JOB GROWTH TO FUEL AUSTIN TEXAS APARTMENT DEMAND
February, 2010
The Capital City's robust employment growth is expected to resume in the coming months, attracting job seekers from areas hit hard by the recession, according to the 2010 National Apartment Report by Marcus & Millichap.
A recovery in the global economy will be particularly beneficial for Austin firms, as technology sales in emerging markets will revive the local manufacturing sector, which has declined by 15 percent since peaking in 2007.
Following are some of the most significant aspects of the Austin Apartment Research Report:
- Job growth is expected to gain steam this year. Companies are forecast to expand local payrolls at a 2.5 percent clip with the addition of 19,000 positions.
- A sharp reduction in multifamily development activity is expected in 2010 as 2,500 units come online. Last year, 7,900 apartments were delivered.
- Population gains and job growth will fuel a 2.1 percent increase in apartment demand this year, resulting in a 40 basis point improvement in vacancy to 10.6 percent.
- Asking rents are forecast to rise 0.6 percent in 2010 to $849 per month while effective rents retreat 0.7 percent to $752 per month.
2010 AUSTIN APARTMENT REVIEW
JANUARY 2010
- Occupancy Increased Minimally Year-Over Year
- 4th Quarter Saw Large Decline in Effective Rents
- Fundamentals are Strong and Jobs Continue to Increase
Not surprisingly, August is a big month for the multifamily industry in the Austin area. With all the new leases for incoming students, we usually see impressive numbers for that month. And 2009 followed that pattern as well. After all the new leases in late summer we normally see a slow but steady fall off in occupancy through the fourth quarter. 2009 broke from that pattern, however. In a recession as deep and widespread as this one has been any good news is as refreshing as it is surprising!
The Overall Occupancy Rate finished 2009 at 89.1%, up 0.1% for the year. As late as May of last year, that figure had fallen to 86.9%, but
rose as much as 2.5 percentage points by November, before it fell slightly at the end of the year. Rents, however, did not follow this trend.
The Overall Effective Rental Rate dropped $39 over the year to finish 2009 at $788 per month. Although steadily decreasing throughout the
year, the decline gained momentum during the 4th Quarter, where $31 of this drop occurred. in the Austin area but whereas Occupancy
managed a slight improvement, it was accomplished at the cost of rental rates.
As recently as the beginning of last year, Austin was not known as a concession-prone market. At that time, only about one in four properties offered an advertised concession, and that averaged only about 2.5 weeks free on a 12-month lease. Today, 54.6% offer concessions and they now average over 4 weeks free.
In fact, the majority of the reduction in Effective Rents came by simply lowering Asking Rents, rather than by offering additional rental
concessions.
There are more new units still in the pipeline as well as new projects being announced with expectations to begin construction early this year. Austin, however, is not experiencing the overbuilt conditions seen in many other TX markets, so we should be able to handle these as they come on board. With the job market looking better, the fact that Austin never got hit too hard with this recession and that the fundamentals are in better shape here than in most places, the multifamily industry in Austin should look forward to a good yr ahead.
Nearly 5100 new units were added in the area over the last year. Lease up rates have been fairly strong. For Same-Store Occupancy Rates, they have only lost 0.99% over the year, even with all the new product hitting the market. This signifies a pretty healthy ability to absorb
this new product.
Unlike most places around the country, Austin has been experiencing job growth throughout this past year. At the beginning of the year, there were 827,983 people employed in the area; by November, that figure had climbed to 843,093.
ALN Apartment Data
Austin Market
General Overview Dec 2009 Annual Change
Occupancy: 89.1 0%
Units Added: 4,520 - 48.5%
Units Absorbed (Annual): 4,039 +110.6%
Average Size (SF): 849 +0.5%
Asking Rent: $826 -4.3%
Asking Rent per SF: $0.97 -4.8%
Effective Rent: $788 -4.7%
Effective Rent per SF: $0.93 -5.2%
% Offering Concessions: 55% +12.4%
Ave. Concession Package: 7.7% +10.6%
Job growth echoes boom years
Central Texas adding positions at clip not seen since 2000; average of wages climbs 7 percent.
After four years in the doldrums, the Central Texas job market roared back to life i
Employment growth last year was almost twice as strong as previously thought, rising 4.5 percent, according to estimates by the Federal Reserve Bank of Dallas.
That's more than double the state average of about 2.1 percent, and far ahead of San Antonio, Dallas and Houston. It's the strongest growth since the 1998-2000 high-tech boom, when jobs in the region were growing at about 6 percent a year.
The job growth came across the economy, from fast food to construction and high tech to health care. It reflects a surge in retail development that saw outdoors retailer Cabela's Inc. hire 450 people in Buda and a new Sears Grand store, 30 miles up Interstate 35, hire more than 100.
State government, the region's second-largest employment source, added jobs in social and health services as state regulators beefed up children and adult protective services.
The five-county area added 30,300 jobs, the Dallas Fed estimates, not the 15,500 originally thought.
If the Fed is correct, it would be the first time the total number of jobs topped 700,000 — well ahead of the previous annual high of 674,100 set just after the peak of the tech boom in 2001. The Federal Reserve tracks and forecasts the overall economy, relying on information from the Texas Workforce Commission, which gathers the data on jobs.
The Workforce Commission will release updated figures on total employment for 2005 on Thursday. Initial estimates, collected monthly, indicated that Travis, Williamson, Hays, Bastrop and Caldwell counties ended 2005 with 689,500 jobs.
Actual payroll data for specific industries is available only through Sept. 30. Still, it provides solid evidence about where the growth was last year.
The sectors adding the most jobs between September 2004 and September 2005 were retail, employment services, restaurants, local government, state government, health care and construction. Combined, they added almost 18,000 jobs.
Not all paychecks are created equal, of course. Nearly one-third of the new jobs are in retail, employment services and restaurants, where the pay is far below the regional average.
Workers have been battered by five years of layoffs and sparse hiring that put wages on ice after the heady days of the Internet boom. Average pay in Central Texas plunged from $787 a week in the third quarter of 2000 to $747 two years later.
Where the jobs are
Central Texas added more jobs last year than expected, and Austin led Texas cities in employment growth rate, according to Dallas Federal Reserve estimates.
Job growth
Austin 4.5%
Dallas 2.3%
San Antonio 2.4%
Houston 2.0%
Statewide 2.1%
Source: Dallas Federal Reserve
Industries that added the most jobs
Category Jobs added Precent change Pay
1. Retail 3,420 11% $474
2. Employment services 3,048 19% $483
3. Restaurants 3,045 6% $284
4. Local government 2,356 4% $737
5. State government 2,129 3% $801
6. Health care 2,124 6% $793
7. Construction 1,831 5% $823
8. Professional equipment 1,569 7% $1,634
(computer/peripherals
9. Architecture/engineering 793 8% $1,137
10. Building supplies 738 15% $674
Industries that lost the most jobs
Category Jobs lost Percent change Pay
1. Insurance carriers 701 10% $1,095
2. Building equip. contractors 568 5% $807
3. Nonresidential construction 355 9% $900
4. Misc. manufacturing 318 12% $696
5. Pharmaceutical/medical 242 12% $1,052
manufacturing
6. Special food services 210 9% $343
7. Medical equip./supply manuf. 207 13% $1,379
8. Federal government 192 2% $975
9. Computer/peripheral manuf. 189 2% $2,271
10. Business support services 188 3% $645
Largest industries in Central Texas
Category Employment Pay
1. Local government 67,659 $737
2. State government 63,332 $801
3. Technology 63,034 $1,734
4. Restaurants 50,269 $284
5. Construction 38,852 $823
6. Health care 37,578 $793
7. Retail 35,734 $474
8. Employment services 19,380 $483
9. Grocery stores 13,560 $429
10. Architectural, engineering 10,918 $1,137
and related services
Total region 704,300 $839
Top-paying jobs
Jobs added/ jobs lost Percent change Pay Percent change
1. Oil and gas extraction +523 +158% $4,211 +275%
2. Computer/peripheral mfg. -189 -2% $2,271 +7%
3. Internet publishing/broadcasting -49 -25% $2,058 +43%
Lowest-paying jobs
1. RV parks +47 +54% $249 +1%
2. Fast-food restaurants +1,159 +5% $255 +8%
3. Bars +107 +4% $261 +13%
Source: Texas Workforce Commission
Notes pay figures are weekly averages.
DOWN-UNDER DEVELOPER SCRAPES SKYLINE
AUSTIN– Constellation Property Group of Australia has contracted to buy the three-acre site on the southwest corner of Red River and East Cesar Chavez streets, across the street from the Austin Convention Center. Sellers are local developers Perry Lorenz and Robert Knight.
The development firm plans a $250 million project to transform the skyline along Town Lake by building two 30-story skyscrapers, one a luxury condominium tower and the other a hotel. The project also would include ground-floor retail and an eight-story office building.
Constellation President Eugene Marchese said he expects to close the land sale in September. Construction is slated to start mid-2007 and be complete in 2010.Marchese estimates one-bedroom condos could start at about $350,000; two-bedroom units between $400,000 and $500,000; and upper-floor units could range from $1.5 million to $2 million.
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SOUTHPARK MEADOWS GROWS, GOES MIXED-USE
Endeavor Real Estate Group started with a plan for a modest retail outpost along I-35 south of Austin. The project has now become a 425-acre mixed-use, master-planned development which will include hundreds of homes, apartments and offices with nearly 1.6 million square feet of retail and restaurants. Southpark Meadows, Endeavor’s most recent endeavor, is planned for I-35 and Slaughter Lane.
The first phase of the retail portion will open next month with a Wal-Mart Supercenter and a Petsmart. Work will begin on phase two, which will include retailers Circuit City, Bed, Bath & Beyond, Rooms to Go and Ashley Furniture, in late May. Several other retailers and restaurants have signed letters of intent.
Southpark Meadows will be fully built in three to five years. The development will reach from Slaughter Lane to Old San Antonio Road and stretch west to South First Street. Recent additions to the development include 143 acres that will be part of a 221-acre residential and commercial segment.
Buildings will feature Hill Country limestone storefronts and landscaping to preserve trees once a part of the former Southpark Meadows concert venue. Five acres of park space will include plazas, a fountain, a pond, playscapes and jogging trails.
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