By Michelle PitcherAustin Business Journal
Austin ties with Atlanta, Charlotte as second-hottest metro for multifamily
The algorithms have spoken: Austin is one of the top metro areas in the nation for apartment developers, per a new report.
Chicago-based Origin Investments recently released findings from its study of 150 metro markets around the United States. The company uses proprietary tech to analyze data from the markets and predict which cities are the most promising places for multifamily growth.
Phoenix, Ariz. topped the list, with Atlanta, Charlotte and Austin coming in second. Raleigh, NC; Nashville, Tenn.; and Tampa, Fla. rounded out the top five slots.
The report comes amidst Austin’s noteworthy rebound from the Covid-19 pandemic slowdown. In 2020, Austin’s apartment market was hit harder than any other large Texas metro by the pandemic, but earlier this month ApartmentData.com reported that Austin may recover with an even stronger apartment market than before.
That has investors, not just builders, interested in the Austin market. In recent weeks, several large apartment complexes have changed hands — most recently Elan Parkside on the site of the old Highland Mall.
The strength of Austin’s rental market is backed up by Origin’s analysis.
Origin’s tech is based on U.S. Census data and other publicly available data from sources including Zillow and U-Haul. It also pulls in predictions from the Urban Land Institute, which regularly reports on the strength of different markets.
Affordability, jobs and population growth are key factors in determining which markets are primed for real estate growth. The type of population growth, however, determines whether an area’s multifamily market will feel the effects, said David Welk, Origin’s Managing Director Acquisitions.
Bolstering Austin’s profile is the slew of high-profile tech companies with major presences — Dell, Tesla, Facebook, Google, Amazon and Oracle come to mind — along with the potential expansion of Samsung — which is rumored to be eyeing Austin for a $17 billion chipmaking plant. More jobs in the tech and engineering sector can be “catalytic” for a region’s apartment market, Welk said. The workers who are moving to Austin are highly educated, well-paid and tend be on the younger side.
Welk said as tech workers move to a new part of the country, they’ll likely rent while they look to buy a home, or they’ll rent to have more flexibility to try out different growing tech markets. He said regardless of their motivations, this increase in demand for renting is “a very important part of the equation on what determines an investible market.”
“A STEM related employee is often going to translate into a renter,” Welk said.
Agents on the ground in Austin are seeing the influx of tech workers firsthand. Sawyer Thomas, a real estate agent who helps people find apartments in Austin, said a lot of renters are coming from New York, California, Idaho and Ohio. Thomas said agents are doing more and more virtual conferences with out-of-state renters.
“It’s creating a crunch on inventory,” Thomas said. “We are definitely seeing a huge influx of people coming for tech jobs.”
Welk added that booming STEM job markets aren’t all the top cities have in common. Many — including Austin, Raleigh and Nashville — are home to large universities. They also tend to be big cities for government jobs — five of the top seven metro areas include state capitals.
Austin’s apartment market doesn’t operate in a vacuum — demand for rental units is affected by the single-family housing market, which has been growing more impenetrable over the past few months as prices climb and inventory stays low.
“It’s important for affordability for home prices to level off some,” said Austin Board of Realtors President Susan Horton. “People are going to be forced into apartments if we don’t, and even those are extremely expensive.”
On the supply side, Austin and Charlotte are beating out their peer cities, in terms of inventory growth, or the percentage of the total number of apartments that have cropped up in the last year. Nearly 16,000 units were under construction in the Austin area at the beginning of June, per ApartmentData.com.
“If there’s land available, they’re going to be building more apartments,” Horton said.