Demand has been weak in Houston's multifamily sector, as leasing activity slows for high-quality assets. For the fourth quarter, total net absorption was 3,749 units, according to a market report from Colliers. While still positive, that's lower than the 4,562 posted in the same period a year ago and well below the 10,833 units in the third quarter.
Class A properties absorption fell to 2,279 units, which was the lowest seen in this property type in five years, according to Colliers. While this may have contributed to the weak demand overall, the fundamentals seem interestingly strong around Class A's. For example, occupancy among this property type in the market is at a record high of 86.1 percent and the category accounted for nearly 61 percent of the total absorption in the fourth quarter.
Meanwhile, the rent trend was evenly spread, with the average per month coming in at $1,258, almost $20 lower than seen at the end of 2024. Rents declined across all property classes.
But multiple encouraging signs emerged for multifamily in Houston. For one, occupancy improved by two percent year-over-year to reach 90.4 percent in the fourth quarter.
Investment activity was strong, with multifamily sales surging by 9.2 percent to $1.1 billion on a rolling fourth-quarter basis. Additionally, the average price per unit hit an all-time high of $173,079, which was also up 19 percent from the 12 months prior.
And importantly, supply is slowing down dramatically, with deliveries only at 1,011 units, about a quarter of the 4,088 seen at the end of 2024. Moreover, construction was down by 34 percent.
"Strong occupancy and improving fundamentals, coupled with a slowing construction pipeline, are supporting a more stable outlook for Houston's multifamily market," Danny Rice, president at Colliers' Houston division, said in a statement
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