Q3 2022 Multifamily Real Estate Report: Austin, TX
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Austin, known for its expansive music scene, eclectic culture, and diverse food options, is one of the fastest-growing cities in the US.
With its growth, it’s not surprising that employment has seen a significant uptick, adding over 19,000 jobs in this quarter alone and over 65,000 total year-over-year.
While Austin’s multifamily vacancy rate rose in Q3 2022 to 5%, that was only in comparison to a recent all-time low in Q2: The rate is still below the area’s overall average of nearly 6%.
Developers are actively moving new product through the construction pipeline as absorption remains elevated, making Austin’s multifamily market a promising investment prospect.
General Area Overview & Demographics
Austin, TX, is the capital of Texas, one of the most populous cities in the United States, and an intrastate competitor with Dallas, TX. As of 2021, Austin had an estimated population of 964,000 people.
Austin’s population has grown steadily since 2010, when Austin had a population of 790,490. This growth rate of 21% is higher than the national growth rate of 5%.
Cultural & Ethnic Makeup of Austin, TX
The racial makeup of Austin is 53.2% White, 35.7% Hispanic or Latino descent, 8.3% African American, 7.1% Asian/Pacific Islander, 0.4% Native American or Alaska Native, and 2.3% from two or more races. Austin also boasts a diverse culture, with over 30 ethnicities represented among its citizens and over 140 languages spoken in Austin households today.
Austin is home to a diverse range of higher education opportunities, including some of America’s top universities. The University of Texas at Austin, Austin Community College, and St. Edward’s University are among some of the most popular institutions in Austin. UT Austin is also home to the McCombs School of Business, one of the top business schools in the country.
Austin has something for everyone, from its vibrant music scene to its unique restaurants and bars. Outdoor enthusiasts will enjoy exploring the many parks in Austin, such as Zilker Park or Lady Bird Lake Hike-and-Bike Trail. Austin has several museums, like The Blanton Museum of Art and Bullock Texas State History Museum, for those interested in culture.
Austin, TX Climate & Weather
Austin, TX, is known for its diverse climate and exceptional weather. Austin experiences hot temperatures during the summer months, with average highs in July and August ranging from 95°F to 100°F. Austin is typically dry during these months, although sporadic thunderstorms are common.
Winters in Austin are mild compared to other cities around the country, with average temperatures ranging from 48°F to 61°F.
Summary of Austin Multifamily Real Estate Performance in Q3 2022
Multifamily real estate in Austin had mixed performance in Q3 2022.
With vacancies remaining well below the region’s average, even after a slight increase in this quarter, rents continued to rise. Apartments are seeing increasing rents for six straight quarters in a row, and annual gains have gone well over 10% for the past year.
Developers currently have over 20,000 units in construction this quarter to supply the area’s ongoing demand. This has additionally caused investment demand to also rise.
Transaction volume, on the other hand, cooled down this quarter, with the number of deals declining throughout the last three months.
What are multifamily rents like in Austin?
Although not at the same pace seen in 2021, rents continue to rise for Austin’s multifamily units.
Austin’s overall asking rent average is at $1,545 per month in Q3, a 2% increase from Q2.
Austin’s Central submarket, being a desirable location, has the highest rent average at $1,970 per month.
Local rents are expected to continue to rise throughout the remainder of 2022, with the average possibly going up to $1,566 per month.
Purchase & Leasing Activity
Transactions have slowed down this quarter, likely due to the rising interest rates in Q3 of 2022.
There was a 36% decrease in the total number of multifamily deals quarter-over-quarter, with deal volume also down 13% year-over-year.
Those factors have caused prices to decrease slightly when comparing Q3 with Q2; however, the average is still higher than last year’s average.
In 2022, the median sales price saw a 7% increase from 2021. This translates to the average sales price per unit for multifamily real estate in Austin transacting at $221,600.
Notable Multifamily Real Estate Deals in Austin in Q3 2022
The following office deals and leases occurred in Austin’s multifamily market.
- Tides Equities’ acquisition of Tides on Copper Creek for $137 million;
- The Connor Group’s acquisition of Edison Riverside for $102 million; and
- Conti Organization acquisition of Pioneer Hill for $70 million.
These are a few, among other transactions, for multifamily real estate in Austin.
New Multifamily Real Estate Development Activity in Austin in Q3 2022
There are currently over 20,000 multifamily units under construction this quarter, with 9,500 units expected to be delivered during Q3 and Q4.
This would be an 18% performance increase when compared to the long-term average for Austin’s multifamily market.
Ongoing population growth with high renter demand will continue to drive supply for many quarters to come.
Market Forecast for Austin’s Multifamily Real Estate Market
Multifamily real estate in Austin will both end the year strong and be positioned for a strong start for 2023.
Steady supply, low vacancy, and increasing rent prices should keep the market active.
While new deliveries could cause an elevation in Austin’s vacancy rate, demand will likely keep that number in check.
With new jobs being added to Austin coupled with strong population growth and pre-pandemic level unemployment, there’s no reason to think that Austin will stop being a top multifamily market in 2023.
Takeaways for Multifamily Real Estate Investors
Investors looking to purchase commercial real estate in Austin are drawn to its market due to its robust economy, high renter demand, and population growth.
As the economy further stabilizes, Austin should continue to be one of the healthiest markets for multifamily real estate in the near future.
As always, each investor must do their own research to decide what’s best for them and their particular situation.
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