Multifamily tenants are continuing to demand high-quality product in Houston, as net absorption in the first quarter slipped to 3,578 units versus the 4,254 units posted in the same period a year ago, a report from Colliers finds.
Almost all of the absorption came from Class A properties, which saw 3,246 move-ins. Meanwhile, lower quality product suffered, including Class B, which posted negative demand of 759 units.
"Class C properties have experienced a downward trend in absorption over the past three quarters; however, absorption remains positive and above the five-year average," Colliers wrote in remarks.
Additionally, average monthly rents dropped to $1,248 from $1,279. Class A units averaged $1,700 per unit, with Class Bs, Cs and Ds coming in at $1,242, $974 and $794, respectively. Also, Colliers noted that rents dropped across all property types.
It also didn't help that supply in the market nearly doubled to 6,469 units.
That said, occupancy improved, going from 88.6 percent in the first quarter of 2025 to 90.4 percent. Plus, investment sales were a bright spot, climbing by 4.5 percent on a rolling four-quarter basis to $798 million, although that number represented a quarterly decline.
Another positive note is that less construction is taking place, with just 13,755 units underway in the first quarter.
"Construction activity has slowed over the past two years, following a period of heightened project development when Houston ranked among the nation's leading markets for units under construction," Colliers said.
The Northwest submarket leads Houston currently for deliveries, absorption and units under construction.
Multifamily cap rates overall in Houston have remained at 5.7 percent for the past four quarters.
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