Multifamily Market's Absorption Makes Best Showing in Decade

HOUSTON-Though oil companies and their profits are linked to the boom in the office market, those same oil companies and their profits are also having an impact on multifamily housing in the area. The upshot is the region logged its highest quarterly absorption in 10 years.

Bill Forrest, senior adviser for Sperry Van Ness in Houston and a well-known local analyst, says the result of the strong job growth has cut three points from the overall vacancy. The latest issue of his quarterly report puts vacancy at 9% versus 12% posted in first quarter 2005. Additionally, 4,200 units were absorbed in the 532,543-unit inventory. Last year at this time, the region was bleeding red on the absorption barometer, with the indicator down 1,500 units.

Forrest points out that, while hurricane evacuees have been the most visible reason for the improving statistics, rising interest rates in single-family housing and job growth have contributed as well. "Oil company profits and expansion are leading to more jobs," he says. "Historically, for every five new jobs, there is a demand for one new apartment unit." Last year, the area picked up 74,000 new jobs, with 60,000 more are anticipated to come on line this year. "All of this means that vacant units are being absorbed, causing occupancies and absorption to increase and concessions to go away," he tells GlobeSt.com.

Forrest says the impact from Hurricanes Rita and Katrina has as many as 100,000 evacuees in the process of becoming permanent metro-area residents, which could potentially keep vacancy rates moving down, especially in the class C and D properties. Class A and B properties should be minimally impacted, he predicts.

"People are moving into class C and D units because that's where most of the vacancies are," Forrest says. In the past year, the sector's occupancy went from an average of 85% to 92%. And, he says it is "expected to stay at that level."

Interestingly enough, rents have remained fairly steady, logging in at about 80 cents per sf, But don't be fooled, Forrest says. Though rents have remained stable, a look at concessions tells another story. "Concessions have gradually decreased and are beginning to go away," he says. "There'll be more of that during the next 12 months."