Summary
- Apartment construction is slowing due to rising interest rates and property value decline, leading to investors betting on higher rents
- Sun Belt states are facing challenges from overbuilding, but other locations have avoided overhang
- Accelerating demand for mid-priced apartments surpassing last year, with lower vacancy and stronger rent growth
- Elgin experiencing housing boom with plans for 60-acre development.
- East Austin seeing new multifamily projects, slow rise in occupancy rates, and declining rental rates.
- Large master-planned community planned in Lockhart, including single-family, multifamily, and commercial space
- San Antonio initiates a new development strategy for the South Side
- San Antonio and DHA officials plan for military biotech hub that could spur future development in East Side
National News
Apartment Construction Is Slowing, and Investors Are Betting on Higher Rents (WSJ
)
- Why it matters: The rise in interest rates pushed construction-loan costs up and property values down slowing new construction.
- Analysts anticipate that the rental market, which had previously been affected by an oversupply, is now witnessing a shift in favor of landlords as downward pressure on rents is projected to subside.
- The decline in new construction starts, which began last year, is ongoing and is anticipated to have a positive impact on rental rates and property values.
- The reduction in the number of new buildings being constructed is expected to result in an increase in rents and a slower growth rate in property values.
- Among all cities in the United States, Austin, Texas is experiencing a more significant slowdown in construction activity compared to others.
Level of Multifamily Oversupply May Be Smaller Than You Think (Costar
)
- Why it matters: Sun Belt states face the biggest challenges from overbuilding, while other locations avoid that fate.
- Over the past 11 quarters, the number of newly added apartment units has consistently exceeded demand.
- Among the top 15 markets with an excess supply, 11 are located in the Sun Belt region, accounting for 40% of the newly constructed multifamily units.
- Despite the excess supply in most markets, the situation appears to be under control as construction levels are expected to decrease in 2025 and 2026.
- A few markets in the United States have successfully avoided excessive supply by maintaining apartment construction levels similar to pre-pandemic levels.
Accelerating Demand For Mid-Priced Apartments Had Already Surpassed Last Year (CoStar
)
- Why it matters: Overall vacancy is lower for apartments rated three stars than the overall market, and rent growth is stronger in 10 of the 15 major markets.
- In the first quarter of this year, there was an 86% increase in demand for mid-priced three-star rated apartments compared to the same period last year.
- Favorable economic conditions have instilled confidence in younger adults, leading to an increase in household formations.
- The three-star price point is an attractive option for first-time renters looking to secure their initial apartment lease.
- Following a steady increase over 10 consecutive quarters, the three-star vacancy rate has remained stable at 7.1% from the first to the second quarter of this year.
- Currently, the market segment for three-star apartments is experiencing a rent growth rate of 1.6%.
Austin News
750-Plus Homes Headed to Elgin to Continue Housing Boom (ABJ
)
- Why it matters: 763 single family homes are planned to be built in Elgin following City Council amendment.
- The developer has been granted an amendment to the existing development agreement, enabling them to construct higher-density housing within the upcoming master planned community.
- The city of Elgin is experiencing significant growth and development, sparked by the establishment of Tesla's gigafactory.
- American Venture has announced plans for a 60-acre development in Elgin, which will include 349,000 square feet of retail space.
Trendy East Austin Eyed For Hundreds of New Apartments (ABJ
)
- Why it matters: Two east Austin multifamily projects are in planning phase and will deliver approximately 400 new units.
- The occupancy rates for multifamily properties are gradually increasing once again.
- OHT Partners LLC has planned a larger development named 7th & Pleasant Valley, which will consist of 360 multifamily units and 12,975 square feet of office space.
- Speculated to be developed by JLCC Interests LLC, the smaller project located at 1307 & 1309 E. 4th St. will feature 44 multifamily units.
- The average monthly rent for an apartment in Austin is currently $1,524, which indicates a year-over-year decline of 7% in rental rates.
- As of August, there were 25,497 apartments under construction and an additional 32,204 proposed for future development.
Developer Teeing Up Big Master-Planned Project in Lockhart (ABJ
)
- Why it matters: North Texas developer plans 178-acre master planned community on the southeast side of Austin, Texas.
- The preliminary proposal includes the development of 400-500 single-family homes, along with multifamily housing and commercial spaces.
- The zoning regulations for the site encompass medium-density commercial, high-density residential, and medium-density residential areas.
- The high-density portion of the project will be occupied by either townhomes or apartments, with an estimated 500 units if apartments are chosen.
- The commercial component of the project will act as a buffer between the property and the adjacent prison.
San Antonio
The City of San Antonio enacts a development plan for the South Side (SABJ
)
- Why it matters: The San Antonio City Council approved the Texas A&M-San Antonio Regional Center plan, which will guide development in a 15-mile area around the university campus.
- Since 2018, this ongoing development plan has been designed to stimulate economic growth by prioritizing enhancements in housing, transportation, and public spaces, reflecting the South Side's evolution into a prominent manufacturing hub.
- The South Side has garnered substantial investments from automakers such as Toyota and Navistar, with the addition of a forthcoming manufacturing facility for JCB, a construction equipment manufacturer.
- The plan places emphasis on incorporating the university into mixed-use developments, as well as investing in infrastructure to facilitate both residential and commercial expansion. It also seeks to maintain a harmonious balance between industrial and residential areas.
VelocityTX angling to build East Side hub for military medical research with Defense Health Agency (SA Express News
)
- Why it matters: San Antonio and DHA officials plan for military biotech hub that could spur future development in East Side.
- There are plans to potentially establish a medical innovation center, estimated at $60 million, near downtown San Antonio at the former GJ Sutton site. This initiative is part of the military's strategy to consolidate its Defense Health Agency.
- VelocityTX has proposed the research center, which would serve as the centerpiece of a larger development project capable of generating over 2,400 employment opportunities in the area.
- Discussions involving city, county, and Joint Base San Antonio officials have been taking place to repurpose an existing building at JBSA-Fort Sam Houston for some of the DHA operations. These talks have expanded to include other stakeholders such as VelocityTX and Port San Antonio.
- The establishment of a "Military Medical Collision Center" intends to facilitate collaboration between military medical entities and civilian counterparts, addressing the current barriers that hinder research and development partnerships.
