HOUSTON—Tightening vacancy and strong rent gains were apparent last year as rising demand tipped the scale in favor of apartment owners reinvigorating the Houston apartment market. Investors' attitudes are shifting to a more bullish outlook, though many will be mindful of property locations and expected increases in insurance costs, according to a report from Marcus & Millichap.

Investors in search of value-add deals in the metro could find some unique opportunities. Houston's strong demographic trends, diverse economic base and healthy job creation will remain attractive to investors and encourage investment activity. Before Harvey, concerns of overbuilding in specific pockets of Houston had many financial sources targeting areas where the threat was much more limited. However, tightening vacancy as residents seek temporary housing while existing stock is restored has many agencies re-evaluating parts of Houston where they were not as actively involved, opening up additional financing opportunities for investors.

Overall sales activity was flat during the trailing 12-month period; however, sales of properties priced above $20 million posted a notable increase. The average price in the metro reached $100,700 per unit during the annual time frame. First-year returns compressed 10 basis points during the past four quarters, with the average in the high-6 to low-7% range, says the report.