JLL Q4 2018 Multifamily Insight

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Q4 2018
Houston
Multifamily Insight
Looking back, the Houston multifamily market saw an ongoing boost from
Hurricane Harvey in 2018 marked by an increase in occupancy, absorption,
and asking rents. Occupancy at year-end stands at 89.6 percent, down 30 basis
points from the end of the third quarter, while the averaging asking price
dipped to $1,022. This in part is due to the usual wintertime slowdown as well
as the comedown from the Harvey boost.
By year-end, Houston has absorbed more units than it added to the market.
Having only 6,800 units of new inventory completed in 2018 has helped
balance the market in a year in which nearly 8,000 units were absorbed.
Modest absorption totals in 2018 can partially be attributed to apartment
tenants moving back into their repaired homes in the aftermath of Hurricane
Harvey. Occupancy is up 20 basis points year-over-year, while asking rates
have increased 1.1 percent over the last 12 months. The Class A segment in the
market has performed best with nearly 9,300 units of net absorption on the
year, marking seven consecutive quarters of growing occupancy.
With the heightened demand comes a renewed interest in construction. A
great deal of land is currently under contract in Houston as both developers
and investors are ramping up plans to capitalize on the growing regional
economy and robust multifamily market. Meanwhile, investor demand has
increased for 1990s and 2000s value-add plays.
Outlook
Current projections for Houston job growth indicate 71,000 jobs will be created
in 2019 with employment growth spanning a multitude of industries (health
care, construction top the list). Absorption should continue to outpace
deliveries in 2019, while rent growth is forecasted to be positive. The
development pipeline will continue to grow in the meantime.
Fundamentals 12-Month Forecast
Total inventory 647,941 units ▲
2018 net absorption 7,966 units ▲
Total occupancy 89.6% ▲
Under construction 15,753 units ▲
Average asking rents $1,022 per unit ▲
Multifamily development activity heating up
• Houston saw more units absorbed than added to the market for the
second year in a row
• A new construction cycle is gaining momentum with many land sites
under contract for multifamily development
• Strong job growth is expected in 2019; sustained demand will lead to
increased asking rates in near future
86.0%
88.0%
90.0%
92.0%
2014 2015 2016 2017 2018
Occupancy (%)
$924
$968 $967
$1,010 $1,022
$800
$1,000
$1,200
2014 2015 2016 2017 2018
Rents (all classes)
0
10,000
20,000
30,000
2014 2015 2016 2017 2018
Supply and demand (units) Net absorption
Deliveries
Source: JLL Research, Apartment Data Services
For more information, contact: Roman Rodriguez | roman.rodriguez@am.jll.com