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Strong Market Fundamentals Supporting Gains in Houston Multifamily Valuations, According to Deal Sikes
[July 10, 2019]

Strong Market Fundamentals Supporting Gains in Houston Multifamily Valuations, According to Deal Sikes


The positive dynamics of Houston's multifamily market have created a robust environment for significant gains in apartment valuations as investors have targeted the city, according to Deal Sikes, a leading Houston-based valuation firm.

"The healthy economy has encouraged household formation and rental housing is a very attractive option for many," said Mark Sikes, principal with Deal Sikes. "Apartment developers have responded with a wave of construction that makes Houston one of the most active markets in the nation for multifamily building. This follows the tepid level of construction in 2018."

Even with the uptick in new apartment deliveries in 2019, the Houston multifamily occupancy rate still stands over 90 percent.

"Construction remains strong in Houston's Inner Loop. The supply of land and construction-appropriate redevelopment sites is tight and the demand enables sellers to receive impressive sales prices," Sikes said. "Some suburban aeas that have been limited in years past, such as Clear Lake and Atascocita, are now being selected by multifamily developers. With higher land prices, the trend throughout the area is for developers to construct mid-rise and high-rise multifamily properties."



Investors have been active in Houston multifamily in recent years, applying upward pressure on prices, said Matthew Deal, principal with Deal Sikes. "Investor activity has increased in the multifamily market as continued job growth and the perceived recovery in the energy sector create a narrative for upside potential. A number of investors have been attracted to Class B and C apartments, which offer the opportunity to create value through renovations and rent increases. The demand for older multifamily investments has been particularly strong on the southeast and eastern parts of Houston, near the chemical plants and blue-collar jobs. Also coming into play is the consideration of Qualified Opportunity Zones, which allow real estate investors to obtain relief from federal capital gains taxes under certain circumstances."

Deal Sikes provides valuation and counseling services for real estate firms, governmental agencies, law firms, and investors across the region. www.DealSikes.com



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