As demand for multifamily units continues to rise in the Greater Houston area, developers have adapted their projects to cater to residents with new luxury apartment complexes.
"The big trend has been building apartments for what I call renters by choice," said Ryan Epstein, executive vice president with commercial real estate company CBRE. "There isn't as much affordable housing being built today."
According to a report by CBRE, the Greater Houston area ranked second in the nation for number of permits issued for new multifamily units in 2014. About 120,000 new jobs were created in Houston in 2014, which has been a driving factor in the demand for apartments, Epstein said.
"Many developers use a metric that says for every five to six new jobs, that creates demand for one apartment unit," he said. "That means we need [24,000]-plus apartment units for [the job creation in 2014 in Houston]."
The Greater Houston area is becoming more of a major market as well, Epstein said, meaning many of the jobs created are higher income positions with the Texas Medical Center and in the engineering field.
The demand for apartments is strong in the Northwest Houston submarket as well, serving as a landing pad for transplanted workers, Epstein said.
"People who are relocating to Houston want to get their kids in a good school district, and then spend a year or two figuring out where they want to buy a house," he said. "The other trend that has continued up in Northwest Houston has been corporate relocations. You've seen a lot more energy [industry] workers here for a year or two before they get relocated. They're going to rent an apartment, not purchase a house."
The rise in demand for multifamily units also correlates directly to increases in rent across Houston.
"Because the spigot was turned off for two years during the economic downtown, that created demand with no supply," Epstein said. "In response to that, landlords have [increased] rents because there has been tremendous demand."
The new apartments under construction in the Houston market also have additional amenities for residents, such as swimming pools, outdoor grilling areas, fitness rooms and 10-foot ceilings—such features that are not found as frequently in other markets.
"If you live in New York, L.A. or Chicago and move to Houston, you'll think rent is on sale," Epstein said. "It's cheap if you compare Houston to other markets in the country. As opposed to living in an old 1980s property that's been painted a few times, here you can move into a beautiful new property with a giant pool and all those extra amenities."
Although he expects multifamily growth to continue in 2015, Epstein said rents will likely stabilize this year.
"The latest report I saw is expecting 2015 job numbers to be around the 62,000 mark [in Houston]," he said. "As we still have a lot of new jobs being created, we'll have more need for apartments. We are building more today, but we have less job growth than last year, so I think there will be less pricing power for the landlord."