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Ed CumminsSenior Vice President713.272.1288 | [email protected]
TRANSWESTERNHOUSTON MULTIFAMILY GROUP1900 West Loop South, Suite 1300Houston, Texas 77027713.270.7700 | telephone713.271.8172 | facsimiletranswestern.net
3Q.2010Houston
TRANSweSTeRN
TheApartmentReport
RENTAL RATES
Effective rental rates in the Houston market experienced meaningful growth in Q3 2010 with a 1.2% increase between June and September. However, for the year ending September 2010, rental rates are still down 0.8%. This is indicative of the deep discounts given over the past year. The largest rent declines exist in the Clear Lake and Southeast Houston submarkets while the East Inner Loop submarket experienced the highest rent growth. Concessions continue to be prevalent in the marketplace as 62% of properties reported concessions.
Outlook: The current trend of increased rental rates should continue for the balance of 2010 as new supply fades and concessions are reduced.
Clint dunCanSenior Associate713.270.3316 | [email protected]
lupE OlivarEsSenior Analyst713.272.1290 | [email protected]
HISTORICAL APARTMENT RENTS/UNIT - QUARTERLY
HISTORICAL APARTMENT RENTS/SF - QUARTERLY
3Q.2010SNAPSHOT
ReNTS OCCUPANCY ABSORPTION SALeS DeVeLOPMeNTEffective rental rates
increased 1.2% in Q3. Effective rents are still
down 0.8% for the past year.
Overall occupancy improved by
approximately 1% in the second quarter to 86.91%. There are 254 properties
at 70% occupancy or less, while there are
1685 properties (65% of total inventory) at 90% occupancy or better.
Strong positive absorption continued in Q3 2010
(5,140 per MPF / 5,101 per O’Connor).
Transaction volume was down slightly from Q2 2010,
with 15 projects trading, 47% of these transactions
represent a distressed sale.
With Class “A”, infill product trading above
replacement cost, developers are actively looking for quality infill
sites.
$612 $643 $657 $672 $688 $707 $725 $740 $756 $766
$-
$100
$200
$300
$400
$500
$600
$700
$800
3Q 2001 3Q 2002 3Q 2003 3Q 2004 3Q 2005 3Q 2006 3Q 2007 3Q 2008 3Q 2009 3Q 2010
$0.73 $0.76 $0.78 $0.79 $0.80 $0.83 $0.85 $0.86 $0.88 $0.89
$-
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
3Q 2001 3Q 2002 3Q 2003 3Q 2004 3Q 2005 3Q 2006 3Q 2007 3Q 2008 3Q 2009 3Q 2010
2
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
OccUpaNcy
Occupancy in Houston improved in Q3 2010 0.7%. Annually, occupancy in Houston has increased 1.1%. This was the first annual increase in occupancy in nearly 3 years and the biggest boost in more than 4 years. However, the Q3 2010 occupancy rate is among the weakest in the nation compared to other major metros at 87.3%. As with Q2 2010, properties constructed in the 1970s experienced the weakest occupancy at 87% while 1990s built apartments experienced the strongest occupancy at 92.7% slightly above properties built in the 2000s.
Outlook: Occupancy will continue to improve for the balance of 2010 as strong apartment demand outpaces supply.
AbSORPTiON
A total of 5,101 units were absorbed in the Houston apartment market during Q3 2010. This demand lifted total absorption for 2010 to 13,587 units, an impressive tally. Approximately 20% of the absorption for Q3 2010 came from units built prior to 2000, a sign of expanding employment.
Outlook: Houston should absorb an additional 4,000 units through the rest of 2010. A total of 60,000 – 70,000 jobs are forecasted to be created for 2010, a number that has been revised upward from the 50,000 – 60,000 initially forecasted.
HISTORICAL APARTMENT OCCUPANCY - QUARTERLY
HISTORICAL APARTMENT ABSORPTION - QUARTERLY
93.4% 93.1%
90.4%
88.6%
90.7%90.2%
89.5% 89.2%
86.8%87.3%
82.0%
84.0%
86.0%
88.0%
90.0%
92.0%
94.0%
3Q 2001 3Q 2002 3Q 2003 3Q 2004 3Q 2005 3Q 2006 3Q 2007 3Q 2008 3Q 2009 3Q 2010
2,118
(88)(1,276)
849
16,447
(1,792)
2,780 3,704
(454)
5,101
(5,000)
0
5,000
10,000
15,000
20,000
3Q 2001 3Q 2002 3Q 2003 3Q 2004 3Q 2005 3Q 2006 3Q 2007 3Q 2008 3Q 2009 3Q 2010
3
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
APARTMENT SUBMaRKET CLASS UNITS BUILT SALE DATE STaTUS
Westhollow Park Far West b 404 1980 9/14/2010 Distressed
Mason Park Apartments Katy A 312 2008 8/31/2010 Stabilized
Mid-Towne i & ii Tomball b 78 1985 8/5/2010 Stabilized
Uptown post Oak Galleria A 392 2008 8/4/2010 Stabilized
Del Mar Gulf Freeway C 544 1978 8/3/2010 Distressed
Retreat at Cinco Ranch Katy A 268 2008 7/15/2010 Stabilized
alexan Upper Kirby Museum District A 230 2008 7/13/2010 Stabilized
Mesa Ridge braeswood C 259 1970 7/13/2010 Distressed
bender Creek North Loop - East C 110 1971 7/9/2010 Distressed
camden yorktown bear Creek/Copperfield A 306 2008 7/8/2010 Stabilized
Falcon Ridge Spring b 234 1983 7/8/2010 Stabilized
Forrester Ph i & ii Northshore/Woodforest b 458 1981/1983 7/6/2010 Distressed
hunterwood Northshore/Woodforest C 255 1971 7/6/2010 Distressed
Fairfield Creek Gulf Freeway b 428 1984 7/2/2010 Stabilized
TOTAL 4,278
HOUSTON aREa SaLES - 7/1/2010 - 9/30/2010
APARTMENT SALES
Apartment sales continued their momentum in Q3 2010 with 14 “arms length” transactions occurring in the Houston market. Distressed assets accounted for 46% of sales activity in Q3.
Outlook: Transaction activity will increase in Q4 2010 as lenders under pressure to remove distressed assets will sell and investors look to take advantage of historically low interest rates.
4
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
SUBMaRKET cITy APARTMENT UNITS pROpERTy TypEcONSTRUcTION
TypE
braeswood houston Floral Gardens 100 Senior Tax Credit Garden Style
brazosport Lake Jackson Jackson Village Retirement Center 96 Senior Tax Credit Garden Style
brazosport Alvin Melbourne Senior Apartments, The 110 Senior Tax Credit Garden Style
brazosport Clute Casa brazoria 36 Tax Credit Garden Style
brookhollow houston Orchard at Oak Forest, The 118 Senior Tax Credit Garden Style
Clear Lake/League City League City Villas at Tuscan Lakes, The 206 Conventional Garden Style
Conroe Conroe Woodside Manor 220 Senior Tax Credit Garden Style
Conroe Conroe Skytop Apartments 192 Tax Credit Garden Style
Deer Park Pasadena ClearPointe Crossing 288 Conventional Garden Style
Far West houston beechnut Oaks 144 Senior Tax Credit Garden Style
FM 1960 East humble Sierra Meadows 90 Senior Tax Credit Garden Style
Galleria houston Place Vendome Redevelopment 321 Conventional Garden Style
Galveston Santa Fe heritage Crossing 72 Senior Tax Credit Garden Style
Greenway Plaza houston 33 ThirtyThree 528 Conventional Mixed Use
Gulf Freeway Pasadena Preserve at baywood 336 Conventional Garden Style
Gulf Freeway houston Sterling Court Senior Residences 140 Senior Tax Credit Garden Style
heights houston Avenue Terrace 144 Tax Credit Garden Style
hwy 288/Almeda houston South Acres Ranch ii 48 Tax Credit Garden Style
inner Loop East houston Kennedy place (Redevelopment) 108 Conventional Garden Style
Katy Katy Legends at Cinco Ranch Apartments 180 Conventional Garden Style
Katy Katy Villas at Grand Parkway, The 330 Conventional Garden Style
Katy Katy Trebah Village 128 Senior Tax Credit Garden Style
Kingwood/Lake Houston Atascocita Wentworth Senior housing 90 Senior Tax Credit Garden Style
Midtown houston CityPlace 185 Conventional Midrise
North Loop - East houston homeTowne on Wayside 128 Senior Tax Credit Garden Style
North Loop - East houston Sakowitz Apartments 166 Tax Credit Garden Style
Northline/Aldine houston Northline Apartment homes 172 Tax Credit Garden Style
Pearland Pearland Carrington Place at Shadow Creek Ranch 360 Conventional Garden Style
Pearland Pearland Discovery at Shadow Creek, The 347 Conventional Garden Style
Pearland Pearland Pearland Senior Villages 126 Senior Tax Credit Garden Style
Steeplechase Cypress Greenhouse Place 140 Senior Tax Credit Garden Style
Texas City/Dickinson La Marque highland Manor Senior housing 141 Senior Tax Credit Garden Style
Texas City/Dickinson La Marque horizon Meadows 96 Tax Credit Garden Style
Woodlands The Woodlands Millennium, The - Waterway Ave 393 Conventional Garden Style
Woodlands Spring Village at The Woodlands Waterway, The 116 Senior Conventional Garden Style
TOTAL 6,395
currently Under construction or in Lease Up
Properties highlighted in green are new additions (vs. prior quarter lists)
cONSTRUcTION
New apartment deliveries are slated to drop to the lowest level seen in more than two decades. Of the 4,232 units scheduled for delivery through 2011, only 61% of these units are from conventional deals. The balance of the units scheduled for delivery represents tax credit properties.
Multifamily permit approvals in Houston are down 33% from a year ago.
Outlook: With Class “A”, infill product trading above replacement cost, developers are actively looking for quality infill sites.
5
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
SUBMaRKET cITy APARTMENT UNITS pROpERTy TypEcONSTRUcTION
TypE
brazosport Lake Jackson Residence at Lake Jackson Ph ii, The 60 Conventional Garden Style
Champions - East houston Mariposa at Ella blvd 180 Senior Tax Credit Garden Style
Champions - East houston Ventana Pointe 96 Senior Tax Credit Garden Style
Clear Lake/League City League City Newport at Marina bend 402 Conventional Garden Style
Deer Park Deer Park Providence Town Square 252 Senior Conventional Garden Style
Galveston Galveston holland house 157 Senior Conventional highrise
Gulf Freeway houston Tarrington Court 153 Senior Tax Credit Garden Style
hwy 288/Almeda houston Cypress Creek at Fayridge 152 Tax Credit Garden Style
inner Loop West houston Zion Gardens 70 Tax Credit Garden Style
inwood houston Parkway Ranch ii 45 Tax Credit Garden Style
inwood houston Chelsea Senior Community 144 Senior Tax Credit Garden Style
Katy Katy Cinco Terrace Apartments 316 Conventional Garden Style
Katy Katy Legends at Cinco Ranch Ph ii 80 Conventional Garden Style
Katy Katy Mason Apartment homes 120 Senior Tax Credit Garden Style
Katy Katy Vista Grand Parkway 200 Conventional Garden Style
Kingwood/Lake Hous-ton
Kingwood Tuscany Place 152 Tax Credit Garden Style
Medical Center houston Cambridge Tower 200 Conventional highrise
Midtown houston Midtown Grove 51 Conventional Garden Style
Midtown houston Post Midtown Square Ph iii 136 Conventional Midrise
Museum District houston Fairmont Museum District Ph ii 250 Conventional Garden Style
Northshore/Woodforest houston Cypress Gardens 100 Senior Tax Credit Garden Style
Pearland PearlandResidences at Pearland Town Center Ph ii, The
238 Conventional Garden Style
Richmond/Rosenberg Richmond Westpark Apartments 248 Conventional Garden Style
River Oaks houston West Dallas Apartments 430 Conventional Midrise
tOtal 4,232
Proposed Construction
Properties highlighted in green are new additions (vs. prior quarter lists)
6
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
Construction by Submarket
60
276
402
252
157
153
152
70
189
716
152
200
187
250
100
238
248
430
100
242
118
206
412
288
144
90
321
72
528
476
144
48
108
638
90
185
294
172
833
140
237
509
0 200 400 600 800 1,000 1,200 1,400 1,600
Braeswood
Brazosport
Brookhollow
Champions - East
Clear Lake/League City
Conroe
Deer Park
Far West
FM 1960 East
Galleria
Galveston
Greenway Plaza
Gulf Freeway
Heights
Hwy 288/Almeda
Inner Loop East
Inner Loop West
Inwood
Katy
Kingwood/Lake Houston
Medical Center
Midtown
Museum District
North Loop - East
Northline/Aldine
Northshore/Woodforest
Pearland
Richmond/Rosenberg
River Oaks
Steeplechase
Texas City/Dickinson
Woodlands
Proposed Units (Total = 4,232) Under Constr. Units (Total = 6,395)
7
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
Source: O’Connor & Associates
8
3Q.2010Houston
The Apartment Report
ThE APARTMENT REPORT • HOUSTON • 3Q.2010
BUILdINg TypE COST PER S.F. NOTES
3-story Garden $65 - $67 200 units or more, 900 SF avg unit size or higher2-story big house ® $68 - $70 All garages4-story or 4-story e-Urban ® $72 - $74 including surface parking, 40 - 45 units per acre4-story wrap $92 - $944-story podium $110 - $115high Rise $160 Cost per Gross SF, including parking
Estimated Construction Costs
* All estimates above include GC overhead and profit, no land or soft costs.Source: humphreys & Partners Architects, L.P.Big House ® and e-Urban ® are registered trademarks of Humphreys & partners architects, L.p.
METHOdOLOgy
The information in this report is the result of a compilation of information on the houston MSA multifamily market. Transwestern obtained the information from a variety of primary and secondary sources, including O’Connor & Associates and M-PF Research.
INTRODUCING TRANSWESTERN HOUSTON’S MULTIFAMILY INVESTMENT SALES GROUP
LOCAL PULSE. NATIONAL RESOURCES. PERFORMANCE ADVANTAGE
CLINT DUNCANSenior Broker713.270.3316
SHANNON BEDINGERMarketing Director
713.272.1285
ED CUMMINSSenior Vice President
713.272.1288
TRACY SHIRAHMarketing Assistant
713.270.3354
LUPE OLIVARESSenior Financial Analyst
713.272.1290
www.transwestern.net/houston
QUARTERLY MARKET REPORT PRESS RELEASE
