HOUSTON

2016 REVIEW

EMPLOYMENT CHANGE

Multifamily development hit a more than

20-year high in the Houston metropolitan
area during 2016 as employment increased
0.5% with 15,000 new jobs. Builders
brought 21,310 apartment units online in the
last four quarters, up from 16,540 deliveries
in 2015. Development was focused in the
high-demand submarkets of Montrose/
River Oaks, Far NW/Montgomery County,
and Bear Creek/Katy, where nearly 40%
of all additions occurred. Even with the
influx, pent-up demand pushed vacancy
down in the Bear Creek/Katy and the Far
NW/Montgomery County areas. Robust
leasing activity could not keep pace with
apartment deliveries in the Montrose/
River Oaks area, leading to rising vacancy
during 2016. This submarket trend
reflected the metro movement, as healthy
absorption trailed rapidly rising inventory
levels leading to overall vacancy of 7.5% in
December of 2016, up from 6.2% one year
prior. Operators responded by trimming
average monthly rent 1.2% annually to $1,101
in December of 2016.

120,000

Employment

80,000
40,000
0

-40,000
-80,000
-120,000
2008

2009

2010

2011

2012

ASKING RENT AND VACANCY

$1,200

8.0%

Rent & Vacancy

$1,100

$900
5.5%
2013
2014
2015
2016*
2017**
*Estimate; **Forecast | Source: Berkadia, Axiometrics,
Moodys Analytics

CONCESSIONS

CONSTRUCTION

1.2% YOY

110 BPS YOY

7.0%

$60,000

6.5%

$30,000

6.0%

$0
2013

2014

2015

2016*

*Estimate | Source: Berkadia, CoStar Group

21,310 Units
28.8% YOY

SALES ACTIVITY INDEX

Index Value (Base Year 2010 = 100)

CAP RATE | PRICE PER UNIT

2012

7.5%

2.5%

300

Sales Index

200

100

0
2012

2013

2014

2015

2016*

*Estimate | Source: Berkadia, CoStar Group

MARKET FACTS
POPULATION

6,853,600

YE 2016

2.0% YOY

HOUSEHOLDS

2,424,500

YE 2016

2.0% YOY

MEDIAN
HOUSEHOLD
INCOME

$60,708

YE 2016

0.2% YOY

0
2013
2014
2015
2016*
2017**
*Estimate; **Forecast | Source: Berkadia, Axiometrics,
Moodys Analytics

2017 PREVIEW

ASKING RENT

$90,000

Permits & Deliveries

10,000

130 BPS YOY

Cap Rate & PPU

PERMITS AND DELIVERIES

30,000

6.0%

40 BPS YOY

7.5%

2017**

6.5%
$1,000

VACANCY

$1,101

2016*

20,000

5.5%

0.5% YOY

2015

7.0%

UNEMPLOYMENT RATE

15,000

2014

7.5%

2016 PERFORMANCE HIGHLIGHTS

EMPLOYMENT

2013

*Estimate; **Forecast | Source: Berkadia, Moodys Analytics

RENT
SHARE OF
WALLET

21.8%

YE 2016

30 BPS YOY

Apartment demand will heighten as worker

headcounts rise 0.4% in the Houston
metropolitan area over the next four
quarters. Total nonfarm employment is
forecast to add a net 13,100 personnel by
year-end. The metro will be boosted by
gains in the manufacturing industry. The
new $417 million Daikin Industries Ltd.
campus will employ up to 5,000 people
when fully operational. A $40 million,
40,000-square-foot manufacturing facility
for IllumiPure is scheduled to open in
the fall, creating 250 jobs. With steady
hiring, residents will newly occupy more
than 13,500 apartments this year, up from
the 11,620 units absorbed during 2016.
Even with the upswing in leasing activity,
absorption will trail the 16,740 units
scheduled to come online by year-end. A
bulk of deliveries will be in the Montrose/
River Oaks submarket, with nearly one out
of every three metrowide additions. Supplyside pressure will shift vacancy up 30 basis
points during the upcoming four quarters
to 7.8% by December. Average asking rent
will advance 1.9% annually to $1,122 per
month by the end of the fourth quarter.
Operators will further maximize returns by
increasing effective rent 2% to $1,095 per
month, trimming average concessions 10
basis points to 2.4% of asking rent.

Data and images pertaining to employment, income, permits, population, rents, single-family housing, and vacancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 2016 are estimated values, while 2017
figures are forecast projections. Apartment market data criteria and methodologies vary by market.