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HOUSTON-During late 2005 and into early 2006, the main news story in the multifamily market involved the so-called “Katrina factor”–hordes of hurricane victims arriving in the city and giving the local apartment complexes a much-needed occupancy boost. A year later, though, most experts agree that the “Katrina factor” is gone from the scene.

“I think one of the things that resulted from Katrina was a false sense of how strong the apartment market was going to continue on,” says Craig LaFollette senior vice president in CB Richard Ellis’s Houston office. “Everyone thought, including myself, that the Katrina impact would last for two or three years, but it hasn’t.”

With occupancy jumping from 88% to 94% in late 2005, developers came in to build as well. “We’ve got a lot of stuff coming down the pike,” LaFollette says. “But fortunately, we’ve had good growth in 2005 and this year, and a good projection next year. That’s been helping us stay even.”

David Mitchell, principal with Apartment Realty Advisors in Houston, agrees–and adds that overbuilding isn’t a concern. Not only will job and population growth take care of extra units in the market, but construction costs and land supply will provide high barriers to entry.

Investments into multifamily properties, which were strong this year, are expected to continue in 2007. LaFollette and Mitchell concur that the market continues to be flush with capital and interest.

“Deals began getting a little harder to close at the end of the year,” Mitchell says. “The number of offers sellers received began getting smaller.” Still, Houston has made its way to the top of the radar screens of institutional investors. And, he adds, it will continue to hold a place at the top next year.

Leasing, investment and construction activities in most submarkets are strong. LaFollette says Clear Lake is doing well as is League City. Another area to keep an eye on, he says, is the Far West submarket.

Mitchell points out that Fort Bend County is seeing its share of growth too. “Obviously, infill Houston continues to be highly sought after,” he says.

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