Austin 3Q23
Multifamily Market Report

$1,650

average rent

93.3%

average occupancy rate

$1.8B

ytd sales volume

-4.8%

YoY rent change

-130 POINTS

yoy occupancy change

43 YTD

individual transactions

Supply & Demand

3Q23

4,758 Units

QUARTERLY DEMAND
YTD: 10,203

6,931 Units

QUARTERLY COMPLETIONS
YTD: 13,210

Annual Demand vs Completions

2018
10,431
9,235
2019
9,738
9,011
2020
5,988
10,531
2021
19,918
11,678
2022
4,366
14,107
2023 YTD
10,203
13,210
  • Planned
    Completions
  • Pre-Planned
    Demand

Demand Trends

  • Transitioning into the typically slower fall leasing season, the Austin apartment market demonstrated robust demand, registering a significant net demand of 4,758 units. This performance positioned Austin third nationally in terms of raw absorption.

 

  • Among the 16 submarkets within Austin, 13 showcased positive absorption, with the Round Rock/Georgetown submarket emerging prominently. This can largely be attributed to a surge in employment activities and the introduction of new projects in the area, which have driven lease-up rates.

Completion Trends

  • The third quarter of 2023 saw the addition of 6,931 units to Austin’s apartment inventory, bringing the total to 13,210 units over the past three quarters of 2023, fulfilling 65% of the year’s projected additions.

 

  • The inventory growth was significantly driven by the Round Rock/Georgetown and East Austin submarkets, together accounting for over 37.3% of the increase of units over the past year.

Demand Outlook

  • Formidable economic and demographic factors are expected to drive demand. However, the absorption of the upcoming 32,690 units — the highest in 29 years — scheduled for delivery over the next four quarters, poses a substantial challenge, even for a vigorous high-demand market like Austin.

 

  • While Austin is projected to see a temporary dip in occupancy due to a surge in completions, the apartment market’s performance is anticipated to rebound to its typically robust level once operators effectively manage the increased unit supply.

New Supply Outlook

  • As of the close of Q3 2023, a total of 42,804 units were under construction, with a significant portion projected for completion in the upcoming four quarters, tripling the past five-year average.

 

  • The East Austin submarket, housing the new Tesla facility, is anticipated to receive the largest number of new apartment units over the forthcoming quarters.

Occupancy & Rent Trends

RENT VS OWN
MONTHLY PAYMENT

$3,713

Average Monthly Mortgage Payment

$1,650

Average Monthly Rent

Occupancy trends

In Q3 2023, the Austin rental market encountered varying occupancy rates amidst a rising inventory and shifting market conditions. Class A units showcased notable stability, achieving a commendable occupancy rate of 93.6%, despite a minor quarter-to-quarter decrease of 14 basis points. Interestingly, seven submarkets bucked the broader trend, witnessing improved occupancy—San Marcos led the charge with a 50-basis point quarter-over-quarter increase, reaching a rate of 93.9%. It was closely followed by Southeast Austin and Northwest Austin, each registering a 40-basis point uptick. This disparity underscores the significance of examining submarket-specific data to unveil localized trends and opportunities within the Austin area.

RENTAL TRENDS

In the third quarter, Austin’s rental market experienced a sharp turn, registering an annual decline of 4.8%, bringing the average rent for new leases to $1,650 by the quarter’s end. While this downturn may seem startling, it primarily stems from an influx of new supply entering the market within a close timeframe, rather than a waning in demand. In fact, a closer examination unveils varied performance across different submarkets and asset classes within Austin. The Round Rock/Georgetown submarket witnessed a noteworthy increase in rent for Class A properties, with a substantial 5.0% annual rise in Q3 2023. Conversely, the Downtown/University submarket reaped the benefits of robust demand for Class B properties, propelling the annual rent growth to an impressive 5.7%, and elevating the average monthly rents in the submarket to a notable $2,666.

Submarket Rent & Occupancy

SubmarketAverage OccupancyAnnual Occupancy ChangeAverage Monthly RentAnnual Rent Change
East Austin92.3%-1.5%$1,778-2.3%
Pflugerville/Wells Branch93.3%-2.0%$1,526-3.6%
Riverside91.9%-3.4%$1,568-2.6%
Far West Austin92.7%-2.6%$1,625-7.2%
Southeast Austin93.5%-2.0%$1,525-3.8%
Cedar Park93.9%-1.1%$1,611-7.5%
South Austin93.7%-1.3%$1,974-4.9%
Round Rock/Georgetown93.2%-1.4%$1,576-4.3%
Far South Austin93.6%-1.5%$1,566-5.6%
San Marcos93.8%-2.3%$1,439-0.2%
Austin-Round Rock, TX93.3%-1.6%$1,650-4.8%
Southwest Austin94.1%-1.3%$1,798-6.2%
North Central Austin93.9%-1.1%$1,547-2.9%
Arboretum93.2%-2.1%$1,478-7.9%
Downtown/University92.9%-0.2%$2,666-5.3%
Northwest Austin93.5%-1.1%$1,570-8.2%
Near North Austin93.3%-1.3%$1,650-4.8%

Units by Submarket Delivering in 2023

42,804

Number of Units Under Construction

32,690

Number of Units UC Delivering In the Next 4 Quarters

Percentage of Units Under Construction

Arboretum - 796
0%
Cedar Park - 4,213
0%
Downtown / University - 3,391
0%
East Austin - 6,804
0%
Far South Austin - 2,436
0%
Far West Austin - 895
0%
Near North Austin - 1,274
0%
North Central Austin - 5,896
0%
Northwest Austin - 356
0%
Pflugerville / Wells Branch - 2,484
0%
Riverside - 745
0%
Round Rock / Georgetown - 6,474
0%
San Marcos - 2,985
0%
South Austin - 655
0%
Southeast Austin - 2,224
0%
Southwest Austin - 1,176
0%

Percentage of Units Delivering Next 4Q

Arboretum - 796
0%
Cedar Park - 3,785
0%
Downtown/University - 1,786
0%
East Austin - 5,108
0%
Far South Austin - 1,963
0%
Far West Austin - 514
0%
Near North Austin - 987
0%
North Central Austin - 4,892
0%
Northwest Austin - 356
0%
Pflugerville/Wells Branch - 1,770
0%
Riverside - 745
0%
Round Rock/Georgetown - 4,551
0%
San Marcos - 2,549
0%
South Austin - 616
0%
Southeast Austin - 1,306
0%
Southwest Austin - 966
0%

Sales Activity

At the end of September 2023, the total value of individual conventional multifamily transactions in Austin, TX, for the year amounted to approximately $1.8 billion, marking a 44.9% decline compared to the same period in the preceding year. Simultaneously, there was a 52% decrease in the number of properties traded, with 43 properties changing hands, indicating a cautious investment environment amid stringent financial conditions. Despite this downturn, Austin’s average price per unit experienced a notable annual rise of 9.0%, escalating to around $237,100. Institutional buyers remain the primary drivers of acquisitions thus far, and amidst fluctuating conditions, international buyers are maintaining steady interest, making up 5.4% of the buyer composition in the Austin market (a notable increase from the five-year average of 3.2%).

  1. City of Austin
  2. Belveron RE Partners
  3. Terracap Mgmt Corp
  4. Tides Equities
  5. Austin Affordable Housing Corp
  1. Endeavor RE Group
  2. Thompson Realty
  3. Carlyle Group
  4. Slate Real Estate Partners
  5. MetLife

*Most Active Buyers and Sellers are based on the sale volume of apartment units.

TRANSACTION VOLUME


YTD Transaction Volume


Y-O-Y Change


Individual Transaction Count


Price Per Unit


Annual Price Change

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Economy

According to the latest economic, Austin’s job market is exhibiting remarkable vitality. By July 2023, 39,500 new roles had been generated from the same time last year, as per data from the Bureau of Labor Statistics (BLS). This reflects a substantial job growth rate of 3.1%. The region’s various sectors witnessed noteworthy employment surges, especially the professional and business services sector, which introduced 10,100 positions, equating to a 3.6% growth. Significantly, the leisure and hospitality sector emerged as the swiftest growing sector, burgeoning by 7.0% and contributing 9,800 fresh opportunities. Regarding unemployment, Austin paralleled the national average at 3.8% in July. This statistical panorama underscores Austin’s robust economic trajectory, marked by proliferating employment across diverse sectors and median wages that eclipse the national mean.

39.5k

July Annual Jobs Created

3.1%

July 23 Employment growth

3.8%

July 23 Unemployment rate
3.8% us may rate

Top 5 Employment Sector Annual Change

Professional & business services

Professional & Business Services

Change from May 2022 to July 2023:
10,100

Percent Change:
3.6%

Leisure & hospitality

Leisure & Hospitality

Change from May 2022 to July 2023:
9,800

Percent Change:
7.0%

Education & health services

Education & Health Services

Change from May 2022 to May 2023:
4,800

Percent Change:
3.3%

Mining, logging, & construction

Mining, Logging, & Construction

Change from May 2022 to May 2023:
3,900

Percent Change:
4.8%

Trade, Transportation & Utilities

Trade, Transportation & Utilities

Change from May 2022 to May 2023:
3,300

Percent Change:
1.6%

Hover over icons to view data
SectorChange from May 2022 to July 2023 Percent Change
Professional and business services10,100 3.6%
Leisure and hospitality9,800 7.0%
Education and health services4,800 3.3%
Mining, logging, and construction3,900 4.8%
Trade, transportation, and utilities3,300 1.6%
Government2,600 1.4%
Manufacturing2,600 3.7%
Other services2,200 4.4%
Financial activities700 0.9%
Information(500)-0.9%

Cost of Living Comparison

Austin, TX presents a cost of living with an index score of 98.8, indicating a market that is more affordable than the national average. However, its housing market is somewhat less affordable, bearing a housing index of 106.3 and a median home sales price of $496,300. When juxtaposed with comparable tech hub, San Francisco, CA, Austin significantly undercuts costs in pivotal areas: housing is 62.0% less costly, and transportation expenses are reduced by 33.0%. This financial dynamic renders Austin an economically attractive destination for numerous individuals.

San Francisco, CA vs. Austin, TX
Cost of Living Comparison
Groceries:

26.3% Less
Housing:

62.0% Less
Utilities:

28.4% Less
Transportation:

33.0% Less
Health:

21.3% Less
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Cost of Living Index

98.8

Index Score

Average Mortgage

$3,713

vs Average Rent: $1,650

Housing

106.3

Index Score

Utilities

90.1

Index Score

Gas

85.6

Index Score

Median Home Sales Price

$496,300

YoY Change: -19.1%

The “Cost of Living” index score provides a comparative assessment of the relative expense involved in maintaining a standard of living in a specific area, benchmarked against a national index score of 100.

Market Outlook

Despite cooling in the past year, Austin’s multifamily market is witnessing a resurgence in demand. The city continues to showcase economic vigor, driven by a thriving job market and consistent growth. By the end of the third quarter, 42,804 housing units were in development, with 32,690 expected to be completed within a year. This surge may introduce temporary market challenges, yet the strong annual net absorption signals a resilient market. Particularly in East Austin, about 5,108 units are projected to be completed over the next 4 quarters. Even with potential market fluctuations, any impact on rent and occupancy is expected to be short-lived. Austin’s suburban growth, driven by accessibility, affordability, and job opportunities, plays a pivotal role in this resurgence. Ranking third nationally for units under construction relative to inventory, developers remain optimistic about Austin’s long-term prospects, gearing up for potential launches in 2024 and 2025.

Sources: RealPage; BLS; MSCI; The Council for Community And Economic Research (C2ER)

To Gain Further Insights Into The AUSTIN Market Please Reach Out To Our local Team

Michael Moffit

Managing Director

Image of Mike Watson

Mike Watson

Managing Director

Image of Richard Mireles

Richard Mireles

Senior Director

Mark Diebold

Senior Director

Nicholas Ling

Senior Director

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Alex Thompson

Associate Advisor

Thomas Rodriguez

Associate

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