Austin Rents Continue to Soar: No Relief in Sight

With strong inbound migration and a vibrant local economy, the Austin rental market continues to strengthen. With no new projects likely for the next year, downtown rents will continue to rapidly increase. According to Axiometrics, a national real estate analytics firm,

“Austin ranks as the best market in Texas. The 10.1% annual effective rent growth in July was the best we’ve ever reported for Austin in our 15+ years in business. In May 2009, Austin and Dallas had practically the same level of rent. Austin’s rent growth over the past two years has made it the highest rent per unit market in Texas. Its average rent of $911 per unit is now $66 a door higher than Dallas. Austin’s occupancy rate of 95.4% is its best in more than 10 years. 2012 Outlook: Strong rent growth, 7.1%, and absorption with occupancy increasing by 100 basis points to 95.9%. Deliveries in 2012 will remain well below the prior peak but planned projects, already numbering 50 projects, are accelerating.”

With occupancy in the high 90s and predicted to be as high as 97% by the end of the year, there will not be enough supply to meet growing demand as tens of thousands of new residents move to Austin. According to the Statesman, “Out-of-state job seekers or employees being transferred also are beefing up the tenant pool, accounting for about 35 percent to 40 percent of the leasing traffic. At least half of those are employed, and the rest have been accommodated by flexible leasing policies, including allowing a renter to provide proof they can pay at least three to six months’ rent.”

Experts predict that rents will continue to rise for the next 12-18 months until new supply relieves some of the pressure. Downtown, however, is not expected to see any new rental units during this time period. As a result, rents are likely to continue to rise for the foreseeable future. If the economy continues to improve, the housing resale market strengthens, or migration increases, downtown rental rates could increase significantly.

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