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C REPORTAUSTIN, TX
MULTIFAMILY | Q2 2019
Austin, TX | Q2 2019
Q2 CRE Report / 2
MULTIFAMILY INVESTMENT SALES CONTACTS
MULTIFAMILY DEBT & STRUCTURED FINANCE CONTACTS
GREYSTEEL RESEARCH & MARKETING CORPORATE LEADERSHIP
SOURCES & METHODOLOGY
KEELEY BYERLead Research Analyst
DANIEL [email protected]
ARI FIROOZABADIPresident & CEO
REBECCA WILEYVP of Marketing
ANDREW [email protected]
DOUG BANERJEESenior Managing [email protected]
BOYAN RADICManaging [email protected]
JASON LANCESenior Designer / Media Coordinator
MITT PATELFinance [email protected]
FISHER WELLSFinance [email protected]
WYN TAYLORFinance [email protected]
JACK [email protected]
YASSI GHASHGHAIVP of Corporate Services
NICOLE CAPOBIANCOVP of Transaction Services
SCOTT SIMONSenior Investment [email protected]
CHRIS “CASTLE” CASTILLOInvestment [email protected]
CHARLIE HOPEInvestment [email protected]
JOHN MARSHALL [email protected]
ANDREW [email protected]
All data is obtained from sources recognized as reliable but Greysteel makes no guarantees as to the accuracy thereof.
(1) Rental & occupancy trends take into account only multifamily assets larger than 10 units, except in the case of development and transactional analysis.
(2) The Austin-Round Rock Metro Area, as defined by Greysteel Research, is comprised of the following counties: Blanco, Burnet, Lee, Llano, Mason, and Milam.
(3) Affordable properties and market-rate properties with an affordable element are not analyzed in this report; this includes, but is not limited to, LIHTC, Section 8, HCVP, senior housing, military housing, corporate housing, and student housing.
(4) Data provided courtesy of Greysteel Research, CoStar Realty Information, Inc., REIS, Bureau of Labor Statistics, Bureau of Economic Analysis, and the U.S. Census Bureau.
* For more information or to inquire about Greysteel, please contact
Ari Firoozabadi, CEO & President ([email protected] | 202.417.3873)
AUSTIN, TXGreysteel’s CREport focuses on any subject that potentially impacts, or relates to, the commercial real estate sector, ranging from
studies of the performance of a specific asset type or region to economic and demographic studies, and anything in-between. Readers
will benefit from our professionals’ expertise and insight into the economic and market trends that affect all sectors of commercial real
estate, as well as our expansive knowledge of local markets. For more information about the CREport, or to request information for a
specific region, please contact [email protected].
Austin, TX | Q2 2019
Q2 CRE Report / 3
OVERVIEW
Home to more than 2.2 million residents, the Austin–Round Rock MSA is the fourth most populated metro in Texas and the 30th largest
MSA in the United States. Situated in the Hill Country of Central Texas, the metropolitan area is centered on the City of Austin—the
fourth largest city in Texas and the 11th largest city in the nation with a population of nearly 1.0 million people. As the state capital of
Texas, Austin offers influential political connections and the sprawling research complexes of the University of Texas. More than 800
high technology companies (with nearly 91,000 employees) operate in the ‘Silicon Hills’ of the metro, drawn by recreational possibilities
of the area’s five Highland Lakes, rich cultural and artistic life, and a reputation as the “Live Music Capital of the World,” with over 250
live music venues and multiple large-scale festivals and concerts each year.
Greater Austin is consistently recognized as a great place to live due in part to its diverse and eclectic population, as well as an
environment that allows a year-round outdoor active lifestyle. The metropolitan area is nationally recognized among the most inventive,
creative, wired, educated, fit, and loved metros in which to live and work. With over 44% of adults 25 years or older holding a bachelor’s
or advanced degree (compared to 31% for the U.S.), higher education is a significant aspect of life in Greater Austin. The region is
home to a robust community college system and six universities, including the University of Texas at Austin (UT), a world-class center
of education and research and the seventh largest public university in the U.S., with an enrollment of nearly 41,000 undergraduates.
Employment continues to rise in the metro with 34,400 jobs added in 2018, a 3.3% annual increase despite a tightening labor market
in certain fields, while the unemployment rate decreased to 2.7%, well below the state and national unemployment rates. Comprising
nearly 20% of the workforce, government remains Austin’s largest employment sector and provides employment stability. While
Austin’s economy has diversified over the last decade, the technology industry continues to play an increasingly large role in the region’s
economic expansion. High tech companies including Apple, Oracle, Google, Facebook, and Indeed are expanding their presence in
Austin. Apple recently announced plans to expand in Northwest Austin by an estimated $1 billion. At full build out, Apple could
become the largest private employer in Austin, encompassing 3.0 million square feet of office space and employing 22,000 workers.
Austin, TX | Q2 2019
Q2 CRE Report / 4
MULTIFAMILY MARKET
Nearly 25% of Austin’s population consists of millennials, which is tops among the largest U.S. markets. These favorable demographics
aren’t likely to shift, since a lot of these young renters are affiliated with the University of Texas at Austin and/or the tech sector, which
continues to recruit young talent. Many students choose to stay in the metro upon graduation, which helps fuel Austin’s relatively
young and highly educated workforce and keeps apartments full.
Greater Austin’s multifamily market is still in a healthy place despite inventory expanding by nearly 35% since 2010. As one of the most
development-heavy markets in the country, Austin’s multifamily supply outpaced demand and increased the vacancy rate to 9.7% at
the end of 2017. A slowdown in deliveries in 2018, coupled with an increase in demand, has allowed vacancies to fall back below
the metro’s historical average of 8.0%. With the expectation of additional job growth, even with unemployment hovering around
3.0%, vacancies should remain relatively tight, giving landlords the power to continue pushing rents. Austin’s strong improvement
in fundamentals has allowed effective rents to surge by 5.2% over the past 12 months, one of the best growth rates in the country.
The steady flow of deals in Greater Austin has generated 122 transactions over the past 12 months, in line with the seven-year average.
Austin’s desirable demographics and strong economy have been a major draw for multifamily investors during this cycle’s upswing and
as investors who were priced out of core coastal markets started to look to the country’s next boom markets, Austin has benefitted
with over 63% of buyers coming from outside of Texas. With strong fundamentals, long-term demand drivers, and above average rent
growth, investors are expected to continue to be attracted to Austin.
Austin continues to be recognized by others for being a leader in numerous areas such as job opportunities, creative economy, and
business opportunities:
#1 Best Places to Live 2018
US News & World Report
April 2018
#1 Best Place for Starting a Business
Inc.
December 2018
#1 Best Big City to Live in
Money
November 2018
#1 Best Places for Veterans to Live
WalletHub
November 2018
#2 Best City for Jobs
New Geography/Forbes
May 2018
#2 Top Digital Economies of the Future
fDi Intelligence
August 2018
Austin, TX | Q2 2019
Q2 CRE Report / 5
AUSTIN MSA Class A Class B Class C Overall
Effective Rent Growth (Y-O-Y) 5.3% 5.1% 5.0% 5.3%
Vacancy Rate 7.3% 6.4% 5.3% 6.5%
Net Absorption (12-Month Trailing) 7,052 2,606 387 10,045
PROPERTY CITY SALE DATE UNITS YEAR BUILT
Bridge at Asher Austin Jun-19 452 2002
Sunwest Austin Jun-19 20 1972
Towns on Tenth Pflugerville Jun-19 93 2015
The Grove Apartments Austin Jun-19 184 1973
Bell Southpark Austin Jun-19 330 2017
Enclave at Waters Edge Austin May-19 184 1985
Haven East Austin May-19 56 1984
The District on La Frontera Austin May-19 512 1997
Bexley Round Rock Apartments Round Rock May-19 330 2018
St Johns Square Austin Apr-19 64 1969
Capella Apartments Austin Apr-19 336 1981
Solano Apartments Austin Apr-19 504 1983
Trifecta Square Austin Apr-19 52 1979
Altis Lakeline Cedar Park Apr-19 354 2016
RECENT SALES
CLASS BREAKDOWN
PIPELINE VS EFFECTIVE RENTAL RATE PSFNET ABSORPTION VS VACANCYNet Absorption vs Vacancy Pipeline vs Effective Rental Rate PSF
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
Vac
ancy
rat
e
# of
uni
ts
Net Absorption Vacancy %
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Effe
ctiv
e re
nt /
SF
# of
uni
ts
Under Construction Delivered Effective Rent PSF
Net Absorption vs Vacancy Pipeline vs Effective Rental Rate PSF
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
2,000
4,000
6,000
8,000
10,000
12,000
Vac
ancy
rat
e
# of
uni
ts
Net Absorption Vacancy %
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Effe
ctiv
e re
nt /
SF
# of
uni
ts
Under Construction Delivered Effective Rent PSF
Austin, TX | Q2 2019
Q2 CRE Report / 6
18%
17%
17%12%
11%
6%
6%
6%
4% 3%
Prof. & Business Services
Government
Trade, Transp. & Utilities
Leisure & Hospitality
Ed. & Health Services
Mining, Logging & Const.
Financial Activities
Manufacturing
Other Services
Information
18%
17%
17%12%
11%
6%
6%
6%
4% 3%
Prof. & Business Services
Government
Trade, Transp. & Utilities
Leisure & Hospitality
Ed. & Health Services
Mining, Logging & Const.
Financial Activities
Manufacturing
Other Services
Information
KEY ECONOMIC INDICATORS
LABOR Q2 2018 Q2 2019 Change
EMPLOYMENT 1,162,000 1,184,000 +1.9%
UNEMPLOYMENT RATE 2.7% 2.2% -0.5%
PEOPLE 2010 2019 2024 Projected
POPULATION 1,716,289 2,231,469 2,543,429
% CHANGE — +30.0% +14.0%
HOUSEHOLDS 650,459 842,329 958,952
% CHANGE — +29.5% +13.8%
HOUSING UNITS 706,505 901,332 1,020,824
OWNER-OCCUPIED 380,100 502,042 578,807
RENTER-OCCUPIED 269,885 340,703 379,747
MEDIAN HH INCOME $62,808 $75,946 $83,937
% CHANGE — +20.9% +10.5%
37.8%
55.7%
OwnerOccupied
RenterOccupied
6.5%
Vacant
HOUSING PROFILE
POPULATION COUNT BY AGE
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Employment Unemployment rate
EMPLOYMENT VS UNEMPLOYMENT RATEEMPLOYMENT SECTORS
450,000
400,000
150,000
350,000
300,000
250,000
200,000
100,000
50,000
00
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
18-24 25-34 35-44 45-54 55-64
2010 2019 2024 Projection
Austin, TX | Q2 2019
Q2 CRE Report / 7
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