$1,562 1Q 2024
-6.2%
90.6% 1Q 2024
-210 BASIS POINTS
4.4% (FEB 2024)
0.6% (FEB 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.
Significant Rent Decline: Austin experienced the most significant decrease in average rent in the first quarter of 2024 among major U.S. cities, with the annual effective rent falling 6.2% to $1,562 compared to the first quarter of 2023.
Oversupply Challenges: Despite Austin facing the steepest annual rent reductions in the early part of 2024, the demand for rental units remains robust. The primary challenge is the substantial influx of new supply overwhelming the market, which is driving down rents more quickly than the pace at which new units are being occupied.
Pockets of Resilience: Certain areas within Austin demonstrated notable resilience and growth. Lake Travis, for instance, saw average occupancy increase by 50 basis points year-over-year, bringing the current rate to 93.5%. Similarly, Far North Austin experienced a 20-basis point increase, reaching 95.8%, the highest rate in the market.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
As the spring leasing season commenced, the Austin apartment market showcased robust demand, recording a net absorption of 3,895 units. This impressive performance placed Austin fifth in the national rankings for net absorption. Out of Austin’s 25 submarkets, 18 reported positive absorption over the quarter. The Georgetown-Leander submarket was particularly notable, largely due to a surge in employment opportunities and the introduction of new projects, which spurred higher lease-up rates. By the close of the year, projections suggest that the Austin market will ascend to third place, trailing only behind New York and Dallas-Fort Worth, with an anticipated annual absorption of approximately 16,800 units.
During the first quarter of 2024, Austin’s apartment inventory saw a notable surge, with 8,692 units added—significantly more than the 3,362 units in the same timeframe of 2023. This influx accounts for approximately 39% of the total expected additions for the year. The bulk of this inventory expansion was centered in the Round Rock and Georgetown-Leander submarkets, which together accounted for over 38.9% of the increase in units so far this year.
In Q1 2024, the Austin rental market experienced a general decline in occupancy rates across most submarkets, coinciding with a rise in inventory. Despite a significant year-over-year decrease of 210 basis points and a modest quarter-to-quarter reduction of 50 basis points, the overall market still managed to maintain an average occupancy rate above 90%. Contrary to this broader trend, two submarkets saw improvements in occupancy rates: Lake Travis, with a notable year-over-year gain of 50 basis points, reaching 93.5%, and Far North Austin, which achieved the market’s highest occupancy rate at 95.8% after a 20-basis point increase. These exceptions underscore the value of examining data at the submarket level to uncover specific trends and opportunities within the Austin area.
During the first quarter, the Austin rental market saw a retreat in annual rent growth, noting a decrease of 6.2% which set the average rent for new leases at $1,562 by quarter’s end. This decline may appear drastic, but it can be largely attributed to the stark influx of new units coming online simultaneously, rather than waning off demand. Over the past quarter, Austin has indeed faced the greatest gap recorded in its history between the volume of new rental units delivered and net absorption. Closer observation shows that the rental market’s performance is not uniform across all sublevels and property class within the market. The descent in rent growth is predominantly seen in Downtown Austin due to a flood of new construction stemming from 2022 which equated to a third of the market’s entire inventory, among the highest proportions in Austin, TX. This situation has escalated competition for landlords of Class A properties. Despite this competition, Class A units maintain a 10% rental premium compared to the overall market average, with rents slightly exceeding $1,700.
Average Monthly Mortgage Payment
Average Monthly Rent
As of March 2024, the total value of individual conventional multifamily transactions in Austin, TX, year-to-date hit about $402.9 million, experiencing a 42.8% decrease compared to the same period last year. During this current period, the number of properties traded decreased by 51%, with 5 properties trading hands, reflecting a cautious stance by would be investors. Despite the decline, Austin’s average price per unit saw a moderate annual increase of 7.0%, reaching approximately $240,500 in the trailing four quarter period. Recently, private investors have emerged as the primary players in acquisitions, with international buyers also making a significant impact, representing 17% of the buyer mix in Austin’s market at the start of 2024.
*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 +
Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.
| Income Assumptions | Value / Unit | Year Change (%) |
|---|---|---|
| Rental Income / Occupied Unit | $1,599.93 | 3.9% |
| Recoverable Expenses / Occupied Unit | $78.47 | 5.3% |
| Other Income / Occupied Unit | $95.31 | 6.6% |
| Total Income / Occupied Unit | $1,773.70 | 4.1% |
| Rental Income | $1,474.30 | 2.3% |
| Recoverable Expenses | $72.31 | 3.7% |
| Other Income | $87.82 | 5.0% |
| Total Income | $1,634.43 | 2.5% |
| Operating Expenses | Value / Unit | Year Change (%) |
|---|---|---|
| Payroll | $146.08 | 5.7% |
| Repairs & Maintenance | $55.62 | 9.1% |
| Leasing | $61.34 | 5.1% |
| General | $29.12 | 0.9% |
| Marketing & Advertising | $31.12 | 11.0% |
| Repairs & Maintenance | $93.15 | 10.0% |
| Cleaning | $16.74 | 7.7% |
| Roads & Grounds | $15.24 | 3.8% |
| General | $61.17 | 12.1% |
| Administrative | $42.92 | 15.1% |
| Security | $6.45 | 12.6% |
| General | $36.47 | 15.6% |
| Management Fees | $50.47 | 1.9% |
| Utilities | $96.71 | 2.9% |
| Electric | $17.64 | 15.0% |
| Gas | $2.74 | -20.5% |
| Water/Sewer | $76.34 | 1.6% |
| Real Estate & Other Taxes | $326.68 | -1.8% |
| Insurance | $51.26 | 32.7% |
| Other Operating Expensees | $3.01 | |
| Total Operating Expense | $841.41 | 4.4% |
| Value / Unit | Year Change (%) | |
| Net Operating Income | $793.02 | 0.6% |
|---|
Despite cooling down in 2023, Austin’s multifamily market is showing signs of persisting interest driven by the city’s robust economic landscape, bolstered by a thriving job market and sustained growth. As of Q1’s close, there are 36,727 residential units in progress, with 17,261 set for completion in the next year—a significant decrease from the earlier forecast. This rebalancing of supply signifies a positive shift, with substantial net absorption annually indicating an upward trajectory for the market’s fundamentals. The Austin, TX market’s fluctuations due to rapid supply growth last year are expected to stabilize as 2024 progresses, potentially leading to ephemeral effects on rents and occupancy rates. Although there has been some market easing, the East Austin submarket remains a key area for new developments, with approximately 3,944 units projected to be finished within the year. Echoing the development momentum in East Austin, other suburban areas in Austin are also becoming increasingly popular with renters and developers, thanks to their strong connectivity, affordability, and attractive job opportunities.
