Previously, GWR owned just 10 apartment buildings containing 2,368 units. The firm now has 26 apartment buildings with 5,851 units, with locations expanding beyond Houston. Because Class B units are not as unpredictable and competitive as Class A holdings, GWR believes the acquisitions present a different investment opportunity.
Similarly, The Barvin Group, another Houston-based property management company, acquired two apartment complexes inside the Loop after raising $16.5 million in capital.
According to commercial real estate firm CBRE, many developers shifted focus toward Class B properties in order to offer updated, yet affordable housing opportunities to Houston renters.
In the Houston Multifamily MarketView Q1 report, CBRE refers to Class B holdings as the “sweet spot,” despite Houston’s sluggish local economy. Investments within the Class B sector are expected to rise significantly as job growth expands to health care, government, hospitality and education.
According to CBRE, rent on Class B properties increased slightly in the first quarter while concessions increased among Class A buildings. Class B and Class C properties kept occupancy above 93 percent over the last year, while Class A occupancy has declined from 84.3 percent to 80.5 percent in the last year.
Class A buildings increased in supply over the last few years, bringing occupancy down. Nevertheless, absorption in Houston’s Class A market was positive at 2,831 units, while Class B absorption fell to a negative 678 units.
Due to Houston’s immense population growth between 2014 and 2015, the demand for rental housing surged, promoting many Houston builders to increase multifamily properties. An estimated 18,000 to 20,000 units went up for construction over the past few years.
However, experts estimate just half the new construction apartments will be absorbed. The highest number of multifamily deliveries fell in the Loop, which are due to be completed this year. According to Zillow, Houston rents are valued at $1,430 – slightly below the metro area rent valuation of $1,576 per month.