Austin’s high-end apartment market closes some of its vacancy gap
High-end apartments have come to dominate the rental market in downtown Austin. A few years ago, those developments saw a sharp drop in occupancy as new units flooded the market. Now the market seems to be on its way to stabilizing.
These days, you can find luxury rentals in virtually every part of the city. In downtown Austin, luxury apartments have popped up on just about every corner.
Robin Davis is the owner of Austin Investor Interests LLC, a private research firm that tracks the Central Texas apartment market. She looked at the area within a 3-mile radius of the 2nd Street District near Austin’s City Hall. Davis found that during the last half of 2013, the occupancy rate for the area’s high-end rentals fell sharply, from just under 92 percent to about 84 percent. She attributes that drop to an influx of new units.
“(In) the downtown high-rise market, just so many units were added in the last 12 and 24 months that it’s just a matter of those stabilizing,” Davis said.
This year, the market’s occupancy rate rose about 2 percent over the last quarter, but it still hasn’t caught up to those 2013 levels, and more than 3,400 new units are currently under construction. As the market works to stabilize, Davis said we’re seeing more and more luxury properties offering concessions to attract tenants. Even apartments in the most coveted parts of town are offering several weeks of free rent.
“I don’t think we’ve seen concessions this high in four to five years,” she said. “The core downtown area had the highest level of concessions over this last quarter, and I expect that to remain on the rise as new units continue to stabilize.”
If you’re more a middle-of-the-road apartment renter, what does it matter to you that so many luxury units are being built? Davis said Austin’s overall rising rents are driven, at least in part, by increases at the top.
“The majority of the rent increase right now is occurring because of these high-end units that are averaging $2.50-plus a square foot, versus the overall average for the whole market, which is $1.40,” she said.
Among those flashy new units, Austin has also seen a rise in one specific type of construction – green building. Doug Ressler is with the real estate research firm Yardi Matrix. He said that as more developers go green, more renters seem drawn to it.
“We have not seen any negative occupancy for that,” Ressler said. “As a matter of fact, it becomes an incentive for the occupancy to increase, so we see it in that regard. We also see it in large student housing centers as well.”
And like other green purchases, these apartments will cost extra. In Austin, that could mean paying about 48 percent more in rent.
This story was produced as part of the Austin Monitor’s reporting partnership with KUT.
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