With properties totaling another 3,100 apartments finished during 2Q, Austin now has added just over 8,700 units during the past year. The metro’s 4.6% annual inventory growth pace recorded since mid-2013 is the second most aggressive expansion rate seen across the country, topped only by Raleigh’s inventory growth of 5.5%.
While lots of new product coming on stream often creates a competitive leasing environment, there’s not much of a problem if big supply is accompanied by big demand. And that’s what we’ve seen so far in Austin. Net absorption in the apartment sector came in at some 3,500 units during 2Q and roughly 7,900 units over the past year.
Occupancy, then, remains very strong: 95.4% overall. Almost all the available product right now is limited to some of the brand new stock moving through initial lease-up.
Sustained high occupancy is allowing strong rent growth to continue so far through this very active construction period. Effective rents for new leases climbed 1.4% during 2Q and 4.1% during the year-ending mid-2014. While the most robust rent growth was realized my middle-market and bottom-tier communities that don’t have to compete with the new properties that are delivering, even class A existing projects managed to achieve very respectable annual rent growth around the 3% mark.
Austin’s flurry of apartment additions will continue throughout the near term. About 13,300 units remained under construction as of mid-2014, with more than 12,000 of these apartments scheduled to finish by mid-2015. With that much additional stock needing to be digested just ahead, look for overall performances to cool off a bit more than has been seen to date. Still, occupancy is expected to remain basically healthy at 94% or better (with all the vacancies in the new stock still building a resident base), and annual rent growth should come in at least a little north of 3%.
(Image source: Shutterstock)