017 or 21,000 the year before.
Total occupancy troughed in Q3 '17 at 88.2% and has steadily increased every quarter since.
Class-A product has had some of the most dramatic movement. Inventory at that price point has doubled in five years, going from 69,000 total units on the ground in March 2013 to 150,000 units in September 2018. Occupancy stands at 87.8% for Q3, the highest it has been since 2013.
"The recent boom in Class A construction (2012-2017) left the market with a great number of units to be occupied, though sustained demand has managed to catch up," JLL wrote in the report.
The flight to quality is overtaking the apartment industry in Houston. According to a report by RentCafé, 97% of the new projects delivered in 2017 were high-end. Luxury properties have also risen on the national scale to 79% in 2017, an increase from just over half in 2012.
Even though Houston remains one of the most affordable metros, the asking rent for all apartment classes is increasing. Rent averages stand at about $1,030, about a $60 increase since 2016.
With the market showing signs of stabilization and a growing population, JLL projects a pickup in multifamily construction in Houston. The report notes roughly 11,000 units under construction.
"The sustained volume of in-migration and local job creation will continue to positively impact Houston’s multifamily market," JLL wrote. "Stabilizing oil prices will further benefit the local economy in the form of job creation, fueling multifamily demand. As the market tightens, we can expect a subsequent wave of construction to rise to match the apartment appetite in the coming years."