Texas Market Reports

With the major markets of Texas adding thousands of new apartments every year, multifamily management firms are increasingly relying on technology to accelerate leasing activity, grow renewal rates and handle requests from tenants — all in the name of keeping their properties competitive and their investor clients happy. As beneficiaries of strong job and population growth throughout this cycle, Dallas-Fort Worth (DFW), Houston and Austin have all watched their multifamily supply levels increase. According to CoStar Group, DFW, a national leader in apartment development, has added more than 20,000 units per year in each of the last three years. Houston has also seen its supply of multifamily product grow over the past several years as natural population growth has worked to offset hiring slumps brought on by depressed energy prices. Austin and San Antonio are also facing demand for more housing via the strong population growth occurring throughout the region.    Multifamily supply growth means that renters have more options on where to live and can afford to be more selective, not only with regard to rental rates, but also in terms of services. To the latter point, management professionals have taken on an added element of customer service that …

Between 2014 and 2016, the Houston multifamily market struggled with an issue of oversupply as a result of accelerated apartment construction. When Hurricane Harvey hit in 2017, Houston residents displaced by the storm produced a surge in apartment demand that helped fill thousands of empty units over the ensuing 12 months. Fast forward to 2019, and two key factors are keeping a strong apartment pipeline flowing and forcing developers to play catch-up: new residents and more jobs. Over the past two years, demand has outpaced deliveries, a welcome sign for investors following the 2014-2016 era. More than 20,000 units came on line in 2016 alone and caused absorption to lag. According to the U.S. Census Bureau, steady increases in population have Houston competing with Chicago for the title of third-most populous city in the country. This demographic trend, coupled with the city’s strong labor market, has created a setting wherein capital keeps trying to find its way into the Bayou City. Underpinning the need for more housing product was the 94,000-plus new residents added during the last year, which ranked Houston’s net migration in the top three of U.S. metros. Given the rise in demand stemming from jobs and in-migration, …

The unprecedented job and population growth that Dallas-Fort Worth (DFW) has experienced during this cycle has brought a plethora of new buyers to the Class B multifamily space, and the simple economics of high demand and low supply are re-shaping the landscape of the investment market. According to CoStar Group, the average price per unit in the Class B space has increased by 4.3 percent year-to-date, and deal volume on sales of Class B assets is down from 2017. These trends attest to the strong impact price escalation has had on the market. A more crowded buyer pool is also breeding competition and pushing prices upward. The metroplex’s growth cycle dates back to the beginning of the expansion. Data from the U.S. Census Bureau shows that between 2010 and 2018, the metroplex added about 1.1 million people, or 122,000 per year. Earlier this year, Cushman & Wakefield released a report stating that DFW added approximately 754,000 jobs between 2009 and 2018, or 75,000 per year. This convergence has significantly boosted apartment demand in the metroplex, ushering in waves of competition for older multifamily assets, many of which are positioned for value-add investment and subsequent rent bumps. Price escalation caused by …

In both Austin and San Antonio, consistent job creation and in-migration contributed to solid household formation and rental demand over the 12-month period ending in June. Many of these new households comprise younger professionals that favor the renter lifestyle. Following stretches of rampant construction, solid apartment demand from this demographic was met with fewer project deliveries in both markets over the past year. The decline in supply additions, coupled with strong absorption, reduced vacancy to near cycle-low levels in both metros during the second quarter. Robust leasing activity across all classes of apartments allowed the average effective rent to rise by more than 5 percent in each locale. These market conditions, paired with projected economic expansion and above-average first-year returns, boosted out-of-state buyer interest in Austin and San Antonio over the past four quarters, equating to notable spikes in transaction velocity. Austin: Class A Demand Austin’s reputation as a tech hub with a well-educated workforce has influenced many professional and business services-related companies to expand in the area, increasing the number of higher-earning residents in the metro. This has strengthened demand for luxury apartments, lowering Class A vacancy by 90 basis points over the 12-month period ending in June amid …