San Antonio operators recorded net absorption of 5,499 apartments through mid-2019. The abundance of developable land made the neighboring Far West San Antonio, Far Northwest San Antonio and Medical Center submarkets favorites for apartment developers. Builders delivered 2,154 apartments across these submarkets since June 2018, accounting for 45% of metro-wide deliveries.

Leasing activity followed in the three areas, with a total of 2,149 net units absorbed. The annual rate of rent growth also accelerated in these submarkets compared to the prior year. Metro-wide absorption outpaced deliveries, resulting in a 50-basis-point annual increase in occupancy to 93.7% in June. Meanwhile, effective rent advanced 3.5% year-over-year to $999 per month in June. During the next four quarters, 4,210 apartments are scheduled for completion among 20 developments. Of those developments, seven are in the Central San Antonio submarket, totaling 1,444 units. During that same period, four apartment communities are expected to break ground metro-wide, representing more than 1,060 units.

Net migration of more than 19,500 people in the San Antonio metro area since mid-2018 is a factor in sustained multifamily demand. Local employers filled 19,100 new jobs in the 12 months ending in June of this year, a 1.8% annual increase. The leisure and hospitality industry led growth with 4,600 new workers, a 3.4% gain, supported in part by greater discretionary income related to a 2.7% annual rise in median household income. Professional and business services sector employers expanded payrolls 3.1% with 4,400 new recruits.

The influx of people in the metro area also generated the need for service providers, particularly in the education and health services sector where 2,900 workers were hired, a 1.8% gain. The prevalence of apartment construction, capital investments and infrastructure projects kept businesses in the construction industry busy, requiring the addition of 2,700 workers, a 5.1% increase. Looking forward, the professional and business services sector will be boosted by the creation of 1,400 jobs following the completion of OKIN Business Process Services' headquarters. Additionally, Pentagon Federal Credit Union will support the financial activities sector with 500 new jobs.

Not to be outdone, the Houston economy continued to strengthen as employers accelerated hiring in the last year. With nearly every employment sector posting gains, total nonfarm employment expanded 2.7% annually through April 2019, outpacing the 1.7% increase during the preceding year. The greatest expansion occurred in the manufacturing sector, as local headcounts grew 6.5% annually since April 2018, even with the effects of tariffs on China, Houston's second-largest trading partner.

A portion of the 14,700 new manufacturing positions came from Lonza Group Ltd. at its cell and gene therapy manufacturing facility in Pearland. The high-paying jobs from the Switzerland-based biotech giant weren't the only well-paid positions added to the market. Professional and business services as well as financial activities employers added a combined 23,600 personnel since April 2018. These positions on average earn 56% more each year than overall Houston salaries. Overall, the Greater Houston workforce grew by 81,900 jobs, even as unemployment lowered 60 basis points year-over-year to 3.9% in April 2019.

Moreover, with multifamily deliveries hitting a post-recession high in 2016, Houston developers pulled back deliveries in recent years. Construction completed on 11,491 additions since mid-2018. While deliveries were spread throughout Greater Houston, a metro-leading 3,277 units became available in Northwest Houston. Development in the area was concentrated in the Katy/Cinco Ranch/Waterside submarket, with the 380-unit Parkland Fulsher community the largest to begin lease-up in the last year. The community was nearly halfway occupied within a quarter of opening, indicating a need for housing in the area.

This demand led to a 160-basis-point annual increase in Katy/Cinco Ranch/Waterside occupancy to 89.6% in the second quarter of 2019. Metrowide, sustained apartment demand resulted in occupancy elevating 40 basis points year-over-year to 90.2% in the second quarter of 2019. With occupancy rising, apartment operators advanced rent on average 1.3% in the last year to $1,045 per month in June 2019. In the Katy/Cinco Ranch/Waterside submarket, rent increased at a more accelerated rate. At $1,198 per month in June 2019, effective rent increased 1.5% year-over-year.

“Houston's fundamentals continue to translate into a strong market where investors keep looking for deals to place capital in,” Ryan Epstein of Berkadia tells GlobeSt.com. “The market is absorbing more units and rents are starting to move in the right direction, which is poised for further improvement as unemployment continues to drop throughout the metro area.”