HOUSTON—Multifamily leasing activity significantly increased in 2017, with strong signs of economic tailwinds lifting the apartment market in the upcoming year, according to Berkadia's multifamily 2018 forecast report. Last year's 22,353 absorbed units doubled that of 2016, thanks to rising demand leading to a 50-basis point rise in occupancy to 92.8% in December.
Surging demand in the multifamily sector, along with accelerated hiring, is expected to increase absorption by approximately 13% in 2018, as more apartment inventory and 7,579 units are scheduled to become available by year-end.
“With a rise in population throughout the Greater Houston area, as well as anticipated total nonfarm employment expanding by 40 basis points in 2018, the apartment market will see continued investment activity with strong fundamentals,” said Ryan Epstein, senior managing director of Berkadia's Houston office. “Occupancy may reach 94.5% by December, an increase of 170 basis points from 2017.”
Other highlights of the report include:
Effective rent is forecast to rise 3.6% by December to $1,079, up from 0.3% annual growth in 2017. The metro trend will be reflected by the Montrose/River Oaks submarket, where monthly rent is expected to rise 3.3% to $1,630 by December.
Work from rebuilding following Hurricane Harvey, as well as large-scale projects such as the $820 million Houston Ship Channel marine terminal, will contribute to the 26,300 overall jobs expected to be added. Houston joins New York and Dallas as the multifamily construction leaders, according to Buchanan St. Partners.
“As more inflation worries enter the investor mindset, real estate as an asset class will become even more popular, as it historically has been an inflation hedge within an investment portfolio,” Epstein tells GlobeSt.com. “As demand for real estate increases, Houston should do very well, as it's one of the few markets that has a very good recovery story and rent growth projections after Hurricane Harvey.”
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
