$1,560 4Q 2023
$1,570 4Q 2024
0.6%
91.4% 4Q 2023
91.0% 4Q 2024
-40 POINTS
1.32M 2023
1.34M 2024
3.5% 2023
3.5% 2024
* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.
** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.
FORECASTED ABSORPTION
FORECASTED NEW SUPPLY
In 2024, Austin’s apartment market is poised for continued strong demand, driven by significant economic and demographic factors. The challenge lies in absorbing the 17,156 new units set for completion in the next four quarters. A second year of unprecedented addition of units will test the market’s ability to absorb the record number of units coming online. However, several factors bolster the forecast for strong apartment demand. Firstly, Austin’s continued job growth, though slightly tempered compared to previous years, remains a significant driver. Additionally, Austin’s reputation as a cultural trendsetter among major U.S. metropolitan areas adds to its appeal among young professionals.
Austin’s robust demographic trends will continue to bolster the absorption of new apartments. However, absorption rates are projected to fall somewhat short of the heightened volume of new apartments entering the market this year, but the gap is expected to be somewhat minor. By the end of the year, apartment occupancy is anticipated to be only marginally lower, with a decrease of about 40 basis points compared to the fourth quarter of 2023.
Austin, a leading example of apartment construction over the past three years, is now experiencing a normalization of its once soaring market fundamentals. By the end of Q4 2023, the metro area recorded over 40,000 units under construction. This significant level of activity is distributed relatively evenly across both urban and suburban areas, with construction underway in 21 of the 25 submarkets. Notably, the North Austin submarket holds the distinction for the largest proportion of these developments, accounting for 12.2% of the total units under construction, or nearly 5,000 units. This area is currently experiencing a boom, driven by its excellent educational facilities and a burgeoning job market. These factors contribute to making North Austin an increasingly sought-after location for residents.
Despite the challenges of stringent underwriting standards, rising capital costs, and elevated construction expenses, which have led many developers to postpone projects in the current year, there’s a rationale to remain optimistic. Developers breaking ground now are likely to be well-positioned to introduce new products in 2025 and 2026. This timing could coincide with a potential economic rally and a slowdown in new deliveries, offering a strategic advantage in the market. Ultimately, Austin will maintain its ranking and reputation as one the fastest growing metros and those investors and developers who can weather a short-term flux will be well positioned in 2025 and beyond.
Average Monthly Mortgage Payment
Average Monthly Rent
The influx of new units expected in Austin in 2024 is poised to moderate average rents across the market for a second straight year. The Class A property segment is set to experience the most significant effects due to the bulk of new unit deliveries. This will increase competition among property operators, leading to a potential continuation of modest rent appreciation for owners. Downtown Austin is particularly vulnerable to further rent deceleration. With approximately 3,200 units under construction, nearly 50% of the 6,695 units currently operational in the submarket, this area is likely to experience significant downward pressure on rent growth. However, it’s important to note that rent declines in Austin in 2024 are expected to be more of an exception than the norm. Out of Austin’s 25 submarkets, 21 are projected to achieve positive rent gains by the fourth quarter of 2024, indicating a generally positive outlook for the majority of the Austin market despite the challenges in specific areas like Downtown Austin.
| Submarket | Q4 2023 Stabilized Occupancy | Q4 2024 Stabilized Occupancy (f) | Annual Occupancy Change (2024/2023) | Q4 2023 Average Monthly Rent | Q4 2024 Average Monthly Rent (f) | Annual Rent Change (2024/2023) |
|---|---|---|---|---|---|---|
| Caldwell County | 96.0% | 95.7% | -0.2% | $1,132 | $1,188 | 4.9% |
| Buda | 92.6% | 92.4% | -0.2% | $1,492 | $1,531 | 2.6% |
| Cedar Park | 92.8% | 92.7% | -0.1% | $1,508 | $1,542 | 2.2% |
| Bastrop County | 95.6% | 95.4% | -0.2% | $1,396 | $1,419 | 1.6% |
| Far West Austin | 95.5% | 95.3% | -0.1% | $1,430 | $1,453 | 1.6% |
| Midtown Austin | 91.7% | 91.2% | -0.4% | $1,533 | $1,555 | 1.4% |
| Lake Travis | 92.3% | 92.0% | -0.4% | $1,775 | $1,799 | 1.3% |
| South Central Austin | 90.8% | 90.4% | -0.3% | $1,688 | $1,706 | 1.1% |
| Northwest Austin | 90.6% | 90.2% | -0.5% | $1,452 | $1,465 | 0.9% |
| Northeast Austin | 88.4% | 88.2% | -0.2% | $1,408 | $1,419 | 0.8% |
| Pflugerville | 91.5% | 91.1% | -0.4% | $1,488 | $1,499 | 0.8% |
| Georgetown | 92.8% | 92.6% | -0.2% | $1,550 | $1,561 | 0.7% |
| West Austin | 94.1% | 93.9% | -0.2% | $2,028 | $2,042 | 0.7% |
| South Austin | 92.2% | 91.8% | -0.3% | $1,480 | $1,489 | 0.6% |
| Central Austin | 93.4% | 93.1% | -0.2% | $1,647 | $1,657 | 0.6% |
| North Austin | 91.3% | 91.0% | -0.3% | $1,503 | $1,511 | 0.5% |
| San Marcos | 92.5% | 92.2% | -0.3% | $1,288 | $1,294 | 0.5% |
| Riverside | 88.0% | 87.5% | -0.5% | $1,458 | $1,463 | 0.3% |
| Round Rock | 92.1% | 91.9% | -0.3% | $1,523 | $1,526 | 0.2% |
| Far North Austin | 97.4% | 97.3% | -0.1% | $1,566 | $1,569 | 0.2% |
| Southwest Austin | 92.3% | 92.1% | -0.3% | $1,647 | $1,649 | 0.1% |
| Southeast Austin | 91.4% | 91.1% | -0.3% | $1,419 | $1,416 | -0.2% |
| East Austin | 91.1% | 90.8% | -0.3% | $1,745 | $1,740 | -0.3% |
| Downtown Austin | 91.6% | 91.5% | -0.1% | $3,063 | $3,050 | -0.4% |
| Hill Country | 94.3% | 94.5% | 0.2% | $1,694 | $1,642 | -3.1% |
| Market | 91.4% | 91.0% | -0.4% | $1,560 | $1,570 | 0.6% |
3Q 2023 Unit Inventory
Number of Units Under Construction
Number of Units UC Delivering
In the Next 4 Quarters
| Submarket | Unit Inventory: 3Q 2023 | Units Under Construction | % of Existing Inventory UC | % of Total UC | Units UC Delivering In the Next 4 Quarters |
|---|---|---|---|---|---|
| Northwest Austin | 34,151 | 1,215 | 3.6% | 3.0% | 643 |
| North Austin | 27,630 | 4,936 | 17.9% | 12.2% | 1,207 |
| Pflugerville | 22,168 | 1,608 | 7.3% | 4.0% | 855 |
| South Austin | 19,293 | 2,034 | 10.5% | 5.0% | 1,069 |
| Riverside | 17,415 | 693 | 4.0% | 1.7% | 451 |
| Round Rock | 17,286 | 3,702 | 21.4% | 9.1% | 1,445 |
| Midtown Austin | 15,098 | 2,174 | 14.4% | 5.4% | 1,374 |
| East Austin | 15,029 | 3,926 | 26.1% | 9.7% | 1,424 |
| Cedar Park | 14,104 | 2,278 | 16.2% | 5.6% | 1,101 |
| Northeast Austin | 13,607 | 2,997 | 22.0% | 7.4% | 1,008 |
| Southeast Austin | 13,197 | 1,972 | 14.9% | 4.9% | 1,032 |
| Southwest Austin | 13,094 | 374 | 2.9% | 0.9% | 369 |
| South Central Austin | 13,083 | 612 | 4.7% | 1.5% | 346 |
| Georgetown | 12,347 | 3,221 | 26.1% | 8.0% | 1,037 |
| Buda | 9,016 | 1,439 | 16.0% | 3.6% | 794 |
| San Marcos | 7,353 | 2,881 | 39.2% | 7.1% | 1,036 |
| Downtown Austin | 6,695 | 3,198 | 47.8% | 7.9% | 1,101 |
| Central Austin | 4,195 | 0 | 0.0% | 0.0% | 0 |
| Lake Travis | 3,656 | 0 | 0.0% | 0.0% | 0 |
| Far North Austin | 2,598 | 276 | 10.6% | 0.7% | 274 |
| West Austin | 2,149 | 0 | 0.0% | 0.0% | 0 |
| Bastrop County | 1,279 | 342 | 26.7% | 0.8% | 0 |
| Hill Country | 1,018 | 447 | 43.9% | 1.1% | 446 |
| Caldwell County | 584 | 145 | 24.8% | 0.4% | 144 |
| Far West Austin | 173 | 0 | 0.0% | 0.0% | 0 |
| Market | 286,218 | 40,470 | 14.1% | 100.0% | 17,156 |
Preliminary data from MSCI indicates that the sales volume for conventional multifamily assets concluded 2023 on a subdued note. Although it is common for sales to be recorded up to the final days of the year and for data services to take several weeks to consolidate these transactions, it is improbable that the expected uptick in volume will significantly alter the overall trend. The final quarter of 2023 saw sales volume dip to $388.4 million, marking the lowest fourth quarter total in over a decade. Annual transaction volume reached $2.3 billion across 58 individual asset sales, representing a 44% decrease in dollar volume from the previous year, yet aligning closely with the pre-pandemic annual average. The traded assets were predominantly high caliber, as evidenced by the increased price per unit (PPU) compared to 2022. Looking ahead to 2024, should interest rates stabilize or fall, the persistent tailwinds fueling Austin’s exponential rise as a top multifamily investment destination could present savvy investors with long-term opportunities, particularly as more attractively priced deals emerge.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
P = Preliminary
| Sector | Employment Change 2023 to 2024 | Percent Change |
|---|---|---|
| Manufacturing | 200 | 0.3% |
| Construction | 1,600 | 2.1% |
| Trade, Transport., & Utilities | 1,100 | 0.5% |
| Information | 200 | 0.4% |
| Financial Activities | 700 | 0.9% |
| Professional & Business Services | 8,100 | 2.8% |
| Education & Health Services | 5,300 | 3.6% |
| Government | 3,600 | 1.9% |
| Lesuire & Hospitality | 2,700 | 1.8% |
| Natural Resources & Mining | 400 | 11.1% |
| Other Services | 700 | 1.4% |
| Overall Employment | 24,000 | 1.8% |
Forecasting a slowdown in Austin’s local economy for 2024 may be premature, despite the noticeable deceleration from its post-pandemic surge in 2023. The region continues to possess strong attractors for new residents and professionals. Notable among these is the $17 billion semiconductor facility under construction in Taylor, just northeast of Austin, spearheaded by the electronics powerhouse Samsung. Additionally, the expanding presence of Tesla Inc., along with a host of other enterprises that have recently grown or relocated to the area, further solidifies its status as a hub of economic activity. These factors collectively suggest that Austin’s growth trajectory is poised to remain vigorous in the upcoming year.
