Marcus & Millichap

Austin Multifamily Market Report

Austin Metro Area, Fourth Quarter 2017

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Spread in Rents Keeps Demand Healthy for Class B/C Apartments

Tight labor market, steady household formation keep demand for apartments high. As job growth in Austin slows this year and the labor market tightens, the apartment market shows signs of stabilizing. Healthy in-migration trends and employment gains are producing strong demand for units and development will reach a new peak in 2017. Housing needs are rising in the market as new households are formed at a stable pace, and net absorption reaches one of its highest levels in the last 10 years as more than 10,200 units are filled. Though supply additions will outstrip demand for a second consecutive year, vacancy remains at a still-tight 6.0 percent, contributing to a steady increase in the metro’s average effective rent.

Class C apartments boast tightest conditions, produce healthy rent growth. Apartment vacancy is tightest for Austin’s Class C units, reaching 5.3 percent in the third quarter. Low vacancy in this segment has encouraged strong rent gains over the last 12 months, with the average effective rent climbing more than 4 percent to over $1,000 per month. Development activity is concentrated in the Class A segment, and the spread between effective rents in the two classes is large enough to keep many renters from moving into newer luxury buildings. As a result, demand for upgraded older properties will remain strong.

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