Austin’s multifamily market displayed weakening fundamentals in the second quarter, but was kept afloat with help from the growing presence of tech companies. Still, the pandemic’s impact and high number of completions have pressured rents, which contracted 0.2 percent to $1,372 on a trailing three-month basis through July. Meanwhile, the occupancy rate in stabilized properties was down 90 basis points in 12 months, to 94.0 percent as of July.
Throughout the last cycle, Austin has built a diversified and balanced economy, which helped it withstand COVID-19’s blunt force. Still, the metro’s economic activity contracted sharply in the second quarter. The unemployment rate rose in April to its highest value at 12.2 percent, but dropped to 7.3 percent in June and further to 6.7 percent in July, according to preliminary data. Yet the 3.3 million unemployment claims filed across the state between mid-March and late August could continue rising, as Gov. Greg Abbott reversed the state’s reopening in early July due to a spike in the number of coronavirus cases in late June.
Multifamily transactions totaled just $812 million through August, with a per-unit price that inched up 2.6 percent to $150,134. Meanwhile, 6,072 units came online and another 28,052 apartments were underway at the end of the summer. Taking current volatility into account, we expect Austin rents to drop 0.4 percent in 2020.