Building ‘Attainable’ Condos Within Austin’s Urban Core
- Mar 31, 2021
Austin continued to showcase strength throughout the pandemic, with real estate fundamentals remaining relatively steady. The strong in-migration from high-cost gateway markets has maintained high demand levels, particularly for more affordable housing options, according to a recent Yardi Matrix report.
Rather than focusing on luxury projects, Pearlstone Partners is developing “attainable” residential projects for mid-tier buyers in some of the city’s densest urban areas, priced below the market at the time of delivery—but not subsidized. The efficient use of floor plans, combined with an overall smart design strategy, generates the success of these buildings, according to Prospect Real Estate experts, who handle listings for Pearlstone.
Recently, the developer completed HOM Condominiums in East Austin, with 100 percent of the units already sold. Two other projects, dubbed Axiom East and Cascade Condominiums, are slated for delivery by the end of this year and in 2022, respectively, with presales well underway. To find out details about their business strategy within the Austin market, as well as their predictions for the condo sector, we reached out to Pearlstone Founder & CEO Robert Lee and Prospect Vice President of Sales Denise Bodman.
How would you define “attainable condominiums” in a sought-after market like Austin?
Lee: Attainable is our designation for housing which is strategically designed and priced to target buyers historically priced out of specific—premium—neighborhoods. We differentiate our product from “affordable” which is a product that is subsidized by either government grants or tax subsidies. Our products are a market-rate product with no such subsidies.
When did you recognize the need for such projects and how do they fit into the pandemic-hit market scheme?
Lee: We pivoted to “attainable housing” to address the need for housing for the “missing middle”—now often referred to as workforce housing—over 7 years ago. The need for more “attainable,” nonsubsidized, market-rate housing is an ever-growing need across the entire country.
What are the main advantages and disadvantages of these communities, compared to more large-scale projects or affordable developments?
Lee: Pearlstone’s mission is to provide housing in the more urban, denser neighborhoods, where land is less readily available but the need for housing is even more pronounced. Our developments can provide attainable pricing because we yield more housing units on less land, compared to single-family detached housing. Our projects range from 60 to 200-plus units in premier urban neighborhoods. Additionally, our product is more environmentally friendly, based on the efficiency of the units.
Are you targeting a specific buyer pool with your investments?
Bodman: Our targeting and demographic has not changed due to the increased market demand, but rather we continue to target the determined demographic for each neighborhood in which Pearlstone is constructing their developments. It has become even more important now for us to continue to market the attainable model to provide housing for local Austinites who face challenges in finding a home in the greater Austin area due to the influx of buyers from the outer markets.
Lee: Our market represents the largest segment of the buyer pool, whether that is a Millennial, first-time homebuyer or an older audience interested in downsizing and living a lock-and-leave lifestyle. Pearlstone’s developments are aimed at anyone interested in living closer to the urban core and all of the amenities provided within our developments and the surrounding location.
What are the most sought-after community amenities when it comes to condos, and how have buyers’ preferences changed since the onset of the pandemic?
Bodman: We have not experienced a change in our buyer’s preferences in the amenities offered since the onset of the pandemic. Rather, buyers are still drawn to the condo lifestyle and the numerous amenities offered within each development. The amenities are often seen as an extension of the home, especially for residents with less square footage, where the amenities offered become a coveted place to gather with friends and family. Certainly, pools to relax in, community centers, fitness centers and fire pits are still very desirable and will continue to be seen as a luxury.
What are the current trends in Austin’s residential market and what are your predictions for this year?
Bodman: We have not seen a drastic change in market trends from last year to now, but we do anticipate the market will continue to increase. Simply put, there is not enough supply to cover the demand of people moving to the city. Austin is still very much a desired and hot market and we expect 2021 to be another very strong year. Now, more than ever, offering buyers the opportunity to live somewhere that they can enjoy a live-work-play environment is becoming increasingly important, along with additional space such as a one-bedroom with a study that offers the ability to work from home.
Lee: Housing demand is strong, and the continued influx of company relocations, expansions and the growth of existing companies such as Tesla, Oracle, Apple and Samsung, show that jobs will continue to grow. Before the global health crisis, we were in a growing housing shortage, and, as we come out of the pandemic, we are seeing a job and population growth that is exceeding our pre-COVID-19 numbers.
A balanced housing market is a 6 month inventory level. We currently sit at around .6 months and recent numbers reflect that the figure has decreased to .4 months. Supply is dropping as demand is rising. Due to aspects such as the length of the development process and lack of land, we expect that the residential housing supply will continue to be challenged in meeting demand.