Occupancy Avg. Rental Rate Net Absorption Under Construction Completions
Houston’s multifamily market started the year with The Northwest absorbed more than 1,100 units or leasing demand on a sound note, absorbing nearly roughly 38% of the total absorption this quarter, 3,000 units in the first quarter of 2018 and most likely stemming from homeowners still continues to showcase tightening fundamentals; displaced by Harvey. The construction pipeline overall occupancy increased 30 basis points over continues to subside for now with the market the quarter to 89.7% and rents grew an annualized currently holding just under 11,000 units 4.5% to $1.16 per sq. ft. across all classes. underway, far below the 5-year active average construction level of 18,580 units. According to reports from Apartment Data Services (ADS) the Central submarket cluster was a hot bed of activity this quarter. The cluster accounted for three of the five hottest submarkets for the quarter Moody Analytics is forecasting Houston to add with Downtown, Heights/Washington Ave, 72,700 new payrolls this year, up from 70,500 in Montrose/Museum /Midtown – Downtown 2017. Using the conventional demand benchmark absorbed 3.6% of its market inventory and saw a of 6:1 for new leasing growth, the outlook this year rental growth of 22.5% annualized. is for Houston to absorb approximately 12,000 units based on sustained job growth.
Robert C. Kramp Director, Research & Analysis– Texas-Oklahoma Division +1 713 5771715 [email protected]
E. Michelle Miller Research Operations Manager– Texas-Oklahoma Division +1 214 9796584 [email protected]
CJ Mgbeahuru Research Coordinator– Texas-Oklahoma Division +1 713 577 1720 [email protected]
CBRE Houston 2800 Post Oak Blvd, Suite 500 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. MARKETVIEW
Houston Multifamily, Q4 2017 Robust absorption pushes market toward equilibrium
89.4% $1.15 PSF 9,010 Units 9,751 Units 2,499 Units
*Arrows indicate trend from previous quarter. Figure 1: Development Pipeline and Net Absorption Units (000) 25
20
15
10
5
0 2011 2012 2013 2014 2015 2016 2017 Deliveries Absorptions Source: CBRE Research, Apartment Data Services, Q4 2017.
DECADE-HIGH NET ABSORPTION PUSHES RATES FALLING CONSTRUCTION WILL CONSTRAIN AND OCCUPANCY HIGHER SUPPLY IN THE NEAR-TERM
Q4 2017 CBRE Research © 2018 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators Net Under Delivered Proposed Unit Rental Rate Occupancy Submarket Property Count Absorptio Constructio Construction Construction Count ($/SF/Mth) Rate (%) n Units n Units Units Units CENTRAL Montrose/ Museum/ Midtown 50 12,501 1.83 90.0 396 1,771 0 3,122 Highland Village/ Upper Kirby/ West U 63 16,619 1.76 91.2 343 0 199 598 Med Center/ Braes Bayou 79 23,361 1.46 88.2 173 652 270 0 Heights/ Washington Ave 46 10,625 1.71 90.7 595 931 0 1,423 Downtown 23 5,951 2.05 67.1 281 220 886 1,800 TOTALS 261 69,057 1.76 85.4 1,788 3,574 1,355 6,943 SOUTHWEST Galleria/Uptown 102 24,306 1.45 88.2 489 281 357 356 Woodlake/ Westheimer 37 12,233 1.12 90.7 331 0 0 0 Energy Corridor/CityCentre/Briar Forest 100 31,554 1.25 86.7 470 1,383 0 920 Westchase 50 14,922 1.16 91.6 361 0 0 0 Alief 110 26,897 0.98 92.5 315 0 0 0 Sharpstown/ Westwood 106 25,538 0.88 91.5 157 0 0 0 Westpark/Bissonnet 57 16,900 0.91 91.6 (234) 0 0 0 Braeswood/ Fondren SW 82 21,786 0.92 87.7 (11) 0 0 0 Almeda/ South Main 26 4,770 1.01 88.1 99 0 0 0 Sugar Land/Stafford/Sienna 51 12,896 1.24 90.0 136 0 132 417 Richmond/ Rosenberg 29 4,766 1.11 92.0 (12) 0 0 0 TOTALS 750 196,568 1.09 90.1 2,101 1,664 489 1,693
NORTHWEST Brookhollow/Northwest Crossing 90 19,711 1.01 90.7 237 293 121 0
Memorial/Spring Branch 108 21,771 1.02 92.6 143 133 0 758 Inwood/ Highway 249 31 5,828 0.89 95.7 74 0 0 0 Willowbrook/Champions/Ella 157 38,963 1.02 90.4 458 0 0 0 Jersey Village/Cypress 62 15,281 1.08 92.8 254 0 0 443 Bear Creek/Copperfield/Fairfield 59 16,240 1.16 90.7 403 0 0 0 Katy/Cinco Ranch/Waterside 90 24,753 1.24 88.0 351 713 0 1,326 Tomball/ Spring 55 12,959 1.21 84.2 385 292 150 701 Woodlands/ Conroe South 67 19,364 1.22 89.7 239 340 0 900 Conroe North/Montgomery 47 8,649 1.00 86.5 159 0 0 680 TOTALS 766 183,519 1.09 90.1 2,703 1,771 271 4,808 NORTHEAST I-10 East/ Woodforest/ Channelview 57 11,651 1.02 81.7 191 546 0 0 I-69 North 27 3,605 0.91 94.8 46 350 0 0 Northline 47 6,294 0.90 91.2 (44) 154 0 0 Greenspoint/Northborough/Aldine 67 17,349 0.89 84.2 586 0 0 0 FM 1960 East/ IAH Airport 46 8,778 0.97 95.0 96 0 0 0 Lake Houston/ Kingwood 49 12,674 1.18 85.7 160 320 0 1,100 Northeast Houston/Crosby 21 3,278 0.88 81.7 16 0 0 0 TOTALS 314 63,629 0.96 87.8 1,051 1,370 0 1,100 SOUTHEAST Hwy 288 South/ Pearland West 46 11,844 1.17 86.4 168 571 0 400 U of H/I-45 South 107 17,554 0.91 89.2 113 0 0 191 Beltway 8/I-45 South 47 13,204 1.00 90.6 146 0 0 0 Pasadena/Deer Park/La Porte 120 23,205 0.97 91.0 281 135 0 0 Friendswood/ Pearland East 28 5,458 1.15 93.6 13 108 0 126 Clear Lake/Webster/League City 95 24,030 1.21 91.8 289 558 0 0 Baytown 54 10,056 1.04 87.3 198 0 384 480 Dickinson/Galveston 74 11,330 1.04 91.8 60 0 0 0 Alvin/Angleton/Lake Jackson 66 10,525 1.06 85.6 99 0 0 0 TOTALS 637 127,206 1.06 89.7 1,367 1,372 384 1,197 HOUSTON TOTALS 2,728 639,979 1.15 88.6 9,010 9,751 2,499 15,741 Source: CBRE Research, Apartment Data Services, Q4 2017.
Q4 2017 CBRE Research © 2018 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
Figure 3: Deliveries and Occupancy Units (000s) (%)
8 92
91 7 90 6 89 5 88
4 87
86 3 85 2 84 1 83
0 82 Q2'10 Q4'10 Q2'11 Q4'11 Q2'12 Q4'12 Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Q2'16 Q4'16 Q2'17 Q4'17
Deliveries Occupancy
Source: CBRE Research, Apartment Data Services, Q4 2017.
Figure 4: Sales By total ($)
Billions ($) 7
6
5
4
3
2
1
0 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17
Quarterly Vol Rolling 12-mo. Total
Source: CBRE Research, Real Capital Analytics, Q4 2017.
Q4 2017 CBRE Research © 2018 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
CBRE OFFICES
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q3 2017 Dramatic apartment demand swing in post-Harvey Houston
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 88.3% $1.13 PSF (4,170) Units 12,105 Units 2,487 Units
*Arrows indicate trend from previous quarter. Figure 1: Occupancy and Rental Rates Spike in Respond to Hurricane % $ 91.0 1.14 90.5 1.13 90.0 1.12 89.5 89.0 1.11 88.5 1.10 88.0 1.09 87.5 87.0 1.08 Jul-16 Jul-17 Oct-15 Oct-16 Apr-16 Apr-17 Jan-16 Jan-17 Jun-16 Jun-17 Dec-15 Dec-16 Feb-16 Feb-17 Sep-16 Sep-17 Aug-16 Aug-17 Nov-15 Nov-16 Mar-16 Mar-17 May-16 May-17 * Occupancy Effective Rental Rate Source: CBRE Research, Apartment Data Services, Q3 2017. *Damaged units are removed from operating inventory reflecting increase in occupancy.
Throughout the first half of the year, the from operating inventory. Responding to the multifamily market experienced improving leasing heightened demand, effective rents climbed 1.5% activity and dwindling concessions. While other in a single month as apartment operators ended commercial sectors saw minimal impact from hefty concessions and lease-up specials. It is Hurricane Harvey, damage to multifamily units and important to note, Figure 2 includes down units in demand from the single-family market has thrust the inventory resulting in negative absorption and a Houston into a landlord market 18 months earlier significant drop in occupancy. than anticipated. LASTING DEMAND WILL SUPPORT MARKET Approximately 15,600 units within 215 properties FOR 36 MONTHS reported damage, according to a survey completed by Apartment Data Services. When these properties Although some renters will return to their homes in were removed from operating inventory, the the next six to nine months, demand from recovery occupancy rate spiked to 90.2%, up from 88.9% at efforts and new permanent renters will the beginning of August. Additionally, year-to-date complement organic growth, which was already net absorption through Q3 2017 stood at more than forecasted to pick up in 2019. 22,000 units when excluding damaged properties
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators Net Under Delivered Proposed Property Rental Rate Occupancy Submarket Unit Count Absorption Construction Construction Construction Count ($/SF/Mth) Rate (%) Units Units Units Units CENTRAL Montrose/ Museum/ Midtown 50 12,501 1.82 86.7 559 1,771 0 3,122 Highland Village/ Upper Kirby/ West U 63 16,619 1.75 89.2 520 199 0 598 Med Center/ Braes Bayou 79 23,361 1.44 85.7 119 922 281 0 Heights/ Washington Ave 46 10,625 1.72 89.0 (146) 435 0 1,919 Downtown 23 5,951 2.03 62.3 266 1,106 274 1,800 TOTALS 261 69,057 1.75 82.6 1,318 4,433 555 7,439 SOUTHWEST Galleria/Uptown 102 24,306 1.42 86.1 179 638 246 356 Woodlake/ Westheimer 37 12,233 1.16 88.0 39 0 0 0 Energy Corridor/CityCentre/Briar Forest 99 31,175 1.20 87.4 (1,120) 1,762 0 920 Westchase 50 14,922 1.13 88.7 115 0 0 0 Alief 110 26,897 0.96 91.4 (20) 0 0 0 Sharpstown/ Westwood 106 25,538 0.87 90.9 (44) 0 0 0 Westpark/Bissonnet 57 16,900 0.91 92.9 (72) 0 0 0 Braeswood/ Fondren SW 82 21,786 0.91 87.8 (625) 0 0 0 Almeda/ South Main 25 4,646 0.99 86.7 (183) 124 0 0 Sugar Land/Stafford/Sienna 51 12,896 1.24 88.9 162 0 483 417 Richmond/ Rosenberg 29 4,766 1.09 92.3 (11) 0 0 0 TOTALS 748 196,065 1.08 89.2 (1,580) 2,524 729 1,693 NORTHWEST Brookhollow/Northwest Crossing 90 19,712 1.00 90.0 (206) 121 0 330 Memorial/Spring Branch 107 21,642 1.01 92.5 205 133 0 608 Inwood/ Highway 249 31 5,828 0.85 94.5 (31) 0 0 0 Willowbrook/Champions/Ella 158 39,001 1.00 89.3 (368) 0 0 0 Jersey Village/Cypress 61 15,131 1.06 91.4 (227) 0 0 443 Bear Creek/Copperfield/Fairfield 59 16,240 1.12 88.1 (8) 0 0 0 Katy/Cinco Ranch/Waterside 90 24,753 1.23 86.2 (222) 207 0 2,039 Tomball/ Spring 53 12,566 1.20 82.5 478 788 408 701 Woodlands/ Conroe South 66 18,983 1.17 90.1 20 724 170 900 Conroe North/Montgomery 47 8,649 1.00 84.6 255 0 222 680 TOTALS 762 182,505 1.06 88.9 (104) 1,973 800 5,701 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,353 1.00 82.5 (857) 546 0 0 I-69 North 27 3,605 0.89 93.6 (2) 350 0 0 Northline 47 6,294 0.90 91.8 (98) 154 0 0 Greenspoint/Northborough/Aldine 67 17,120 0.88 80.5 (1,081) 0 0 0 FM 1960 East/ IAH Airport 46 8,778 0.96 93.8 (42) 0 0 0 Lake Houston/ Kingwood 48 12,356 1.14 86.2 (288) 300 0 1,100 Northeast Houston/Crosby 21 3,278 0.88 83.3 (312) 0 0 0 TOTALS 312 62,784 0.95 87.4 (2,680) 1,350 0 1,100 SOUTHEAST Hwy 288 South/ Pearland West 45 11,599 1.15 86.6 (61) 400 0 400 U of H/I-45 South 105 17,257 0.89 88.4 (316) 240 0 191 Beltway 8/I-45 South 47 13,204 1.00 89.6 (149) 0 200 0 Pasadena/Deer Park/La Porte 120 23,205 0.97 89.6 (395) 135 0 0 Friendswood/ Pearland East 28 5,458 1.15 93.3 (10) 108 0 126 Clear Lake/Webster/League City 95 24,032 1.18 90.8 (90) 558 203 0 Baytown 53 9,678 1.00 88.6 (227) 384 0 480 Dickinson/Galveston 74 11,330 1.03 91.3 88 0 0 0 Alvin/Angleton/Lake Jackson 66 10,525 1.08 84.8 36 0 0 0 TOTALS 633 126,288 1.05 89.2 (1,124) 1,825 403 1,197 HOUSTON TOTALS 2,716 636,699 1.13 88.3 (4,170) 12,105 2,487 17,130 Source: CBRE Research, Apartment Data Services, Q3 2017. Damaged units are not removed from inventory and contribute to negative absorption.
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
Figure 3: Post-Harvey Key Takeaways
ESTIMATED DAMAGED UNITS DEMAND RESPONSE • 15,662 units reported damage—40% were • 10,926 units absorbed since Hurricane Class B Harvey
• 2 properties totaling 309 units will likely be • More than 22,000 units absorbed year-to- condemned and removed permanently from date stock
HEAVILY IMPACTED SUBMARKETS FUNDAMENTALS SHIFT POST- HARVEY Energy Corridor/CityCentre/Briar Forest | 2,743 units • Occupancy at 90.2% when damaged units are removed from operating inventory Greenspoint/Northborough/Aldine | 1,696 units • Effective rent increased by $15 per month Katy/Cinco Ranch/Waterside | 1,379 units • Effective rental rate increased 1.7 cents Braeswood/Fondren SW | 1,110 units per sq. ft.
Source: CBRE Research, Apartment Data Services, Q3 2017.
Figure 4: Development Pipeline and Forecasted Absorption Trend
Units (000s) 25
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5
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Deliveries Projected Deliveries Net Absorption
Source: CBRE Research, Apartment Data Services, Q3 2017.
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis– Texas-Oklahoma Division +1 713 5771715 [email protected]
E. Michelle Miller Research Operations Manager– Texas-Oklahoma Division +1 214 9796584 [email protected]
CBRE OFFICES CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q2 2017 Absorption rallies as deliveries continue to decline
Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 88.9% $1.11 PSF 6,773 Units 11,054 Units 4,493 Units
*Arrows indicate trend from previous quarter. Figure 1: Development Pipeline and Occupancy 000’s Units % 6 92
5 90
4 88
3 86
2 84
1 82
0 80 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Deliveries Occupancy Source: CBRE Research, Apartment Data Services, Q2 2017.
NET ABSORPTION RATES RISE ACROSS THE Although nearly 8,000 units are projected to be MARKET delivered for the second half of 2017, absorption Houston is showing signs that its new supply surge rates are forecast to be more than 22,000 units is burning off. Recent data show occupancy has during 2018 and 2019. risen by 60 basis points to 88.9% and deliveries Along with having the highest net absorption, the have dropped by 1,182 units. The completion of Northwest cluster also holds the three top demand 4,493 units in the Q2 2017 is the fewest units submarkets: Woodlands/Conroe South, delivered since the beginning of 2016. Further Tomball/Spring, and Katy/Cinco Ranch/Waterside, balancing the scale, net absorption increased 38% for a combined absorption of 1,861 units. since the Q1 2017. Houston absorbed 6,773 units— Additional strong markets include Energy the most since the Q2 2013. Incentives have Corridor/City Centre/Briar in Southwest Houston boosted the allure of the new product as 5,320 out and Montrose/Museum/Midtown which is of the 6,773 units absorbed were within the Class A centrally located. category. In the longer view, by 2020, Houston is forecasted Construction is slowing in Houston with 3,000 to multiply by over 200,000 payrolls and with these fewer units under construction this quarter in additions, multifamily demand will quickly fill the comparison from the start of the year. recent expansion cycle that started in 2014.
Q2 2017 CBRE Research © 2017 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators
Net Under Delivered Proposed Property Unit Rental Rate Occupancy Submarket Absorption Construction Construction Construction Count Count ($/SF/Mth) Rate (%) Units Units Units Units CENTRAL Montrose/ Museum/ Midtown 51 12,702 1.79 80.4 434 1,513 365 3,380 Highland Village/ Upper Kirby/ West U 61 16,213 1.67 85.5 412 199 297 598 Med Center/ Braes Bayou 77 22,813 1.41 87.2 165 1,202 659 Heights/ Washington Ave 48 11,030 1.68 88.9 398 435 1,919 Downtown 21 5,448 2.06 63.2 267 1,120 242 1,800 TOTALS 258 68,206 1.72 81.0 1,676 4,469 1,563 7,949 SOUTHWEST Galleria/Uptown 100 23,613 1.36 85.4 231 1,266 277 356 Woodlake/ Westheimer 37 12,235 1.14 87.6 58 Energy Corridor/CityCentre/Briar Forest 104 32,688 1.17 86.6 492 242 640 920 Westchase 50 14,922 1.11 87.9 35 266 Alief 110 26,894 0.95 91.5 37 Sharpstown/ Westwood 106 25,538 0.88 91.0 -4 Westpark/Bissonnet 57 16,900 0.89 93.4 -157 Braeswood/ Fondren SW 82 21,787 0.90 90.7 76 Almeda/ South Main 24 4,422 1.00 90.6 53 124 Sugar Land/Stafford/Sienna 48 12,217 1.22 88.6 72 483 200 273 Richmond/ Rosenberg 29 4,766 1.07 92.4 25 TOTALS 747 195,982 1.06 89.6 918 2,115 1,383 1,549 NORTHWEST Brookhollow/Northwest Crossing 89 19,593 0.99 91.1 149 121 330 Memorial/Spring Branch 108 21,714 1.00 91.6 100 133 608 Inwood/ Highway 249 32 5,854 0.85 95.3 70 Willowbrook/Champions/Ella 158 39,013 0.99 90.3 213 Jersey Village/Cypress 61 15,131 1.05 92.9 25 443 Bear Creek/Copperfield/Fairfield 59 16,216 1.13 88.0 145 Katy/Cinco Ranch/Waterside 89 24,487 1.16 87.1 580 207 300 2,039 Tomball/ Spring 52 12,426 1.15 78.0 599 946 354 1,051 Woodlands/ Conroe South 65 18,815 1.16 89.9 682 170 900 Conroe North/Montgomery 44 8,032 0.98 81.5 208 222 396 680 TOTALS 757 181,281 1.05 88.6 2,771 1,629 1,220 6,051 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,353 0.99 90.0 70 246 300 I-69 North 27 3,646 0.89 93.3 48 350 Northline 47 6,290 0.87 93.4 57 Greenspoint/Northborough/Aldine 67 16,853 0.87 86.3 279 FM 1960 East/ IAH Airport 45 8,681 0.95 94.3 73 Lake Houston/ Kingwood 47 12,031 1.12 88.6 266 604 550 Northeast Houston/Crosby 21 3,278 0.87 92.9 -12 TOTALS 310 62,132 0.94 91.3 781 954 246 850 SOUTHEAST Hwy 288 South/ Pearland West 45 11,599 1.12 87.2 280 540 400 U of H/I-45 South 105 17,199 0.90 89.6 -316 191 Beltway 8/I-45 South 46 13,004 0.97 90.8 58 200 Pasadena/Deer Park/La Porte 118 22,839 0.96 92.1 276 294 Friendswood/ Pearland East 28 5,458 1.13 93.5 -26 108 126 Clear Lake/Webster/League City 95 23,868 1.16 91.1 161 410 350 Baytown 53 9,678 1.01 90.9 12 384 480 Dickinson/Galveston 74 11,330 1.02 90.5 73 Alvin/Angleton/Lake Jackson 66 10,533 1.06 84.6 109 TOTALS 630 125,508 1.04 90.0 627 1,936 0 1,547 HOUSTON TOTALS 2,702 633,109 1.11 88.9 6,773 11,054 4,493 17,694
Source: CBRE Research, Apartment Data Services, Q2 2017.
Q2 2017 CBRE Research © 2017 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
Figure 3: Deliveries and Absorption Units (000s) 25
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0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Projected Deliveries Deliveries Net Absorption
Source: CBRE Research, Apartment Data Services, Q2 2017.
Figure 4: Top Sales Transactions
Name Address Units Submarket
1 Westchase Ranch Resort 2101 Hayes Rd 776 Westchase
2 City West 2828 Hayes Rd 510 Westchase
3 Modera at Spring Town Center Kuykendahl 396 Tomball/Spring
4 Watermark at Walker Commons 2205 W Walker St 368 Clear Lake/Webster/League City
5 Mason Park 222 Mason Creek Dr 312 Katy/Cinco Ranch/Waterside
6 SYNC at Harmony 3530 Discovery Creek Blvd 308 Woodlands/Conroe South
7 Residences at Cinco Ranch 20900 Farm to Market 1093 300 Katy/Cinco Ranch/Waterside
8 La Esencia 300 N Vista Dr 296 Willowbrook/Champions/Ella
9 Pine Forest 406 Deats Rd 286 Dickinson/Galveston
10 Westborough Crossing 2031 Westborough Crossing 274 Katy/Cinco Ranch/Waterside
Source: CBRE Research, Real Capital Analytics, Q2 2017.
Q2 2017 CBRE Research © 2017 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis– Texas-Oklahoma Division +1 713 5771715 [email protected]
E. Michelle Miller Research Operations Manager– Texas-Oklahoma Division +1 214 9796584 [email protected]
Albert J. Spiers Researcher +1 713 5771717 [email protected]
CBRE OFFICES CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q1 2017 Emptying pipeline leads to improved net absorption rates
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 88.3% $1.11 PSF 4,916 Units 14,451 Units 5,675 Units
*Arrows indicate trend from previous quarter. Figure 1: Development Pipeline and Net Absorption
Units (000s) 25
20
15
10
5
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Projected Deliveries Deliveries Net Absorption
Source: CBRE Research, Apartment Data Services, Q1 2017.
NET ABSORPTION RATES DOUBLE YEAR-OVER- strongest demand in the city following the YEAR Northwest, absorbing 1,247 units in Q1 2017. Improving metrics indicate the Houston Within the individual submarkets, the Energy multifamily market is stabilizing. As new units were Corridor/CityCentre/Briar Forest submarket had leased in Q1 2017, occupancy decreased slightly the highest demand with 502 units absorbed, from 88.5% in Q4 2016. Year-over-year Q1 2017 net mostly in Class A product. In the Tomball/Spring absorption rates are nearly double demand levels submarket, Class A properties saw the second from this time last year. Net absorption increased highest net absorption at 438 units. from 3,545 units in Q4 2016 to 4,916 units in Q1 2017. Owners continue to utilize aggressive concessions Houston delivered 5,765 units in Q1 2017 with the to gain a competitive edge and fill their Central cluster adding 2,120 units, leading all other apartments. Most developments are continuing to submarkets in completion activity. Central also had offer an average of three months free rent. the heaviest development pipeline with 5,937 units Houston’s new class of “Prime Class A” under construction. Due to increasing inventory, apartments are differentiating themselves through occupancy in Central Houston dropped 80 basis lavish amenities that are successfully attracting points from 79.1% to 78.3%. Central had the new residents in addition to free rent incentives.
Q1 2017 CBRE Research © 2017 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators
Net Under Delivered Proposed Property Unit Rental Rate Occupancy Submarket Absorption Construction Construction Construction Count Count ($/SF/Mth) Rate (%) Units Units Units Units CENTRAL Montrose/ Museum/ Midtown 52 12,736 1.74 77.0 268 1,779 859 3,313 Highland Village/ Upper Kirby/ West U 61 16,213 1.66 85.6 76 500 719 Med Center/ Braes Bayou 77 22,813 1.40 86.5 305 1,861 256 Heights/ Washington Ave 48 11,030 1.67 84.1 319 435 2,136 Downtown 21 5,448 2.07 58.5 279 1,362 286 1,500 TOTALS 259 68,240 1.71 78.3 1,247 5,937 2,120 6,949 SOUTHWEST Galleria/Uptown 100 23,613 1.36 86.6 80 1,267 277 356 Woodlake/ Westheimer 37 12,235 1.16 87.2 130 387 Energy Corridor/CityCentre/Briar Forest 104 32,688 1.19 85.1 502 882 230 920 Westchase 50 14,922 1.13 87.7 3 266 Alief 110 26,894 0.95 91.4 25 Sharpstown/ Westwood 106 25,538 0.87 91.0 -80 Westpark/Bissonnet 57 16,900 0.91 94.3 -13 Braeswood/ Fondren SW 82 21,787 0.91 90.4 132 Almeda/ South Main 24 4,422 0.99 88.9 -1 124 Sugar Land/Stafford/Sienna 48 12,217 1.20 91.9 133 551 273 Richmond/ Rosenberg 29 4,766 1.07 91.9 53 TOTALS 747 195,982 1.07 89.7 964 3,090 894 1,549 NORTHWEST Brookhollow/Northwest Crossing 89 19,593 0.97 90.8 136 120 330 Memorial/Spring Branch 108 21,714 1.00 91.4 17 133 608 Inwood/ Highway 249 32 5,854 0.85 94.2 -7 Willowbrook/Champions/Ella 158 39,013 0.98 89.7 35 Jersey Village/Cypress 61 15,131 1.05 92.8 124 152 443 Bear Creek/Copperfield/Fairfield 59 16,216 1.11 86.8 268 417 Katy/Cinco Ranch/Waterside 89 24,487 1.17 85.5 492 753 746 2,039 Tomball/ Spring 52 12,426 1.14 74.0 474 946 1,051 Woodlands/ Conroe South 65 18,815 1.16 87.5 454 900 Conroe North/Montgomery 44 8,032 0.98 85.1 21 619 168 520 TOTALS 757 181,281 1.04 87.8 2,014 2,723 1,331 5,891 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,353 0.97 89.5 -39 246 300 I-69 North 27 3,646 0.88 91.8 -20 350 Northline 47 6,290 0.87 92.7 11 Greenspoint/Northborough/Aldine 67 16,853 0.86 88.1 -75 FM 1960 East/ IAH Airport 45 8,681 0.93 94.0 47 Lake Houston/ Kingwood 47 12,031 1.10 88.8 110 627 250 Northeast Houston/Crosby 21 3,278 0.86 93.1 -42 TOTALS 310 62,132 0.92 91.1 -8 1,223 0 550 SOUTHEAST Hwy 288 South/ Pearland West 45 11,599 1.14 84.7 57 540 550 400 U of H/I-45 South 105 17,199 0.90 91.5 332 191 Beltway 8/I-45 South 46 13,004 0.97 91.7 -31 152 Pasadena/Deer Park/La Porte 118 22,839 0.94 90.8 260 294 Friendswood/ Pearland East 28 5,458 1.12 94.0 25 108 126 Clear Lake/Webster/League City 95 23,868 1.15 90.6 144 550 557 Baytown 53 9,678 1.00 90.7 -56 384 480 Dickinson/Galveston 74 11,330 1.01 89.7 -78 230 Alvin/Angleton/Lake Jackson 66 10,533 1.04 83.5 46 TOTALS 630 125,508 1.03 89.7 699 1,478 1,330 1,754 HOUSTON TOTALS 2,703 633,143 1.11 88.3 4,916 14,451 5,675 16,693
Source: CBRE Research, Apartment Data Services, Q1 2017.
Q1 2017 CBRE Research © 2017 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
Figure 3: Expected Deliveries by Quarter
Units
10,000
8,729
8,000
6,000 5,675
4,000
2,376
2,000 1,234 1,007 537 640 281 0 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Source: CBRE Research, Apartment Data Services, Q1 2017.
Figure 4: Top Sales Transactions
Name Address Units Submarket
1 Connection at Buffalo Pointe 10201 Buffalo Speedway 352 Med Center/Braes Bayou
2 Vista at Grand Crossing 302 Cobia Dr 351 Katy/Cinco Ranch/Waterside
3 Broadstone Grand Parkway 1111 Falcon Dr 342 Katy/Cinco Ranch/Waterside
4 North Park Crossing 310 Parramatta Ln 336 Willowbrook/Champions/Ella
5 Oak Forest 1370 Afton St 321 Memorial/Spring Branch
6 Equinox 2950 Old Spanish Trl 304 Med Center/Braes Bayou
7 Normandy Woods 695 Normandy St 268 I-10 East/Woodforest/Channelview
8 Hollister Place Apartments 6565 Hollister Rd 260 Brookhollow/Northwest Crossing
9 London Park Apartments 14545 Bammel N Houston Rd 257 Willowbrook/Champions/Ella
10 The Meritage 4550 N Braeswood Blvd 240 Med Center/Braes Bayou
Source: CBRE Research, Real Capital Analytics, Q1 2017.
Q1 2017 CBRE Research © 2017 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis– Texas-Oklahoma Division +1 713 5771715 [email protected]
E. Michelle Miller Research Operations Manager– Texas-Oklahoma Division +1 214 9796584 [email protected]
Albert J. Spiers Researcher +1 713 5771717 [email protected]
CBRE OFFICES CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q4 2016 Historic deliveries blanket the market
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 88.5% $1.10 PSF (3,545) Units 15,713 Units 5,350 Units
*Arrows indicate change from previous quarter. Figure 1: Development Pipeline and Occupancy 000’s Units Occupancy (%) 25 96 94 20 92 15 90
10 88 86 5 84 0 82 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Projected Deliveries Deliveries Occupancy
Source: CBRE Research, CBRE Econometric Advisors Q4 2016. Development continued to soar through the end TYPICAL SEASONAL TRENDS RESULT IN of 2016, topping out at 22,549 units delivered, DROPPING NET ABSORPTION which is the most units deliveries in a single year Slowing employment and net migrations, on record for the Houston Market. The fourth combined with a lengthy, active construction cycle quarter of 2016 also had the highest amount of have led to weakening multifamily demand deliveries compared to any other fourth quarter. throughout the year. Although the fourth quarter With the abundance of new development, typically sees lower than average demand, Q4 2016 occupancy levels decreased slightly due to the registered the most negative net absorption since concentrated supply in several submarkets. 2006. The year closed with negative 2,960 units Looking forward, Houston has 15,713 additional absorbed. The only market to see a decline yet still units under construction that will deliver maintain positive net absorption was the Central throughout 2017 and 2018. The first quarter of Houston cluster which slid to 269 units absorbed. 2017 is set to deliver 7,353 units followed by 2,282 The most negative net absorption was in the units in Q2 2017. The second half of the year will Southeast cluster at negative 1,248 units and the finally see a sharp drop in delivered construction. individual submarket with the most negative net The supply imbalance should level out towards absorption was Willowbrook/Champion/Fairfield at the end of 2017 just as demand begins to negative 598 units. increase.
Q4 2016 CBRE Research © 2017 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators
Net Under Delivered Proposed Property Unit Rental Rate Occupancy Submarket Absorption Construction Construction Construction Count Count ($/SF/Mth) Rate (%) Units Units Units Units
CENTRAL Montrose/ Museum/ Midtown 49 11,901 1.75 80.1 (74) 1,800 662 3,273 Highland Village/ Upper Kirby/ West U 61 16,206 1.69 85.2 106 500 270 598 Med Center/ Braes Bayou 74 21,813 1.37 89.0 (47) 2,117 301 0 Heights/ Washington Ave 48 11,030 1.69 81.0 68 435 378 1,538 Downtown 19 4,819 1.97 60.3 216 1,122 611 1,500 TOTALS 251 65,769 1.69 79.1 269 5,974 2,222 6,909 SOUTHWEST Galleria/Uptown 99 23,369 1.36 87.2 (127) 986 388 0 Woodlake/ Westheimer 37 12,235 1.12 85.9 142 0 387 0 Energy Corridor/CityCentre/Briar Forest 102 31,848 1.16 86.0 353 1,126 280 1,170 Westchase 49 14,653 1.15 89.1 (153) 266 0 Alief 110 26,895 0.94 91.2 (430) 0 0 Sharpstown/ Westwood 106 25,538 0.86 91.5 (292) 0 0 Westpark/Bissonnet 57 16,900 0.90 93.4 (158) 0 0 Braeswood/ Fondren SW 83 21,907 0.89 89.8 (164) 0 0 Almeda/ South Main 24 4,422 0.97 89.3 (113) 124 0 Sugar Land/Stafford/Sienna 48 12,217 1.21 90.9 (175) 0 273 Richmond/ Rosenberg 29 4,766 1.06 90.8 (102) 0 0 TOTALS 744 194,750 1.06 89.6 (1,219) 2,502 1,055 1,443 NORTHWEST Brookhollow/Northwest Crossing 89 19,593 0.97 90.1 (191) 120 330 Memorial/Spring Branch 107 21,527 0.98 90.9 (184) 0 281 Inwood/ Highway 249 33 6,030 0.83 94.3 4 551 0 Willowbrook/Champions/Ella 158 39,013 0.98 89.6 (598) 0 0 Jersey Village/Cypress 60 14,961 1.03 92.3 (147) 322 443 Bear Creek/Copperfield/Fairfield 57 15,799 1.08 89.9 (198) 417 0 Katy/Cinco Ranch/Waterside 87 23,800 1.15 85.9 296 925 130 2,246 Tomball/ Spring 49 11,468 1.12 76.0 266 1,348 979 1,051 Woodlands/ Conroe South 65 18,815 1.15 85.2 367 0 900 Conroe North/Montgomery 44 8,014 0.99 84.9 (52) 619 472 150 TOTALS 749 179,020 1.03 87.9 (437) 4,302 1,581 5,401 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,353 0.97 89.8 (135) 246 300 I-69 North 26 3,503 0.87 92.1 (9) 350 0 Northline 47 6,290 0.86 92.7 1 0 78 0 Greenspoint/Northborough/Aldine 67 16,686 0.86 85.9 (153) 0 0 FM 1960 East/ IAH Airport 45 8,681 0.93 93.5 25 0 0 Lake Houston/ Kingwood 47 12,031 1.13 87.9 (114) 327 250 Northeast Houston/Crosby 21 3,278 0.83 94.4 60 0 TOTALS 309 61,822 0.92 90.9 (325) 923 78 550 SOUTHEAST Hwy 288 South/ Pearland West 45 11,612 1.15 84.2 25 240 400 U of H/I-45 South 105 17,259 0.89 89.6 (311) 0 222 191 Beltway 8/I-45 South 46 13,004 0.99 92.0 (139) 152 0 Pasadena/Deer Park/La Porte 118 22,838 0.94 89.8 (267) 294 192 0 Friendswood/ Pearland East 28 5,458 1.11 93.7 (60) 0 126 Clear Lake/Webster/League City 94 23,690 1.14 90.9 (117) 203 557 Baytown 53 9,678 1.00 91.3 (41) 384 480 Dickinson/Galveston 73 11,100 0.99 92.3 (181) 230 878 Alvin/Angleton/Lake Jackson 64 10,027 1.03 86.0 (157) 509 0 TOTALS 626 124,666 1.03 90.0 (1,248) 2,012 414 2,632 HOUSTON TOTALS 2,679 626,027 1.10 88.5 (2,960) 15,713 5,350 16,935 Source: CBRE Research, Apartment Data Services, Q4 2016.
Q4 2016 CBRE Research © 2017 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
CENTRAL HOUSTON REMAINS THE MOST Figure 3: Avg. Rental Rate by Class EXPENSIVE AREA DESPITE RATE REDUCTIONS $/SF For the past two quarters, rental rates have 1.5 continued to drop. Q4 2016 overall rental rates ended the year at $1.10 per sq. ft. Class A properties 1.3 saw the most significant drop from $1.52 to $1.49 1.1 per sq. ft. year-over-year. The Class B market rental rates declined by a modest $0.01 per sq. ft., while 0.9 the Class C market increased by $0.01 per sq. ft. year-over-year. Deliveries remain strong, and the 0.7 new supply in lease-up is pushing these rental rates 0.5 down. Heavy discounts are still available on most Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Class A properties, which are offering 1-2 months Class A Class B Class C free rent on top of reduced rates. Source: CBRE Research, Apartment Data Services, Q4 2016. Even with declining rental rates, the Central Houston submarkets maintained the highest rates with an average of $1.69 per sq. ft., which dropped Figure 4: Avg. Occupancy Rate by Class from $1.74 per sq. ft. in Q3 2016 but are still above the market average of $1.10 per sq. ft Occupancy (%) 95
OCCUPANCY CONTINUES DOWNWARD TREND 90 Across the board, Class A, B, and C properties all saw a drop in occupancy. Average occupancy 85 dropped 90 basis points (bps) from 89.4% in Q3 2016. At year-end 2016, market-wide occupancy has 80 not been this low since 2012. Although still above 75 90% occupancy, Class B and C properties saw the largest drop in this metric, at 110 bps and 140 bps, 70 respectively. Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Class A saw a small increase in demand last quarter, Class A Class B Class C but due to the large amount of deliveries, however, Source: CBRE Research, Apartment Data Services, Q4 2016. occupancy dropped in Q4 2016 from 80.1% to 79.6%. Figure 5: Development Activity
SLOWING DOWN AT THE END OF THE YEAR Units (000s) Houston finally saw development activity slow in Q4 35 2016. Although there were 19,509 units under 30 construction at year-end, it is the lowest amount of 25 projects underway since 2014 when 24,290 units 20 were delivered. Additionally, 2016 has 7,000 less 15 units under construction than Q4 2015. The wave of construction underway will take time to 10 deliver and be absorbed. Q4 2016 has the highest 5 amount of fourth quarter deliveries on record at 0 5,350 units. With the strong deliveries and 2009 2010 2011 2012 2013 2014 2015 2016 construction activity, occupancy will continue to Under Construction Deliveries struggle in Class A properties and it will take a shift Source: CBRE Research, Apartment Data Services, Q4 2016. in demand to see a change in this key indicator.
Q4 2016 CBRE Research © 2017 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis– Texas-Oklahoma Division +1 713 5771715 [email protected]
E. Michelle Miller Research Operations Manager– Texas-Oklahoma Division +1 214 9796584 [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q3 2016 Central and NW capture bulk of leasing demand
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 89.4% $1.12 PSF 1,947 Units 17,572 Units 6,859 Units
*Arrows indicate change from previous quarter. Figure 1: Overall Net Absorption and Construction
Units (000s) 30
25
20
15
10
5
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Projected Deliveries Deliveries Net Absorption Source: CBRE Research, Apartment Data Services, Q3 2016. best performing quarter with a record net LEASING CONTINUES TO DECLINE EXCEPT IN absorption of 1,170 units in the Med Center/Braes NEW PRODUCT Bayou, Heights/Washington and Downtown Demand has struggled to keep up with increasing areas. Additionally in the suburbs, the Northwest supply all year and the trend continues in Q3 2016. submarket showed signs of healthy demand as Occupancy dropped slightly and the market residents absorbed 1,643 units, the highest since experiences the largest decline in net absorption Q1 2015. New product has driven demand in the since Q4 2015. Historically the second half of the Northwest, which delivered the highest number year sees a significant seasonal drop in leasing, so of units for three consecutive quarters, 9,219 an overall decline is not out of the ordinary. units thus far in 2016. However, the seasonal slowdown combined with a softer first half of the year will result in lower than Although the construction cycle has begun to average year end absorption numbers. slow, there are an additional 6,695 units projected to be delivered by the end of the year. The supply Although net absorption has waned throughout imbalance continues to put pressure on the city, submarkets with the largest concentration properties in a lease-up as owners attempt to of recent construction are now capturing a large stabilize occupancy through enticing share of Class A leasing due to pent up demand. concessions. The result is higher demand in Class The urban Central submarkets experienced its A product around the city.
Q3 2016 CBRE Research © 2016 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators
Net Under Delivered Proposed Property Unit Rental Rate Occupancy Submarket Absorption Construction Construction Construction Count Count ($/SF/Mth) Rate (%) Units Units Units Units
CENTRAL Montrose/ Museum/ Midtown 49 11,901 1.81 80.7 24 1,800 327 3,273 Highland Village/ Upper Kirby/ West U 60 15,759 1.73 86.9 227 949 0 598 Med Center/ Braes Bayou 74 21,813 1.43 89.2 346 2,117 224 Heights/ Washington Ave 48 11,030 1.75 80.4 349 435 198 664 Downtown 18 4,581 2.00 58.4 224 1,678 338 1,186 TOTALS 249 65,084 1.74 79.1 1,170 6,979 1,087 5,721 SOUTHWEST Galleria/Uptown 98 2,283 1.39 89.4 56 1,376 431 856 Woodlake/ Westheimer 36 11,848 1.15 87.6 (72) 387 336 Energy Corridor/CityCentre/Briar Forest 102 31,848 1.18 84.8 330 884 728 1,170 Westchase 49 14,653 1.13 90.3 (36) 266 Alief 110 26,895 0.96 92.8 (230) Sharpstown/ Westwood 106 25,538 0.87 92.6 (121) Westpark/Bissonnet 57 16,900 0.90 94.3 11 Braeswood/ Fondren SW 83 21,907 0.90 90.6 (220) Almeda/ South Main 24 4,422 0.98 92.8 50 124 Sugar Land/Stafford/Sienna 48 12,217 1.23 92.4 246 551 273 Richmond/ Rosenberg 29 4,766 1.08 93.0 (39) TOTALS 742 173,277 1.07 91.0 (25) 3,588 1,495 2,299 NORTHWEST Brookhollow/Northwest Crossing 89 19,593 0.97 91.5 (145) 120 330 Memorial/Spring Branch 107 21,527 1.01 91.8 115 281 Inwood/ Highway 249 33 6,030 0.82 93.7 (32) Willowbrook/Champions/Ella 158 39,013 1.00 91.2 (185) 250 241 Jersey Village/Cypress 60 14,961 1.06 93.3 3 170 443 Bear Creek/Copperfield/Fairfield 56 15,657 1.12 91.1 (22) 417 Katy/Cinco Ranch/Waterside 86 23,688 1.18 84.9 990 1,053 635 2,246 Tomball/ Spring 48 11,215 1.15 74.9 437 1,601 748 1,051 Woodlands/ Conroe South 65 18,815 1.18 83.0 396 924 900 Conroe North/Montgomery 45 8,022 1.00 85.4 86 759 448 150 TOTALS 747 178,521 1.05 88.1 1,643 4,370 2,996 5,401 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,353 0.95 91.0 (222) 246 300 I-69 North 26 3,503 0.88 92.3 (54) 350 Northline 47 6,290 0.86 92.7 33 Greenspoint/Northborough/Aldine 67 16,694 0.86 87.2 (394) FM 1960 East/ IAH Airport 45 8,681 0.94 93.0 48 Lake Houston/ Kingwood 47 12,031 1.14 88.5 (62) 327 584 Northeast Houston/Crosby 21 3,278 0.82 92.6 (12) TOTALS 309 61,830 0.92 91.0 (663) 923 584 300 SOUTHEAST Hwy 288 South/ Pearland West 43 11,062 1.14 88.1 75 329 638 U of H/I-45 South 405 17,264 0.89 91.4 (207) 222 191 Beltway 8/I-45 South 46 13,004 0.98 93.1 (123) Pasadena/Deer Park/La Porte 118 22,838 0.94 91.0 21 294 192 Friendswood/ Pearland East 28 5,458 1.14 94.8 (55) 126 Clear Lake/Webster/League City 93 23,345 1.16 92.8 133 550 557 Baytown 53 9,678 1.01 91.8 (34) 283 480 Dickinson/Galveston 73 11,100 1.00 94.0 42 230 Alvin/Angleton/Lake Jackson 64 10,027 1.03 87.7 (30) 309 TOTALS 923 123,776 1.03 91.6 (178) 1,712 697 1,992 HOUSTON TOTALS 2,970 602,488 1.12 89.4 1,947 17,572 6,859 15,713 Source: CBRE Research, Apartment Data Services, Q3 2016.
Q3 2016 CBRE Research © 2016 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
STABLE RATES KEEP CONCESSIONS COMPETITIVE Figure 3: Avg. Rental Rate by Class As owners seek to gain a competitive edge, $/SF aggressive concessions seen in the previous two 1.50 quarters continued through Q3 2016. Depending on the lease term, properties are offering 1-3 months 1.30 free rent prorated across the course of a one-year 1.10 lease. With generous concessions being offered on every corner, owners are also seeking to hold on to 0.90 their current residents. Typical concessions available for renewals include $100-$200 off of their 0.70 current monthly rent depending on unit size. 0.50 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Rates metro wide across all classes remained stable Class A Class B Class C with little changed over the previous quarter. The Source: CBRE Research, Apartment Data Services, Q3 2016. Central Houston submarkets maintained the highest rates with an average of $1.74 per sq. ft. compared to the market average of $1.10 per sq. ft. Figure 4: Avg. Occupancy Rate by Class
Occupancy (%) CLASS A SEES UPTICK IN OCCUPANCY Even though average occupancy for the city dropped 100 an additional 30 basis points (bps) to 89.4%, Class A 95 occupancy climbed to 80.1% due to an increase in 90 four of the five submarkets. Class B did not fare as well in Q3 2016 as occupancy in this segment 85 declined in all five metro submarkets, down 180 bps 80 to 91.3%. 75
Demand for Class A product grew this quarter, likely 70 due to seasonal leasing trends. Notable Katy/Cinco Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Ranch/Waterside properties absorbed 1,036 units- Class A Class B Class C the most Class A net absorption in the city. Source: CBRE Research, Apartment Data Services, Q3 2016.
PERMITTING AT LOWEST LEVEL IN 10 MONTHS Figure 5: Development Activity The Houston market experienced the delivery of Units (000s) 6,859 units during Q3 2016. Year-to-date 17,199 35 units have delivered, surpassing this period in 2015 30 by more than 3,000 units. At its current pace, 2016 25 will be another record breaking year for multifamily 20 construction in Houston as 23,894 units will have 15 delivered by year-end. 10 However, the pipeline has begun to shrink as 2,000 5 fewer units are in the expected delivery pipeline 0 than in Q2 2016. Multifamily permitting has also 2009 2010 2011 2012 2013 2014 2015 2016 YTD declined significantly, down 63% off its high in Q3 Under Construction Deliveries 2014. Source: CBRE Research, Apartment Data Services, Q3 2016.
Q3 2016 CBRE Research © 2016 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
Figure 6: Top 10 Key Sales Transactions
Name Address Units Submarket 1 The Aberdeen 3400 Woodchase Dr 656 Westchase 2 Waterford Place 3125 Crestdale Dr 552 Memorial/Spring Branch 3 The Pointe 4101 S Shaver 517 Pasadena/Deer Park/La Porte 4 Wallingford Apartments 2750 Wallingford 462 Westchase 5 City Station 905 Cypress Station 448 Willowbrook/Champions/Ella 6 Lynn at Country Club 2200 W Baker Rd 432 Baytown 7 Maxey Village 666 Maxey Rd 409 I-10 East/Woodforest/Channelview 8 Foundations at Woodland 541 Farm to Market Rd 1488 384 Woodlands/Conroe South 9 Cole’s Crossing 12500 Barker Cypress 370 Bear Creek/Copperfield/Fairfield 10 The Belvedere At Westchase Apts 10936 Meadowglen Ln 367 Westchase
Source: Real Capital Analytics, Q3 2016.
INVESTMENT SALES MARKET SEES ACTIVE Figure 7: Unemployment Rates THIRD QUARTER, BUT DOWN YEAR-TO-DATE Unemployment (%) The investment sales market in Houston is 10 down 29% in total properties sold year-to-date. However, Q3 2016 was an active quarter with 8 35% more properties sold compared to Q2 6 2016. Year-to-date volume totals $2.9 billion, down 27% from the same period in 2015. 4 Investors active in the Houston market continues to be Private buyers as they make up 2 81% of total acquisitions. REITS and Publicly 0 Listed Securities made up 7%, institutional 2010 2011 2012 2013 2014 2015 2016 buyers made up 7%, and international buyers U.S. Texas Houston MSA made up 5% of acquisitions in the Houston market. Source: U.S. Bureau of Labor Statistics, August 2016.
EMPLOYMENT SLUGGISH DESPITE AUGUST GAINS Houston's unemployment rate has risen above the U.S. average for the first time to 5.8%, 80 bps above the national average. Even with industries like the Port of Houston being the second largest in the U.S. by tonnage and the Texas Medical Center, the combined employment gains still struggle to make up for the lost business in oil and gas. August employment grew by 500 jobs, which although not robust, indicates energy and professional and business services sectors are stabilizing.
Q3 2016 CBRE Research © 2016 CBRE, Inc. | 4 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division [email protected]
E. Michelle Miller Research Operations Manager Texas-Oklahoma Division [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q2 2016 Renters Have the Upper Hand; First Since 2009
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 89.7% $1.12 PSF 2,964 Units 19,861 Units 5,106 Units
*Arrows indicate change from previous quarter. Figure 1: Multifamily Demand Slows After Strong Cycle Units (000s) 20
15
10
5
0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Projected Deliveries Deliveries Net Absorption Source: CBRE Research, Apartment Data Services, Q2 2016.
NEW ADDITIONS OUTPACING NEW DEMAND - Loop, The Woodlands, and Katy communities are INDUSTRY KNEW THIS DYNAMIC WAS COMING offering up to three months prorated free rent on As expected, Houston’s multifamily demand one year leases. Some properties are even throughout the first half of the year remains advertising hold periods to allow renters to take below recent record leasing trends. Net advantage of leasing specials and not face early absorption in the first two quarters of 2016 termination penalties at their current rental. dropped 45% from the first six months of 2015. Over the last decade, the second half of the year is TALES OF THE CITY: SPOT DEMAND/SOFTNESS strongly affected by seasonal leasing trends FORM WEST BY NORTHEAST resulting in 30% less net absorption than the first Three of the four strongest demand markets are six months of the year. This suggests this year located in the Northwest Submarkets. Despite Houston will see the lightest demand since 2009. layoffs in the energy industry, Katy/Cinco Ranch In addition to slowing demand, there is an experienced the strongest demand followed by additional 18,000 units projected to deliver by the the Energy Corridor absorbing 678 and 493 units end of 2016. Given this supply dynamic, newly respectively. Devastating spring floods continue delivered projects are offering substantial to impact the Greenspoint and Aldine apartment concessions to maintain leasing and quickly markets, which saw negative net absorption of stabilize new properties. For example, Inner 1,217 units.
Q2 2016 CBRE Research © 2016 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators Rental Occupancy Net Under Delivered Proposed Property Unit Submarket Rate Rate Absorption Construction Construction Construction Count Count ($/SF/Mth) (%) Units Units Units Units CENTRAL Montrose/ Museum/ Midtown 48 11,670 1.85 82.0 (61) 2,064 196 2,058 Highland Village/ Upper Kirby/ West U 60 15,756 1.76 85.5 300 925 300 Med Center/ Braes Bayou 73 21,514 1.48 88.7 69 2,042 378 375 Heights/ Washington Ave 48 10,658 1.71 79.6 282 570 623 900 Downtown 17 4,291 1.99 56.2 142 1,987 207 1,186 TOTALS 246 63,889 1.76 78.4 732 7,588 1,404 4,819 SOUTHWEST Galleria/Uptown 98 22,983 1.40 89.0 (6) 1,376 878 Woodlake/ Westheimer 36 11,848 1.15 88.3 145 387 Energy Corridor/CityCentre/Briar Forest 100 31,264 1.18 85.2 493 1,176 459 1,420 Westchase 49 14,653 1.16 92.3 106 266 Alief 111 27,036 0.98 93.5 9 Sharpstown/ Westwood 106 25,538 0.85 93.3 53 Westpark/Bissonnet 57 16,900 0.89 94.8 (77) Braeswood/ Fondren SW 83 21,907 0.88 91.5 68 Almeda/ South Main 24 4,422 0.95 91.7 (29) Sugar Land/Stafford/Sienna 48 12,217 1.22 90.4 101 200 624 Richmond/ Rosenberg 29 4,766 1.00 93.8 (28) TOTALS 741 193,534 1.06 91.3 835 3,405 459 2,922 NORTHWEST Brookhollow/Northwest Crossing 89 19,593 0.97 92.2 (12) 120 120 330 Memorial/Spring Branch 107 21,523 1.00 91.4 126 247 281 Inwood/ Highway 249 33 6,030 0.81 94.2 (23) Willowbrook/Champions/Ella 158 39,013 1.01 91.5 (103) 250 80 Jersey Village/Cypress 60 14,961 1.06 93.3 (69) 613 Bear Creek/Copperfield/Fairfield 56 15,657 1.12 91.4 362 417 Katy/Cinco Ranch/Waterside 84 53,295 1.18 81.8 678 3,382 948 2,039 Tomball/ Spring 47 10,884 1.14 73.0 354 1,879 965 1,051 Woodlands/ Conroe South 65 18,815 1.19 80.9 98 273 900 Conroe North/Montgomery 44 7,870 1.00 85.8 94 927 372 150 TOTALS 743 207,641 1.05 87.6 1,505 6,975 3,005 5,364 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,353 0.94 93.0 68 246 300 I-69 North 26 3,503 0.87 93.9 29 350 Northline 46 6,212 0.86 93.5 13 Greenspoint/Northborough/Aldine 67 16,694 0.84 90.7 (1,217) FM 1960 East/ IAH Airport 44 8,454 0.92 94.8 33 228 Lake Houston/ Kingwood 46 11,751 1.13 91.1 10 607 Northeast Houston/Crosby 21 3,278 0.82 93.0 8 TOTALS 306 61,245 0.91 92.9 (1,056) 824 0 907 SOUTHEAST Hwy 288 South/ Pearland West 43 11,062 1.12 86.7 94 300 638 U of H/I-45 South 105 17,264 0.87 92.7 142 191 Beltway 8/I-45 South 46 13,004 0.97 94.0 91 Pasadena/Deer Park/La Porte 117 22,646 0.94 91.7 122 192 Friendswood/ Pearland East 28 5,458 1.14 95.8 11 126 Clear Lake/Webster/League City 93 23,345 1.16 92.2 214 347 553 Baytown 53 9,678 1.00 92.2 46 480 Dickinson/Galveston 73 11,100 0.98 93.6 (14) 230 Alvin/Angleton/Lake Jackson 63 9,867 1.03 93.4 242 238 TOTALS 621 123,424 1.02 92.5 948 1,069 238 1,988 HOUSTON TOTALS 2,657 649,733 1.12 89.7 2,964 19,861 5,106 16,000 Source: CBRE Research, Apartment Data Services, Q2 2016.
Q2 2016 CBRE Research © 2016 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
SUSTAINED HIGH ASKING RENTS Figure 3: Avg. Rental Rate by Class UNDERWRITING CONCESSIONS $/SF Rental rates have seen little change over the last 1.50 year. Houston rental rates are $1.12 per sq. ft. which is only a $0.02 increase from 2015. Class A 1.30 rental rates have likely peaked seeing little 1.10 movement throughout the last five quarters. 0.90 However, Class B and C properties have been able to increase rents as demand for more affordable 0.70 apartments is on the rise. The average Class B 0.50 property will cost renters $941 per month—a $15 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 increase in a single year. The highest rents in Class A Class B Class C Houston are all located in the Central submarkets Source: CBRE Research, Apartment Data Services, Q2 2016. with the most expensive being Downtown at $1.99 per sq. ft. While most apartments are employing concessions to spur leasing activity, some properties in saturated areas like Cinco Ranch are Figure 4: Avg. Occupancy Rate by Class offering rent reductions up to 15% on certain floor Occupancy (%) plans. 100 95 LEASE-UPS WEIGH DOWN OCCUPANCY 90 As the multifamily market delivers more new 85 product, the saturation of apartments in lease-up continues to drag down the overall occupancy. The 80 city’s overall occupancy dropped an additional 50 75 basis points (bps) to 89.7%, the lowest since Q1 70 2013. The steady decline in Class A occupancy is Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 not as indicative of softness as it might seem; the Class A Class B Class C stabilized Class A occupancy is still above 90%, Source: CBRE Research, Apartment Data Services, Q2 2016. and concessions are attracting savvy renters on the hunt for a deal. Although concessions make new properties affordable for some renters, Class B product remains the most desirable product in Figure 5: Development Activity Houston. Class B occupancy climbed to 93.3% Units (000s) from 93.0% in Q1 2016. 35 30 BUILDING PERMITS RIGHTFULLY SHRINK 60% 25 After a heavy construction cycle, development is 20 beginning to slow. Permits have declined by 60% 15 since Q3 2014, thus under construction activity 10 slowed to 19,861 units under construction. 5 Deliveries continue to decelerate as well with only 0 5,106 units delivered this quarter bringing the 2016 2009 2010 2011 2012 2013 2014 2015 2016 YTD total to 10,300 new units. An additional 18,000 Under Construction Deliveries units are anticipated to deliver this year with slowing net absorption occupancy expected to Source: CBRE Research, Apartment Data Services, Q2 2016. increase.
Q2 2016 CBRE Research © 2016 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
Figure 6: Top 10 Key Sales Transactions
Name Address Units Submarket 1 Villas de Palmas 8701 Town Park Dr 659 Shaprstown/Westwood 2 Victoria Village 1705 Jenkins Rd 612 Pasadena/Deer Park/ La Porte 3 Park Texas 11911 Martin Luther King Jr 596 Hwy 288 South/ Pearland West 4 Trails of Ashford 12710 Brant Rock Dr 544 Westchase 5 The Preserve Apartments 600 E Medical Center Blvd 530 Clear Lake/Webster/League City 6 Sandridge 4025 Burke Rd 504 Pasadena/Deer Park/La Porte 7 The Steeples 2151 S Kirkwood 408 Energy Corridor/CityCentre/Briar Forest 8 Lakes at Madera 305 W Baker Rd 392 Baytown 9 Raveneaux 14500 Cuteen Rd 382 Willowbrook/Champions/Ella 10 Emerald Pointe 920 Houston Ave 363 Heights/Washington Ave
Source: Real Capital Analytics, June 2016.
NEW JOB GAINS REFLECT SLOW GROWTH Figure 7: Unemployment Rates YEAR Unemployment (%) Houston’s unemployment rate surpassed the 10 U.S. rate as local unemployment continues to climb to 5.5% in June. While employment 8 growth is stagnant, job losses are relatively 6 isolated to the exploration and production sectors, primarily oil field services and oil field 4 equipment manufacturing. However, the losses in E&P are balanced by job gains throughout the 2 retail and healthcare sectors. Yet, job gains have not been robust enough to balance out losses. 0 The short term outlook contains flat 2010 2011 2012 2013 2014 2015 2016 employment yet, long term forecasts show U.S. Texas Houston MSA improvement in 2018 and 2019. Source: U.S. Bureau of Labor Statistics, June 2016.
CAPITAL MARKETS Year to date, the Houston multifamily market is continuing to see a major rise in private buyers and conversely a drop in institutional buyers. From Q2 2015 to Q2 2016, Houston saw an 11% increase in private buyers, which is 21% higher in comparison to the private buyers in the rest of the U.S.
Despite this rise in private investments, sales continue to decline throughout the city year- over-year. Houston’s average price per unit declined significantly compared to the rest of the U.S. with a gap roughly from $7.60 a unit to $14.50 per unit.
Q2 2016 CBRE Research © 2016 CBRE, Inc. | 4 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division [email protected]
E. Michelle Miller Research Operations Manager Texas-Oklahoma Division [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q1 2016 Building permits slow as market calibrates supply pipeline
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 90.2% $1.10 PSF 2,803 Units 24,889 Units 5,234 Units
*Arrows indicate change from previous quarter. Figure 1: Permit Activity by Month
000s 4
3
2
1
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016 Source: CBRE Research, Apartment Data Services, Q1 2016.
PERMIT ACTIVITY RIGHTFULLY SLOWING – BUT MORE As Class A construction dwindles further (giving DELIVERIES SLATED FOR 2016 the market time to take a breather) , Houston multifamily permit activity has been developers and investors are shifing their focus registering at an elevated level since January 2014 towards renovations and value-adds in Class B with a high-water mark being reached in June of properties to create enhanced, yet affordable, last year with 3,471 permits that month. As the housing that many Houston renters are craving. market begins to absorb this new product, Indeed this class category seems to be a sweet developers are pulling back – and so far this year spot this year for both renters and investors in only 1,401 permits have been issued – a sharp the wake of Houston’s economy slowing down reduction when compared to the torpid pace of on the accelerator for payroll and population the past two years. Meanwhile, in another gains. While the Class A sector continues to see adjustment to the supply pipeline, Houston has some rental rates on the rise in various parts of recently seen a handful of planned projects the metro, the Class B sector will be on the rise canceled or postponed in areas such as Baytown in Houston’s multifamily market as job growth and the Montrose/Museum/Midtown continues in the employment categories of submarkets. leisure and hospitality, government, teaching and health care.
Q1 2016 CBRE Research © 2016 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators Rental Occupancy Net Under Delivered Proposed Property Submarket Unit Count Rate ($/SF/ Rate Absorption Constructi Construction Construction Count Mth) (%) Units on Units Units Units CENTRAL Montrose/ Museum/ Midtown 46 11,018 1.78 88.2 (143) 3,059 - 2,058 Highland Village/ Upper Kirby/ West U 59 15,486 1.75 84.9 202 1,195 279 300 Med Center/ Braes Bayou 72 21,376 1.48 88.8 (17) 2,266 193 375 Heights/ Washington Ave 46 10,450 1.71 78.5 110 578 283 956 Downtown 14 3,345 1.93 68.0 56 2,667 400 1,396 TOTALS 237 61,675 1.73 81.7 208 9,765 1,155 5,085 SOUTHWEST Galleria/Uptown 98 22,983 1.42 89.0 74 1,376 - 578 Woodlake/ Westheimer 35 11,513 1.15 89.7 (40) 725 - - Energy Corridor/CityCentre/Briar Forest 99 30,848 1.19 84.8 621 1,592 1,243 2,044 Westchase 49 14,653 1.15 91.8 142 266 - - Alief 110 26,895 0.95 94.0 115 - - - Sharpstown/ Westwood 106 25,538 0.85 93.3 (45) - - - Westpark/Bissonnet 58 16,900 0.90 95.4 11 - - - Braeswood/ Fondren SW 83 21,906 0.88 91.3 (170) - - - Almeda/ South Main 24 4,438 0.98 92.3 (69) - - - Sugar Land/Stafford/Sienna 48 12,217 1.24 89.6 58 200 312 - Richmond/ Rosenberg 29 4,766 1.10 94.4 9 - - - TOTALS 739 192,657 1.07 91.4 706 4,159 1,555 2,622 NORTHWEST Brookhollow/Northwest Crossing 88 19,473 0.97 93.1 (133) 240 - 330 Memorial/Spring Branch 107 21,523 1.00 90.8 132 - - 281 Inwood/ Highway 249 33 6,030 0.82 94.6 1 - - - Willowbrook/Champions/Ella 156 38,773 0.99 92.4 32 241 - - Jersey Village/Cypress 60 14,961 1.06 93.7 (71) - - 613 Bear Creek/Copperfield/Fairfield 58 15,677 1.12 88.7 214 288 - - Katy/Cinco Ranch/Waterside 83 23,059 1.20 79.7 424 1,819 775 2,039 Tomball/ Spring 42 9,194 1.14 82.4 293 3,418 - 1,051 Woodlands/ Conroe South 62 17,891 1.19 84.6 185 924 989 900 Conroe North/Montgomery 42 7,422 0.97 89.7 21 1,375 80 450 TOTALS 731 174,003 1.04 89.0 1,098 8,305 1,844 5,664 NORTHEAST I-10 East/ Woodforest/ Channelview 56 11,352 0.93 92.4 (5) 246 - 300 I-69 North 26 3,503 0.87 93.2 60 - - - Northline 46 6,212 0.84 93.3 (90) - - - Greenspoint/Northborough/Aldine 67 17,475 0.83 93.6 43 - - - FM 1960 East/ IAH Airport 44 8,454 0.92 94.4 116 228 - - Lake Houston/ Kingwood 45 11,447 1.14 93.4 88 304 - 607 Northeast Houston/Crosby 21 3,278 0.81 93.3 (2) - - - TOTALS 305 61,721 0.91 93.4 210 778 0 907 SOUTHEAST Hwy 288 South/ Pearland West 43 11,062 1.12 95.9 (76) 300 - 400 U of H/I-45 South 104 17,042 0.88 93.1 122 222 - 191 Beltway 8/I-45 South 46 13,004 0.97 93.5 (11) - - - Pasadena/Deer Park/La Porte 117 22,646 0.90 91.0 93 192 264 - Friendswood/ Pearland East 28 5,458 1.11 95.3 52 - - 126 Clear Lake/Webster/League City 93 23,345 1.15 91.3 93 347 416 553 Baytown 52 9,397 0.98 94.3 61 283 - 480 Dickinson/Galveston 73 11,100 0.98 93.8 68 230 - - Alvin/Angleton/Lake Jackson 62 9,629 1.01 90.5 179 308 - - TOTALS 618 122,683 1.01 93.2 581 1,882 680 1,750 HOUSTON TOTALS 2,630 612,739 1.10 90.2 2,803 24,889 5,234 16,028 Source: CBRE Research, Apartment Data Services, Q1 2016.
Q1 2016 CBRE Research © 2016 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
RENTS SUSTAIN HIGH ASKING RATES Figure 3: Avg. Rental Rate by Class
Although Houston rents have steadily increased $/SF over the last few years, signs are pointing towards 1.50 stable to sideways rent growth, as Q1 2016 saw rents at $1.10 per sq. f., where they remained for the last 1.30 six months. 1.10
0.90 Strengthening demand in Class B properties resulted in a slight increase in overall rates; average 0.70 rental rates are $1.09 per sq. f. Concessions rather 0.50 than sofening rates are on the rise in Class A Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 product due to a surplus in inventory. Average Class A Class B Class C rental rates for top tier product remain above $1.50 Source: CBRE Research, Apartment Data Services, Q1 2016. per. sq. f., with some properties, such as 2929 Weslayan, asking upwards of $2.80 per sq. f. in the Highland Village/Upper Kirby/West U submarket. Figure 4: Avg. Occupancy Rate by Class NEW SUPPLY PUTS A SMALL DENT IN OCCUPANCY % Houston’s overall occupancy dropped 40 basis 100 points (bps) to 90.2%, the lowest since Q1 2013. 95 Whereas, Class A occupancy has steadily declined 90 from 84.3% to 80.5% year-over-year. Again, this due 85 to the dramatic increase in units delivered over the past two years, approximately 41,000 units and thus 80 an increase in price per. sq. f. On the other hand, 75 Class B and Class C properties occupancy held 70 steady above 93.0% for the last 12 months. Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Class A Class B Class C Total net absorption for Q1 2016 was 2,803 units, Source: CBRE Research, Apartment Data Services, Q1 2016. which in historical terms is in line with the total units absorbed for the year in 2009. While Class A occupancy remains on the low end, absorption was positive at 2,831 units, on the other hand, Class B Figure 5: Construction Activity and Net Absorption absorption was a negative (678) units due to Units (000s) seasonal adjustments. 35 30 CONSTRUCTION TAPERING. FINALLY. 25 Afer several quarters of strong construction 20 activity, Q1 2016 construction slowed to 24,889 15 units under construction. The majority, 10 approximately 21,000, of these units will deliver 5 throughout 2016. The number of completions this 0 quarter totaled 5,234 units, with the majority in the 2009 2010 2011 2012 2013 2014 2015 2016 YTD northwest submarkets. These include the high-end Under Construction Deliveries Net Absorption Class A properties, District at Memorial opening with 324 units, and 311-unit Pearl Citycentre. Source: CBRE Research, Apartment Data Services, Q1 2016.
Q1 2016 CBRE Research © 2016 CBRE, Inc. | 3
MARKETVIEW HOUSTON MULTIFAMILY
Figure 6: Top 10 Key Transactions
Name Address Units Submarket 1 Wilshire Place Apartments 6000 Hollister St. 536 Brookhollow/Northwest Crossing 2 Advenir at Stone Park 6160 E. Sam Houston Pkwy. 480 I-10 East/Woodforest/Channelview 3 Pines of Northwest Crossing 7200 Pinemont 412 Brookhollow/Northwest Crossing 4 Monterra Park 4000 Watonga 392 Brookhollow/Northwest Crossing 5 Retreat on Rosslyn 5801 N. Houston Rosslyn 364 Brookhollow/Northwest Crossing 6 Emerson Park 1799 FM 528 354 Beltway 8/I-45 South 7 Radius at Shadow Creek Ranch 2400 Business Center 350 Hwy 288 South/ Pearland West 8 Avana Cypress Estates 10802 Legacy Park Dr. 336 Jersey Village/Cypress 9 Dolce Living Grand Harbor 24758 Grand Harbor 324 Katy/Cinco Ranch/Waterside 10 Fountains at Katy 1007 S. Mason Rd. 316 Katy/Cinco Ranch/Waterside
Source: Real Capital Analytics, April 2016.
NEW JOB GAINS REFLECT SLOW GROWTH YEAR Figure 7: Unemployment Rates Houston is already halfway through expected job % losses in the wake of low crude oil prices and 10 according to the Bureau of Labor Statistics, the Houston MSA job growth numbers showed 10,100 8 jobs gained in February, a year-over-year growth of 0.3%. These are the most sluggish job growth 6 numbers since the recession in 2009. 4
Still, job gains were due in part to seasonal hiring in 2 restaurants and retail stores. Deepest declines of the industry sectors year-over-year have been in mining 0 and logging (-16.5%), manufacturing (-9.0%), and 2010 2011 2012 2013 2014 2015 2016 professional and business services (-2.6%). A major U.S. Texas Houston MSA blow to mining and logging is due to the continuous Source: U.S. Bureau of Labor Statistics, February 2016. drop in oil prices as well as the major oil and gas companies announcing recent layoffs. with ongoing infrastructure improvements in the While employment growth will be slow, payroll Houston Ship Channel--will be critical to Houston's forecasts generally agree on a continuing oil price future economic prosperity as a global trade and recovery throughout the year, while at the same logistics hub. time, modest job gains are expected throughout the retail and other service sectors. For example, the For the 14th consecutive month, the Houston healthcare sector has played a significant role in the Purchasing Managers Index (PMI) registered below growth of the Houston MSA, especially with the the neutral point of 50, steadily declining in continued expansion of the Texas Medical Center February to 44.5, continuing to show the Houston and area hospital systems. The completion of the economy contracting. Panama expansion project in June--in concert
Q1 2016 CBRE Research © 2016 CBRE, Inc. | 4
MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division [email protected]
E. Michelle Miller Research Operations Manager Texas-Oklahoma Division [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston SE SW9 NW9 Almeda/South Main Woodlands/Conroe South 9 Alvin/Angleton/Lake Jackson SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q4 2015 New Construction Peaks in 2016, Units Online Just as Jobs Pick Up
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 90.6% $1.10 PSF (131) Units 29,005 Units 4,198 Units
*Arrows indicate change from previous quarter. RENTS, CONCESSIONS UP AGAIN THIS QUARTER corporate units and temporary, short-term leases Houston’s multifamily market is cooling as some making the difference. area vacancies rise and the new normal of slower job growth settles into the economy, brought by the Conversely, Class B and Class C properties continue downturn in the oil and gas sector. And yet to gain renters at a steady pace, and can almost be multifamily demand ended 2015 higher than classified as completely full at 93.6% and we expect expected, with 13,013 units absorbed, the majority that to be seen in the year ahead as affordable being in newly built Class A product. Rents housing becomes more than a topic of conversation. expanded year-over-year another 5.0%. One favoring factor is the dwindling affordable housing as home Multifamily completions have not slowed down, prices creep higher and area demand for rental units delivering 4,198 units in Q4 2015; bringing the 2015 are buttressed by new industrial construction on the total to 18,327units delivered. In 2016, expected east side of town. deliveries will total approximately 17,000 units, foreshadowing the end of the construction boom An imbalance of supply and demand is starting to Houston has maintained the last five years. This is a creep into the analytics, specifically Class A much needed breather and just in time to calibrate properties. Apartments are functionally full at 95% with the pace of the jobs market, which is expected occupancy, although Houston’s overall occupancy to have another slow year in 2016 before gaining isn’t quite there ending the year at 90.6% due to steam gain during 2017 and 2018.
Figure 1: Supply and Demand Figure 2: Supply and Occupancy Units (000’s) Occupancy (%) Completions 7 (000’s) 100 7 6 6 95 5 5 4 90 4 3 85 3 2 2 80 1 1 0 75 0 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Class A Absorption Completions Completions CLASS A CLASS B CLASS C
Source: CBRE Research, Apartment Data Services, Q4 2015. Source: CBRE Research, Apartment Data Services, Q4 2015.
Q4 2015 CBRE Research © 2016 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 3: Key Indicators Rental Occupancy Net Under Delivered Proposed Property Unit Submarket Rate Rate Absorption Construction Construction Construction Count Count ($/SF/Mth) (%) UnitsUnits Units Units CENTRAL Montrose/ Museum/ Midtown 45 10,822 1.82 92.1 122 3,623 251 1,690 Highland Village/ Upper Kirby/ West U 58 15,209 1.76 85.2 14 1,474 550 300 Med Center/ Braes Bayou 71 20,998 1.47 90.4 (219) 2,644 564 376 Heights/ Washington Ave 42 9,466 1.73 85.3 119 1,485 - 956 Downtown 11 2,428 1.94 90.6 27 3,437 - 1,396 TOTALS 227 58,923 1.74 88.7 63 12,663 1,365 4,718 SOUTHWEST Galleria/Uptown 98 22,983 1.44 88.7 10 1,184 - 578 Woodlake/ Westheimer 35 11,513 1.19 89.9 62 338 -- Energy Corridor/CityCentre/Briar Forest 99 30,700 1.19 83.1 304 1,740 293 1,420 Westchase 49 14,653 1.16 89.3 (181) 266 265 - Alief 110 26,895 0.94 93.5 (209) - - - Sharpstown/ Westwood 106 25,538 0.84 93.5 132 --- Westpark/Bissonnet 58 16,900 0.88 95.4 38 --- Braeswood/ Fondren SW 83 21,906 0.86 91.9 353 --- Almeda/ South Main 24 4,438 0.97 94.0 24 --- Sugar Land/Stafford/Sienna 47 11,905 1.23 91.4 (88) - - 940 Richmond/ Rosenberg 29 4,766 1.08 94.2 1 --- TOTALS 738 192,197 1.07 91.4 446 3,528 558 2,938 NORTHWEST Brookhollow/Northwest Crossing 88 19,421 0.95 93.8 32 240 - 330 Memorial/Spring Branch 106 21,276 1.00 91.0 (204) 247 394 281 Inwood/ Highway 249 34 6,030 0.81 94.7 (30) - - - Willowbrook/Champions/Ella 156 38,773 1.00 92.2 (456) - - 239 Jersey Village/Cypress 60 14,961 1.08 94.2 (119) - - 613 Bear Creek/Copperfield/Fairfield 58 15,677 1.11 87.1 217 288 520 - Katy/Cinco Ranch/Waterside 80 22,311 1.20 80.7 237 2,729 2,014 Tomball/ Spring 41 8,864 1.11 82.2 284 3,442 360 1,051 Woodlands/ Conroe South 59 16,804 1.21 88.9 (72) 2,015 - 900 Conroe North/Montgomery 40 7,114 0.98 93.9 (42) 1,147 - 658 TOTALS 722 171,231 1.04 89.9 (153) 10,108 1,274 6,086 NORTHEAST - I-10 East/ Woodforest/ Channelview 56 11,352 0.92 92.5 (50) 246 - 300 I-69 North 26 3,503 0.86 91.5 (43) - - - Northline 46 6,212 0.84 94.7 37 --- Greenspoint/Northborough/Aldine 67 17,475 0.81 93.4 92 --- FM 1960 East/ IAH Airport 44 8,454 0.91 93.0 33 228 -- Lake Houston/ Kingwood 45 11,447 1.13 92.7 (72) 304 - 607 Northeast Houston/Crosby 21 3,278 0.80 93.1 63 --- TOTALS 305 61,721 0.89 93.0 60 778 - 907 SOUTHEAST Hwy 288 South/ Pearland West 42 10,786 1.12 88.4 (67) 576 382 400 U of H/I-45 South 103 17,014 0.86 92.4 (98) 222 -- Beltway 8/I-45 South 46 13,004 0.97 93.6 (39) - - - Pasadena/Deer Park/La Porte 117 22,646 0.91 90.6 (26) 192 180 - Friendswood/ Pearland East 28 5,458 1.13 94.1 (22) - 63 126 Clear Lake/Webster/League City 93 23,345 1.14 90.9 (259) 347 376 553 Baytown 52 9,397 0.96 93.7 77 283 - 480 Dickinson/Galveston 73 11,100 0.95 93.1 36 --- Alvin/Angleton/Lake Jackson 61 9,609 0.99 88.4 (149) 308 -- TOTALS 615 122,359 1.00 91.7 (547) 1,928 1,001 1,559 HOUSTON TOTAL 2,607 606,431 1.10 90.6 (131) 29,005 4,198 16,208 Source: CBRE Research, Apartment Data Services, Q4 2015.
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RENTAL RATES Figure 4: Avg. Rental Rate by Class
Although Houston rents remained stable this quarter $/SF at $1.10 per sq. ft., overall rental rate growth has 2.00 continued to see an increase of 5.0% year-over-year.
Class A apartments, 2010 and newer, show rental 1.50 rates trending higher along with lower occupancy resulting in less stability. As a result, 44% of Class A 1.00 properties offer generous concessions compared with only 22% of the overall inventory offers discounts. 0.50 Class A properties built prior to 2010 are relatively safe from those trends. 0.00 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
OCCUPANCY Class A Class B Class C Overall occupancy dropped 50 basis points (bps) to 90.6% in the fourth quarter. This is where the shift in Source: CBRE Research, Apartment Data Services, Q4 2015. property class demand is happening. Class A occupancy rates dipped 20 bps to 84.3%, including properties in lease-up. Whereas, leading the way Figure 5: Avg. Occupancy Rate by Class again from last quarter, Class B occupancy recorded % 93.6%, remaining above 93.0% for the last six 95 quarters.
90 With a continued tight home supply and an increased average price of $280,290, up 3.7% year- over- year, multifamily occupancy will remain above 85 90%. According to Moody’s Analytics, the Houston metro area population is forecast to reach 10.9 80 million by 2045. All of which point to a vast reservoir Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 of renters. Class A Class B Class C
CONSTRUCTION Source: CBRE Research, Apartment Data Services, Q4 2015. The number of units under construction remains a robust 29,005 in Q4 2015, an increase of 2,300 units Figure 6: Construction Activity and Net Absorption from last quarter. The top three urban submarkets 000’s Units with the most units under construction are 35 Montrose/Museum/Midtown, Downtown, and Med 30 Center/Braes Bayou totaling 9,704 units. The 25 revitalization of Downtown is a major contributing 20 15 factor for continued growth of development. 10 5 The number of completions year-to date is a 0 phenomenal 18,327 units. In 2016, estimated delivered construction will total approximately 2008 2009 2010 2011 2012 2013 2014 2015 17,100 units, majority expected in Q1 2016. Under Construction Deliveries Net Absorption Source: CBRE Research, Apartment Data Services, Q4 2015.
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Figure 7: Top 10 Key Transactions
Name Address Units Submarket 1 Sands Point Apartments 8300 Sands Point Dr 495 Sharpstown/Westwood 2 Central Park 3230 S Gessner 424 Westchase 3 The Falls at Clear Lakes 801 E NASA Rd 1 400 Clear Lake/Webster/League City 4 Sorrel Grand Parkway 1660 Katy Gap Rd 380 Katy/Cinco Ranch/Waterside 5 Abbey at Grant Road 9611 Grant Rd 372 Willowbrook/Champions/Ella 6 Skytop & Oakcreek 2213 N Frazier St 368 Conroe North/Montgomery 7 Calais Midtown 3210 Louisiana St 356 Montrose/Museum/Midtown 8 Emerson Park 1799 FM 528 354 Friendswood/Pearland East 9 Avana Cypress Estates 10802 Legacy Park Dr 336 Jersey Village/Cypress 10 23806 Colonial Pkwy 23806 Colonial Pkwy 324 Katy/Cinco Ranch/Waterside
Source: Real Capital Analytics, January 2016.
EMPLOYMENT Figure 7: Unemployment Rates Houston is already halfway through expected job % losses, according to the Bureau of Labor Statistics, 10 the Houston MSA job growth numbers showed 4,800 jobs gained in November, a year-over-year 8 growth of 23,700 jobs. Job gains were due in part to seasonal hiring in restaurants and retail stores. 6 Deepest declines of the industry sectors year-over- 4 year have been in manufacturing (-6.0%), mining and logging (-4.9%), and financial activities (- 2 2.6%). A major blow to manufacturing is due to the continuous drop in oil prices. 0 2007 2008 2009 2010 2011 2012 2013 2014 2015
While employment growth will slow, employment U.S. Texas Houston MSA losses are unlikely. Job losses could occur in Source: U.S. Bureau of Labor Statistics, November 2015. exploration and production, oil field services, and oil field equipment manufacturing. However, modest job gains are expected throughout the For the last eleven months, the Houston retail sector. The healthcare sector has played a Purchasing Managers Index (PMI) registered significant role in the growth of the Houston MSA, below the neutral point of 50, steadily declining in especially with the continued growth of the Texas November to 44.9, showing the Houston economy Medical Center that employee an estimated continues to contract. 106,000 people. Additionally, the ongoing investment in the improvement of the Houston Ship Channel is critical to ensure this region The Houston-The Woodlands- Sugar continues to capture its share of economic Land MSA added 4,800 jobs in prosperity delivered because of maritime November, with a year-over-year commerce. growth of 23,700 jobs.
Q4 2015 CBRE Research © 2016 CBRE, Inc. | 4 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis – South Central U.S. [email protected]
E. Michelle Miller Research Operations Manager [email protected]
Kindell Villarreal Researcher +1 713 577 1894 [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST C1 Montrose/Museum/Midtown SW1 Galleria/Uptown NW1 Brookhollow/Northwest Crossing NE1 I-10 East/Woodforest/Channelview SE1 Hwy 288 South/ Pearland West
C2 Highland Village/Upper Kirby/West U SW2 Woodlake/Westheimer NW2 Memorial/Spring Branch NE2 I-69 North SE2 U of H/I-45 South
C3 Med Center/Braes Bayou SW3 Energy Corridor/CityCentre/Briar Forest NW3 Inwood/Highway 249 NE3 Northline SE3 Beltway 8/I-45 South
C4 Heights/Washington Ave SW4 Westchase NW4 Willowbrook/Champions/Ella NE4 Greenspoint/Northborough/Aldine SE4 Pasadena/Deer Park/La Porte
C5 Downtown SW5 Alief NW5 Jersey Village/Cypress NE5 FM 1960 East/IAH Airport SE5 Friendswood/Pearland East
SW6 Sharpstown/Westwood NW6 Bear Creek/Copperfield/Fairfield NE6 Lake Houston/Kingwood SE6 Clear Lake/Webster/League City
SW7 Westpark/Bissonnet NW7 Katy/Cinco Ranch/Waterside NE7 Northeast Houston/Crosby SE7 Baytown
SW8 Braeswood/Fondren SW NW8 Tomball/Spring SE8 Dickinson/Galveston
SW9 Almeda/South Main NW9 Woodlands/Conroe South SE9 Alvin/Angleton/Lake Jackson
SW10 Sugar Land/Stafford/Sienna NW10 Conroe North/Montgomery
SW11 Richmond/Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q3 2015 Deliveries stretch past demand; construction to taper in 2016
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 91.1% $1.10 PSF 2,485 Units 26,667 Units 4,319 Units
OVERVIEW *Arrows indicate change from previous quarter.
Robust demand over the past several years created an urban Figure 1: Supply and Demand
renaissance for Class A renters as developers aimed to keep Units (000’s)
pace with new product – and Houston is now seeing the result 7 as these deliveries arrive on-line – just in time as job growth 6 has slowed, albeit only for the time being. Houston saw an additional 3,000 units break ground in Q3 2015, up from 5 Q2 2015 and 56% of the units presently under construction 4 are expected to deliver within six months and in 2016, 3 Houston will continue to see a high number of deliveries with approximately 17,000 units slated to deliver. Consequently, 2 Houston is cresting its multifamily Class A construction cycle 1 this year and into next, giving the market just the right amount 0 of time to catch-up as population and job gains rebound later in the coming year. Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 During the recovery and into the recent expansion, Houston’s Class A Absorption Completions evolving renter demographic saw demand cut across age groups which saw lifestyle preferences converge for the Source: CBRE Research, Apartment Data Services, Q3 2015. appeal Class A urban product for Inner Loop, Galleria and mixed-use projects on the city’s west side. One example is Figure 2: Supply and Occupancy located within the official boundaries of Houston’s Downtown Completions District. There are approximately 2,800 existing units, 2,700 Occupancy (%) (000’s) units under construction and 2,500 units proposed, with an 100 7 additional 7,000 residents projected; this means that, with the 6 cresting of the construction pipeline today, the urban Class A 95 product now under development will see demand rally no 5 Thousands later than 2017. 90 4 Meanwhile, the consensus is that the multifamily and single- 3 family housing markets are generally holding their own even 85 in light of recent cooling in single family home sales 2 80 (townhomes and condos of the most) and Class B and C 1 sector demand has not been higher. The Houston housing inventory, currently at 3.6 months, continues to show how 75 0 strong the demand is for single-family and is well below the Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 state average of 4.0 months. Absorption finishing out the year Q1 2015 Q2 2015 Q3 2015 will reflect the seasonal downturn, though, Houston will naturally see a lower absorption than the go-go pace of the Completions CLASS A CLASS B CLASS C past 2 or 3 years as the market takes a needed breather.
Source: CBRE Research, Apartment Data Services, Q3 2015.
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Figure 3: Key Indicators Rental Rate Proposed Net Absorption Under Delivered Property Unit Rental Rate Growth (%) Occupancy Rate Construction Submarket Y-o-Y* Construction Construction Count Count ($/SF/Mth) (%) Units Units Units Units CENTRAL Montrose/ Museum District 54 13,784 1.82 3.7 93 223 3,687 36 1,690 Inner Loop West/ Greenway Plaza 65 16,567 1.81 2.9 85 551 1,108 541 1,216
Medical Center/ Bellaire 72 21,080 1.49 4.6 92 (17) 2,267 265 670 Heights 23 4,414 1.75 8.0 80 127 1,312 634 664 Inner Loop East 56 8,424 1.28 5.3 94 44 3,461 2,130 TOTALS 270 64,269 1.63 4.9 89 928 11,835 1,476 6,370 SOUTHWEST Galleria 101 24,346 1.45 3.5 90 323 1,063 - 976 Woodlake/ Westheimer 39 12,293 1.18 4.2 90 84 338 - - West Memorial/ Briar Forest 88 27,194 1.20 3.9 86 175 2,645 1,025 1,170
Westchase 49 14,653 1.17 6.1 91 86 266 - - Alief 112 27,276 0.94 5.4 94 108 - - - Sharpstown/ Westwood 106 25,538 0.84 9.7 93 3 - - - Gulfton/ Bissonnet 58 16,900 0.88 8.1 95 (46) - - - Braeswood/ Fondren SW 84 21,937 0.84 6.6 89 (1) - - - Almeda/ South Main 22 4,283 0.96 8.6 93 17 301 - - Fort Bend 55 14,488 1.24 3.6 88 446 599 - 1,320 Richmond/ Rosenberg 28 4,536 1.09 7.8 94 (22) - - - TOTALS 742 193,444 1.07 6.1 91 1,173 5,212 1,025 3,466 NORTHWEST Brookhollow 92 20,518 0.97 7.7 92 - 240 - 330 Spring Branch 95 18,319 0.91 6.5 94 (87) 573 - 281 Inwood/ Northwest 40 7,383 0.84 4.9 95 (2) - - - FM 1960 West/ Champions 153 37,600 0.98 7.0 92 (85) - - 539 FM 1960 West/ Steeplechase 73 19,323 1.09 3.8 95 (90) - - 353 Bear Creek/ Copperfield 51 13,903 1.13 6.1 89 31 - - 510 Katy/Far West 73 20,171 1.20 0.7 82 588 1,944 1,120 1,603 Tomball/ Far Northwest 27 5,871 1.21 2.5 79 352 1,459 - 1,297 Woodlands/ Far North 55 16,495 1.23 2.3 90 435 444 - 1,666 Conroe/ Montgomery 44 7,598 0.98 4.0 94 9 1,768 - 508 TOTALS 703 167,181 1.05 4.6 90 1,151 6,428 1,120 7,087 NORTHEAST Northshore/ Wood Forest 40 8,646 0.91 6.8 92 (1) - - - Eastex Frwy/ Near Northeast 30 5,503 0.84 4.3 94 (36) - - -
Northline/ Aldine 62 10,110 0.83 6.6 95 13 - - - Greenspoint 37 9,473 0.81 5.9 93 (46) - - - FM 1960 East/ IAH Airport 47 8,930 0.95 8.1 92 (8) 534 330 -
Lake Houston/ Kingwood 45 11,446 1.14 6.5 93 (71) 304 - 591 Far East 29 4,833 0.87 3.6 91 58 246 - 300 TOTALS 290 58,941 0.91 5.9 93 (91) 1,084 330 891 SOUTHEAST Hwy 288/ South 59 13,577 1.07 8.2 90 (98) 798 - - Gulfgate/ Almeda Mall 98 22,083 0.91 10.9 93 (337) - - - Galena Park/ Jacinto City 3 362 0.89 (10.8) 97 (6) - - - Pasadena/ Deer Park 114 22,121 0.90 6.2 92 (81) 372 - - Friendswood/ Pearland 30 5,909 1.31 9.6 90 (44) - 368 729 Clear Lake 98 24,936 1.16 9.8 94 (86) 347 - 350 Baytown 52 9,397 0.94 10.3 93 65 283 - 240 Galveston/ Brazoria 134 20,709 0.95 8.5 91 (89) 308 - - TOTALS 588 119,094 1.02 6.6 92 (676) 2,108 368 1,319
HOUSTON TOTAL 2,593 602,929 1.10 6.1 91 2,485 26,667 4,319 19,133 *Annualized Source: CBRE Research, Apartment Data Services, Q3 2015.
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RENTAL RATES Figure 4: Rental Rates, Avg. Monthly Although Houston rents remained stable this quarter $/SF at $1.10 per sq. f., overall rental rate growth has 2.00 continued to see an increase of 6.6% year-over-year. The Montrose/Museum District submarket is 1.50 recording the highest average rental rate in Houston at $1.82 per sq. f., followed by the Inner Loop West/ Greenway Plaza submarket at $1.81 per sq. f. 1.00
Shifing outside the central markets, Houston 0.50 continues to see multifamily growth in the eastern submarkets. Gulfgate/Almeda Mall and Baytown are 0.00 the two submarkets with exponential rent growth, Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 10.9% and 10.3% year-over-year, respectively. Class A Class B Class C Contributing factors are the ongoing strength of Class D Market Average Houston’s Ship Channel and the April 2016 opening Source: CBRE Research, Apartment Data Services, Q3 2015. of the Panama Canal. Figure 5: Occupancy Rate by Class
OCCUPANCY % 95 Overall occupancy dropped 30 basis points (bps) to 91.1% in the third quarter. Leading the way again from last quarter, Class B occupancy recorded 90 94.2%, remaining above 93.0% for the last five quarters. This is where the shif in property class 85 demand is happening. Whereas Class A occupancy rates dipped 20 bps to 84.3%, including properties in 80 lease-up. Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Class A Class B Class C Class D Market Average With a continued tight home supply and an increased average price, up 3.7% year-over- year, Source: CBRE Research, Apartment Data Services, Q3 2015. multifamily occupancy should continue to remain above the 90% mark. Population and job growth will continue to impact the housing market in a positive Figure 6: Construction Activity and Net Absorption light, mainly in the eastern sections of Houston. 000’s Units 30 CONSTRUCTION 25 The number of units under construction remains a 20 robust 26,667 in Q3 2015, an increase of 3,000 units 15 from last quarter. The top three suburban markets 10 with the most units under construction are West 5 Memorial/Briar Forest, Katy/ Far West, and Conroe/ Montgomery, totaling 6,357 units. 0
2008 2009 2010 2011 2012 2013 2014 The number of units delivered this quarter totals Under Construction Deliveries Net Absorption 2015 YTD 4,319 units, bringing the year-to-date total to 14,129 units. Next year, estimated delivered construction Source: CBRE Research, Apartment Data Services, Q3 2015. will be similar to 2015, but taper off at the beginning of 2017.
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Figure 7: Unemployment Rates EMPLOYMENT Although Houston’s job growth numbers % showed a loss in August, they were regained in 10 September, with 6,400 jobs added and the forecast is that Houston will end the year in 8 the black with a net new jobs total eclipsing 6 14,500 payrolls. 4 However, despite some job losses in the 2 energy sector, a significant increase in job growth was in the government sector with 0 21,200 jobs, followed by education and health 2006 2008 2009 2010 2011 2012 2013 2014 2005 2007 2015 with 6,000 jobs. The Texas Medical Center U.S. Texas Houston MSA continues to be a major employer in the Houston area, with an estimate of 106,000 Source: U.S. Bureau of Labor Statistics, September 2015. employees. The Houston-The Woodlands- Sugar Land The Houston Purchasing Managers Index for MSA added 6,400 jobs in September, with a September lies at 47.6, a smidge below the year-over-year growth of 36,200 jobs. neutral point of 50, which shows the Houston economy is slightly contracting.
CAPITAL MARKETS Q3 2015 Houston’s multifamily sales volume totaled $867 million, a 27% drop from Q2 2015 sales volume according to per Real Capital Analytics. The average price per unit in Q3 2015 is $82,420. On a national level, the multifamily average price per unit was 11.0% higher year- over-year, at $135,513 per unit for Q3 2015.
Figure 8: Top 10 Key Transactions
Name Address Units Submarket 1 The Palms on Westheimer 6425 Westheimer Rd 798 Galleria 2 Villages at Meyerland 8900 Chimney Rock Rd 714 Braeswood/Fondren SW 3 Monte Carlo 10950 Briar Forest 592 West Memorial/ Briar Forest 4 Boardwalk at Town Center 2203 Riva Row 450 Woodlands/Far North 5 El Sol Del Rio 14405 Rio Bonito Rd 424 Alief 6 Mira Bella 22921 Imperial Valley Dr 394 FM 1960 East/ IAH Airport
7 Reserve at Windmill Lakes 9988 Windmill Lakes Blvd 392 Gulfgate/ Almeda Mall 8 IMT Uptown Post Oak 1111 Post Oak Blvd 392 Galleria 9 Westmount at Summer Cove 725 FM 1959 376 Clear Lake 10 Parkside Grand Parkway 1226 W Grand Pkwy S 354 Katy/ Far West Source: Real Capital Analytics, October 2015.
Q3 2015 CBRE Research © 2015 CBRE, Inc. | 4 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis – South Central U.S. [email protected]
E. Michelle Miller Research Operations Manager [email protected]
Kindell Villarreal Researcher +1 713 577 1894 [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST
C1 Montrose/ Museum District SW1 Galleria NW1 Brookhollow NE1 Northshore/ Wood Forest SE1 Hwy 288/ South C2 Inner Loop West/ Greenway Plaza SW2 Woodlake/ Westheimer NW2 Spring Branch NE2 Eastex Frwy/ Near Northeast SE2 Gulfgate/ Almeda Mall C3 Medical Center/ Bellaire SW3 West Memorial/ Briar Forest NW3 Inwood/ Northwest NE3 Northline/ Aldine SE3 Galena Park/ Jacinto City C4 Heights SW4 Westchase NW4 FM 1960 West/ Champions NE4 Greenspoint SE4 Pasadena/ Deer Park C5 Inner Loop East SW5 Alief NW5 FM 1960 West/ Steeplechase NE5 FM 1960 East/ IAH Airport SE5 Friendswood/ Pearland SW6 Sharpstown/ Westwood NW6 Bear Creek/ Copperfield NE6 Lake Houston/ Kingwood SE6 Clear Lake SW7 Gulfton/ Bissonnet NW7 Katy/Far West NE7 Far East SE7 Baytown SW8 Braeswood/ Fondren SW NW8 Tomball/ Far Northwest SE8 Galveston/ Brazoria SW9 Almeda/ South Main NW9 Woodlands/ Far North SW10 Fort Bend NW10 Conroe/ Montgomery SW11 Richmond/ Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q2 2015 Houston CBD multifamily pipeline will light up the skyline
Total Occupancy Avg. Rental Rate Net Absorption Under Construction Completions 91.4% $1.10 PSF 4,875 Units 23,776 Units 5,628 Units
*Arrows indicate change from previous quarter. Figure 1: Net Absorption and Occupancy Rate DOWNTOWN LIVING The Houston CBD pipeline is a major indicator of how Absorption (Units) Occupancy Rate the multifamily sector is performing. According to the (%) Downtown District, there are nine multifamily 2,000 96 properties under construction, which will add roughly 1,500 94 2,700 units to the existing 8,424 units in the Inner 92 Loop East submarket. 1,000 90 The growth of new developments in the CBD was 500 88 spurred by the fact that there are 150,000 daytime 0 86 employees in downtown, but also by the Downtown Central Southwest Northwest Northeast Southeast Living Initiative (TIRZ #3) agreement. Developers were provided a tax abatement of $15,000 per unit built to Q2 2015 Occupancy Rate make projects more feasible. Source: CBRE Research, Apartment Data Services, Q2 2015.
DEVELOPMENT STAYING ON TRACK CRUDE: UP, DOWN OR SIDEWAYS Labor and construction material costs are on the rise, Crude oil prices stabilized throughout the second quarter, up 0.1% from May 2015 to June 2015, and 0.4% after bottoming out below $50 in March. The Federal since March 2015. Is this slowing down development? Reserve Bank of Dallas reports the West Texas Intermediate Development will not slow down due to costs as price is 40% lower than last year and recent fluctuations multifamily construction is peaking, and will begin to could spawn energy job cuts overseas. However, lower oil decline over the next year naturally as fewer projects prices fuel the thriving downstream sector which will are being capitalized. There are 23,776 units continue to boost east Houston, specifically Baytown. currently under construction, and 9,810 units have delivered year-to-date. The Houston market is However, despite some job losses in the energy sector, estimated to deliver 24,000 units in 2015. Houston has created 41,400 jobs (not seasonally adjusted) in 2015. Stable employment coupled with growing home Future development is following suit along the prices and a static single family supply benefit the Houston recently opened sections of the Grand Parkway. multifamily market. The month of June saw an increase in Opportunity arises for single-family, multifamily and home sales, but this will not deter the multifamily market. retail developments. Sections of the Grand Parkway As home prices increase, some consumers may struggle opening later this year will connect Hwy 249 to I- with housing affordability and as a result they turn to 45N, and I-45N to Hwy 59N. The increased apartment living. connectivity in these suburban areas will continue to Due to Houston’s rapid population growth, spur new multifamily opportunities, as the case has the multifamily market has added on been for the urban markets in the last few years. average, 10,000 units per year since 2005.
Q2 2015 CBRE Research © 2015 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators Rental Rate Occupancy Net Under Delivered Proposed Property Unit Rental Rate Submarket Growth (%) Rate Absorption Construction Construction Construction Count Count ($/SF/Mth) Y-o-Y* (%) Units Units Units Units CENTRAL Montrose/ Museum District 53 13,569 1.82 1.2 92.2 264 3,537 396 1,690 Inner Loop West/ Greenway Plaza 64 16,361 1.80 0.6 82.4 518 1,315 - 1,216 Medical Center/ Bellaire 72 21,080 1.50 2.6 92.1 12 1,707 - 670 Heights 22 4,132 1.80 4.2 82.3 150 1,594 - 664 Inner Loop East 56 8,424 1.29 5.3 92.9 63 2,289 - 3,063 TOTALS 267 63,566 1.64 2.8 88.4 1,007 10,442 396 7,303 SOUTHWEST Galleria 100 23,916 1.46 4.4 90.4 276 1,248 262 976 Woodlake/ Westheimer 38 11,917 1.12 3.4 91.9 115 714 -- West Memorial/ Briar Forest 87 26,780 1.21 2.9 86.8 395 2,830 333 1,170 Westchase 49 14,357 1.14 6.7 91.8 16 566 -- Alief 112 27,276 0.94 7.4 94 2 --- Sharpstown/ Westwood 106 25,536 0.82 8.2 92.3 197 - 122 - Gulfton/ Bissonnet 58 16,900 0.87 4.5 95.4 42 --- Braeswood/ Fondren SW 84 21,937 0.83 5.5 88.9 (217) - - - Almeda/ South Main 22 4,280 0.95 6.3 93.9 (35) - - - Fort Bend 51 13,520 1.24 1.7 88.2 302 77 464 1,382 Richmond/ Rosenberg 28 4,536 1.06 7.0 94.8 2 --- TOTALS 735 190,955 1.06 5.3 91.7 1,095 5,435 1,181 3,528 NORTHWEST Brookhollow 92 20,302 0.96 5.3 93.6 64 634 - 330 Spring Branch 95 18,313 0.90 5.1 94.1 50 573 - 281 Inwood/ Northwest 40 7,383 0.84 4.9 95.3 45 --- FM 1960 West/ Champions 153 37,600 0.97 7.1 92.5 51 - 288 539 FM 1960 West/ Steeplechase 73 19,323 1.08 4.4 95.2 230 - - 353 Bear Creek/ Copperfield 50 13,573 1.14 8.0 90.1 (57) 260 342 250 Katy/Far West 76 21,016 1.20 2.1 77.7 333 1,883 1,917 1,893 Tomball/ Far Northwest 26 5,511 1.22 2.1 77.4 446 540 384 1,604 Woodlands/ Far North 55 16,497 1.26 2.5 86.4 664 660 698 1,666 Conroe/ Montgomery 44 7,598 0.96 2.1 93.6 19 708 - 300 TOTALS 704 167,116 1.05 4.4 89.6 1,845 5,258 3,629 7,216 NORTHEAST Northshore/ Wood Forest 40 8,646 0.90 6.3 92.1 (27) - - - Eastex Frwy/ Near Northeast 30 5,503 0.84 3.3 95.0 6 --- Northline/ Aldine 61 9,944 0.80 5.8 94.4 (11) - - - Greenspoint 37 9,473 0.80 4.8 93.4 98 --- FM 1960 East/ IAH Airport 47 8,930 0.95 8.0 92.1 4 306 -- Lake Houston/ Kingwood 45 11,446 1.14 8.1 93.7 24 - 264 591 Far East 29 4,833 0.86 4.0 88.7 18 -80 - TOTALS 289 58,775 0.90 5.8 92.8 112 306 344 591 SOUTHEAST Hwy 288/ South 58 13,192 1.06 4.4 92.9 207 880 - 300 Gulfgate/ Almeda Mall 97 22,083 0.90 8.9 95.1 69 -78 - Galena Park/ Jacinto City 3 362 0.85 (3.1) 98.9 10 --- Pasadena/ Deer Park 113 21,858 0.89 5.7 93.3 104 180 - 264 Friendswood/ Pearland 29 5,541 1.10 6.0 96.8 27 476 - 729 Clear Lake 97 24,520 1.13 7.5 95.5 232 416 - 347 Baytown 52 9,397 0.94 12.9 92.2 (42) - - - Galveston/ Brazoria 134 20,709 0.85 8.3 92.1 209 383 -- TOTALS 583 117,662 0.96 6.3 94.6 816 2,335 78 1,640 HOUSTON TOTAL 2,578 598,074 1.10 5.5 91.4 4,875 23,776 5,628 20,278
*Annualized Source: CBRE Research, Apartment Data Services, Q2 2015.
Q2 2015 CBRE Research © 2015 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
RENTAL RATES Figure 3: Rental Rates, Avg. Monthly Houston rental rates rose a very strong 6.8% from $/SF this time last year and are up 2.5% since Q1 2015. 1.50 The Baytown and Friendswood/Pearland submarkets continue to follow the pace that the central submarkets have been seeing. Class A 1.00 properties are at a going rate of $1.31 per. sq. ft. in Baytown, a rise from $1.28 per sq. ft. in Q1 2015, and $1.25 per sq. ft. in Q4 2014. 0.50 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Where Friendswood/Pearland Class A rents are Class A Class B Class C Class D Market Average continuing upwards at $1.32 per sq. ft. for Q2 2015, and have grown from $1.29 per sq. ft. in Q1 2015, Source: CBRE Research, Apartment Data Services, Q2 2015. and $1.25 per sq. ft. in Q4 2014. The rise in demand and rental rates for Class A properties is due in part Figure 4: Occupancy Rate by Class to the expansion of the Grand Parkway, but the focus on multifamily is slowly shifting towards the % eastern suburban markets, and away from the west 94 and central area markets. The growth of Houston’s 92 Ship Channel and the future opening of the Panama 90 88 Canal in April 2016 are two contributing factors. 86 84 OCCUPANCY 82 Houston’s overall occupancy continues to hold 80 strong with occupancy at 91.4% in the second Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Class A Class B Class C quarter, an increase of 30 basis points (bps) quarter- Class D Market Average over-quarter. Class B occupancy rates continue to Source: CBRE Research, Apartment Data Services, Q2 2015. dominate at 94.7%, whereas Class A occupancy rates are steady at 84.5%, including properties in Figure 5: Construction Activity and Net Absorption lease-up. 000’s Units Home prices are increasing, which may not be 30 affordable to some consumers who are choosing 25 not to own. As a result, they turn to apartment living. 20 The month of June saw a 4.1% increase in home 15 sales year-over-year, but this will not deter the 10 multifamily market from gaining renters. 5 0 CONSTRUCTION
The number of units under construction remains a 2007 2008 2009 2010 2011 2012 2013 2014 robust 23,776 in Q2 2015, slightly down from Under Construction Deliveries Net Absorption 2015 YTD 25,766 in Q1 2015,. The Montrose/Museum District Source: CBRE Research, Apartment Data Services, Q2 2015. submarket leads the urban submarkets with 3,537 units currently under construction, and the West Memorial/Briar Forest submarket tops the suburban The Katy/Far West submarket delivered 1,917 submarkets with 2,830 units under construction. units, the most of the suburban submarkets. The Units delivered this quarter totaled 5,628, a 34.6% Montrose/Museum District submarket added 396 bump from Q1 2015 deliveries. units, the largest of the central submarkets.
Q2 2015 CBRE Research © 2015 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
EMPLOYMENT Figure 6: Unemployment Rates The Greater Houston Partnership has revised % their expected job growth from 62,900, to 10 20,000-30,000 new payrolls. Yet, the Houston MSA unemployment picture continues to 8 outshine the national economy. Since 2008, 6 Houston continues to show a low unemployment rate at 4.5%. The Texas and U.S. 4 unemployment rates have remained steady at 2 4.4% and 5.5%, respectively. 0 The healthcare sector has played a significant 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 role in the growth of the Houston MSA, U.S. Texas Houston MSA especially with the continued growth of the Texas Medical Center. Additionally, the ongoing Source: U.S. Bureau of Labor Statistics, May 2015. investment in the improvement of the Houston Ship Channel is critical to ensure this region The Houston-The Woodlands- Sugar Land continues to capture its share of economic MSA added 4,300 jobs in June, with a year- prosperity delivered because of maritime over-year growth of 55,700 jobs. commerce.
CAPITAL MARKETS Per Real Capital Analytics, Q2 2015 Houston’s The Houston market sold a staggering multifamily sales volume totaled a phenomenal $5.58 billion in multifamily assets for the $1.19 billion. With an inventory of 16,999 units, rolling 12 month total in Q2 2015. spread amongst 52 properties, the average price per unit was $82,478. On a national level, the multifamily average price per unit was significantly higher than Houston's, at $127,391 per unit for Q2 2015.
Figure 7: Key Transactions
Name Address Units Submarket 1 Broadway Square 8751 Broadway Blvd 2,469 Gulfgate/Almeda Mall 2 El Sol Brillante 6403 Sierra Blanca Dr 792 Alief 3 Baybrook Village I & II 2702 W Bay Area Blvd 776 Friendswood/Pearland 4 Morgan West Oaks 2400 Briarwest Blvd 671 West Memorial/Briar Forest 5 Renaissance Village at Shadow Lake 2920 ShadowbriarDr 624 Alief 6 Braesridge 11100 BraesridgeDr 542 Braeswood/Fondren SW 7 Preserve at Colony Lakes 1000 Farrah Lane 420 Ft. Bend 8 The Mandolin 10325 Cypresswood Dr 384 FM 1960 West/Steeplechase 9 Casa Verde 2 Goodson Dr 384 Northline/Aldine 10 Broadstone Post Oak 3100 Post Oak Blvd 272 Galleria
Source: Real Capital Analytics, July 2015.
Q2 2015 CBRE Research © 2015 CBRE, Inc. | 4 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Robert C. Kramp Director, Research & Analysis – South Central U.S. [email protected]
E. Michelle Miller Research Operations Manager [email protected]
Kindell Villarreal Researcher +1 713 577 1894 [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST
C1 Montrose/ Museum District SW1 Galleria NW1 Brookhollow NE1 Northshore/ Wood Forest SE1 Hwy 288/ South C2 Inner Loop West/ Greenway Plaza SW2 Woodlake/ Westheimer NW2 Spring Branch NE2 Eastex Frwy/ Near Northeast SE2 Gulfgate/ Almeda Mall C3 Medical Center/ Bellaire SW3 West Memorial/ Briar Forest NW3 Inwood/ Northwest NE3 Northline/ Aldine SE3 Galena Park/ Jacinto City C4 Heights SW4 Westchase NW4 FM 1960 West/ Champions NE4 Greenspoint SE4 Pasadena/ Deer Park C5 Inner Loop East SW5 Alief NW5 FM 1960 West/ Steeplechase NE5 FM 1960 East/ IAH Airport SE5 Friendswood/ Pearland SW6 Sharpstown/ Westwood NW6 Bear Creek/ Copperfield NE6 Lake Houston/ Kingwood SE6 Clear Lake SW7 Gulfton/ Bissonnet NW7 Katy/Far West NE7 Far East SE7 Baytown SW8 Braeswood/ Fondren SW NW8 Tomball/ Far Northwest SE8 Galveston/ Brazoria SW9 Almeda/ South Main NW9 Woodlands/ Far North SW10 Fort Bend NW10 Conroe/ Montgomery SW11 Richmond/ Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW
Houston Multifamily, Q4 2014 Multifamily ends 2014 with a bang
Total Occupancy Avg. Rent Rate Net Absorption Under Construction Completions 91.1% 1.05 $/SF 1,483 Units 26,630 Units 3,814 Units
*Arrows indicate change from previous quarter.
Figure 1: Net Absorption and Occupancy Rate
Absorption (000’s Units) Occupancy Rate (%) 7 94 6 92 5
4 90 3 2 88 1 86 0 (1) 84 Central Northeast Southeast Northwest Southwest
Q1 Q2 Q3 Q4 2014 Total Units Absorbed Occupancy Rate
Source: CBRE Research, Apartment Data Services, Q4 2014.
OVERVIEW Supported by rapid population growth, Houston’s multifamily market has been a major highlight of 2014. Alsonotablewastheamountofjobscreatedinthe Houston’s overall occupancy rate returned to its Houston Market, totaling 122,900 over the 12 months peak of 91.1% in Q4 2014, which was last achieved ending October 2014. in Q3 2013. Rental rates remained at a record high of $1.05 per sq. ft. Net absorption is positive for the eighth consecutive quarter and ended 2014 with a total of 16,084 units Houston’s net absorption dropped from 3,655 absorbed. units in Q3 2014, to 1,483 units absorbed this Multifamily construction permits increased by 65% from quarter. This brings 2014 year-end to a total of ayearago. 16,084 units absorbed, only slightly down from 2013 when 16,412 units were absorbed.
Q4 2014 CBRE Research © 2015 CBRE, Inc. | 1 MARKETVIEW HOUSTON MULTIFAMILY
Figure 2: Key Indicators
Avg. Rent Rental Rate Occupancy Net Under Delivered Proposed Property Unit Rate Growth Rate Absorption Construction Construction Construction Submarket Count Count ($/SF/Mth) Y-o-Y (%) (%) Units Units Units Units CENTRAL Montrose/ Museum District 52 13,344 1.77 3.2 90.5 248 3,476 - 1,268 Inner Loop West/ Greenway Plaza 65 15,826 1.74 8.3 80.6 178 2,011 1,093 1,202 Medical Center/ Bellaire 70 20,516 1.44 3.9 93.9 (76) 1,616 - 1,549 Heights 20 3,744 1.66 (0.6) 85.3 100 1,663 - 664 Inner Loop East 56 8,424 1.25 4.9 91.7 50 2,015 - 2,531 TOTALS 263 61,854 1.57 3.9 88.4 500 10,781 1,093 7,214 SOUTHWEST Galleria 101 23,463 1.436.7 90.5 (59) 1,791 355 556 Woodlake/ Westheimer 37 11,989 1.13 12.1 91.5 146 714 276 - West Memorial/ Briar Forest 84 25,775 1.17 9.2 87.8 306 3,758 464 1,170 Westchase 48 14,092 1.11 8.8 92.2 (250) 828 -- Alief 113 27,276 0.91 10.9 93.7 (144) - - - Sharpstown/ Westwood 105 25,194 0.78 7.9 91.2 151 - - - Gulfton/ Bissonnet 58 16,901 0.83 3.2 95.1 7 - - - Braeswood/ Fondren SW 84 21,937 0.80 9.1 89.2 (13) - - - Almeda/ South Main 22 4,280 0.90 4.8 94.5 8 - - - Fort Bend 49 13,056 1.20 9.5 87.3 55 850 249 720 Richmond/ Rosenberg 28 4,536 1.02 6.7 93.8 2 - - - TOTALS 729 188,499 1.02 8.1 91.5 209 7,941 1,344 2,446 NORTHWEST Brookhollow 93 20,432 0.928.0 92.3 (86) 240 - 330 Spring Branch 98 18,466 0.88 6.8 92.8 (235) 573 - - Inwood/ Northwest 39 7,256 0.82 5.5 94.6 63 - - - FM 1960 West/ Champions 152 37,294 0.93 6.1 92.6 181 384 - 539 FM 1960 West/ Steeplechase 73 19,332 1.07 8.7 93.1 88 - - 260 Bear Creek/ Copperfield 48 13,021 1.08 8.4 94.8 (61) 342 - 250 Katy/Far West 69 18,332 1.20 7.6 86.6 140 2,859 502 2,125 Tomball/ Far Northwest 25 5,127 1.20 7.8 69.0 274 180 396 568 Woodlands/ Far North 53 15,799 1.21 6.9 83.9 248 869 341 1,939 Conroe/ Montgomery 44 7,598 0.95 4.7 92.5 12 380 300 TOTALS 694 162,657 1.02 7.1 89.2 624 5,827 1,239 6,311 NORTHEAST Northshore/ Wood Forest 40 8,646 0.86 4.0 91.1 (5) - - - Eastex Frwy/ Near Northeast 30 5,503 0.82 5.6 95.0 44 - - - Northline/ Aldine 61 9,956 0.78 5.9 94.1 (41) - - - Greenspoint 37 9,473 0.7710.1 89.1 (17) - - - FM 1960 East/ IAH Airport 46 8,600 0.90 8.0 94.6 79 306 - 330 Lake Houston/ Kingwood 45 11,586 1.10 9.2 93.7 (135) 264 - 264 Far East 28 4,743 0.85 2.3 89.2 41 80 138 - TOTALS 287 58,507 0.87 6.4 92.4 (34) 650 138 594 SOUTHEAST Hwy 288/ South 58 13,216 1.00 5.9 89.6 78 382 - 222 Gulfgate/ Almeda Mall 95 21,956 0.84 8.5 94 (4) 78 - - Galena Park/ Jacinto City 3 362 0.97 10.9 96.4 (7) - - - Pasadena/ Deer Park 113 21,862 0.86 7.9 91.9 (11) 180 - 264 Friendswood/ Pearland 29 5,541 1.04 5.4 95.8 22 476 - 729 Clear Lake 97 24,520 1.08 7.9 93.7 (16) - - 763 Baytown 51 9,157 0.89 9.4 92.5 74 240 -- Galveston/ Brazoria 134 20,715 0.90 8.6 89.9 48 75 - 238 TOTALS 580 117,329 0.94 8.1 93.0 184 1,431 - 2,216 HOUSTON TOTAL 2,553 588,846 1.05 8.1 91.1 1,483 26,630 3,814 18,781
Source: CBRE Research, Apartment Data Services, Q4 2014.
Q4 2014 CBRE Research © 2015 CBRE, Inc. | 2 MARKETVIEW HOUSTON MULTIFAMILY
RENTAL RATES Figure 3: Rent Rates, Avg. Monthly $/SF Although Houston’s overall rental rate 1.70 remained at a record level of $1.05 per sq. ft, 1.50 Class A rental rates decreased because of properties in lease-up. The Central 1.30 submarkets average rates are still the highest 1.10 in the Houston metro area, ranging from 0.90 $1.25- $1.77 per sq. ft. Inner Loop East has the 0.70 highest Class A rental rate at $1.89 per sq. ft. 0.50 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 OCCUPANCY Class A Class B Class C Class D Market Average Source: CBRE Research, Apartment Data Services, Q4 2014. Houston’s overall occupancy increased by 10 basis points (bps) from the previous quarter. Figure 4: Occupancy Rate by Class Class A and Class B rates are up from 82.8% and 93.3% in Q3 2014, to 86.4% and 94.4% for % 96 Q4 2014, respectively. On a geographic basis, 94 occupancy was the highest at 93.0% in the 92 Southeast submarkets, while the lowest 90 occupancy rate was 88.4% in the Central 88 submarkets. Renters will notice the positive 86 side of lower occupancy rates in Class A 84 product, seeing moderating rent growth and an 82 increase in concessions. Additionally, this will 80 allow Class A product to catch up with Class B Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 and Class C occupancy rates. Class A Class B Class C Class D Market Average Source: CBRE Research, Apartment Data Services, Q4 2014. CONSTRUCTION Figure 5: Construction Activity and Net Absorption The number of units under construction 000’s Units increased from 24,562 in Q3 2014, to 26,630 in 30 Q4 2014. The West Memorial/Briar Forest 25 submarket leads the way with 3,758 units currently under construction. 20 15 Delivered units for Q4 2014 totaled 3,814, 10 bringing 2014 to a grand total of 17,628 units 5 completed. Inner Loop West/Greenway Plaza had 1,093 units delivered in Q4 2014. 0
Multifamily permit activity continues to stay 2007 2008 2009 2010 2011 2012 2013 2014 Under Construction MF Permit Activity strong, and Houston will continue to see a Deliveries Net Absorption steady number of deliveries throughout 2015. Source: CBRE Research, Apartment Data Services, Q4 2014.
Q4 2014 CBRE Research © 2015 CBRE, Inc. | 3 MARKETVIEW HOUSTON MULTIFAMILY
Figure 6: Unemployment Rates % 10
8
6
4
2
0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US Texas Houston MSA Source: U.S. Bureau of Labor Statistics, December 2014.
The Houston MSA unemployment rate continues maintainable in the long-term. The recent decrease to drop, and has reached a new low of 4.9%. The in oil prices may slow down future developments, Texas and U.S. unemployment rates have dropped especially in the multifamily sector. as well to 5.1% and 5.8%, respectively. These are the lowest rates we have seen since 2009. Despite the drop in oil prices, Houston’s economy is poised for modest growth with support from Houston is diversified and prepared to handle a healthcare, downstream energy, and drop in oil prices. The market has experienced business/consumer services to support a growing tremendous absorption, job growth and rent population. growth in recent years, at a pace that is not
Figure 7: Hottest Submarkets
Rank Submarkets % of Mkt Absorbed Rent Rate Growth (last 3 months) (%) 1 Woodlake/Westheimer 1.2 6.0 2 Baytown 0.8 13.4 3Far East 0.9 9.1 4 Inwood/Northwest 0.9 4.9 5 Inner Loop East 0.6 7.6 Source: Apartment Data Services, January 2015.
Figure 8: Key Transactions
Name Address Units Submarket 1 Trails at Dominion Park 200 Dominion Park 843 FM 1960 West/Champions 2 Village in the Woods 11800 Grant Road 530 FM 1960 West/Steeplechase 3 Villas at Hermann Park 6301 Almeda 320 Medical Center/Bellaire 4 Township Apartments 401 S. Bender Avenue 300 FM 1960 East/IAH Airport 5 Oaks of Cypress Station 1000 Cypress Station Drive 294 FM 1960 West/Champions 6 Alta Heights 145 Heights Blvd 256 Inner Loop West/Greenway Plaza 7 San Melia Apartments 6383 El Mundo Street 252 Medical Center/Bellaire 8 Parque Del Oro Apartments 8380 El Mundo Street 224 Medical Center/Bellaire 9 Versailles Park Apartments 7200 Almeda 224 Medical Center/Bellaire 10 Mirage Apartments 2100 Bering Drive 200 Galleria
Q4 2014 CBRE Research © 2015 CBRE, Inc. | 4 MARKETVIEW HOUSTON MULTIFAMILY
CONTACTS
Lynn Cirillo Research Operations Manager [email protected]
Kindell Villarreal Researcher 713 577 1894 [email protected]
CBRE OFFICES
CBRE Houston 2800 Post Oak Blvd, Suite 2300 Houston, TX 77056
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.
CENTRAL SOUTHWEST NORTHWEST NORTHEAST SOUTHEAST
C1 Montrose/ Museum District SW1 Galleria NW1 Brookhollow NE1 Northshore/ Wood Forest SE1 Hwy 288/ South C2 Inner Loop West/ Greenway Plaza SW2 Woodlake/ Westheimer NW2 Spring Branch NE2 Eastex Frwy/ Near Northeast SE2 Gulfgate/ Almeda Mall C3 Medical Center/ Bellaire SW3 West Memorial/ Briar Forest NW3 Inwood/ Northwest NE3 Northline/ Aldine SE3 Galena Park/ Jacinto City C4 Heights SW4 Westchase NW4 FM 1960 West/ Champions NE4 Greenspoint SE4 Pasadena/ Deer Park C5 Inner Loop East SW5 Alief NW5 FM 1960 West/ Steeplechase NE5 FM 1960 East/ IAH Airport SE5 Friendswood/ Pearland SW6 Sharpstown/ Westwood NW6 Bear Creek/ Copperfield NE6 Lake Houston/ Kingwood SE6 Clear Lake SW7 Gulfton/ Bissonnet NW7 Katy/Far West NE7 Far East SE7 Baytown SW8 Braeswood/ Fondren SW NW8 Tomball/ Far Northwest SE8 Galveston/ Brazoria SW9 Almeda/ South Main NW9 Woodlands/ Far North SW10 Fort Bend NW10 Conroe/ Montgomery SW11 Richmond/ Rosenberg
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. Houston Multifamily MarketView
Q3 2014 CBRE Global Research and Consulting
TOTAL OCCUPANCY AVG. RENT NET ABSORPTION UNDER CONSTRUCTION DELIVERIES PROPOSED CONSTRUCTION 91.0% $1.05 Per Sq. Ft. 3,539 Units 25,462 Units 5,949 Units 18,282 Units
Directional arrows based on change from the previous quarter. Data reflects market totals. RENTAL RATES CONTINUE STRONG GAINS
NET ABSORPTION WAS POSITIVE Figure 1: Net Absorption and Occupancy Rate FOR THE SEVENTH CONSECUTIVE 6,000 94% QUARTER
Houston multifamily market fundamentals 93% 5,000 continued their positive trend in the 92% third quarter of 2014, with occupancy 4,000 remaining steady. Apartment demand 91% continued to increase in the third quarter 3,000 due to Houston’s growing job market and 90% population. Net absorption for Q3 2014 2,000 totaled 3,539 units, which keeps 2014 on 89% pace with 2013, during which Houston 1,000 88% had 16,189 units of net absorption for the 0 calendar year. 87%
(1,000) 86% OCCUPANCY REMAINS STEADY AT Central Southwest Northwest Northeast Southeast 91.0% Q1 Q2 Q3 2014 YTD Total Units Absorbed Occupancy Rate Houston’s proposed and under construction Source: Apartment Data Services, October 2014. CBRE Research, Q3 2014. projects show the ever expanding market is not slowing down, continuing to push the market upward while the occupancy rate remained steady at 91%. Houston’s the first time; rents have continued to increase with occupancy following in its path. suburban submarkets will continue to see New, Class A product in the Inner Loop East submarket is commanding high rental an increase in construction as the central rates at $1.97 per sq. ft., and following close behind is the Montrose/Museum District submarkets remain steady. Despite a large submarket at $1.85 per sq. ft. With these high rental rates and more deliveries in the number of new deliveries expected in 2014, Inner Loop submarkets, occupancy is decreasing due to the low demand. occupancy rates should remain steady or increase slightly in the central and suburban DELIVERED UNITS UP 11% FROM PREVIOUS QUARTER submarkets. Multifamily construction activity remained strong in Q3 2014, delivering 5,949 apartment units to the market. This activity is up 11.0% from Q2 2014 when 3,722 HIGHEST RENTS ACHIEVED units delivered. At the end of Q3 2014, 24,562 units remained under construction Q3 2014 average rental rates have across the Houston metro area. Proposed construction in Houston reached 18,282 continued to push upward to an all-time units in Q3 2014, a slight increase of 320 units more than in Q2 2014, significantly high of $1.05 per sq. ft., from $1.03 per sq. less than growth in recent years. ft. in Q2 2014. Rental rates in Houston are at an all-time high after a couple of years of rapid growth with a 7.8% year-over- year increase for Q3 2014. The $1.00 per sq. ft. barrier was passed in Q1 2014 for
© 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 729 763 238 904 556 928 268 240 720 539 260 250 568 636 264 222 900 Units © 2014, CBRE, Inc. Proposed Construction 0 0 0 0 0 1,044 0 0 1,549 0 0 0 0 0 0 0 0 0 0 0 0 0 2,125 0 0 0 0 0 0 0 0 0 0 0 0 Units Delivered Delivered Construction 0 0 0 0 0 0 0 0 0 0 0 336 0 0 0 0 0 0 0 Units Under Construction 6 0 80 0 78 (5) (3) 42 85 240 29 714 133 14 3,134 586 80 24 87 1,329 843 21 81 91 35 47 33 1,356 350 1,952 Units Absorption 95.4 (66) 476 93.891.8 89.7 116 87.8 260 3,476 763 1,268 91.1 166 1,654 336 2,895 79.483.2 392 181 2,158 1,283 780 90.8 220 1,791 94.2 398 90.0 1,392 87.5 94.094.3 (75) 142 562 90.5 (89) 95.1 89.3 94.3 92.8 122 89.7 93.7 94.193.7 92.2 (30) 259 573 384 95.2 (56) 342 92.2 89.063.4 494 382 3,192 180 746 82.292.5 423 698 1,076 1,316 91.194.294.4 89.3 (87) (20) (10) 88.4 93.7 94.9 (76) 264 88.3 (38) 382 350 94.0 98.4 92.0 (103) 180 % Occupancy
Mth. Rents $/Sq. Ft./ $/Sq.
362 0.97 Unit Count
29 5,541 1.04 48 13,021 1.08 Count 2,552 587,584 1.05 91.0 3,539 24,562 5,949 18,282 Property ake 97 24,520 1.06 Alief 113 27,276 0.89 Heights 20 3,744 1.68 Far EastFar 28 4,743 0.83 Galleria 101 23,463 1.42 Baytown 51 9,158 0.86 Fort BendFort 47 12,577 1.21 Westchase 48 14,092 1.11 Clear L Greenspoint 37 9,473 0.78 Brookhollow 94 20,492 0.91 Katy/Far WestKaty/Far 67 17,677 1.19 Central Total 267 61,999 1.58 87.1 1,397 9,963 1,879 7,660 Spring Branch 98 18,466 0.87 Inner Loop EastInner Loop 56 8,424 1.22 Hwy 288/ South 58 13,216 1.00 Southeast Total 580 117,330 0.94 92.9 Northeast Total 287 58,509 0.86 92.3 (111) 344 Southwest Total 726 187,732 1.02 91.7 433 7,530 1,562 2,472 Northwest Total 692 162,014 1.02 88.7 1,787 5,369 2,158 5,298 Northline/ Aldine 61 9,956 0.77 Gulfton/ Bissonnet 58 16,901 0.83 Inwood/ Northwest 39 7,256 0.81 Galveston/ Brazoria 134 20,715 0.89 Almeda/ South Main 22 4,280 0.89 Pasadena/ Deer ParkPasadena/ 113 21,862 0.85 Conroe/ Montgomery 43 7,546 0.94 Richmond/ Rosenberg 28 4,536 1.01 Woodlands/ Far North Far Woodlands/ 53 15,799 1.22 Friendswood/ Pearland Friendswood/ Gulfgate/ Almeda Mall 95 21,956 0.84 Woodlake/ WestheimerWoodlake/ 37 11,989 1.12 Tomball/ Far Northwest Far Tomball/ 25 5,131 1.21 Sharpstown/ Westwood 105 25,194 0.77 Medical Center/ Bellaire 71 20,516 1.45 Bear Creek/ Copperfield Braeswood/ Fondren SWBraeswood/ Fondren 84 21,937 0.79 Lake Houston/ KingwoodLake 45 11,588 1.10 Northshore/ Wood ForestNorthshore/ Wood 40 8,646 0.84 Galena Park/ Jacinto CityGalena Park/ 3 FM 1960 East/ IAH Airport 46 8,600 0.90 Montrose/ Museum District 54 13,434 1.77
West Memorial/ Briar ForestWest 83 25,487 1.17 FM 1960 West/ ChampionsFM 1960 West/ 152 37,294 0.92 Eastex Frwy/ Near NortheastEastex Frwy/ 30 5,503 0.81 FM 1960 West/ SteeplechaseFM 1960 West/ 73 19,332 1.06
Figure 2: Key Indicators Key Figure 2: Inner Loop West/ Greenway Plaza Greenway West/ Inner Loop 66 15,881 1.79 Submarket Central Houston Total Southwest Northwest Northeast
Southeast
MULTIFAMILY THIRD QUARTER THIRD MULTIFAMILY MARKETVIEW Source: Apartment Data Services, October 2014. CBRE Research, Q3 2014.
Q3 2014 Houston Multifamily | MarketView 2
Q3 2014 Houston Multifamily | MarketView 3
2014 2014 2014 2014
2013 2013 2013 2013
2014 YTD
2012 2012 2012 2012
2011 2011 2011 2011
Market Average Market Average
Market Average Market Average
2010 2010 2010 2010
2009 2009 MF Permit Activity 2009
Houston MSA Houston MSA Houston MSA Houston MSA
2008 2008 2008 2008
Class D
Class D
2007 2007 2007 2007
2006 2006 2006 2006 Texas Texas Texas Texas
Class C 2005 2005 Class C 2005
2004 2004 2004 2004
2003 2003 2003 2003 US Under Construction US
Class B
Class B
2002 2002 2002 2002
2001 2001 2001 2001
Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
2000 2000 Q3 2013 Q4 2013 2014 Q1 Q2 2014 Q3 2014 2000 2007 2008 2009 2010 2011 2012 2013 Class A Class A Class A Class A 8 6 2 0 4
26 22 20 18 16 12 10 24 14 $1.70 $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 000's Figure 5: Construction Activity and Net Absorption Construction Figure 5: Unemployment Rates Figure 6: Figure 3: Average Rents, $/Sq. Ft./Mth. $/Sq. Rents, Average Figure 3: by Class Occupancy Rates Figure 4: 7% 6% 5% 4% 3% 9% 8% 9% 8% 7% 6% 5% 4% 3% Units 10% 10% 95% 92% 89% 86% 83% 80% Source: Bureau of Labor Statistics, October 2014. Source: Bureau of Labor Statistics, CBRE Research, Q3 2014. Source: Apartment Data Services, October 2014. CBRE Research, Q3 2014. Source: Apartment Data Services, October 2014. CBRE Research, Q3 2014. Source: Apartment Data Services, October 2014. Source: Apartment Data Services, October CBRE Research, Q3 2014.
MULTIFAMILY THIRD QUARTER THIRD MULTIFAMILY MARKETVIEW UNEMPLOYMENT The Houston economy continues outshine to the national Nationaleconomy. unemployment basis dropped 10 points this quarter the 6.2%. to In September 2014, while Houston unemployment rateTexas fell 5.1%, to exceptional the With 5.0%. to dropped unemployment employment growth and population growth, we will continue see to increase an apartment in demand. MULTIFAMILY CONSTRUCTION MULTIFAMILY The number units of under construction increased from The Q3 in 2014. 24,562 to up Q2 in 2014 23,722 Montrose/Museum submarket leads the Houston area units under construction, followed the by with West 3,476 Memorial/Briar units. These Forest submarket with 3,134 two submarkets the of market’s combined 26.9% total hottest areas for new development. Despite the amount apartments for demand increasing the construction, under which we are not seeingis keeping with up higher supply, rental rates and lower occupancy rates as a result. MULTIFAMILY OCCUPANCY MULTIFAMILY which stands occupancy overall rate 91%, is The Q3 2014 fromeven last quarter basis points and decrease 10 from Occupancy the in suburban submarketsQ3 2013. stands highermuch than the urban submarkets due the to lower rentaloverall rates. the example, For Friendswood/Pearland submarket leads occupancy the way with and rate, a 95.4% the Bear Creek/Copperfieldsubmarket closelyfollows behind with occupancy a 95.2% rate. MULTIFAMILY RENTS MULTIFAMILY the is One major noticeablechange happening 2014, in increasing rent suburban growth markets, Houston’s in and decreasing rent growth the in urban core. Houston rents reaching $1.05 continued Q3 their in 2014, upward climb per ft. sq. for the first time. Overall rental ratesincreased months, while Class the over A, past C and B, 12 7.8% D rental rates each increased 5.8%, 8.0%, and 6.9% respectively. Leading the6.3% suburban year-over-year, submarkets rent in the is Woodlands/Far North submarket Northwest followed the by Tomball/Far ft., sq. per. at $1.22 perand Fort ft. sq. The Bend submarkets with rents at $1.21 rents can be found the in Innerhighest Q2 2014 overall per ft., sq. Loop West/Greenway Plaza submarket at $1.79 led the by Montrose/Museum District submarket at $1.77 per per ft. sq. ft. sq. and the Heights submarket at $1.68 for the Montrose/This a decrease is rent in from Q2 2014 Museum District and Heights submarket and $0.02 by $0.03 respectively. © 2014, CBRE, Inc. , we © 2014, CBRE, Inc. SE3 City Galena Park/Jacinto SE4 Park Pasadena/Deer SE7 Baytown SE8 Galveston/Brazoria
NORTHEAST SOUTHEAST NE1 Forest Northshore/Wood SE1 Hwy 288/South NE2 Eastex Frwy/Near Northeast SE2 Gulfgate/Almeda Mall NE3 Northline/Aldine NE6 Lake Houston/Kingwood SE6 Clear Lake NE7 Far East
Lynn Cirillo Lynn Manager Operations Research CBRE Americas Research 2800 Oak, Post Suite 2300 Houston, TX 77056 e: [email protected] Kindell Villarreal Researcher CBRE Houston Research 2800 Oak, Post Suite 2300 Houston, TX 77056 1894 577 713 t: +1 e: [email protected] CONTACTS this Houston information about For more contact: please MarketView, Multifamily TEXAS RESEARCH Bear Creek/Copperfield NW1 Brookhollow NW4 FM 1960 West/Champions NE4 Greenspoint NW5 FM 1960 West/Steeplechase NE5 East/IAH Airport FM 1960 SE5 Friendswood/Pearland NW7 Katy/Far West NW10 Conroe/Montgomery SOUTHWEST NORTHWEST SW3 West Memorial/Briar Forest NW3 Inwood/Northwest SW4 Westchase SW5 Alief SW6 Sharpstown/Westwood NW6 SW7 Gulfton/Bissonnet SW8 Braeswood/Fondren SW NW8 Northwest Tomball/Far SW9 Almeda/South Main NW9 Woodlands/Far North SW10 Fort Bend SW11 Richmond/Rosenberg
Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed to confirm independently its accuracy and have not verified it and make no guarantee, warranty or representation about it. It is your responsibility and all rights to the material are reserved and cannot be completeness. This information is presented exclusively for use by CBRE clients and professionals reproduced without prior written permission of CBRE. DISCLAIMER GLOBAL RESEARCH AND CONSULTING AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe.forecasting and consulting solutions to real estate investors and occupiers around . and Consulting can be found at www.cbre.us/research research produced by Global Research Additional U.S. C1 Montrose/Museum District SW1 Galleria CENTRAL C2 Inner Loop West/Greenway Plaza SW2 Woodlake/Westheimer NW2 Spring Branch C3 Medical Center/Bellaire C4 Heights C5 Inner Loop East
FOLLOW CBRE FOLLOW
Q3 2014 Houston Multifamily | MarketView 4 Houston Multifamily MarketView
Q2 2014 CBRE Global Research and Consulting
TOTAL OCCUPANCY AVG. RENT NET ABSORPTION UNDER CONSTRUCTION DELIVERIES PROPOSED CONSTRUCTION 91.1% $1.03 Per Sq. Ft. 5,221 Units 23,722 Units 3,722 Units 17,962 Units
Directional arrows based on change from the previous quarter. Data reflects market totals. HOUSTON APARTMENT MARKET STILL CLIMBING.
Houston’s job and population growth Figure 1: Net Absorption and Occupancy continued to drive apartment demand. Units Absorbed Occupancy Rate Rental rates and occupancy pushed upward 4,000 94% as average rents reached $1.03 per sq. ft. 3,500 93% for the first time ever in Houston and overall occupancy climbed to 91%. Net absorption 3,000 92% for Q2 2014 totaled 5,221 units, which 2,500 91% keeps 2014 on pace with 2012 and 2013, 2,000 90% during which Houston averaged 16,300 1,500 89% units of net absorption per year. 1,000 88%
Multifamily construction activity remained 500 87% 0 86% strong in Q2 2014 delivering 3,722 Central Southwest Northwest Northeast Southeast apartment units to the market. This was Q1 Q2 2014 YTD Total Units Absorbed Occupancy down slightly from Q1 2014 when 4,143 Source: Apartment Data Services, July 2014. units delivered. At the end of Q2 2014, CBRE Research, Q2 2014. 23,722 units remained under construction Memorial/Briar Forest submarket has rapid growth. Rental rates increased 7.6% across the Houston metro area. experienced a continued increase in year-over-year in Q2 2014, which is an new projects and closed Q2 2014 with increase of 90 basis points from Q1 2014’s In Houston’s CBD, several new projects 3,374 units under construction. High year-over-year rental rates. are underway, spurred in part by the city’s levels of office development in the nearby Downtown Living Initiative, which offers Energy Corridor is driving the apartment New, Class A product in the Montrose/ developers a $15,000-per-unit subsidy development in West Memorial/Briar Museum District submarket is commanding for apartments built downtown. SkyHouse Forest. The Katy/Far West submarket high rental rates at $1.89 per. sq. ft. Houston, a 24-story, 336-unit complex follows with 2,820 units under construction. Suburban submarkets have a lower trend, recently broke ground in April. There are The Tomball/Far Northwest follows and with rental rates as low as $1.36 per sq. ft. 880 units currently under construction in Woodlands/Far North submarkets are in the Katy/Far West submarket, and $1.29 the Inner Loop East submarket, including also experiencing a boom in apartment in the Bear Creek/Copperfield submarket. 500 Crawford expected delivery in March construction driven primarily by the 2015. Proposed construction in the expansion of the Grand Parkway and the Houston’s proposed and under construction CBD includes the Camden Downtown development of the ExxonMobil campus projects show the ever expanding market Towers and Market Square Tower with near Spring with a combined total of 1,969 is not slowing down, and continues to push 560 units and 463 units, respectively. units under construction. Adding to this the market upward. Houston’s suburban The city hopes to encourage downtown boom is the start of phase one of CityPlace submarkets will continue to see an increase apartment development in order to increase located just south of The Woodlands, which in construction as the central submarkets population and revitalize the area. will expand the office market by 4 million remain at pace. Despite a large number sq. ft. when completed. of new deliveries expected in 2014, Suburban development has steadily occupancy rates should remain steady or increased over the past few months in Q2 2014 average rental rates increased increase slightly in the central and suburban certain areas. Most notably, the West to $1.03 per sq. ft., from $1.00 per sq. ft. submarkets. in Q1 2014. Rental rates in Houston are at an all time high after a couple of years of
© 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 697 150 763 862 636 550 514 720 222 240 239 300 250 640 568 838 268 1,116 1,338 1,604 3,348 2,099 1,832 4,812 1,150 2,466 7,702 Units 17,962 © 2014, CBRE, Inc. Proposed Construction 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 154 383 281 162 272 342 370 520 792 818 1,238 3,722 2,112 Units Delivered Delivered Construction 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 108 240 248 634 264 880 350 573 384 342 930 714 562 698 512 3,214 2,847 1,136 1,069 1,994 2,820 1,039 3,374 Units 6,088 7,713 8,711 Under 23,722 Construction
4 2 0 1 (1) 41 54 49 77 59 18 83 19 66 60 61 70 (19) (17) (30) 273 254 312 183 170 192 190 117 132 362 116 176 218 272 234 215 417 100 277 176 238 779 518 552 Units 5,221 1,832 1,540 Absorption 96.6% 91.2% 94.7% 87.0% 89.1% 93.3% 91.2% 94.0% 89.4% 94.6% 92.2% 89.3% 81.9% 89.6% 93.4% 93.9% 92.2% 80.8% 95.6% 91.5% 93.9% 89.1% 91.1% 91.5% 99.2% 93.8% 91.3% 93.3% 94.1% 92.5% 95.6% 91.8% 92.1% 63.7% 79.1% 89.8% 81.1% 87.9% 93.7% 94.6% 90.5% 93.3% 91.1% 87.3% 92.7% 92.0% 86.2% Occupancy
Mth. Rents $0.94 $0.81 $1.80 $0.94 $1.05 $0.82 $0.76 $0.77 $0.82 $0.84 $0.78 $1.75 $0.84 $0.88 $0.88 $1.44 $1.71 $1.05 $1.21 $0.99 $1.22 $0.98 $0.91 $0.91 $0.82 $0.90 $0.80 $0.92 $0.83 $1.04 $1.06 $1.04 $1.39 $1.19 $1.16 $1.11 $1.21 $1.17 $0.87 $1.07 $0.75 $0.92 $1.03 $1.01 $0.85 $1.00 $1.58 $/Sq. Ft./ $/Sq.
362 7,424 9,348 9,850 9,473 5,503 8,646 4,605 8,600 4,280 3,804 4,536 8,424 7,118 5,541 4,441 Unit Count 16,877 13,231 20,532 24,520 21,937 14,950 20,516 11,588 12,241 12,866 20,492 21,956 37,293 18,465 21,862 13,021 19,332 22,870 17,192 11,989 15,458 25,255 27,276 14,092 25,194 58,265 60,925 116,987 582,960 160,236 186,547
3 57 54 97 43 84 62 54 60 37 30 40 71 27 46 45 22 46 21 57 94 28 56 95 98 48 73 38 99 29 66 37 53 23 82 48 132 152 113 113 105 580 688 285 721 264 Count 2,538 Property Alief Heights Far East Far Galleria Baytown Fort Bend Fort Westchase Clear Lake Greenspoint Brookhollow Katy/Far West Katy/Far Central Total Spring Branch Inner Loop East Inner Loop Hwy 288/ South Southeast Total Northeast Total Southwest Total Northwest Total Northline/ Aldine Gulfton/ Bissonnet Inwood/ Northwest Galveston/ Brazoria Almeda/ South Main Pasadena/ Deer Park Pasadena/ Conroe/ Montgomery Richmond/ Rosenberg Woodlands/ Far North Far Woodlands/ Friendswood/ Pearland Friendswood/ Gulfgate/ Almeda Mall Tomball/ Far Northwest Far Tomball/ Woodlake/ Westheimer Woodlake/ Sharpstown/ Westwood Medical Center/ Bellaire Bear Creek/ Copperfield Braeswood/ Fondren SW Braeswood/ Fondren Lake Houston/ Kingwood Lake Northshore/ Wood Forest Northshore/ Wood Galena Park/ Jacinto City Galena Park/ FM 1960 East/ IAH Airport
Montrose/ Museum District West Memorial/ Briar Forest West FM 1960 West/ Champions FM 1960 West/ Eastex Frwy/ Near Northeast Eastex Frwy/ FM 1960 West/ Steeplechase FM 1960 West/
Figure 2: Key Indicators Key Figure 2: Inner Loop West/ Greenway Plaza Greenway West/ Inner Loop Submarket Central Houston Total Northeast Southeast Northwest
Southwest
MULTIFAMILY SECOND QUARTER SECOND MULTIFAMILY MARKETVIEW Source: Apartment Data Services, July 2014. CBRE Research, Q2 2014.
Q2 2014 Houston Multifamily | MarketView 2
Q2 2014 Houston Multifamily | MarketView 3
2014 2014 2013 2013
23,722 2012 2012
Q2 2014
Q2 2014
2011 2011 16,965
Market Average Market Average
Market Average Market Average 2010 2010
MF Permit Activity Net Absorption 10,387 2009
Houston MSA Houston MSA Q1 2014 2008 2008 Class D Q1 2014 Class D
4,552
2007 2007 2006 2006 2,015 Texas Texas
Class C Class C 2005
Q4 2013
Q4 2013 2004 2004
5,872 2003 2003 US
Deliveries Under Construction
Class B Class B 2002 2002
16,103 Q3 2013 2001
Q3 2013 17,015 2000 Class A Class A Class A Class A 8 6 2 0 4
20 18 16 12 10 14 $1.70 $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 000's Construction Activity and Absorption Construction Figure 5: Unemployment Figure 6: Average Rates ($/Sq. Ft./Mth.) ($/Sq. Rates Average Figure 3: by Class Occupancy Rates Figure 4: 7% 6% 5% 4% 3% 9% 8% Units 83% 80% 95% 92% 89% 86% 10% Source: Bureau of Labor Statistics, July 2014. CBRE Research, Q2 2014. Source: Apartment Data Services, July 2014. CBRE Research, Q2 2014. Source: Apartment Data Services, July 2014 CBRE Research, Q2 2014. Source: Apartment Data Services, July 2014. Source: Apartment Data Services, July CBRE Research, Q2 2014.
MULTIFAMILY SECOND QUARTER SECOND MULTIFAMILY MARKETVIEW UNEMPLOYMENT The Houston economy continues outshine to the national Nationaleconomy. unemployment held steady throughout unemploymentthe the quarter Texas at 6.3%. In May 2014, rate fell 5.2%, to while Houston unemployment dropped to 5.1%. MULTIFAMILY CONSTRUCTION MULTIFAMILY The number units of under construction increased from The West Q2 in 2014. 23,722 to up 2014 Q1 in 22,246 Memorial/Briar Forest submarket remains one the of hottestmarket’s areas for new development. Units under 2014. construction from Q1 increased 8% by Q2 in 2014 The booming office developmentin thearea drivingis apartment demand. MULTIFAMILY OCCUPANCY MULTIFAMILY occupancy 10 up overall rate stands at 91%, The Q2 2014 basis points (bps) from last quarter and bps 20 from Q2 2013. Class C and D projects led the improvement over quarter with 93.3%, to and Class C occupancy 60 up bps Q2 in 2014, Class A occupancy 87.5%. bps, to Class D occupancy 140 up dropped 82.8%. to This number skewed is downward because the data includes new many apartments that are still the in process leasing of Class up. B occupancy was 93.3%, down 2014. Q1 in from 93.6% MULTIFAMILY RENTS MULTIFAMILY Houston rents continued Q2 their in 2014, upward climb per ft. sq. for the first reachingtime. Overall $1.03 rental months, the over pastrates 12 remained steady at 7.6% while Class A, B and C rental rates each increased 6.7%, respectively. Class D rates and decreased 7.3%, 6.6% 4% by Rent growth was strong most in since the of Q2 2013. 41 rents can besubmarkets. found The highest Q2 2014 overall thein Montrose/Museum District per sq. submarkets at $1.80 led the by ft., Inner Loop Greenway West/ Plaza submarkets per per ft. sq. and the Heights submarket at $1.71 at $1.75 ft.sq. The highest rents suburban in markets were found Fortin Bend and the Woodlands/Far North areas, at an per ft. sq. average $1.21 of © 2014, CBRE, Inc. , we © 2014, CBRE, Inc. Hwy 288/South Gulfgate/Almeda Mall Galena Park/Jacinto City Galena Park/Jacinto Pasadena/Deer Park Pasadena/Deer Friendswood/Pearland Clear Lake Baytown Galveston/Brazoria
SOUTHEAST SE1 SE2 SE3 SE4 SE5 SE6 SE7 SE8
Northshore/Wood Forest Eastex Frwy/Near Northeast Northline/Aldine Greenspoint FM 1960 East/IAH Airport Lake Houston/Kingwood Far East
NORTHEAST NE1 NE2 NE3 NE4 NE5 NE6 NE7
Lynn Cirillo Lynn Research Operations Manager CBRE Americas Research 2800 Oak, Post Suite 2300 Houston, TX 77056 e: [email protected] Kindell Villarreal Researcher CBRE Houston Research 2800 Oak, Post Suite 2300 Houston, TX 77056 1894 577 713 t: +1 e: [email protected] CONTACTS this Houston information about For more contact: please MarketView, Multifamily TEXAS RESEARCH Brookhollow Spring Branch Inwood/Northwest FM 1960 West/Champions FM 1960 West/Steeplechase Bear Creek/Copperfield Katy/Far West Tomball/Far Northwest Tomball/Far Woodlands/Far North Conroe/Montgomery
NORTHWEST NW1 NW2 NW3 NW4 NW5 NW6 NW7 NW8 NW9 NW10
Galleria Woodlake/Westheimer West Memorial/Briar Forest Westchase Alief Sharpstown/Westwood Gulfton/Bissonnet Braeswood/Fondren SW Almeda/South Main Fort Bend Richmond/Rosenberg SOUTHWEST SW1 SW2 SW3 SW4 SW5 SW6 SW7 SW8 SW9 SW10 SW11
Montrose/Museum District Inner Loop West/Greenway Plaza Medical Center/Bellaire Heights Inner Loop East
. and Consulting can be found at www.cbre.us/research research produced by Global Research Additional U.S. to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed to confirm independently its accuracy and have not verified it and make no guarantee, warranty or representation about it. It is your responsibility and all rights to the material are reserved and cannot be completeness. This information is presented exclusively for use by CBRE clients and professionals reproduced without prior written permission of CBRE. DISCLAIMER AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around C1 CENTRAL C2 C3 C4 C5
FOLLOW CBRE FOLLOW
Q2 2014 Houston Multifamily | MarketView 4 Houston Multi-Housing MarketView
Q1 2014 CBRE Global Research and Consulting
TOTAL OCCUPANCY AVG. RENT NET ABSORPTION UNDER CONSTRUCTION DELIVERIES PROPOSED CONSTRUCTION 90.9% $1.00 Per Sq. Ft. 5,538 Units 22,246 Units 4,199 Units 17,678 Units
Directional arrows based on change from the previous quarter. Data reflects market totals. HOUSTON APARTMENT MARKET STILL CLIMBING.
Houston’s job and population growth Figure 1: Net Absorption and Occupancy continued to drive apartment demand. Units Absorbed Occupancy Rental rates and occupancy continued their 2,000 93% upward trend as average rents reached 1,800 92% $1.00 per sq. ft. for the first time ever in 1,600 91% Houston and occupancy climbed to 90.9%. 1,400 90% Q1 2014 net absorption was 5,538 units - 1,200 roughly 1% of the market - which puts this 1,000 89% 800 year on pace with 2012 and 2013, during 88% 600 which Houston averaged 16,300 units of 87% net absorption per year. 400 86% 200
0 85% In Q1 2014, 4,199 new apartment units Central Southwest Northwest Northeast Southeast were delivered, up slightly from the Q4 Q1 2014 YTD Total Units Absorbed Occupancy 2013 when 4,060 units delivered. 22,246 Source: Apartment Data Services, April 2014. units remained under construction across CBRE Research, Q1 2014. the Houston metro at the end of Q1 2014. development in the nearby Energy Corridor New Class A product in the Inner Loop is driving the apartment development in is commanding high rental rates. In the Construction activity remained strong in West Memorial/Briar Forest. The Tomball/ Montrose/Museum District submarket, the inner loop as it has since the start of Far Northwest and Woodlands/Far North Class A average rental rates are $1.83 per this development cycle. 8,342 units were submarkets are also experiencing a boom sq. ft. with some properties asking over under construction in the loop, with the in apartment construction driven primarily $2.20 per sq. ft. for a 1 bedroom unit. The development concentrated in the area by the development of the Exxon campus newest Rental rates for Class A product in bounded on the north by I-10 and by US- near Spring and the expansion of the the suburban submarkets can range from 59 to the south. Several new projects were Grand Parkway. Roughly 3,500 combined $1.20 to $1.50 per sq. ft. underway in the CBD, spurred in part by units are under construction in those the city’s Downtown Living Initiative, which submarkets. Developers and investors are confident in offers developers a $15,000-per-unit the Houston market, which continued to subsidy for apartments built downtown. Q1 2014 average rental rates increased to expand in Q1 2014. Quality development The city hopes to encourage downtown $1.00 per sq. ft., from $0.98 per sq. ft. in projects, along with a strong and diversified apartment development in order to increase Q4 2013. Rental rates in Houston are at local economy, should continue to push the population and revitalize the area. an all time high after a couple of years of market upward throughout 2014. Despite a rapid growth. However, the pace of growth large number of number of new deliveries Suburban development has increased is slowing. Rental rates increased 7.0% expected in 2014, occupancy rates over the past few months in certain areas. year-over-year in Q1 2014, whereas, over should remain steady or increase slightly. Notably, the West Memorial/Briar Forest the previous 5 quarters, rental rates grew Rental rates should continue to increase submarket saw a large increase in new at an average of 7.7% year-over-year. With throughout 2014, although the rate of projects and ended Q1 2014 with 3,122 strong leasing activity and development growth will be slower than it has been the units under construction, compared to only anticipated to continue, rental rates should past few quarters. 832 units in Q1 2013. High levels of office continue to trend upward, albeit not at the rapid pace seen in recent quarters.
© 2014, CBRE, Inc. 636 778 239 120 278 300 247 329 550 550 763 390 300 571 3,150 1,422 1,125 1,002 2,566 1,116 1,246 1,414 2,785 1,092 7,249 5,138 Units 17,678 © 2014, CBRE, Inc. Proposed Construction 180 338 231 120 246 714 240 302 764 180 764 302 1,064 4,199 1,529 1,424 Units Delivered Delivered Construction 168 350 342 504 880 352 240 785 262 168 590 2,407 1,576 3,573 1,130 1,378 1,068 2,115 1,994 3,122 Units 7,739 8,342 5,407 Under 22,246 Construction
8 2 51 82 73 45 73 95 43 47 67 88 27 94 55 73 78 97 (34) (43) 218 348 104 256 434 102 268 170 118 194 283 339 158 210 135 106 271 294 472 196 558 481 (159) Units 1,810 5,538 1,086 1,603 Absorption 89.3% 88.6% 92.4% 93.5% 88.3% 94.6% 91.0% 90.4% 91.7% 90.3% 92.5% 95.3% 98.9% 90.9% 84.8% 95.1% 92.9% 93.1% 95.9% 91.4% 94.0% 91.4% 91.7% 74.2% 65.3% 86.8% 89.1% 88.3% 93.0% 92.3% 86.4% 91.1% 90.2% 94.5% 92.4% 93.5% 88.9% 94.6% 89.6% 93.1% 92.9% 91.9% 92.0% 91.1% 92.7% 86.6% 88.4% Occupancy
Mth. Rents $0.82 $0.73 $0.85 $0.87 $1.03 $1.75 $0.89 $0.78 $0.88 $0.97 $1.16 $0.90 $0.97 $1.68 $1.02 $1.00 $0.83 $1.02 $0.82 $0.80 $1.22 $1.41 $1.67 $1.16 $1.14 $0.81 $0.84 $1.02 $0.92 $1.16 $1.38 $0.83 $0.79 $1.05 $0.75 $1.12 $1.05 $0.74 $0.85 $0.81 $0.75 $0.83 $0.98 $0.97 $0.90 $1.55 $0.98 $/Sq. Ft./ $/Sq.
362 4,478 9,473 8,436 4,280 7,118 4,536 5,541 7,765 3,728 3,407 9,348 7,346 8,644 5,651 Unit Count 11,498 12,202 37,293 20,447 11,524 13,087 14,066 13,021 18,834 18,063 21,998 21,956 20,753 16,703 20,465 24,257 14,286 22,866 11,580 10,142 24,073 14,092 24,973 27,284 16,786 21,937 58,322 58,514 183,931 574,299 117,014 156,518
3 26 37 44 44 52 94 43 22 61 58 48 71 38 95 28 95 71 65 29 97 53 21 49 19 54 99 42 35 61 40 31 78 48 56 84 152 116 134 105 114 283 712 589 255 673 Count 2,512 Property Alief Heights Far East Far Galleria Baytown Fort Bend Fort Westchase Clear Lake Greenspoint Brookhollow Katy/Far West Katy/Far Central Total Spring Branch Inner Loop East Inner Loop Hwy 288/ South Southeast Total Northeast Total Southwest Total Northwest Total Northline/ Aldine Gulfton/ Bissonnet Inwood/ Northwest Galveston/ Brazoria Almeda/ South Main Pasadena/ Deer Park Pasadena/ Conroe/ Montgomery Richmond/ Rosenberg Woodlands/ Far North Far Woodlands/ Friendswood/ Pearland Friendswood/ Gulfgate/ Almeda Mall Tomball/ Far Northwest Far Tomball/ Woodlake/ Westheimer Woodlake/ Sharpstown/ Westwood Medical Center/ Bellaire Bear Creek/ Copperfield Braeswood/ Fondren SW Braeswood/ Fondren Lake Houston/ Kingwood Lake Northshore/ Wood Forest Northshore/ Wood Galena Park/ Jacinto City Galena Park/ FM 1960 East/ IAH Airport
Montrose/ Museum District West Memorial/ Briar Forest West FM 1960 West/ Champions FM 1960 West/ Eastex Frwy/ Near Northeast Eastex Frwy/ FM 1960 West/ Steeplechase FM 1960 West/
Figure 2: Key Indicators Key Figure 2: Inner Loop West/ Greenway Plaza Greenway West/ Inner Loop Submarket Central Southeast Northwest Houston Total Southwest
Northeast
MULTI-HOUSING FIRST QUARTER FIRST MULTI-HOUSING MARKETVIEW Source: Apartment Data Services, April 2014. CBRE Research, Q1 2014.
Q1 2014 Houston Multi-Housing | MarketView 2
Q1 2014 Houston Multi-Housing | MarketView 3
2014 2014
2014 2013 Q1 2014 2012 Q1 2014
2013 2011 2011 Market Average Market Average
Market Average Market Average 2010 2010
2012
MH Permit Activity Net Absorption Q4 2013 Q4 2013 2009
Houston MSA Houston MSA Class D 2008
Class D
2011 2011 2007 2007
Q3 2013 Q3 2013 2006 2010 Texas Texas
Class C
Class C 2005
2004 2004 2009
Q2 2013 Q2 2013 2003 US Deliveries Under Construction
Class B
Class B
2008 2002 2001 2001 Q1 2013
2007
Q1 2013 2000 2000 Class A Class A Class A Class A 8 6 2 0 4
20 18 16 12 10 14 000s 000s $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 Construction Activity and Absorption Construction Figure 5: Unemployment Figure 6: Average Rates ($/Sq. Ft./Mth.) ($/Sq. Rates Average Figure 3: by Class Occupancy Rates Figure 4: 7% 6% 5% 4% 3% 9% 8% Units 10% 84% 81% 78% 96% 93% 90% 87% Source: Bureau of Labor Statistics, April 2014. CBRE Research, Q1 2014. Source: Apartment Data Services, April 2014. CBRE Research, Q1 2014. Source: Apartment Data Services, April 2014 CBRE Research, Q1 2014. Source: Apartment Data Services, April 2014. Source: Apartment Data Services, April CBRE Research, Q1 2014.
MULTI-HOUSING FIRST QUARTER FIRST MULTI-HOUSING MARKETVIEW UNEMPLOYMENT The Houston economy continues outshine to the national National economy. unemployment held steady thethroughout the quarter at 6.7%. In March 2014, unemployment rateTexas fell 5.5%, to while Houston unemployment dropped 5.2%. to growth Economic slowed year-over- economy grew 2.9% as Houston’s Marchin 2014 year. MULTI-HOUSING CONSTRUCTION MULTI-HOUSING The number units of under construction at the end of The Q4 in 2013. from up 17,614 was 22,246 2014 Q1 Central (Inner Loop) region accounts for the highest share construction, of with about 4 out units every of 10 under construction Houston in being there. built The West Memorial/Briar Forest submarket has become one the of hottestmarket’s 2014, areas for new development. In Q1 units under constructionthere within were that 3,122 submarket while last year at this time only 822 units were underway. The booming office developmentin thearea is driving apartment demand. MULTI-HOUSING OCCUPANCY MULTI-HOUSING occupancy rates stood 40 basis up at 90.9%, points 2014 Q1 Class (bps) from last quarter 2013. bps from and Q1 70 A occupancy was 85%. This number skewed is downward because the data includes new many apartments that are still thein process leasing of Class up. B occupancy was 93.6%, Class C occupancy increased 10 fromup Q4 in 2013. 93.5% reaching 92.7%. 2014, bps Q1 as well in MULTI-HOUSING RENTSMULTI-HOUSING Houston 2014, rents continued Q1 their in upward climb per ft. sq. for the firstreaching $1.00 time. Overall rental the over pastrates year while Class increased A, 7.0% B and C rental rates each increased 6.4%. Class D rates increased Rent growth was strong most in of 2013. since Q1 4.9% rents can submarkets. 2013 The highestthe 41 Q1 overall still be foundthe in Central (InnerLoop) submarkets, led by per ft. sq. andMontrose/Museum District again at $1.75 per ft. sq. TheInner Loop West/Greenway Plaza at $1.68 Woodlands/ in highest rents suburban in markets were $1.16, North,Far Tomball/Northwest, and Fort Bend. © 2014, CBRE, Inc. , we © 2014, CBRE, Inc. Hwy 288/South Gulfgate/Almeda Mall Galena Park/Jacinto City Galena Park/Jacinto Pasadena/Deer Park Pasadena/Deer Friendswood/Pearland Clear Lake Baytown Galveston/Brazoria
SOUTHEAST SE1 SE2 SE3 SE4 SE5 SE6 SE7 SE8
Northshore/Wood Forest Eastex Frwy/Near Northeast Northline/Aldine Greenspoint FM 1960 East/IAH Airport Lake Houston/Kingwood Far East
NORTHEAST NE1 NE2 NE3 NE4 NE5 NE6 NE7
Lynn Cirillo Lynn Research Operations Manager CBRE Americas Research e: [email protected] Eric Himarios Research Analyst CBRE Houston Research 2800 Oak, Post Suite 2300 Houston, TX 77056 1792 577 713 t: +1 e: [email protected] CONTACTS this Houston information about For more please contact: MarketView, Multi-Housing TEXAS RESEARCH Brookhollow Spring Branch Inwood/Northwest FM 1960 West/Champions FM 1960 West/Steeplechase Bear Creek/Copperfield Katy/Far West Tomball/Far Northwest Tomball/Far Woodlands/Far North Conroe/Montgomery
NORTHWEST NW1 NW2 NW3 NW4 NW5 NW6 NW7 NW8 NW9 NW10
Galleria Woodlake/Westheimer West Memorial/Briar Forest Westchase Alief Sharpstown/Westwood Gulfton/Bissonnet Braeswood/Fondren SW Almeda/South Main Fort Bend Richmond/Rosenberg SOUTHWEST SW1 SW2 SW3 SW4 SW5 SW6 SW7 SW8 SW9 SW10 SW11
Montrose/Museum District Inner Loop West/Greenway Plaza Medical Center/Bellaire Heights Inner Loop East
. and Consulting can be found at www.cbre.us/research research produced by Global Research Additional U.S. to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed to confirm independently its accuracy and have not verified it and make no guarantee, warranty or representation about it. It is your responsibility and all rights to the material are reserved and cannot be completeness. This information is presented exclusively for use by CBRE clients and professionals reproduced without prior written permission of the CBRE Global Chief Economist. DISCLAIMER AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around C1 CENTRAL C2 C3 C4 C5
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Q4 2013 CBRE Global Research and Consulting
TOTAL OCCUPANCY AVG. RENT NET ABSORPTION CONSTRUCTION DELIVERIES PROPOSED CONSTRUCTION 90.5% $0.98 Per Sq. Ft. 510 Units 17,614 Units 4,060 Units 20,820 Units
Directional arrows based on change from the previous quarter. Data reflects market totals. RENTAL RATES AND CONSTRUCTION ACTIVITY CONTINUE STRONG GAINS IN Q4 2013.
NET ABSORPTION EXCEEDS 16,000 UNITS Figure 1: Market Net Absorption and Occupancy IN 2013
The number of units absorbed in 2013 reached 16,678. 6,000 93% Not only is net absorption outpacing the three-year average of approximately 14,000 units, but this marks the sixth consecutive year with positive annual net 5,000 92% absorption. Due to increased new supply delivered in Q4 2013 creating new options for renters, absorption compressed to 510 units, down from 3,794 units in Q3 2013. All five submarkets in the greater Houston 4,000 91% area had positive net absorption in each quarter of 2013, except the Northwest which experienced negative net absorption of 202 units in Q4 2013. 3,000 90% The Southwest recorded the highest net absorption, with 5,191 units, while the Inner Loop posted the lowest, at 1,645 units. Although the horizon for new 2,000 89% deliveries suggests further increases in absorption, the Houston MSA is on course to remain positive in Q1 2014 due in large part to continued job growth. 1,000 88%
OCCUPANCY REACHED 90.5% in Q4 2013. Q4 2013 occupancy outperformed both Q4 2011 and 0 87% Q4 2012 occupancy, by 280 basis points (bps) and 90 Units Central Southwest Northwest Northeast Southeast bps, respectively. Although occupancy fell 60 bps from Q3 2013, Houston still experiences occupancy over Q1 Q2 Q3 Q4 2013 Total Units Absorbed Occupancy 90%. Per the Houston Association of Realtors, home Source: Apartment Data Services, January 2014. sales increased 19.4% year-over-year in November CBRE Research, Q4 2013. with trailing year volume up 31.9%, to $20.8 billion, which is the highest 12-month total on record. With robust home sales bringing months of supply to DELIVERED UNITS INCREASE TO 4,060 construction numbers up with these submarkets historic lows and strong housing demand in general, WHILE UNITS UNDER CONSTRUCTION DIP reporting 1,487 and 1,327 units underway, multifamily fundamentals are tight, especially as more TO 17,614. respectively. millennials opt for Class A rentals in the Inner Loop. Multi-housing construction cooled slightly in Q4 2013. As a persistent trend from Q3 2013, most of Q4 2013 saw the most construction deliveries of any RENTS ACHIEVED $0.98 PER SQ. FT. IN Q4 the units under construction are concentrated in the single quarter since Q2 2009. An impressive 4,060 2013. Central (or Inner Loop region). Inner Loop West/ units were delivered this quarter, bumping the annual Rent growth continued in Q4 2013 and Houston Greenway Plaza leads the pack with a grand total of total to a staggering 11,472 units. This is a positive average rental rates are on track to reach $1.00 3,055 units currently under construction. Montrose/ for the growing multi-housing sector in Houston as per sq. ft. soon. Rents reached $0.98 per sq. ft. in Museum District was not far behind with 2,509 units. the total is closely aligned with demand and has not Q4 2013, continuing the upward pattern for all four The Southwest region is also active with 5,297 units surpassed its previous peak of over 14,000 units quarters of 2013. Occupancy dipped this quarter, under construction, where the largest share of activity delivered per year in 2008 and 2009. as did some of the Class A rents, with deliveries is in the West Memorial/Briar Forest submarket with up significantly over the quarter. The pace of rent 2,251 units under construction. With another 1,425 The Houston MSA is currently experiencing a single growth may moderate until this new product is fully units in the pipeline, this Energy Corridor-area market family housing shortage and, with 69,800 new leased up. Class B, C, and D all saw $0.01 per sq. should soon catch up to the high demand created jobs forecasted for 2014 by the Greater Houston ft. gains demonstrating growing demand for these from that growing sector. The Northwest Region Partnership, the multi-housing sector can expect units. Moody’s Analytics’ placed net migration for the posted strong construction numbers again, totaling another strong year. In anticipation of 2014, 20,820 Houston MSA in 2013 at 55,700 persons due to rapid 5,001 units. The most heated submarket for the multifamily units are currently proposed. 35.3% of growth in the energy and healthcare sectors and the Northwest Region is Katy/Far West, with 1,551 units this proposed construction is slated for the Central relatively low cost of living. This trend should continue under construction and another 2,870 delivered. region, with a slew of high profile mid- and high-rise in 2014, supporting rents and construction. As expected, the ExxonMobil campus has driven properties expected to begin construction next year. Woodlands/Far North and Tomball/Far Northwest
© 2014, CBRE, Inc. 60 636 514 527 239 271 247 300 329 647 706 676 571 2,668 1,227 1,002 1,330 1,115 1,620 2,870 1,840 1,425 1,150 3,905 7,342 1,036 7,387 © 2014, CBRE, Inc. by Units 20,820 Proposed Construction 0 0 430 323 302 396 660 643 322 152 832 322 1,128 2,610 Units 4,060 Delivered Delivered Construction 180 236 132 700 352 504 302 409 416 302 2,509 1,337 3,055 1,327 1,551 1,282 1,487 2,251 Units 5,279 6,616 5,001 Under 17,614 Construction
1 6 6 (3) (1) 68 42 39 61 64 17 46 46 69 92 33 16 36 11 68 (41) (44) (37) (40) (64) (54) (31) (15) (50) (12) (92) (45) (36) (13) (75) 157 249 203 196 145 288 119 160 510 (258) (105) (202) Units Absorption 92.3% 86.3% 93.4% 88.3% 94.1% 93.7% 90.8% 89.6% 89.3% 90.9% 89.2% 89.4% 96.7% 94.6% 73.3% 87.2% 94.2% 92.9% 92.1% 95.8% 90.2% 92.4% 91.2% 72.5% 87.5% 88.2% 88.0% 93.7% 89.9% 86.3% 91.6% 93.3% 92.1% 90.7% 92.5% 89.0% 91.5% 93.9% 92.3% 91.4% 87.1% 91.0% 91.3% 87.4% 91.8% 88.7% 91.1% Occupancy
Mth Rents $0.86 $0.71 $0.84 $0.82 $1.12 $1.02 $1.71 $0.78 $0.88 $0.96 $0.86 $0.95 $0.89 $1.16 $1.67 $1.64 $1.02 $0.99 $0.82 $0.98 $0.80 $0.78 $1.39 $1.09 $1.13 $0.79 $0.82 $1.00 $1.34 $1.15 $1.01 $0.91 $1.07 $0.83 $0.77 $0.72 $0.83 $1.02 $0.73 $0.79 $0.73 $0.82 $0.95 $1.51 $0.88 $0.96 $0.97 Per Sq.Per Ft./
362 4,280 9,473 8,436 4,478 7,118 4,536 7,765 3,728 5,541 3,407 9,348 7,346 8,644 5,651 Unit Count 11,524 11,498 12,202 37,293 20,447 13,087 14,066 13,021 18,834 18,063 21,998 21,956 20,753 16,703 20,465 24,257 22,866 14,286 11,580 24,073 24,973 27,284 14,092 10,142 16,786 21,937 58,322 58,514 183,931 117,014 156,518 574,299
3 43 22 44 44 26 37 52 94 61 58 48 38 71 28 95 95 71 53 21 65 29 97 99 49 19 54 35 78 42 48 40 61 31 56 84 152 116 134 105 114 283 712 255 589 673 Count Property 2,512 Alief Heights Far East Far Galleria Baytown Fort Bend Fort Westchase Clear Lake Greenspoint Brookhollow Katy/Far West Katy/Far Central Total Spring Branch Inner Loop East Inner Loop Hwy 288/ South Southeast Total Northeast Total Southwest Total Northwest Total Northline/ Aldine Gulfton/ Bissonnet Inwood/ Northwest Galveston/ Brazoria Almeda/ South Main Pasadena/ Deer Park Pasadena/ Conroe/ Montgomery Richmond/ Rosenberg Woodlands/ Far North Far Woodlands/ Friendswood/ Pearland Friendswood/ Gulfgate/ Almeda Mall Tomball/ Far Northwest Far Tomball/ Woodlake/ Westheimer Woodlake/ Sharpstown/ Westwood Medical Center/ Bellaire Bear Creek/ Copperfield Braeswood/ Fondren SW Braeswood/ Fondren Lake Houston/ Kingwood Lake Northshore/ Wood Forest Northshore/ Wood Galena Park/ Jacinto City Galena Park/ FM 1960 East/ IAH Airport
Montrose/ Museum District West Memorial/ Briar Forest West FM 1960 West/ Champions FM 1960 West/ Eastex Frwy/ Near Northeast Eastex Frwy/ FM 1960 West/ Steeplechase FM 1960 West/
Figure 2: Key Indicators Key Figure 2: Inner Loop West/ Greenway Plaza Greenway West/ Inner Loop Submarket Central Houston Total Southeast Northwest Southwest
Northeast
MULTI-HOUSING FOURTH QUARTER FOURTH MULTI-HOUSING MARKETVIEW Source: Apartment Data Services, January 2014. CBRE Research, Q4 2013.
Q4 2013 Houston Multi-Housing | MarketView 2
Q4 2013 Q4 2013 2012
Q4 2013 Market Average 2011 © 2014, CBRE, Inc.
Q4 2013 Market Average
2012 2010 2009 Q3 2013 MH Permit Activity Absorption Net
Q3 2013 Class D
2011 Class D 2008
Houston MSA 2007
2010 2006 Q2 2013 Q2 2013
Class C
Class C 2005 Texas
2009
2004
Q1 2013 2003 Q1 2013 Class B US Class B 2008
Under Construction Deliveries 2002 2001 Q4 2012
2007 Q4 2012 2000 Class A Class A 0 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 8,000 6,000 4,000 2,000 Construction Activity and Absorption Construction Figure 5: Unemployment Figure 6: Average Rates Per Sq. Ft./Mth Per Rates Average Figure 3: by Class Occupancy Rates Figure 4: 7% 6% 5% 4% 3% 9% 8% Units 20,000 18,000 16,000 14,000 12,000 10,000 84% 81% 78% 96% 93% 90% 87% 10% Source: Bureau of Labor Statistics, January 2014. CBRE Research, Q4 2013. Source: Apartment Data Services, January 2013. CBRE Research, Q4 2013. Source: Apartment Data Services, January 2014 CBRE Research, Q4 2013. Source: Apartment Data Services, January 2013. Source: Apartment Data Services, January CBRE Research, Q4 2013.
MULTI-HOUSING FOURTH QUARTER FOURTH MULTI-HOUSING MARKETVIEW UNEMPLOYMENT Unemployment continued its steady decline through since Q4 2010 National2013. unemployment experienced a significant decline this quarter, as of to 6.6% August from in November The 7.3% 2013 2013. Texas unemployment rate in November fell to 5.8%, 2013 while Houston unemployment dropped to 5.6%. The Greater Houston Partnership expects 69,800 new jobs to be which created will maintain in 2014, the healthcare The year. new the into trend rate unemployment downward sector in the Houston MSA has played a large role in this growth; not only in the Texas Medical Center, but also in Pearland, supporting further development in the Hwy 288/South submarket. MULTI-HOUSING CONSTRUCTION MULTI-HOUSING The number down of units under construction is 17,614, for Q4 2013 but still in Q3from stronger 2013, 18,672 than first two quarters of the respectively. 449, and 16, The Central whichyear, (Inner were 15,124 Loop) region’s accounts for the highest share of construction, representing 38% of units underway, followed by the Southwest region at 30%,where most construction is in the West Memorial/Briar Forest submarket. The Northwest region’s share of construction activity isn’t far behind at28.4%. This region also had the highest number of delivered units for Q4 2013. Office development and employment growth is a contributing factor for the multi-housing construction boom in the Energy Corridor and in the north submarkets near the ExxonMobil campus. The number of proposed unitsis up this quarter, reaching 20,820, suggesting that the development trend will not slow for multi-housing in 2014. MULTI-HOUSING OCCUPANCY MULTI-HOUSING 90.5% of units are occupied across the city. This marks an entire year of citywide occupancy rates above 90%. over Year year occupancy is up 90 However, Class D occupancybps in Q4 from 2012. 89.6% was the only product type to experience a gain in occupancy over the quarter, from Class B and in Q4 2013. Class C product to 85.1% 84.0% in Q3 2013 still have occupancies over 90%, at 93.5% respectively. and 91.6%, Class A occupancy dropped likely to 86.2% due to the in Q4 2013, high volume of delivered units. Overall, submarkets 25 of the 41 experienced occupancy rates over 90%. Inner Loop East, located in the central region, jumped 50 to record in Q4 the 2013, to 94.6% highest in Q3 2013 bps, from 94.1% occupancy submarkets of all 41 this quarter. Despite the positive gains for that submarket, overall Central region occupancy dipped from 92.2% in Q3 in Q4 2013. to 87.4% 2013 MULTI-HOUSING RENTSMULTI-HOUSING Houston rents continued their upward reaching climb in Q4 2013, $0.98 per sq. ft. for the first all classes time. In 2013, experienced positive rent growth: Both Class and A B rents increased by 6.6% over the year and Class C rents Rents rose on by 5.1%. average, to Q4 2013, from Q3 2013 grew in three out of the five regions with the Northwest and Southeast remaining the same. Rent growth was strong in most submarkets. of the 41 The highest rents overall can Q4 2013 still be found in the Central (Inner Loop) submarkets, led by Montrose/Museum District per again at $1.71 sq. ft. and Inner Loop West/Greenway Plaza per sq. at ft. $1.64 Heights showed the most impressive gains with a market for average at $1.67 Medical in Q3 2013. Center/Bellaire up from $1.57 Q4 2013, and the the reach to submarkets other only the were submarket Galleria Southwest’s per respectively. sq. and ft.$1.30 $1.34 level, at $1.39 The highest rents in in suburban Woodlands/Far and markets North, were$1.15, and $1.13 in Katy Far West and Fort Bend$1.12, respectively.
Q4 2013 Houston Multi-Housing | MarketView 3 , we © 2014, CBRE, Inc. TWITTER Hwy 288/South Gulfgate/Almeda Mall City Galena Park/Jacinto Park Pasadena/Deer Friendswood/Pearland Clear Lake Baytown Galveston/Brazoria SOUTHEAST SE1 SE2 SE3 SE4 SE5 SE6 SE7 SE8
Northshore/Wood Forest Eastex Frwy/Near Northeast Northline/Aldine Greenspoint FM 1960 East/IAH Airport Lake Houston/Kingwood Far East NORTHEAST NE1 NE2 NE3 NE4 NE5 NE6 NE7 [email protected] [email protected] Lynn Cirillo Lynn Research Operations Manager e: Allie Conwell Multi-Housing Researcher, CBRE Houston Research 2800 Oak, Post Suite 2300 Houston, TX 77056 1894 577 713 t: +1 e: CONTACTS this Houston information about For more please contact: MarketView, Multi-Housing TEXAS RESEARCH FACEBOOK Brookhollow Spring Branch Inwood/Northwest FM 1960 West/Champions FM 1960 West/Steeplechase Bear Creek/Copperfield Katy/Far West Northwest Tomball/Far Woodlands/Far North Conroe/Montgomery NW2 NW3 NW4 NW5 NW6 NW7 NW8 NW9 NW10 NORTHWEST NW1 Woodlake/Westheimer West Memorial/Briar Forest Westchase Alief Sharpstown/Westwood Gulfton/Bissonnet Braeswood/Fondren SW Almeda/South Main Fort Bend Richmond/Rosenberg Galleria SW2 SW3 SW4 SW5 SW6 SW7 SW8 SW9 SW10 SW11 SOUTHWEST SW1
GOOGLE+ Inner Loop West/Greenway Plaza Medical Center/Bellaire Heights Inner Loop East Montrose/Museum District Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed to confirm independently its accuracy and have not verified it and make no guarantee, warranty or representation about it. It is your responsibility and all rights to the material are reserved and cannot be completeness. This information is presented exclusively for use by CBRE clients and professionals reproduced without prior written permission of the CBRE Global Chief Economist. DISCLAIMER AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around +FOLLOW US +FOLLOW C2 C3 C4 C5 C1 CENTRAL
Q4 2013 Houston Multi-Housing | MarketView 4