Central Texas Roundup | JLL Multifamily | 3/3/25

Summary

• Texas apartment supply expected to drop notably in 2025.
• New-home sales slump at the start of 2025.
• Trump announces new tariffs on major trading partners.
• West Campus proposal suggests taller buildings, increased affordability.
• Austin homebuilding market stabilizes with increased inventory.
• Massive mixed-use project planned for East Austin.
• New student housing developer targets major universities nationwide.
• San Antonio considers development fee revisions to boost affordability.
• Seguin faces apartment oversupply amid rapid development.

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National

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Texas Apartment Supply to Drop Notably in 2025 (RealPage)

• Why it matters: Texas apartment supply is declining after a peak in 2024, with new deliveries expected to drop from nearly 120,000 units in 2024 to about 70,000 in 2025, and further to 45,000-50,000 units annually in 2026 and 2027.
• The multifamily construction landscape in Texas has undergone a dramatic shift in recent years. The state witnessed a sharp decline in new apartment starts, plummeting from a high of over 114,000 units in 2022 to just 68,000 in 2023. This downward trend continued into 2024, with starts further reduced to approximately 38,800 units.
• This slowdown has been particularly pronounced in major Texas metropolitan areas. Houston and Austin, in particular, have experienced their most significant drop in new apartment construction in more than ten years. Meanwhile, Dallas, though still leading the state in new multifamily developments, has not been immune to this trend. The city saw its apartment starts decrease from 21,900 units in 2023 to 15,600 in 2024, marking a substantial reduction in new construction activity.

U.S. New-Home Sales Slump at the Start of 2025 (WSJ)

• Why it matters: Sales of new single-family homes decreased by 10.5% in January, totaling 657,000 units, which was below the expected 671,000.
• The housing market continues to face challenges, as evidenced by recent data. The inventory of newly constructed homes available for purchase has risen to an estimated 495,000 units. This represents a 9.0-month supply at the current pace of sales, an increase from the 8.0-month supply recorded in December.
• The market's sluggishness is further underscored by a decline in existing home sales. According to the National Association of Realtors, sales of previously owned homes dropped by 4.9% in January. This downturn in both new and existing home sales can be attributed to the ongoing hurdles faced by prospective homebuyers, namely elevated home prices and high mortgage rates.

Tariff threats rear again as Trump vows to go through with them (ABJ)

• Why it matters: President Trump has announced 25% tariffs on imports from Mexico and Canada, and a 10% tariff on Chinese goods, scheduled to take effect on March 4, 2025.
• The implementation of new tariffs has raised concerns among experts about potential price hikes in multiple industries, with home construction and manufacturing sectors being particularly vulnerable. This economic shift could have far-reaching consequences, given the significant role of international trade in the U.S. economy.
• Recent data from the first ten months of 2024 highlight the importance of key trading partners, with Mexico, China, and Canada emerging as the top three sources of U.S. imports. Together, these nations accounted for a substantial 42% of the total value of goods imported into the United States during this period.
• In light of these developments, Chris Siepmann, an advisor specializing in geopolitical regulatory risks, cautions businesses against expecting complete clarity on tariff policies under the current administration. Siepmann recommends that companies prepare strategies to navigate an environment characterized by uncertain and potentially incomplete information regarding trade policies.

Austin

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West Campus Could Get Taller High-Rises (ABJ)

• Why it matters: The new proposal suggests increasing the maximum building height in West Campus to 600 feet (40+ stories) in some areas, surpassing the Frost Bank Tower.
• The University Neighborhood Overlay (UNO), implemented in 2004, has significantly transformed West Campus, leading to a substantial population growth of 28,000 residents in the area. This dramatic increase underscores the policy's impact on urban development and density in the vicinity of the university.
• A new proposal aims to enhance affordability in the area by adjusting the income requirements for certain units. The plan suggests lowering the affordability threshold from the current 60% of Austin's median family income (MFI) to 50% MFI, potentially making housing more accessible to a broader range of residents.
• Additionally, the proposal outlines a comprehensive rezoning strategy for the UNO area. It recommends redrawing the boundaries of UNO subdistricts and introducing new height limits. The plan envisions a tiered approach, with the transit-core subdistrict allowing buildings up to 600 feet, the inner-west subdistrict permitting structures up to 420 feet, and the outer-west subdistrict capped at 90 feet. This stratified approach aims to create a more diverse and dynamic urban landscape while potentially increasing housing capacity.

Austin Homebuilding Landscape in Focus (ABJ)

• Why it matters: Austin’s housing inventory and active listing have steadily increased over the past year, indicating a more balanced market for homebuyers.
• In the Austin metropolitan area's residential construction sector, D.R. Horton Inc. has emerged as the dominant force for 2024. The company solidified its position as the top volume homebuilder in the region, achieving an impressive $929 million in home sales and successfully closing on 2,764 properties throughout the year.
• The broader picture of Austin's homebuilding industry reveals significant activity across multiple firms. A total of 53 homebuilders operating in the area reported their annual figures, collectively initiating construction on 16,580 new homes. Moreover, these builders managed to complete and close sales on 19,625 properties during the same period. These numbers provide a comprehensive snapshot of the robust homebuilding market in Austin for the year 2024, highlighting both the initiation of new projects and the successful completion of existing ones.

Huge mixed-use project along Colorado River gains steam (ABJ)

• Why it matters: Kairoi Residential is planning a massive 115-acre mixed-use development called Bolm Riverfront District in East Austin.
• The ambitious development project is set to transform the urban landscape with its comprehensive and diverse offerings. In its initial phase, the plan calls for the construction of four apartment buildings, collectively housing 410 multifamily units. Notably, the project demonstrates a commitment to affordable housing, with 41 units, representing 10% of the total, earmarked for residents earning 60% of the median family income.
• Beyond residential spaces, the development aims to create a vibrant, mixed-use community. The plans encompass an array of amenities and commercial spaces, including retail outlets, an expansive hotel, and over 134,000 square feet dedicated to restaurants. Cultural and entertainment facilities are also central to the project, featuring a 27,000-square-foot arts theater and an 8,500-square-foot music venue. Additionally, a 37,000-square-foot civic center is planned, further enhancing the community's social infrastructure.
• At the helm of this transformative project is Kairoi Residential, a San Antonio-based developer with an impressive track record. The firm has recently made its mark on Austin's skyline by completing the city's tallest tower, Sixth & Guadalupe. Demonstrating their continued ambition, Kairoi is currently engaged in the development of Waterline, which is set to become the tallest tower in Texas upon completion.

Veteran developer of student housing eyes projects at universities across the nation (ABJ)

• Why it matters: Maslow's Campus Communities, created in 2024 by American Campus Communities co-founder, has formed a strategic partnership with Pennybacker Capital Management LLC for student housing development and acquisition.
• Maslow's strategic focus is centered on prestigious educational institutions, specifically targeting schools within the Power Four conferences and those classified as Carnegie Research One institutions. This selective approach naturally includes the University of Texas within their scope of interest.
• The company's investment strategy demonstrates flexibility in terms of project locations. They are actively pursuing opportunities both on university campuses and in their immediate vicinities. For off-campus ventures, Maslow's is particularly interested in properties situated within comfortable walking distance of the institutions. This approach aligns well with their interest in potential acquisitions in Austin's West Campus area, known for its proximity to the University of Texas.
• This dual-pronged approach allows Maslow's to capitalize on the diverse needs of the student housing market, catering to preferences for both on-campus living and the independence offered by nearby off-campus accommodations.

San Antonio

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Development Fee Revision Aims to Increase Affordable Housing

• Why it matters: District 10 council member Marc Whyte has requested a review of current development and permitting fees in San Antonio, with the intention of reducing development costs inside city limits and making homes from affordable.
• The initiative seeks to evaluate the impact of existing fees on various aspects of residential development, including home prices, construction schedules, and project viability. This comprehensive assessment is driven by the overarching objective of making housing more affordable.
• To achieve this goal, several proposals are under consideration. One suggestion involves revising the timeline for fee payments, potentially easing the financial burden on developers at critical stages of construction. Another proposal aims to streamline processes for seasoned builders by potentially waiving certain fees and inspection requirements, recognizing their experience and track record.
• Additionally, there's a push for greater transparency in how fees are calculated. This move towards clearer fee structures could help developers better anticipate costs and potentially lead to more efficient project planning and execution. Collectively, these measures are designed to optimize the development process, with the ultimate aim of reducing housing costs for end-users.

Seguin working through glut of new apartments (SABJ)

• Why it matters: Seguin is experiencing an oversupply of new apartments; in 2024, 456 new units were delivered, representing 25% of the city's total 1,755-unit market.
• Seguin's apartment market is experiencing a significant shift in its vacancy landscape. The city's overall apartment vacancy rate has surged to 24%, a stark increase from the 6% rate observed just a few quarters ago. This dramatic rise can be primarily attributed to the recent completion of two new apartment complexes, which are currently grappling with exceptionally high vacancy rates of 80% and 63% respectively.
• The introduction of these 456 new units represents a substantial addition to the rental inventory, particularly when considering Seguin's modest population of 36,000 residents. This influx of new apartments has outpaced the market's ability to absorb them in the short term.
• While the market has shown some resilience with a positive net absorption of 106 units, this uptake is not sufficient to counterbalance the rapid expansion of available units. The disparity between new deliveries and absorption rates has led to the current oversupply situation, contributing to the elevated vacancy rates across the city.