2,825 New Apartments in Q3 Lift Houston Occupancy to Its Highest Since 2022

Colliers opens its third-quarter Houston apartment report with a line from president Danny Rice about "tapering deliveries and a thinning construction pipeline." The deliveries half is easy to check in the report's own table: developers finished 2,825 units in the quarter, against 4,864 in the second quarter and 4,148 a year earlier.

Renters kept signing anyway. Net absorption was 4,801 units, which Colliers says matches the market's five-year seasonal average, and metro occupancy rose to 91.2%, its highest since early 2022.

Class A did most of the leasing

Class A buildings took more than 70% of the quarter's absorption, and their occupancy rose to 87.2%, the highest in six years by Colliers' count. Class B sat at 92.6% and Class C at 93.0%, both close to their second-quarter levels.

New buildings are filling, and they are paying for it. The MRI ApartmentData MarketLine report for October shows 73.0% of Class A units offering a concession, which works out to 8.4% off rent across the class.

Rents have not turned yet. Colliers puts the average effective rent at $1,247, down from $1,254 in the second quarter and $1,275 a year earlier, and MRI shows rents down 1.9% over 12 months.

Pricing has held up better than rents. Colliers says the average Houston sale came in at $172,175 per unit, up 3.0% from a year ago, while the average cap rate held at 6.0%, the highest since 2017.

Houston closed $801.0 million of apartment sales in the quarter, against $1.7 billion a year earlier. Cross-border buyers still took 7.6% of acquisition volume so far this year, their largest share since 2019.

Houston also still trails its peers on occupancy. Yardi Matrix's September report, published Oct. 19, put the metro at 91.3%, the lowest of the 30 largest markets it tracks.

The pipeline depends on who counts

The thinning pipeline is harder to pin down. Colliers counts 12,557 units under construction, down 5.4% from the second quarter, but the same table lists 7,985 for the third quarter of 2025, so by Colliers' own measure the pipeline is larger than it was a year ago.

Colliers also revises its history. Its second-quarter report put the second quarter of 2025 at 18,775 units under construction, a figure that does not line up with the 7,985 it now shows one quarter later.

Other trackers work from different property lists and definitions. Cushman & Wakefield had 11,756 units underway at the end of June, down 36.4% from a year earlier, and Lee & Associates had 12,920, against 24,018 a year before.

Transwestern counted 13,319, the Greater Houston Partnership 13,066 and Matthews 21,129, or 2.63% of inventory. Six of the seven counts fall between 11,756 and 13,319, and Matthews is the outlier.

Cushman's submarket table shows where the new units will land: 2,342 are under way in Northwest Houston, where stabilized vacancy was 11.6%, and 1,398 in Sugar Land and Missouri City, where it was 6.4%.

Transwestern, which draws its submarket lines differently, found more than 11,000 units, or 83% of its count, going up in the suburbs and 2.2K in the urban core.

Philip Morgan, CEO of The Morgan Group, sounded closer to Cushman's numbers than to Colliers' year-over-year comparison on a Bisnow Houston panel on Oct. 19. "Starts have really not come back in a material way," he said.

A few projects are starting. Hunington Residential broke ground on The Vic at Sunterra, a 279-unit community in Katy, according to Bisnow's Oct. 23 deal sheet, and OHT Partners expects its 396-unit project at 19615 Park Row Boulevard to finish in late 2027.

What it means for owners and investors

For the next year, demand is running well ahead of what is being built. MRI counts 21,588 units absorbed over the past 12 months against 12,722 under construction, and the Bureau of Labor Statistics shows Houston payrolls at 3,489,400 in September (preliminary), up 1.0% from a year earlier.

Occupancy gains reach collections first, and concessions burn off only as leases renew, so a buyer underwriting a 2027 exit should model rent growth lagging occupancy.

Timing favors owners of existing buildings for a while. Gabe Lerner of Lincoln Property Co. told Bisnow a year ago that a developer not already buying land was "a year and a half away from even getting a shovel in the dirt," and OHT's 396-unit project, which broke ground in March, is not due until late 2027.

Class B and C owners have a different problem. Their buildings are already above 92% occupied, so their upside depends on Class A landlords pulling back specials, which would widen the gap between Colliers' $1,712 average Class A rent and $1,237 for Class B and push price-sensitive renters back down a class.

Northmarq quoted Freddie Mac 10-year loans at 6.03% to 6.08% at 55% leverage on Oct. 22, just above the 6.0% average cap rate, so a buyer paying an average price borrows at a higher rate than the property yields.

Nationally, builders are still pulling back. The Census Bureau's Oct. 20 release put national starts in buildings of five or more units at a 349,000 annual rate in September, which Multifamily Dive calculated as down 25.9% from a year earlier, and Associated Builders and Contractors says construction input prices rose 11.2% over the same 12 months.

What to watch next

Cushman & Wakefield's third-quarter Houston MarketBeat is the next check on Colliers' 12,557, since Cushman's count fell 36.4% in the year to June while Colliers' rose over the year to September. Cushman's national report ranked Houston fifth in the country with 26,000 units absorbed through September.

The Census Bureau's October construction data comes out Nov. 18, and Colliers' fourth-quarter report comes after year-end. Colliers' latest figures for last year's fourth quarter show just 1,011 new units delivered against 4,275 absorbed.