Austin Tops List for Downtown Rental Premium
- Jun 19, 2019
In most cities you’ll pay a premium to live downtown, but nowhere more so than in Austin, Texas. Average rents in the state capital’s urban core are nearly double the market average of $1,257 per month, according to a new study by RealPage.
Austin’s downtown premium of 92 percent makes the city an outlier, but other communities such as Philadelphia, Houston, Chicago and Cleveland also register a substantial price gap between the city center and the rest of the market. In Philadelphia, for example, the spread is 59 percent, while in Cleveland it is 53 percent.
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The Austin result is “perhaps a little surprising,” according to Greg Willett, chief economist at RealPage, which published the report. “Areas adjacent to downtown Austin or even out into the more suburban environments actually have lots of high-priced luxury product,” he noted to Multi-Housing News.
Education and jobs
One reason for the lofty rents in the city’s Downtown/University submarket, which contains more than 22,000 apartment units, is the presence of the University of Texas at Austin, one of the nation’s largest public universities. Job growth in the technology, medical and creative sectors are also spurring residential demand in the downtown.
Given overcrowded roads and long commute times in Austin, many downtown workers also prefer to live close to work. There is only one primary route into the area, Interstate 35. Nevertheless, “in most cases, there’s not much relationship between the premium for downtown living and the availability of mass transit options,” Willett pointed out.
Large-scale construction in the urban core doesn’t preclude sizeable rent premiums either. Austin’s apartment supply has grown by more than 60,000 units this economic cycle, with inventory surging by more than 30 percent since 2010 in the Downtown/University submarket.
“Metros with bigger-than-typical pricing premiums in the urban core include Houston, Chicago, Dallas, Charlotte, Atlanta and Boston, all areas that rank among the downtown new supply leaders for this economic cycle,” noted Willett.
Despite the construction boom, the Austin metro is one of the most under-supplied multifamily markets in the country, and the city is striving to tackle its affordability issues.