Houston multifamily demand to continue in 2015

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Paul Takahashi / HBJ

Living area in The Belvedere apartments, built by Martin Fein Interests Ltd. in Springwoods Village, a master-planned community developed by CDC Houston.

Paul Takahashi

Reporter- Houston Business Journal

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Houston's multifamily sector will continue to grow next year, according to CBRE's 2015 market forecast.

Developers are rushing to build new apartment projects as Houston's strong job growth attracts thousands of new residents. Experts say a new apartment unit is necessary for every five or six jobs that are created.

These new apartments are being absorbed by the market quickly. Multifamily occupancy rates are nearing Houston's record high of 91 percent this year, according to CBRE.

"We're leasing them up as fast as we're putting them into the ground," said Ryan Epstein, a multifamily broker with CBRE.

Multifamily demand will continue to be strong next year, Epstein said.

Nationally and locally, homeownership rates are declining, particularly among young professionals who are seeking a more urban lifestyle. There also is a growing trend of retiring Baby Boomers who are downsizing to apartments.

Millennials and empty nesters, who are accustomed to amenities in single-family homes, expect high-end finishes in apartments. Developers are obliging, adding upscale touches like gas stoves and tile backsplashes to their new projects.

As a result, growing apartment demand and expectations are driving rent prices higher. Over the past decade, the average monthly rent in Houston has increased from $632 in 2004 to $920 this year, according to Houston-based Apartment Data Services Inc.

The rent growth, particularly in newer, more amenity-laden Class A apartments, has allowed older apartment owners to renovate their units. This has elevated the quality of Houston's apartment stock, Epstein said.

"The whole multifamily economy is healthy from top to bottom," Epstein said.

Paul Takahashi covers residential and multifamily commercial real estate for the Houston Business Journal.