Austin Apartment Market Posts Strong Fundamentals

Austin Apartment Market Posts Strong Fundamentals

As featured in the Austin Business Journal, November 8, 2013

Article by Jan Buchholz

The apartment sector of the Austin real estate market is expected to post strong returns as the Austin population of 20- to 34-year-olds is expected to grow at two-and-a-half times the national average this year, according to the latest Apartment Research Market Report by Marcus & Millichap.

Adding to the positive formula, vacancy rates still continue to post below the 5 percent market and rents will have risen about 5.7 percent during 2013.

Somewhat ironically, the highest rent growth has occurred for properties built before 1970. In that category rents have jumped an average of 9.7 percent, perhaps as a result of surging job growth in lower-paying industries.

Here’s a look at other highlights of the report:

  • By the end of the year, developers will have delivered 6,300 new units in Austin, which compares to 3,850 units delivered in 2012.
  • Nearly 20 percent of the new units completed this year are for senior housing and student living projects.
  • The average of 4.7 percent vacancy rates is slightly above what it was a year ago, owing in part to the delivery of new inventory in the far south Austin submarket, as well as Cedar Park, San Marcos and the downtown submarkets.
  • Pre-1970s units have the tightest vacancy rate of 2.7 percent.
  • Apartments built since 2000 have the highest vacancy rate, but it’s still small — about 5 percent.
  • Investment sales are on par with last year, which saw an acceleration of deals in the fourth quarter of 2012 in advance of changes to capital gains tax formulas.
  • More than 60 percent of the investment sales during the past 12 months were for assets involving five to 50 units with Texas buyers accounting for most of those deals.
  • The increase in new apartment developments should translate into an increase of investment listings in the near future.
  • Construction of the Dell Medical School on the University of Texas campus should increase the need for apartments in neighborhoods nearby.
  • Renters might take a liking to Pflugerville with the construction of the new Hawaiian Falls water park, which is expected to support 250 to 300 seasonal jobs and 100 permanent positions.
  • The southeast submarket could benefit from improvements to the Austin-Bergstom International Airport, as well as plans by a private developer to build a retail center nearby.
2016-12-08T18:33:17+00:00 Real Estate|