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Rental rate growth may not be sustainable, investment pros say
With the Bayou City’s office and multifamily units reaching record-breaking rental prices, capital market and investment experts say the climbing rates are likely "not sustainable."
Houston has outpaced much of the nation in its economic growth and will continue to do so for the foreseeable future, said Michael McAfee, southwest division manager at San Francisco-based Wells Fargo Bank at an Urban Land Institute panel discussion Oct. 24.
However, though Houston’s fundamentals are strong, it’s likely that within 18 to 24 months, Houston’s unprecedented high will start to taper off to what is considered “normal†levels, said Ron Miller, director of acquisitions for Dallas-based Invesco Real Estate during the panel discussion.
“Across the board, Houston has seen rents rise from a (metropolitan statistical area) standpoint — more than any other market,†Miller said. “Rents grew much more quickly than we ever thought any market could and it’s going to be hard to sustain.â€
On the upside for tenants, it’s still relatively cheap to live in Houston compared with other gateway markets, and high rents are going to drive new development in the hottest and tightest submarkets, Miller said.
Mark Hanrahan, managing director at Iowa-based Principal Real Estate Investors, stressed that there is still some apprehension regarding the threat of overbuilding in Houston.
Looking forward, some multifamily pockets will likely soften as more product hits the ground in the next couple of years, he said.
Overall, the panel of capital markets experts suggested a cautiously optimistic outlook for Houston’s development and rental rate future.
"We will look back at this moment not as the beginning of end, but rather beginning of long-term redefinement,†said Glenn Lowenstein, founding partner at Houston-based Lionstone Group during the discussion.
Kathy Curtis, Licensed Apartment Locator 281-842-7965 or
leasewithkat@gmail.com
shared by Kathy Curtis/Texas Apartment Locators
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Great Post Kathy.
Thanks Joel, just wanted to share some interesting information!