MARKET SNAPSHOT: Employment Growth in Austin Outpaces Both State and Nation, Leading to Voluminous Rent Increases
By Philip Shea, Associate Editor
Employers in the Austin metro area increased head counts by 3.3 percent over the last 12 months, with local business alone expanding their workforce by 2.6 percent—or 20,400 employees. As a result of this, the local unemployment rate receded 90 basis points to 6.4 percent, this according to Hendricks & Partners.
As the jobs picture continues to improve, multifamily operators saw an opportunity to raise rents by 1.5 percent over the past three months to $876 per month. Over the past year, owners and operators increased asking prices 5.3 percent, leading to soaring rents in the central and western parts of the metro.
The downtown area saw its average rent increase 3.8 percent to $1,088 per month between the second quarters of 2011 and 2012, this after a staggering 13.5 percent increase the year before. While around 4,000 units are in the pipeline for this submarket, the historically low number of new completions in 2011 are still inflating costs and keeping operators reluctant to offer many concessions.
In another interesting development, the westernmost submarket, which includes neighborhoods like Tarrytown, Westlake and Bee Cave, is beginning to post rents comparable to the downtown area. With a vacancy rate of 4.9 percent, this submarket sported an average rent of $1,083 per month in the second quarter of 2012—just $5 less than the metro’s central market.
In terms of employment, Austin continues to be a major hub for the technology and communication sectors, and the last year has seen a significant migration of workers and companies from Silicon Valley to the region. Companies like Samsung, eBay and Emerson Process Management have ramped up hiring and continue to favor the metro due to its favorable business climate, quality of life, competitive costs and economic opportunities.
Construction for the metro overall was muted, with no major projects being delivered over the past few quarters. However, developers currently have 9,080 units in the pipeline, and Hendricks & Partners notes that permitting activity heated up in the first half of 2012 as builders requested permits for 5,430 units—eclipsing the 10-year average of 4,080 units annually.
Overall vacancy ticked down 20 basis points to 4.8 percent in the second quarter, this after falling 90 basis points in the first quarter. The strongest improvement came in the northeast submarket, where operators saw a staggering 290-basis-point drop between quarters to 4 percent.
The submarket with the lowest vacancy, however, continues to be the San Marcos area, with an exceptional rate of 1.9 percent—a 400-basis-point improvement from Q2 2011. San Marcos is the home of Texas State University and is more than 30 miles from Austin’s city center, allowing for lower rents and more concessions from operators.
For more news from Austin, click here.