Area's apartment market still sizzling hot
Jan. 14, 2012
The Austin-area apartment market is hot these days, as heightened demand due to job and population growth plus a lag in new projects have combined to make it the hottest sector of the real estate market. The Austin apartment market has been on a hot streak for at least a year and a half, and while the rush for rentals is making for happy landlords, tenants are feeling the pinch, The trend is expected to continue tthrough 2012, as it will take time for supply to catch up to demand, even though the development pipeline for Central Texas is bulging with 10,000 - 12,000 planned apartment units as developers rush to fill the void.
MPF Research, which tracks rents and occupancies in Austin and other markets, says the local Austin / Round Rock / Cedar Park apartment market will be the nation's No. 2 performer this year based on projected increases in rents and occupancies, just behind San Francisco, CA
Last year Austin ranked No. 6 among major U.S. markets based on its 7.2 % increase in rents, trailing San Francisco, San Jose and Oakland , and Boston and New York. Nationwide, rents rose an average of 4.7 percent, MPF says.
Capitol Market Research predicts that the Austin area apartment market will be on the upswing for at least another 2 to 3 years It's data, which tracks 145,000 units in Austin and other areas, including Round Rock, Pflugerville, Cedar Park, Leander and Kyle, shows that the region ended 2011 with 95.9% of its apartments occupied, up from 94.8 percent at the end of 2010.
The all-time high — 97.6 percent occupancy — was reached in December 2000
Average rents across all unit types — 1, 2 and 3-bedrooms — climbed last year to $913/mo, compared with $853 in 2010. Rents for 1 bedroom units saw the biggest jump, soaring to $878/moas of December, 2011 compared with $731 at the end of 2010 MPF forecasts rent growth of about 5.5% in 2013 and about 4% in 2014. Forecasts show Austin will have demand for about 4,800 apartment units this year. About 3,100 new units are expected to be completed this year, followed by 4,900 in 2013. Thousands more units are in the planning stages, bu some of those projects could have problems obtaining financing.
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AMLI Residential, a major player in the local apartment market, is budgeting for rent growth of 5 to 6 percent across its Austin properties, said Taylor Bowen, vice president of development.
"We predict Austin will be our top-performing market in 2012 based on our rent growth projections," Bowen said.Planned projects In Austin, the south-central part of town is hardest hit by the rental squeeze, said Sanders, the apartment-locator specialist. And that's exactly where a number of developers — including the Hanover Co., Ardent Residential and Greystar — have zoomed in, with plans calling for 942 apartments on South Lamar Boulevard, south of downtown and Lady Bird Lake.
Greystar is planning a 400-apartment project at the shopping center that houses Alamo Drafthouse. Ardent's project, planned for the southeast corner of Lamar and Gibson, is slated for 202 apartments. Ardent plans to break ground by the end of this month.
Farther south on Lamar, Post Properties is building a complex that will have 298 units, the first of which are due to open late this year.
In September, the Hanover Co. plans to break ground on an upscale apartment project just south of the popular Uchi restaurant. Hanover's development would have about 340 apartments, with average rents of $1,700 to $1,800, said David Ott, development partner with Houston-based Hanover. The first units are expected to open in spring 2014, Ott said. Hanover is confident it will obtain financing, Ott said. "There was no new supply in the central submarket last year," Ott said, and only one project — Post's on South Lamar — will bring units to market this year. New supply also will be limited in 2013 in the area, he said.
"This is good news for continued strengthening of occupancies and rents in that area; however, oversupply is a real risk starting in 2014 and 2015, depending on how many of the pipeline deals actually get done," Ott said.
Ott said location and product quality will be critical to the success of any project planned in Austin. Those two factors helped Hanover achieve the highest rents in the city, at its downtown apartment tower, the Ashton. The high-rise is 95 percent occupied, with rents averaging about $3,400 a month, Ott said. On South Lamar, Hanover expects the proximity to Lady Bird Lake, high-end finishes and skyline views will all be selling points, Ott said. City's a hot market The region's job and population growth are among the factors fueling demand for apartments, experts say.
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Austin , J.D. Power survey says. (CONT.)
The Austin area and Orange County, Calif., each scored 122 points on the J.D. Power 2005 New Home Builder Customer Satisfaction Study. Houston scored 118, followed by Dallas/Fort Worth at 117. The average score among the 30 markets was 112. The lowest score, 98, came from Jacksonville, Fla.
The scores are based on responses to a 4 page survey that J.D. Power sent to buyers of new homes between March and July of this year. Customer satisfaction is based on 10 factors, weighted according to how important the issues are to the customers. Listed in order of importance, they are: warranty and customer service; home readiness; sales staff; construction manager; quality of workmanship and materials; price and value; physical design elements; builder's design center; recreational facilities; and location.
KB Home, which placed No. 1 last year, followed closely behind Pulte, and Centex Homes received the third-highest rating. To be included, builders must have closed on 150 or more houses in the Austin market in 2004. Ken Langston, president of KB Home's Austin division, said the high overall satisfaction reported by Austin home buyers illustrates what a competitive market Central Texas is.
Austin/Round Rock/Cedar Park
Apartment Market Report
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