HOUSTON — Houston has experienced substantial improvement in multifamily fundamentals this year, according to Marcus & Millichap’s Fourth Quarter 2011 Apartment Research Market Report. Employment, vacancy, rents and sales transactions have risen, although the construction market is still lagging. Overall, Houston is poised to enter 2012 in a strong position.
Houston led the nation in employment growth through the first three quarters of this year, adding a total of 65,300 jobs. It is projected to add more than 87,000 positions total in 2011. Contributing to hire employment numbers are companies such as Burns & McDonnell Engineering Co., which will hire 100 new employees during the next 18 months.
The apartment vacancy rate in Houston dropped to 9.2 percent during the third quarter and it is projected to reach 8.8 percent in the fourth quarter, which would be an improvement of 200 basis points compared to last year. Growing employment in Houston should help vacancy continue to fall during the coming year.
Rents are also on the rise. Asking rents in metro Houston in the third quarter rose to $778 per month, an increase of 2.4 percent compared to the third quarter of 2010. During the fourth quarter, asking rents are projected to reach $785 per month. Effective rents also are rising. In the third quarter, effective rents reached $707 per month, a 2 percent increase compared to the third quarter of 2010, and are slated to climb to $714 per month by year’s end.
Additionally, the investment sales market has surged with transaction velocity rising 62 percent during a 12-month period. The average sale price rose to $31,500 per unit, a total of 15 percent, compared to the third quarter of last year. One of the largest sales of the year in Houston occurred in August when ajoint venture between Ascension Commercial Real Estate and Moriah Real Estate Co. acquired a 4,568-unit portfolio of Class B apartment buildings in Texas for an undisclosed amount. The portfolio contained one property located in Austin and 14 properties located in Houston.
Despite improvement in employment, rents, sales and vacancy, construction is still lagging. During the last 12 months, approximately 1,100 units have come online in metro Houston, compared to 7,600 units the previous year. Although more than 13,700 units are planned, groundbreaking dates have not yet been set for most projects.
— Savannah Duncan