Austin, TX Multifamily Market Report
Market Overview
The Austin multifamily sector still leads the nation’s largest 50 markets in annual net absorption as a share of inventory, with about 6,300 units absorbed in the last 12 months. This trend can be attributed to the area’s growing labor force and high price tag of single-family homes. However, Austin is experiencing a significant supply pipeline, with the city having the third-largest construction pipeline in the country. The annual volume of units sold is slowing, but investors are still steadfast in Austin, as the market experienced $2.3 billion in sales volume in the last 12 months. Currently, the market is trading at a 4.3 percent cap rate.
Highlights
- More than 2,800 units are currently underway in Downtown Austin, 45 percent of the submarket’s inventory.
- Austin has experienced substantial growth in demand, with the absorption of 6,300 units in the last 12 months, making it the second-highest in the country as a percentage of inventory.
- Austin suburbs are seeing the strongest rent growth. Specifically, Far North Austin, Bastrop County, and Caldwell County are leading the market.
- The Austin metropolitan area has 42,000 units currently underway. This places it among the top markets in the country in terms of apartment construction.
Rents | Vacancy | Construction
Over the past 10 years, Austin has been a popular choice for developers. As a result, the inventory has grown by 42% since the start of 2010. This means that a significant portion of the current inventory in the metro area is relatively new.
Austin’s demand side is experiencing strong growth due to a thriving job market, particularly in the fast growing manufacturing and professional service sectors. This situation has resulted in a higher demand for multifamily housing. Austin currently has a vacancy rate of 9.1 percent, heavily attributed to the area’s robust growth in units delivered.
Rent growth has significantly declined from the high levels observed in late 2021, plummeting to 0.5 percent. Austin’s most costly submarket saw rents fall 2.9 percent in the last year, but with average monthly rents of $3,160, the submarket’s nominal rents remain among the highest in the country.
The Austin metro is currently constructing approximately 42,000 apartment units, which is among the highest number of units being built in any market. Much of the construction is focused on the TX-130 corridor, where Tesla and Amazon are carrying out significant expansions. Although the record level of construction may be a cause for concern, the market requires more rental units to meet future demand.
Sales
Over the past decade, Austin’s prominence has increased significantly, moving from a tertiary market to a firmly established secondary market in the United States. With a long upcycle for multifamily investments, investors have been able to move away from core coastal markets and invest in fast-growing Sunbelt markets, especially Austin. The market’s robust demographics, strong economic performance, and compelling market conditions have made it one of the most attractive markets for investors to plant capital. Recent investment has been within Austin’s northern and northwest suburbs, where nearly 11,000 units were sold over the past year. Prices for suburban assets have risen quickly, with newer properties selling for more than $260,000 per unit. National and foreign buyers have dominated purchasing in Austin, with local investors being edged out of most sales.
Austin by the Numbers
- Units Under Construction: 42,636
- Units Delivered (12-Month): 12,328
- Vacancy Rate % Change YOY: 1.8%
- Asking Rent Growth YOY: 0.5%
- Average Price Per Unit: $246,000
- Sales Volume 12-Month: $2.3B
- Sales Comparables 12-Month: 143
