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Austin's Multi-Housing Building and Apartment Market to Remain Strong in 2015

Monday, June 01, 2015

Though some moderation in fundamentals is expected, Austin’s multi-housing buildings and apartment market will likely remain healthy in 2015. Strong job growth within the metro, primarily in the tech sector, remains enticing to young professionals, sparking demand for multi-housing buildings for sale in Austin. Demand is expected to remain strong with more than 35,000 jobs projected to be added to the market, a growth rate of 3.9 percent.

Employment and Population Totals

As noted by Axiometrics, “whether it is for employment or entertainment, Austin is a huge draw for millennials. Supply was a major concern in 2014, but the market still achieved an occupancy rate of 95 percent. Most areas outside of the CBD experienced rent growth at or above 5 percent. 

Outside of a few neighborhoods, the market has weathered the storm of supply, which has been running at twice the long-term average. While rent growth rates and occupancy are likely to moderate as another wave of supply hits in 2015, expect new construction starts to slow, which will lead to absorption outpacing supply again in 2016 and 2017.”

Austin Multi-Housing Development

From 1997 to 2013, Austin delivered an average of approximately 4,600 apartment units per year, showing strong demand for multi-housing buildings. Apartment deliveries jumped to 11,000 units in 2014 but, as already mentioned, the market still performed solidly. Axiometrics expects approximately 10,000 new units to deliver in 2015, but the pace will slow to 6,200 units in 2016 and 4,000 units in 2017.

Multi-Housing Building Occupancy and Absorption

Austin’s multi-housing buildings occupancy rate remained at 95.2 percent for the second consecutive year in 2014, well above the long-term average of 93.8 percent. Class B and C properties maintained a higher occupancy rate (95.8 percent) during 2014 than Class A assets (94.5 percent), which indicates new supply has had more of an impact on certain segments of the market than others. The same Class A properties had an average occupancy rate of 95 percent during 2012 and 2013, while Class B and C properties had an occupancy rate of 95.2 percent during that period.

Austin Completions and Net Absorption Austin Occupancy


Rental Rates for Multi-Housing Buildings

Effective rent growth moderated from 5.2 percent in 2013 to 3.5 percent in 2014 as supply reached an elevated level. With another major round of supply scheduled to hit in 2015, rent growth is projected to slow to 2.8 percent, but the rate should improve from 2016 to 2018 as new deliveries return to a more normal level.

Austin Rental Rates Growth Austin Annual Rental Rate Growth

Contact HFF Austin for more information regarding multi-housing properties on the market in this area.

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