Ryan Epstein is the executive vice president of multifamily at CBRE Houston.
New multifamily construction has slowed in Houston as apartments saturated some submarkets and oil prices plummeted.
However, the market for buying and selling apartment properties is still strong, said Ryan Epstein, executive vice president overseeing CBRE Group Inc. (NYSE: CBG) multifamily capital markets in Houston.
“The fundamentals seem to be holding pretty well,” Epstein said. “We haven’t seen a big impact operationally on apartments.”
CBRE is set to release its second-quarter multifamily report soon, but Epstein said the numbers point to a solid multifamily market. Houston is still absorbing new apartments, capitalization rates have held steady and rent is still growing, he said. However, Epstein also acknowledged that traffic to some apartment properties has slowed and rent concessions of up to two months have crept into the market.
Despite some mixed results, CBRE is still seeing plenty of activity in the multifamily investment market, Epstein said. A quality apartment in a good location will still see aggressive pricing, he said.
“We’re still seeing a good number of transactions,” Epstein said. “I assume the market will do fewer total transaction volume this year compared to last year. We’re a little bit ahead of where we were at the end of July last year, but not by much. We’ll probably end up doing about the same volume.”
Epstein and his team has noticed a shift in the type of investors who are buying into Houston’s multifamily market during the oil slump, he said.
“We’re seeing more private and foreign capital than institutional investors right now,” Epstein said. “Institutions are waiting and watching on the sidelines.”
Investors who have large portfolios continue to be bullish on Houston apartments, Epstein said.
Private capital, like pension funds and wealthy investors, are are taking a long-term view of Houston’s multifamily market, banking on the expectation that oil prices will rebound sooner or later. As Houston has become more of an international city, it has attracted an influx of foreign capital from Asia, Canada and South America, Epstein added.
The biggest hurdle facing apartment deals is the negative perception of Houston’s oil heavy industry amid the oil downturn.
“There’s a big perception from outside investors about Houston,” Epstein said.” They’re expecting a lot of ugliness to happen, but we’ve still haven’t really seen that. Any fall-off or fewer bidders is because of that perception.”
Epstein and other multifamily real estate brokers point to data that show there hasn’t been a degradation in the market as many industry observers feared. Once more investors see that, more investors have jump back into the market, Epstein said.
“Once a few of them step back into the water, and people see they didn’t drown, they’ll follow,” he said.
Aug 6, 2015, 7:40am CDT–Paul Takahashi Reporter Houston Business Journal
