HOUSTON

MULTIFAMILY REPORT FIRST QUARTER 2019

MARKET AT A GLANCE

OCCUPANCY
RATE 92.8%
Down 120 bps since 1Q18

EFFECTIVE $
RENT 1,088
Up 1.5% since 1Q18

TOTAL
INVENTORY 685,331

OCCUPANCY AND RENT TRENDS

DEVELOPMENT, APARTMENT DEMAND FOCUSED DOWNTOWN

Apartment development remained focused in the Downtown/Montrose/River Oaks submarket as builders worked to meet
demand in the dense urban core of the Houston metropolitan area. Approximately 22% of metrowide additions during the
last four quarters were in the submarket. The new inventory facilitated leasing activity, as annual absorption was highest in
the area. Even with sustained rental demand, leasing activity trailed inventory growth to lead to Downtown/Montrose/River
Oaks occupancy lowering to 93.1% year over year. The downshift moved occupancy closer to the five-year average of 93.7%.
Apartment operators responded in kind by tapering rent growth. After rising 7.1% during the preceding year, the average
effective rent advanced 4.3% over the last four quarters to $1,896 per month in March 2019. The submarket trend was reflected
across the metro. Apartment occupancy shifted down closer to the five-year average as effective rent growth lessened. Greater
Houston occupancy was 92.8% in the first quarter of 2019, down 120 basis points year over year as many displaced residents
from Hurricane Harvey returned home. At the same time, effective rent advanced 1.5% to $1,088 per month in March 2019.

95% $1,200
OCCUPANCY AND RENT TRENDS

94% $1,100

93% $1,000

92% $900

91% $800

90% $700
2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 2Q18 4Q18

Occupancy Rate Effective Rent

a Berkshire Hathaway and Jefferies Financial Group company

HOUSTON
MULTIFAMILY REPORT

DELIVERIES AND DEMAND

30,000 DELIVERIES AND DEMAND

DELIVERIES 681 20,000

Units YTD

10,000

0
NET
ABSORPTION -133
Units YTD -10,000
2014 2015 2016 2017 2018 2019*
Deliveries Demand
*Year to date

ECONOMIC TRENDS

Greater Houston employers accelerated hiring, helping

2018 UNEMPLOYMENT* 2019
underpin housing demand near employment hubs.
4.5% -40 BPS
CHANGE
4.1% Total nonfarm employment expanded 2.5% annually
since January 2018, up from 1.5% growth during the year
before. The latest increase moved local employment
2018 EMPLOYMENT* 2019 growth above the 1.9% national expansion over the
3.04m 2.5 %
CHANGE
3.12m last year. Hiring among professional and business
services employers provided an economic boost for
the Houston economy. The sector head counts grew
2018 EXISTING SFH SALES** 2019 by a metro-leading 15,200 net positions, representing

102.5k -14.6%
CHANGE
87.5k a 3.1% annual increase since January 2018. There
will be room for additional growth as Hines and
Ivanhoé Cambridge is developing a 47-story, 1 million-
square-foot office tower in downtown. This project,
2018 MEDIAN SFH PRICE** 2019
along with several large-scale projects that broke
$ 236.2k 2.3 %
CHANGE
$241.6k ground last year, like the $150 million The Cannon
development, supported hiring in the construction
industry. Construction companies added 8,200 net
2018 10-YEAR TREASURY** 2019 jobs, for 3.8% annual growth since January 2018. The
2.84% -30 BPS
CHANGE
2.57% growing labor force contributed to the decline in the
unemployment rate to 4.1% in January 2019.

*January; **March
U.S. SHARE OF WALLET METRO SHARE OF WALLET

U.S. METRO
ANNUAL RENT ANNUAL RENT

27.2 %
share of wallet
19.0 %
share of wallet

FIRST QUARTER 2019 BERKADIA

HOUSTON
MULTIFAMILY REPORT

SUBMARKET BREAKDOWN

OCCUPANCY AVG RENT AVG RENT NET DELIVERED

INCREASE ABSORPTION UNITS
SUBMARKET NAME 1Q18 1Q19 1Q18 1Q19 1Q18 1Q19 1Q19 ANNUAL 1Q19 ANNUAL
Alief 93.8% 91.9% 2.1% 2.4% $828 $848 -155 -367 0 0
Baytown 92.5% 92.2% 5.5% 2.0% $900 $918 -108 175 0 224
Bear Creek 94.5% 93.3% 5.8% 0.4% $1,055 $1,059 -31 -185 0 0
Braeswood Place/Astrodome/South Union 94.0% 93.3% 4.9% -0.1% $1,192 $1,191 0 -162 0 0
Brazoria County 94.1% 93.4% 8.7% 2.1% $942 $962 49 -85 0 0
Champions East 92.9% 91.4% 5.0% 3.3% $848 $876 -170 -426 0 0
Champions West 94.5% 93.3% 7.1% 0.5% $1,056 $1,061 99 -239 0 0
Clear Lake 94.7% 93.2% 8.7% 0.0% $1,065 $1,065 -29 -442 0 0
Conroe/Montgomery County 94.4% 93.3% 1.4% 3.8% $953 $989 -59 -130 0 0
Cypress/Waller 93.0% 92.9% 10.0% 3.7% $1,199 $1,243 -59 -7 0 0
Downtown/Montrose/River Oaks 94.2% 93.1% 7.1% 4.3% $1,817 $1,896 349 915 207 1,235
East Inner Loop 95.8% 94.2% 8.3% 8.4% $1,014 $1,099 -122 -163 0 0
Far West Houston 93.5% 92.6% 6.2% -0.2% $1,050 $1,048 163 -157 0 146
Friendswood/Pearland 94.5% 93.2% 2.0% -0.3% $1,164 $1,161 160 319 93 540
Galleria/Uptown 93.1% 92.6% 3.9% -0.4% $1,314 $1,309 228 171 112 318
Galveston/Texas City 94.8% 93.3% 7.5% 2.3% $927 $948 -131 -245 0 0
Greater Heights/Washington Avenue 93.6% 93.5% 3.4% 1.5% $1,486 $1,508 -41 406 0 448
Greenway/Upper Kirby 94.4% 94.0% 16.1% -1.6% $1,641 $1,614 85 -68 0 0
Gulfton/Westbury 95.9% 94.1% 7.0% 0.7% $968 $975 -101 -605 0 0
Hobby Airport 92.9% 90.2% 4.4% -0.7% $857 $851 103 -462 0 0
Humble/Kingwood 95.3% 93.2% 7.5% -0.6% $1,060 $1,054 -83 -42 0 320
Katy 94.5% 93.0% 6.7% -0.7% $1,231 $1,222 283 192 204 502
Memorial 93.3% 92.1% 19.5% -1.2% $1,559 $1,540 147 -83 65 73
North Central Houston 92.4% 90.8% -2.3% 2.4% $737 $755 -189 -377 0 0
Northeast Houston 94.3% 91.2% 14.9% 3.4% $951 $983 -125 -64 0 446
Northwest Houston 94.2% 93.2% 6.1% 2.8% $833 $856 -203 -290 0 0
Pasadena/Southeast Houston 94.6% 92.1% 1.7% 4.4% $820 $856 -30 -739 0 0
Rosenberg/Richmond 92.8% 93.8% 7.0% 3.7% $1,099 $1,140 27 89 0 0
Sharpstown/Fondren Southwest 93.7% 92.3% 1.3% 4.8% $764 $801 -262 -525 0 0
Spring Branch 94.0% 92.9% 9.4% 1.3% $1,083 $1,097 40 -162 0 60
Spring/Tomball 93.6% 93.2% 14.6% 0.6% $1,124 $1,131 16 297 0 387
Sugar Land/Stafford 94.4% 94.5% 1.8% 1.1% $1,177 $1,190 28 53 0 41
The Woodlands 94.4% 92.9% 11.6% -0.2% $1,245 $1,243 -72 205 0 504
West University/Medical Center/Third Ward 94.1% 93.5% 0.2% -1.1% $1,687 $1,668 -89 261 0 372
Westchase 93.2% 92.2% 1.6% 1.3% $976 $989 148 -295 0 0
TOTALS 94.0% 92.8% 6.6% 1.5% $1,071 $1,088 -133 -3,239 681 5,616

© 2019 Berkadia Real Estate Advisors LLC

Berkadia® is a registered trademark of Berkadia Proprietary Holding LLC
Document sources: Axiometrics; Berkadia Research; Federal Reserve Bank of St. Louis; Moody’s

BERKADIA FIRST QUARTER 2019

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