With a 33% population growth over the last decade, the amount of companies it has attracted, and a full job recovery from the pandemic by May 2021, Austin, TX, is one of the fastest, if not the fastest, rebounding markets in the U.S.

Austin, TX is the fastest-growing U.S. city with a 33% population increase over the last decade, beating out Raleigh, NC, the market with the second-largest growing population. Cheaper costs, a business-friendly environment, as well as a lack of corporate and income taxes, have lured many technology companies and its workers to trade a Silicon Valley presence for more affordable “Silicon Hills” locations. Google, Oracle, Facebook, Apple, and other tech players have been increasing their footprint in the Austin area for years and continue to do so. Tesla and Amazon are currently completing major expansions. Tesla moved its headquarters in December 2021 and is building its Gigafactory, which will add over 10,000 jobs.  

It would be short-sighted to say that Austin’s job growth was limited to the tech sector. According the Bureau of Labor Statistics, Austin recovered all jobs lost due to the pandemic by May 2021. By May 2022 data showed year-over-year positive job growth in almost all industries. With the University of Texas at Austin, a world-class institution that regularly ranks as one of the best schools in the world for science, technology, engineering and math graduates, as a source for much of the local talent, it's no wonder that 24% of Austin’s population is in the 20-34 year old range (a figure quickly approaching 500,000).  

Even with the large amount of new construction, vacancy rate is currently at 7.6%, lower than its historical average of 8.3%.

Many of the same factors that have lured various industries to the area have also made Austin, TX, a darling of developers for the past decade. Multifamily inventory has expanded by over 40% since 2010, making a significant portion of the market’s local inventory newer than 12 years old. With such a large push to deliver units over the past decade, Austin is now near the top of all markets in new apartment construction. However, it’s vacancy rate is currently at 7.6%, lower than its historical average of 8.3%.

Austin will need more than 100,000 new apartments by 2035 to keep up with demand but only has 30,000 units under construction that will be ready over the next few years.

With roughly 30,000 units currently under construction, some industry experts worry that supply could outpace demand if population growth does not continue at its current pace. But a recent study commissioned by the National Apartment Association and the National Multifamily Housing Council, projects that Austin will need more than 100,000 apartments by 2035 to keep up with demand. And with Austin being rated as the best place to live according to U.S. News and World Report for the past four years thanks to the market’s exceptional job growth, migration, and desirability, there seems to be plenty of room for continued growth of new apartment construction.

Rents are up 20% since the start of the pandemic, with average rent at $1696 per month.

In the past 12 months, Austin has seen the strongest demand for apartments than anytime in the market’s history. With asking rents now up roughly 20% since the start of the pandemic, Austin is arguably the fastest recovering rental market in the country. This price growth has cooled down a bit to 10.7%, consistent with a larger market outlook that peak rent growth could be in the rearview mirror. The average apartment rents for $1696 per month, with units in Austin’s most expensive submarkets fetching an average of $3,300 per month. Like most markets, rent growth has been strongest in the surrounding suburban areas. One contributing factor to the strong demand for apartments may be the meteoric rise of single-family home values (over 40% in the last year). In such a competitive home-buying environment, many Austinites, while enjoying greater job prospects and higher salaries, have found themselves priced out of the housing market. To accommodate growing families and greater work from home flexibility, many potential buyers are choosing to upsize their rentals instead of purchasing single family homes. It therefore follows suit that the bulk of rent growth has been seen in 2 and 3-bedroom units.

Pre-pandemic, the average per unit price was $165,000. Today, multifamily sales average $246,000 per unit.

With increased rental demand comes an increased interest in multifamily commercial real estate investments. More than $8 billion worth of apartments were bought and sold in 2021, doubling the previous record. Pre-pandemic, assets sold for an average of $165,000 per unit with newer complexes selling closer to $190,000 per unit. Today, multifamily sales average $246,000 per unit.

With vigorous population growth, a flourishing high-paying job market, and record-setting apartment demand, the Austin metro area is an exciting prospect for multifamily investment ventures. While developers continue to put new assets on the market and rent price increases slow down, the extraordinary need for apartment housing in the next decade poses a significant opportunity worth exploring.

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