Austin, TX Multifamily Market Report
Market Overview
The Austin multifamily market is experiencing a rebound in demand compared to Q4 2022; however, this is being overshadowed by an increase in new completions throughout the market. Over 18,000 units are expected to be delivered by the end of Q4 2023, the highest anticipated in the market’s history. As a result of one of the strongest second quarters in the market’s history, Austin is experiencing a robust year for annual net absorption. Annual net absorption exceeds the pre-pandemic average, standing at 9,700 units. Seasonal demand plays a leading role in the market’s upswing, but the exponential growth of Austin’s suburbs also plays a significant role. Thanks to accessibility, affordability, employment opportunities, and amenities, the suburban areas are attracting many new residents.
Highlights
- There are approximately 42,000 units underway in response to Austin’s overall population growth of 2.7%.
- The supply-demand imbalance will be more drastic for owners of higher-end products due to the fact that 29,000 Class A units are underway.
- The two largest suburban counties saw population growths of 4.0% and 5.0%, respectively, between 2021 and 2022.
- Annual net absorption has outpaced the 10-year average, currently standing at 9,700 units.
Rents | Vacancy | Construction
Austin’s 2023 annual net deliveries are expected to reach 18,300 units, an all-time high for the market.
The Austin multifamily market has cooled in the last year, with vacancies having increased from 7.5% in Q1 2022 to the current level of 10.6%. While vacancy rates have increased, single-family home prices have also increased by 35% in the past two years, making homeownership unattainable for the average renter. Over the past year, leasing activity has been the strongest among Austin’s higher-quality assets. Both urban and suburban areas have been popular with renters in search of Class A products. Austin is currently experiencing a decrease in rent growth, registering at a rate of -3.9%. This can be attributed to the cooling in demand and the sharp influx of products.
Apartment construction in Austin is over 50% higher than the five-year average of 29,000. Austin ranks third nationally in most units under construction as a share of inventory. Developers are optimistic about the market’s long-term outlook and are preparing now so they can be well-positioned to offer new products in 2024 or 2025. Austin trends have shifted from the popularity of garden-style properties to mid-rise units, which account for 45% of all units underway. Higher quality Class A units also account for 67% of units underway.
Sales
Austin, By the Numbers in the Last 12 Months
- Units Under Construction: 41,932
- Units Delivered: 17,598
- Vacancy Rate: 10.6%
- Asking Rent Growth: -3.9%
- Average Price Per Unit: $238,000
- Sales Volume: $1.5B
- Sale Comparables: 101
Austin’s multifamily market has cooled, with investment sales coming to a near standstill in Q2 of 2023. Sales volume in Q2 2023 experienced a 70% decline from the average, standing at 1,800 units. Most properties sold this quarter were almost exclusively properties over 200 units and properties in several submarkets as well. The Housing Authority of the City of Austin has been one of the most active buyers and has maintained affordable housing in areas where it is likely to be scarce.
