With deliveries tapering off, apartment supply and demand inching closer to equilibrium
Houston’s multifamily market is set for supply and demand parity in 2019, according to Berkadia’s 2019 Houston Multifamily Market preview. Following a slowdown in absorption deriving partially from a return of homeowners to residences after Hurricane Harvey, multifamily developers will taper deliveries to bring supply and demand closer to equilibrium.
“2019 should actually be very favorable towards the landlord,” said Ryan Epstein, Senior Managing Director of Berkadia’s Houston office. “We’re not going to have a lot of supply, so it’s a good year for landlords to solidify occupancies and work on increasing rents. The trend of capital chasing assets will continue into 2019, and Houston has displayed exceptional fundamentals that will keep the multifamily market attractive for a variety of large institutional investors.”
Rising interest rates will present some headwinds in 2019, according to Senior Managing Director Tucker Knight of Berkadia’s Houston office.
“Multifamily developers and investors are certainly more conscientious about where we are in the cycle,” said Knight. “The status quo is expected to remain in 2019, with recession-proof tactics taking place in 2020. Overall, firms will remain creative in making deals work because of rising rates and the absence of price fluctuations. When it comes to development, construction financing is now more readily available than it was 20 months ago.”
Highlights from Berkadia’s 2019 Outlook report:
- Developers are expecting to deliver 5,560 units in 2019, approximately a third fewer than in 2018 which saw 8,300 units come online.
- Effective rents are expected to rise 4.2 percent year over year from $1,129 to $1,177 per month.
- Consistent apartment demand will be driven by employment growth which is forecast to expand by 2.6 percent.
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