HOUSTON – (By Dale King, Realty News Report) – The Texas multifamily property market continues to show strength, with prices, occupancy and absorption rates rising sharply. The Colliers Multifamily Q4 2021 report for Houston highlights continued momentum in the sector.
Although some analysts expect the market to moderate later in 2022, the multifamily market entered the year largely on the same strong footing it finished 2021.
Key takeaways from the Colliers Q4 2021 report for Houston’s rental market:
- Occupancy rose both quarter-over-quarter and year-over-year;
- Annual absorption more than doubled in 2021 compared with 2020;
- Average rents increased over the quarter and year, while median and average sales prices rose and cap rates compressed.
Huge Absorption: 37,308 Units in Houston in 2021
Demand for multifamily housing in Houston remained elevated in Q4 2021, with 3,548 units absorbed during the quarter and total annual absorption reaching 37,308 units. That surge reflects strong renter demand across the market.
For Class A properties, the average monthly rent for a two-bedroom unit rose from $1,165 in Q3 2021 to $1,184 in Q4 2021, up from $1,043 in Q4 2020. Robust demand is also visible in development activity: more than 15,000 units were under construction at year-end and another 31,260 units were proposed.
Occupancy climbed from 88.4 percent in Q4 2020 to 91.8 percent in Q4 2021. Colliers’ historical data back to Q4 2018 show both average rent and occupancy are at their highest levels in the four-year span. Asking rents had largely hovered between $1,030 and $1,060 for several quarters before accelerating in late 2021.
Fort Worth and Dallas: Even Stronger Rent Growth
RealPage data indicate even more intense rent growth across North Texas. Houston apartment rents remain more affordable compared with many units in Dallas and Fort Worth as well as the national average.
RealPage reported that Dallas-area rents increased 18.2 percent year-over-year in January 2022, putting the average Dallas apartment rent at $1,454. In Fort Worth, average rents reached $1,306 in January, a 15.8 percent increase from the prior year. Despite rapid increases locally, Dallas, Fort Worth and Houston all remained below the national average rent of $1,654 per month for apartment units.
Apartment Investment Sales Surge
Investment activity in Houston’s multifamily sector jumped dramatically. According to Colliers and data from Real Capital Analytics, investment sales volume in Houston rose 735 percent from Q4 2020 to Q4 2021, and grew 386 percent from Q3 2021 to Q4 2021. These gains far outpaced national volume increases, which rose 126 percent year-over-year and 132 percent quarter-over-quarter.
Houston’s median sales price per unit climbed 18 percent over the quarter, from $137,171 to $161,859. By comparison, the U.S. median price per unit increased 7 percent over the quarter, from $181,147 in Q3 to $194,453 in Q4 2021. While Houston’s price growth and transaction volume were notable, national valuations remained higher on a per-unit basis.
Overall, the Q4 2021 data underscore a multifamily market in Texas — especially in Houston and North Texas — that experienced strong demand, rising rents and heightened investor interest as 2021 closed. Developers responded with a substantial pipeline of projects, and investors pushed sales volumes sharply higher as they sought to capitalize on market momentum.
Feb. 24, 2022 Realty News Report Copyright 2022.
File: Texas Apartment Market Skyrocketing
Photo: Courtesy Trammell Crow Residential (Allora)
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Realty News Report Archive: Trammell Crow Residential says it will spend $1.5 billion to build more than 8,000 units that are affordably priced at levels attainable for middle-class families. Branded as “Allora” apartments, the rental buildings will be constructed with a simplified building design.