TEXAS SNAPSHOT, SEPTEMBER 2006

Austin Multifamily Market

The Austin, Texas, multifamily market has recovered strongly from the downturn that occurred in 2000, according to Cindy Harris, senior vice president with Trammell Crow Company. “Rental rates and occupancies have been increasing every year to a current high of 95 percent overall,” Harris says. “However, the number of units in construction and in planning is reported to be in excess of 16,000 — a significant pipeline for a city of Austin’s size, which if built is expected to create some imbalance in supply and demand dynamics in 2007 and potentially 2008.”

Some of this multifamily development that is under construction and planned for the state’s capital is in line with a growing trend: to develop in mixed-use environments. “Larger scale mixed-use environments are being planned in Austin that create a pedestrian-oriented community for people to live, work and play,” Harris says.

One notable example of this type of development is Crestview Station, which is a transit-oriented development (TOD) that Harris believes will create a new lifestyle choice for Austin residents. Crestview Station is a 73-acre master-planned community at a Capital Metro station that is planned to open in 2008. The project, located at Airport Boulevard and Lamar will include retail, office, luxury apartments, condominiums, single-family homes and recreation facilities. The project is expected to begin construction in 2007. Other mixed-use projects include The Domaine and the Mueller Airport redevelopment project.    

Austin is evolving into a more urban environment in and around downtown, creating a new demand for multifamily product in the city’s core. “The city of Austin has aggressively moved to increase density in the downtown and central region of Austin by rezoning some residential areas to central business district (CBD) zoning,” Harris says. “The city also has supported height and density increases for condominium development in downtown and is in the process of establishing Transit Overlay Districts within one quarter mile of all Cap Metro station areas. This is the first light-rail line in Austin that will create seven light rail stops from far north Austin to downtown.”

The majority of new multifamily development is occurring in Central Austin, near downtown and the University of Texas campus. Within 3 miles of downtown, there are numerous apartment, condominium, hotel and mixed-use development projects being developed. “Additionally, suburban areas to the north and south are seeing significant apartment development activity,” Harris says.

With such strong activity taking place, developers from all over the country — and the world — have become attracted to the Austin market. “Many large-scale firms are entering the market with large-scale project experience,” Harris says.

The diverse group of developers in Austin has created a wide range of projects, from standard suburban apartments to upscale, 40-story condominium projects in downtown. “Upscale student projects, large-scale mixed use developments, TODs and infill projects are all being developed or planned at this time,” Harris says. “The overall pipeline of product is significant.”

The average rental rate for multifamily product in Austin is between $0.85 and $0.90 per square foot. Rents range from $0.70 per foot range in the East Austin submarkets to more than $1.35 in the Central submarket. Overall, Austin’s vacancy rate is approximately 5 percent. “Rental rates and occupancies should remain stable for the balance of 2006,” Harris says.

In the coming years, the CBD and Central Austin corridors are expected to experience a significant amount of growth. “More than 2,500 units are planned for this area, ranging from small-scale condominium and rental projects to high-end condominium/ hotel buildings,” Harris says. “The Central Austin corridor will become highly urbanized as a result of the population growth in and around downtown Austin.”

As long as job and population growth remains strong in Austin, the market should continue to grow. “Current forecasts indicate that Austin will gain more than 400,000 workers in the next 25 years,” Harris says. “Austin’s population is projected surpass San Antonio’s during the next 25 years as well to exceed 1 million people.”

— Cindy Harris is senior vice president with Trammell Crow Company.

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