HOUSTON

MULTIFAMILY REPORT SECOND QUARTER 2018

MARKET AT A GLANCE

OCCUPANCY
RATE 89.9%
Up 100 bps since 2Q17

EFFECTIVE $
RENT 1,031
Up 5.0% since 2Q17

TOTAL
INVENTORY 643,906

OCCUPANCY AND RENT TRENDS

RISE IN EMPLOYMENT, APARTMENT OCCUPANCY BOOST RENT GROWTH

With a slowdown in apartment deliveries during the last year as part of the recovery from Hurricane Harvey, the average
occupancy rate elevated amid sustained rental demand in the Houston metropolitan area. After apartment inventory grew
2.8% annually since mid-2016, inventory expanded 0.9% in the last four quarters. Apartment inventory growth was highest
in the Downtown submarket, expanding 9.3% annually to 5,952 total units by the second quarter of 2018. Even with the
rise in inventory around the metro’s central business district, leasing activity exceeded deliveries as Downtown occupancy
reached 78.5% in June 2018, up from 63.2% one year prior. Helping drive demand in the area was United Airlines Inc.
moving 1,400 employees into its new downtown Houston office during the first quarter of 2018. The submarket trend
was reflected in the metro as Greater Houston average occupancy elevated 100 basis points year over year to 89.9% in
mid-2018. With occupancy rising, apartment operators increased rent 5.0% during the last year to $1,031 in June 2018. In
the Downtown submarket, rent increased 0.6% annually to stay a metro-high $2,031 by the end of the second quarter.

93% $1,100
OCCUPANCY AND RENT TRENDS

91% $1,000

89% $900

87% $800

85% $700
3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18

Occupancy Rate Effective Rent

a Berkshire Hathaway and Jefferies Financial Group company

HOUSTON
MULTIFAMILY REPORT

DELIVERIES AND DEMAND

25,000 DELIVERIES AND DEMAND

DELIVERIES 3,836 20,000

Units YTD
15,000

10,000

NET 5,000
ABSORPTION 7,107
Units YTD 0
2013 2014 2015 2016 2017 2018*
Deliveries Demand
*Year to date

ECONOMIC TRENDS

Houston employers accelerated hiring in the last

2017 UNEMPLOYMENT* 2018
year, which underpinned sustained rental demand.
5.0% -40 BPS
CHANGE
4.6% Total nonfarm employment expanded 2.9%, or by
86,300 net jobs, annually through May 2018, up from
1.0% expansion during the year prior. The latest local
2017 EMPLOYMENT* 2018 growth exceeded the 1.6% U.S. average increase
3.02m 2.9%
CHANGE
3.10m since May 2017. Job creation in the professional and
business services sector contributed to the rise in
Greater Houston labor force. Employers added a
2017 EXISTING SFH SALES** 2018 metro-leading 34,900 net jobs for 7.3% growth during

91.6k 12.0 %
CHANGE
102.6k the last year. Hiring was also robust in the metro’s
largest employment sector—trade, transportation,
and utilities—as elevated oil prices helped the
Houston economy recover. The sector expanded
2017 MEDIAN SFH PRICE** 2018
2.4% with 15,100 workers added to payrolls. Part of
$ 230.2k 3.3%
CHANGE
$ 237.8k the additions came with the expanding presence of
DHL in the metro. During the third quarter of 2017, the
global logistics company signed a three-year lease
2017 10-YEAR TREASURY** 2018 for a 128,924-square-foot distribution facility in north
2.19% 70 BPS
CHANGE
2.91% Houston. DHL will grow its footprint further when the
222,000-square-foot facility near the Port of Houston.

*May; **June
U.S. SHARE OF WALLET METRO SHARE OF WALLET

U.S. METRO
ANNUAL RENT ANNUAL RENT

26.5 %
share of wallet
19.0 %
share of wallet

SECOND QUARTER 2018 BERKADIA

HOUSTON
MULTIFAMILY REPORT

SUBMARKET BREAKDOWN

# OF PRICE RENTAL RATE

SUBMARKET NAME COMMUNITIES # OF UNITS SIZE (SF) ($ / MO.) ($ / SF / MO.) OCCUPANCY
Montrose/Museum/Midtown 53 13,191 924 $1,693 $1.83 88.7%
Highland Village/Upper Kirby/West U 63 16,617 969 $1,762 $1.82 91.4%
Med Center/Braes Bayou 80 23,734 881 $1,310 $1.49 87.5%
Heights/Washington Ave 48 10,937 887 $1,554 $1.75 88.7%
Downtown 23 5,952 968 $2,031 $2.10 78.5%
I-10 East/Woodforest/Channelview 58 11,735 834 $871 $1.04 85.0%
I-69 North 27 3,605 851 $793 $0.93 92.7%
Northline 48 6,405 838 $771 $0.92 93.4%
Greenspoint/Northborough/Aldine 66 17,181 794 $724 $0.91 88.1%
FM 1960 East/IAH Airport 46 8,778 897 $884 $0.99 94.0%
Lake Houston/Kingwood 49 12,674 940 $1,127 $1.20 84.9%
Northeast Houston/Crosby 21 3,278 884 $809 $0.92 82.3%
Brookhollow/Northwest Crossing 90 19,711 826 $836 $1.01 92.1%
Memorial/Spring Branch 109 21,846 916 $964 $1.05 92.2%
Inwood/Hwy 249 31 5,828 882 $794 $0.90 94.8%
Willowbrook/Champions/Ella 158 39,093 884 $920 $1.04 91.1%
Jersey Village/Cypress 62 15,281 907 $1,012 $1.12 93.1%
Bear Creek/Copperfield/Fairfield 61 16,461 902 $1,050 $1.16 92.6%
Katy/Cinco Ranch/Waterside 90 24,782 953 $1,180 $1.24 88.0%
Tomball/Spring 56 13,251 927 $1,142 $1.23 87.3%
Woodlands/Conroe South 68 19,702 942 $1,198 $1.27 90.7%
Conroe North/Montgomery 47 8,649 896 $918 $1.03 90.9%
Hwy 288 South/Pearland West 46 11,844 967 $1,146 $1.19 87.1%
U of H/I-45 South 108 17,794 798 $743 $0.93 90.6%
Beltway 8 /I-45 South 47 13,204 861 $882 $1.02 90.7%
Pasadena/Deer Park/La Porte 120 23,205 849 $849 $1.00 91.0%
Friendswood/Pearland East 28 5,458 856 $992 $1.16 93.6%
Clear Lake/Webster/League City 96 24,288 885 $1,091 $1.23 90.9%
Baytown 55 10,196 855 $871 $1.02 88.2%
Dickinson/Galveston 72 11,186 839 $904 $1.08 92.0%
Alvin/Angleton/Lake Jackson 66 10,525 825 $882 $1.07 86.7%
Galleria/Uptown 102 24,148 897 $1,288 $1.44 89.3%
Woodlake/Westheimer 37 12,233 889 $1,017 $1.14 92.1%
Energy Corridor/CityCentre/Briar Forest 105 32,659 946 $1,161 $1.23 84.6%
Westchase 50 14,922 840 $987 $1.18 91.6%
Alief 109 26,897 872 $875 $1.00 92.1%
Sharpstown/Westwood 106 25,538 790 $716 $0.91 92.6%
Westpark/Bissonnet 57 16,900 810 $751 $0.93 91.4%
Braeswood/Fondren SW 82 21,786 838 $781 $0.93 88.0%
Almeda/South Main 26 4,770 843 $842 $1.00 89.3%
Sugar Land/Stafford/Sienna 51 12,896 957 $1,208 $1.26 91.3%
Richmond/Rosenberg 29 4,766 875 $987 $1.13 94.0%
TOTALS 2,746 643,906 882 $1,031 $1.17 89.9%

© 2018 Berkadia Real Estate Advisors LLC

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

BERKADIA SECOND QUARTER 2018

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© 2018 Berkadia Proprietary Holding LLC

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