Is Multifamily Finally Peaking?

There's plenty new of apartment projects popping out of the ground. (There's a good chance at least one of you reading this is at a groundbreaking right now.) But with 94% occupancy and the highest rents in years, fundamentals appear unshaken. That’s why we’re excited to host Bisnow’s Austin Multifamily Summit on Oct. 30, starting at 7:30am to see when, if ever, multifamily will flatten.

Event panelist ARA principal Pat Jones (right, with colleague Andrew Childers) says lease-ups have been very successful in Austin, and deliveries have actually been pretty slow and spread out. Overbuilding concerns have made institutional investors cautious, but that's leaving a great opportunity for private investors who know what's what, he says. He’s got two urban new construction deals on the market in Austin, Elan East and Lakeshore Pearl. They’re ultra-luxury and a great price compared to Downtown, which has made them popular with investors.

Pat says private investors really got in the game on Northland at Stonehollow, a 600-unit property next to the Domain, but ultimately were beat out by an institutional all-cash buyer (after 20 tours and 10 offers). It’s a '90s value-add property in a great location, with lots of room to upgrade and push rents. Pat's most recent deal was in San Antonio—a private investor with foreign capital purchased NoBu Station, a new 474-unit luxury community at Bulverde and 1604 (94% occupied). That’s in the path of San Antonio’s growth, and investors loved the fact that HEB owns land next door. 

Austin absorbed a record 4,800 units in the Q3 and actually gained occupancy, says event speaker and JLL managing director Scott LaMontagne (with his family). He tells us even more units will be delivered in the next two quarters, continuing the theme of supply and demand. Austin’s prime renter demographic (18- to 34-year-olds) grew by nearly 70,000 over the past five years with no new supply causing a pent-up demand, Scott says.

As more units deliver (another 7,500 are scheduled over the next few quarters), the market will probably test the current demand levels, he tells us. By Q3 and Q4 ’15, the deliveries will taper down to about 1,500 units per quarter; as of now, only one project is planned for delivery in Q1 ’16. Scott says a lot of high-rent, high-density development is in the works not only in the core, but also in South Austin, such as the Streetlights project, The Catherine. Areas like these will test how deep the renter pool is for the higher-rent projects that charge in the range of $2 to $3/SF. As a percentage of the population, how many can afford and be willing to pay for those kinds of rent structures, he says.