Marty McAdams, the firm's regional manager, says, "Last year, strong demand, fueled by robust job growth, outpaced the number of units brought to the market by a large margin. This favorable trend is continuing in 2001. Despite the national slowdown, job growth remains healthy and demand is expected to exceed supply once again, culminating in lower vacancies and improved rent growth."

McAdams predicts that sales velocity will increase as investors return to the Houston market. He says this trend will have significant impact on class A properties, which have been dormant in the last two years. In fact, the report forecasts class A sales to gain momentum in the balance of this year as submarket vacancies decrease and rents grow.

According to the report, the apartment market also will be kept in check with moderate construction levels of 8,000 new units delivering by year's end. Strong job growth will keep absorption high, with researchers anticipating nearly 14,000 units will be absorbed. Marcus & Millichap is projecting a 6% rent increase before the year closes.