The ongoing Covid-19 coronavirus pandemic, combined with an overall weak economy, has helped soften Houston’s multifamily real estate market during the second quarter of 2020. But it could have been a lot worse, real estate experts say.
Recent reports by Houston-based ApartmentData.com and Los Angeles-based CBRE found that the average rent for an apartment unit in Houston fell by 1.3% last quarter and that citywide multifamily occupancy dropped 40 basis points, with higher-end developments taking the biggest hit.
The average effective rent per unit in Houston last quarter was $1,045 per month. Rents for Class A units fell by 3.7% during Q2, compared to the 0.9% decline the city’s Class B units saw.
Meanwhile, the citywide occupancy rate stood at 88.8 percent during the second quarter of 2020.
CBRE attributed the declines to the number of new high-end units coming to market.
During the first half of 2020, CBRE estimates that developers completed more than 14,000 new units. That, combined with another 19,000 units in the pipeline, has helped to drive the dip in average rent per unit.
That said, Houston renters leased up an additional 2,054 net units last quarter, according to the reports. For the first half of 2020, Houston has seen positive net absorption of 4,397 units, CBRE said.
“Absorption in June of 1,263 units is very respectable for any June and is the force behind the firming of rent in Classes B, C and D,” said Bruce McClenny, president of ApartmentData.com. “The reopening of Texas during June is behind Houston’s improving statistics. However, recent spikes of the virus throughout Texas potentially pose a threat to undermine market conditions. July will be another month to see how the economic slowdown impacts apartment market movements.”
The blow Houston’s multifamily market has taken in the wake of Covid-19 could have been more significant, the CBRE report said, given the city’s ties to the global energy market, which has also taken a beating this year. But CBRE anticipates continued headwinds for the multifamily market later this year.
“The weak economy and high rents of Class A product has also led to a negative net absorption in the central submarkets and lower occupancy rates,” the report said. “The suburban submarkets have generally maintained rent and occupancy levels better throughout Houston.”
As the CBRE report noted, Houston has seen a number of high-profile multifamily developments come to market in recent months.
Earlier this month, Washington, D.C.-based Madison Marquette, with investment support from Los Angeles-based AECOM Capital, opened The Travis at 3300 Main St.
The 30-story, 375,775-square-foot luxury apartment tower sits atop 14,000 square feet of retail space, which includes a restaurant scheduled to open during the first quarter of 2021.
The building offers 328 one-, two- and three- bedroom units.
Also this month, High Street Residential, the residential subsidiary of Dallas-based Trammell Crow Co., broke ground on a 43-story apartment tower in downtown Houston.
The project is at 808 Crawford St., next to Discovery Green, and is expected to deliver in late 2022.
Once complete, the tower will include 309 apartment units in a mix of one-, two- and three-bedroom floor plans, including 16 two-story townhome-style units on the 15th through 34th floors and four two-story penthouses on the 41st floor.
Publication: Houston Business Journal