HOUSTON-A seasoned veteran of the Houston multifamily industry says new construction and slow job growth will translate into higher vacancies in the near future. Multifamily rents will likely experience slow growth as well, but for different reasons.

Jeff Eisenhardt of the Houston office of Hendricks & Partners predicts to GlobeSt.com rent growth will be slow–if not flat–due to a property owners’ rush to be grandfathered for legislation that takes effect Jan. 1 and requires installation of energy-efficient fixtures and toilets if they intend to pass water costs to tenants through individual metering or per unit assessments. The legislation takes into consideration that units can be switched only at renewal time or when new deals are struck.

Eisenhardt says it is going to be difficult for property owners to hit tenants with a water bill for the first time along with rent increases. He says rent growth could slip due to the new law, but it won’t be a sign that the market is ailing. Ultimately, he believes property owners will improve the bottom line through the water allocation system.

The prognosis for rents and vacancies is less than stellar. Nonetheless, the city remains a hotbed of sales activity. Through the third quarter, Houston logged 80 property sales or 30 more than in the first nine months of 2001. Meanwhile, 2,936 units delivered in the third quarter with year-to-date construction outpacing net absorption by 6,173 units.

Eisenhardt, though, believes “all roads lead to Houston.” Cheap money, affordable per unit prices and continued job growth, albeit slow, are luring investors to town. On the average, Houston property owners are getting $47,382 per unit, according to Phoenix-based Hendricks & Partners’ latest market report.

Apartments remain the “darling” of commercial real estate investments for lenders and investors who are shying away from the stock market. And Eisenhardt assesses, the relatively quick turnovers prove the ease of getting a deal done in today’s environment.

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