Supply Catches Up With Demand in Austin
- Dec 21, 2017
Austin’s multifamily market shifted down a gear in 2017, due to 2016’s strong wave of supply. As a result, rents contracted 0.3 percent year-over-year through October, trailing the 2.3 percent U.S. average. Continued construction pushed the occupancy rate to 94.6 percent as of September, down 70 basis points in 12 months. This figure is likely to keep falling in the short term, while the metro absorbs the new stock.
The Texas capital boasts a strong economic and population growth, maintaining a steady demand for multifamily, despite the temporary surge in supply. A leading market for science, technology, engineering and math (STEM) jobs, the metro added 6,600 positions in the education and health services sector, partly thanks to the opening of Dell Seton Medical Center. Austin’s most notable development underway is the mixed-use, 700-acre Mueller project, which is in full development and is slated to house 14,300 residents and 14,500 employees, while also generating 10,500 construction jobs.
Transaction activity continued to decelerate in the second half of 2017, with $961 million in apartments trading in the first 10 months of the year, half of last 2016’s volume. Nearly 3,700 units were delivered this year through October, a third of last year’s new stock, but almost 17,000 units were still under construction as of October. Given the metro’s strong pipeline, we expect rents to remain flat in the foreseeable future.