2021 Houston Texas MSA - Greystone
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SPRING ISSUE
2021
MARKET INSIGHT REPORT
Houston
Texas MSA
| TOTAL EMPLOYMENT | UNEMPLOYMENT
Employment / Unemployment
3.30 16.0%
Millions
The Houston metro area shed 141,300 jobs for the year-ended December 3.20 14.0%
2020. This equated to a 4.4% decline in overall employment. The local
12.0%
unemployment rate was 8.0%, above the U.S. unemployment rate of 6.5% 3.10
and placing Houston at 42 of 51 for highest unemployment of the largest 10.0%
3.00
U.S. metro areas. The current Moody’s Analytics forecast for Houston shows
8.0%
a total job increase of 4.0% in 2021 and a 3.1% increase in 2022. This pace
2.90
will allow Houston to recover to their 2019 employment high in 2022. 6.0%
2.80
The Greater Houston Partnership (GHP) also released its annual Houston 4.0%
2021 economic forecast and foresees a choppy year of growth in 2021, with 2.70 2.0%
most of the region’s recovery coming in the second-half of the year. Though
most sectors will see job growth, retail is expected to extend job losses, and
2.60 0.0%
energy jobs could decline further or post a break-even scenario depending Apr '20 Sept '20 Dec '20 Dec '19 Apr '20 Sept '20 Dec '20 Dec '19
on several factors, including the new administration’s reentry into the Paris
Agreement, new mileage and emission rules for autos and trucks, and more.
Set on remaining world leaders in the energy sector, Houston energy METRO AREA EMPLOYMENT DECEMBER PERCENT CHANGE FROM
firms are investing in clean energy research. Halliburton Labs, for (THOUSANDS) 2020 DECEMBER 2019
example, was recently launched to promote innovation and to solve
clean energy challenges. Halliburton’s incubator signed three new Total Nonfarm 3,068.2 -4.4%
energy tech startups in 2020 that will have access to Halliburton Mining and Logging 64.5 -17.8%
facilities and its expert staff and network. The GHP estimates the city Construction 217.1 -10.1%
has seen $3.7 billion of cleantech venture funding in recent years. Manufacturing 213.1 -9.3%
Trade, Transportation, and Utilities 636.9 -2.5%
Information 29.9 -8.6%
Financial Activities 163.8 -3.0%
Professional and Business Services 517.6 1.0%
Education and Health Services 405.4 -1.4%
Leisure and Hospitality 295.9 -10.9%
Other Services 103.4 -11.8%
Government 420.6 -1.5%
Sources: U.S. BLS, Current Employment Statistics
2 Houston Metro Market Insight Report 3
Rental Market
• Average rent will decline an additional 0.9% in 2021 | AVERAGE RENT / VACANCY
before increasing 1.5% in 2022 and 2.3% in 2023
$1,200 8.0%
• Vacancy rate will rise 140 basis points to 7.4% in 2021
$1,100 7.0%
due to a high volume of new completions
$1,000 6.0%
• Product built prior to 2019 should still hold vacancy to the 5.0%-5.5% range
$900 5.0%
$800 4.0%
'16 '17 '18 '19 '20 '21* '22*
Average Rent Average Vacancy
Source: Reis, *Projected
-1.4%
Average Rent Decrease | ASKING RENT COMPARISON
From $1,097 to $1,081
$2,000
YoY
$1,000
YEAR ASKING VACANCY
BUILT RENT RATE $0
Studio 1 BR 2 BR 3 BR
Before 1970 $968 5.2%
| ASKING RENT PSF
1970-1979 $881 5.4%
1980-1989 $898 5.2% $3.00
1990-1999 $1,229 5.9% $2.00
2000-2009 $1,306 5.0%
$1.00
2010-2019 $1,625 6.9%
After 2019* $1,949 31.5% $0.00
Studio 1 BR 2 BR 3 BR
*Includes Properties in Lease-Up
Houston MSA Southwest U.S.
Source: Reis, 4Q 2020
4 Houston Metro Market Insight Report 5Multifamily Construction Permits
The Houston market has a cumulative apartment inventory • Active single family for-sale inventory was down 32% in
growth forecast of 2.8% for 2021, the highest percentage gain December 2020 as compared to one year prior.
since 2016. This compares to a U.S. average of 2.4%.
• Months inventory for single-unit residential housing declined from 3.2
A 1.1% gain to inventory in 2022, or 7,087 units, will coincide to 2.0 months supply, and days to sell declined from 98 to 86 YoY.
with stronger absorption of 9,625 units, beginning a multi-
year trend of declining vacancy across the metro.
| TOTAL RESIDENTIAL BUILDING PERMITS
80,000
70,000
60,000
50,000
17,483 New Units 40,000
30,000
2021 Expected Completions
20,000
7,087 New Units Will Follow in 2022
10,000
0
| COMPLETIONS / NET ABSORPTION
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20
20,000
Multifamily Units (5+ Units) Single Family Units (1-4 Units)
16,000 Source: U.S. Census, Multifamily Includes Condos
12,000
8,000
4,000
48,557 19,858 $272K
0
'16 '17 '18 '19 '20 '21* '22*
Completions Net Absorption Single Family Multifamily Permits Median Single
Source: Reis, All Figures are Annual Totals, *Projected Permits (5+ Units) Family Price
+20.8% YoY -8.0% YoY +7.9% YoY
6 Houston Metro Market Insight Report 7Multifamily Sales
| AVERAGE SALES PPU / CAP RATE
$150,000 7.5%
$125,000 7.0% $3.1B 26,407
$100,000 Sales Volume Total # Units Sold
6.5%
$75,000
-57.0% YoY -58.4% YoY
6.0%
$50,000
$25,000 5.5%
$0 5.0%
'11 '12 '13 '14 '15 '16 '17 '18 '19 '20
$ / Unit Cap Rate | APARTMENT SALES TRANSACTIONS
Source: Real Capital Analytics, Based on Sales of $2.5 Million and Greater 80,000 $9
Billions
70,000 $8
$7
60,000
$6
$129,049 50,000
40,000
$5
Avg. Sold Price / Unit $4
+5.6% YoY 30,000
$3
20,000
$2
10,000 $1
0 $0
5.2% Total # Units
'11 '12 '13
$ Volume
'14 '15 '16 '17 '18 '19 '20
Avg. Cap Rate Source: Real Capital Analytics, Based on Sales of $2.5 Million and Greater
-20 bps YoY
Sources: Greystone; Reis; RealCapitalAnalytics; U.S. Census; Bureau of Labor; Texas A&M;
The Greater Houston Partnership
8 Houston Metro Market Insight Report 9Copyright ©2021 Greystone & Co. II LLC. All Rights Reserved. References to the term “Greystone,” refer to Greystone & Co. II LLC and/or its affiliated companies, as applicable. Although the information contained herein has been obtained from sources deemed reliable, Greystone Real Estate Advisors LLC makes no express or implied guaranty, warranty, or representation that the information is complete or accurate. Further, any projections, opinions, assumptions, or estimates used or offered herein are for the purpose of example only. Accordingly, Greystone Real Estate Advisors LLC recommends that you conduct your own careful, independent investigation into all aspects of this research report in order to gain a full understanding of the program / topic and reach your own conclusions or opinions as to its value and any related issues. The information contained in this research report should be independently examined by experts selected by you. Any recipient of these materials from Greystone Real Estate Advisors LLC should not and may not rely on these materials for any purpose beyond general introductory information.
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