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Q1 2021 | Houston Multifamily Market Report

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Key Takeaways

• Occupancy up quarter over quarter, down annually
• Absorption increased quarterly and annually
• Average rents rose over the year and over the quarter
• Inventory increased by 16,969 units March ‘20 to March ’21

2021_Q1_Multifamily_Occupancy Rate   2021_Q1_Multifamily_Net Absorption
 2021_Q1_Multifamily_Under Construction  2021_Q1_Multifamily_Monthly Rate

 

Houston Highlights

According to Emsi Labor Analytics, as of 2020 Houston’s regional population has increased by 7.5% since 2015, growing by 500,885. Population is expected to increase by 7.6% between 2020 and 2025, adding 544,540. From 2015 to 2020, jobs increased by 2.3% in Houston-The Woodlands-Sugar Land, TX from 3,276,633 to 3,350,731. This change outpaced the national growth rate of 1.3% by 1.0%. As the number of jobs increased, the labor force participation rate decreased from 62.9% to 60.6% between 2015 and 2020. Concerning educational attainment, 21.0% of Houston-The Woodlands-Sugar Land, TX residents possess a Bachelor’s Degree (1.0% above the national average), and 7.3% hold an Associate’s Degree (1.3% below the national average). The top three industries in 2020 were General Medical/Surgical Hospitals, Education/Hospitals (Local Government) and Restaurants/Entertainment.

Market Indicators

2021_Q1_Multifamily_Market Indicators

Historic Comparison

2021_Q1_Multifamily_Historic Comparison

 
Market Fundamentals

 2021_Q1_Multifamily_Market Fundamentals

Houston’s overall occupancy rate increased 40 basis points over the quarter. The average monthly rent rose from $1,041 to $1,056.

Pricing & Sales Volume

Houston’s multifamily investment sales volume increased 24.1% over the quarter between Q4 2020 and Q1 2021 according to our data provider, Real Capital Analytics. The increase in volume reflects a positive change in market conditions when compared to the year over year volume decrease of 42.9% between Q1 2020 and Q1 2021. When comparing Houston to the U.S., Houston’s quarterly volume increase was significantly greater than the 0.6% increase in U.S. quarterly sales volume.

Houston’s average sales price per unit increased by 14.4% over the year from $126,969 to $145,273. The U.S. average price per unit increased by 0.4% over the year from $173,617 in Q1 2020 to $174,406 in Q1 2021.

Average Price per Unit

2021_Q1_Multifamily_Ave Price Per Unit

Houston Sales Volume ($)

2021_Q1_Multifamily_Sales Volume

Cap Rates

Houston’s multifamily cap rates remained at 5.1% over the quarter, but decreased over the year by 30 basis points. In comparison, the average U.S. cap rate decreased 10 basis points over the quarter from 5.1% to 5.0% and dropped 40 basis points on an annual basis from 5.4%.

Average Cap Rate
2021_Q1_Multifamily_Ave Cap Rates
 
Executive Summary
Commentary by Chip Nash

In the last 90 days, interest in Houston Multifamily has spiked considerably from where it has been for the past 24 months. Investors are anxiously searching for opportunities to invest their equity and the market has responded with numerous new offerings. Contrary to the previous twelve months, investors now have multiple opportunities to consider, spurring spiked pricing and pushing cap rates to lower numbers than seen at the beginning of 2021.

We expect sales volume to continue to increase as investors are priced out of buying opportunities in other markets both nationally as well as within the state of Texas. Low cap rates in Dallas and Austin have driven investors to Houston. The volume of inbound calls from out of state and new to the market investors is astonishing. We estimate that as much as 75% of the properties sold this year could go to investors that don’t currently own here. We believe there will be an increased demand for value-add properties where cash on cash yields are expected to grow once rehab improvements and unit upgrades are completed, thus giving investors a boost in performance and yield and gains in occupancy. As job creation and employment continue to rebound, apartment owners expect to push rents accordingly as new supply drops off late in the year.

The gap in cap rates for older value-add properties versus newer stabilized properties continues to narrow. Interest rates remain very attractive and agency lending has stepped up recently and is competing favorably with debt funds for well-located apartment properties. We see this continuing through at least the end of the 4th quarter.

 

 
   2021_Q1_Multifamily_Ashford Lakes
   
 
Ashford Lakes
Colliers Houston Multifamily Advisory Group is pleased to announce the exclusive listing of Ashford Lakes, an upscale, Class A, Value-Add Opportunity in the heart of West Houston’s Energy Corridor. Originally built by Jenard Gross, one of Houston’s long-term prestigious builders, current ownership has renovated one third of the units and are achieving $150+ or more premium verses nonrenovated units providing new ownership the opportunity to renovate the remaining two-thirds of the units. Located on Dairy Ashford Road just south of the exclusive Memorial suburban neighborhoods and minutes from both CityCentre and Memorial City Mall, the surrounding areas offer a blend of high-end shopping, unique dining, forested parks and includes direct access to Terry Hershey Park, a 500-acre park with over ten miles of hike and bike trails. 
 

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Q1 2021 | Houston Multifamily Market Report

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Related Experts

Lisa Bridges

Director of Market Research | Houston

Houston

Lisa joined Colliers in 2010 as Director of Market Research and has 37 years of commercial real estate experience. Lisa initiates proactive market research projects to further the business goals of the company. She writes and prepares 29 market reports annually, including quarterly reports on Houston's retail, office, industrial and healthcare properties.  Further, she prepares statistical ownership reports for various clients as well as an annual Houston Economic Overview. Lisa also creates PowerPoint market presentations, trade journal articles, and other marketing materials supporting the company's business endeavors. She works with senior management in planning the company's marketing strategy and public relations support for local and national conferences, luncheon meetings, recruitment programs, and special events.  Lisa works closely with the company's brokers to develop effective custom market research material specific to existing and potential clients.

Lisa serves on the Colliers Editorial Board, the Colliers U.S. Research Council, and is a recipient of the Colliers Researcher of the Year Award.

Lisa earned the Commercial Property Research Certification (CPRC) from Colliers University.  CPRC is the first and only accreditation for commercial real estate research professionals. It offers a professional development path to increase strategic and tactical expertise in marketing/research, knowledge of the industry and capabilities with commercial real estate tools.

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Todd Stewart

Senior Vice President | Houston

Houston

Mr. Stewart joined Colliers in September 2020 and is a Senior Vice President and Director of Multifamily Investment Properties. Mr. Stewart has 30 years of experience with investment properties. During the course of his career, Mr. Stewart and his partners have negotiated sales in the amount of approximately $12 billion in more than 500 transactions totaling 150,000 units throughout the United States. He has been ranked one of the top multi-housing specialists in Houston for the past 20 years and has worked with a variety of clients including individuals, private syndicators, pension funds, REITs, S&L’s, insurance companies and banks.

Prior to joining Colliers, Mr. Stewart was a Managing Director at JLL, a Senior Managing Director with HFF (Holliday Fenoglio Fowler, L.P.) and an Executive Vice President of the CBRE Houston Multi-Housing Properties Group. As a member of CBRE’s Major Accounts Group, Mr. Stewart was a top ranking regional and national multi-housing salesperson. He has been ranked as a Houston Business Journal Heavy Hitter and has received the Directors Award. 

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Chip Nash

Senior Vice President | Houston

Houston

Chip Nash joined Colliers Houston in September 2020 and is Senior Vice President and a Director of Multifamily Invest Properties.

Before joining Colliers, Nash was a Managing Director for JLL focusing exclusively on private capital investment sales of multifamily properties for eight years. Previous to JLL, Nash held similar positions at Berkadia, Hendricks and Partners, and Pinnacle International Realty Group. He has negotiated hundreds of transactions encompassing a 25+ year track record in investment sales along with a previous seven years spent in the commercial banking business for a conglomerate of banks owned by Pulte Home Corporation.

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Bob Heard

Senior Vice President | Houston

Houston

Bob is a Senior Vice President within Colliers’ Houston office and a director of Multifamily Investment Properties. Bob brings 12 years of real estate experience specializing in capital markets and multifamily investment sales. Over the course his career, Bob has been involved in all aspects of income-producing properties including the management, syndication, rehabilitation, purchase and sale of multifamily developments. Prior to joining Colliers, Bob was a Vice President within JLL Houston’s Capital Markets Multi-Family Investment Group. Prior to JLL, Bob was a Senior Associate with the multi-family investment sales group at Berkadia. Bob is a Licensed Real Estate Broker with a Series 7 License.

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Jim Humphries

Associate | Houston

Houston

Jim Humphries is an Associate at Colliers in Houston since 2015 and part of Colliers Investment Services Group (CISG). He specializes in multifamily assets with an emphasis on properties within Texas and the Southern United States.

Colliers Houston’s ISG team takes a consultative approach to commercial real estate which includes developing and executing strategies that are both consistent with its clients’ objectives as well as feasible in the current market environment.

Jim has seven years of multifamily real estate experience. Most recently as an analyst with the HFF Houston Multifamily group where he was directly involved in more than $6 billion in transactions. In that role, his responsibilities included underwriting and market analysis for both existing and to-be-built acquisitions and dispositions.

Jim’s primarily focus is on multifamily investment services and capital markets. His responsibilities include multifamily investment sales, business development, financial and debt analysis, market research, due diligence and offering memorandum production.

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