Multifamily's Surprising Continued Strength
If you’re like us, the continued occasional multifamily groundbreaking announcements have had you raising your eyebrows. Haven’t oil prices dropped? Haven’t we had the biggest pipeline in the nation for years? Sure, says CBRE EVP Ryan Epstein, but fundamentals are still great.
Ryan says multifamily operations haven’t been impacted by the weakened energy markets. Absorption is pretty healthy—4,875 units absorbed in Q2—and rents rose a very strong 6.8% from this time last year and are up 2.5% since Q1. He’s been surprised to see that the top tier market is doing very well. New high-rise properties are leasing up quickly and are pulling in renters at impressive rates. Ryan says we’ll continue to see a lot of deliveries over the next two years, including 24,000 units completing this year. (That sounds high, but if we can continue to absorb almost 5,000 units each quarter, we’ll soak up almost all of them.)
The concentration of Inner Loop mid-rise construction has sparked some concessions there, but so far Ryan’s only seeing one month free rent, a typical concession for lease-up no matter the economic conditions. Institutional capital has finally stopped funding development, which’ll make 2017 a sparse delivery year. Investment sales are down a little across the metro this quarter, but Ryan’s team has actually picked up steam and recently closed the sale of Broadstone Post Oak, pictured. It’s a trophy asset and received very strong interest, eventually trading to a foreign investor who’s never bought in Houston before.