HOUSTON–Panelists at the Multifamily Focus panel at RealShare Houston agreed that the entire multifamily market is changing in a number of ways.
“The market is smoking hot,” said moderator Scott Ziegler, senior principal at Ziegler Cooper Architects. “It’s on fire and it’s showing itself in all the different directions of the city.”
The market’s demand is partially due to the larger number of people actively looking toward multifamily housing options over single family homes. Ziegler said they estimate 30% of each 100,000 new residents will opt for multifamily housing.
For tenants, there is a serious move toward 24/7 urban lifestyle centers, which impacts what developers are creating. Residents want to be able to live, work and play in the same area – tending to socialize in smaller communities, gravitating toward the same restaurants, clubs and public places.
“Development will continue to be driven by consumers and how they lead their life; both their work life and their leisure life,” said Kerry French, senior vice president and managing director at NorthMarq.
This desire is beginning to create cities within cities, said Jeremy Edmiston, vice president of Pinnacle Family of Companies.
While tenants are attracted to the mixed-use lifestyle centers, Ziegler said the projects add complexity on the development side as well as require a much larger scale in capital.
In addition to the move toward lifestyle centers, tenants, especially the millennials, are also interested in smaller units within amenity-rich buildings. They are also tending away from garden-style centers and more toward high-rise structures.
Edmiston said the millennial tenants “will allocate more money to living where it’s cool so they can be cool.”
Over the years, the design of multifamily housing projects has changed. French said, he is amazed at how multifamily has changed from basic shelter to amenities like rooftop entertainment centers, dog park services, fitness centers and more.
With the increased demand and the amenity-rich new construction projects, rental rates in the market have continued to rise. Jeffrey Fript, associate vice president of investments for Marcus & Millichap, said there is an increasing gap between class B and class C buildings that were constructed in the 1970s and 1980s and the new class A product.
The popularity of this property type is also bringing in capital from around the world, according to Todd Marix, senior managing director of HFF. “Capital is excited to be here,” he said. “The track record is superb. We feel like this market has legs.”