- There are a lot of new multifamily units in the greater Austin pipeline.
- The multifamily industry has already seen lower rents in the last year.
- And while this may not be great for developers, it does help make our community a little more affordable.
I was browsing twitter earlier this week (or was it Threads? Who can tell?) and saw an interesting headline. Unfortunately, though, I did not have time to read the article. But the tweet (or Thread) said that there are at least 14,000 multifamily units in the Austin development pipeline for 2023.
That seemed like a lot to me. So I definitely wanted to come back and do a little investigation into the issue – what is the future of Austin multifamily? Are there a lot more units on deck? Well that’s what we are writing about this week.
The Austin Multifamily Pipeline is Very Large
We have talked a lot about how interesting these times are in commercial real estate. And reading through the multifamily industry outlooks – well there is a lot of uncertainty on the horizon. I have also obviously written a lot in this blog about our need for more and denser housing. And, despite what I will write in this entry, there’s no question we still need more and denser housing. Because housing is still unaffordable to so much of our population. And the best way to resolve that issue is to build more units.
Well developers in Austin are certainly taking that challenge seriously. In 2022, there were over 12,000 new multifamily units added to the Austin metro area. While that seems like a large number, according to one report, there are over 42,000 new units still currently under development. That makes Austin one of the fastest growing multifamily industries in the country.
That does not mean, of course, that all of those units are going to be delivered in 2023. Emily Blair, from the Austin Apartment Association, said she expects about 20,000 new units to come online in 2023. That would be a one year record for the area.
What These New Units Mean for the Future of the Market
Again, that is, obviously, a lot of units. But there is also a lot of demand. In the last few years, Austin has averaged about 33,000 new residents per year – or about 90 per day. And that number does not seem to be slowing down as Austin remains popular for both individuals and companies. As a result, we can absorb a lot of new multifamily units.
But does a lot mean 42,000 new ones? Maybe not.
Over the last year, multifamily rents have decreased approximately 3.4% across the board. Average occupancy is still at 93% – so the communities are mostly full. But to keep them full, owners have had to lower the asking rents. In addition, unsurprisingly rent concessions are increasing across the spectrum.
So we have people and companies moving to Austin but maybe not as fast as new multifamily units are going up. What does that mean? It appears to mean that rents are going to continue to decrease in the Austin metro area.
And isn’t that what we need to happen? Look, I realize we represent a lot of multifamily investors and developers. Heck, I am one myself. Lower rents are not necessarily good news for us.
But I have written a lot of words in this blog about how Austin is completely unaffordable to a large percentage of its population. And the way to solve that is through building more. And now by doing so, we are seeing rents come down.
This is a weird time for commercial real estate. And I suspect we will see a lot fewer starts in the next year or two. But for now, all of the new multifamily units coming online means Austin is a little more affordable than it was last year.