CoStar Insights

Austin Apartment Market: A Model For Other Metros?

by Sam Tenenbaum | Dec 15, 2016
Austin Market

Like many metros across the country, Austin experienced a large influx of luxury apartments in its downtown—in this case, the Downtown/University Submarket—over the past few years. Here’s a look at historical deliveries in units according to CoStar Market Analytics:


Units Delivered














Unlike other metros, though, Austin’s downtown apartment starts have slowed considerably. As of right now, fewer than 300 units are scheduled to deliver in 2017. After that, the pipeline dries up, and justifiably so. Here’s a look at vacancy by submarket cross-referenced with percentage of inventory underway:

A higher-than-average vacancy might be attributed to new deliveries not yet stabilized, but let’s look at demographics:

As you can see, new apartments in Downtown/University require an income of nearly $160,000, while the median income for the submarket hovers around $40,000—a large disparity, even with roommates. Twelve month rent growth clocks in at (-3%), and only about 25% of the population in Downtown/University earns six figure salaries. The data suggests developers think the wellspring of high-end renters has dried up. Those that are still building are building condos, such as the 375 unit Independent, which will be the tallest residential building west of the Mississippi, or the 154 unit Fifth & West.

Perhaps more interesting, let’s look at some of the suburban submarkets. For the past few months at CoStar, we’ve been suggesting that demand for new housing abounds, but in the suburbs as opposed to downtown areas. Far North, for example, currently has an occupancy of 95%, despite having nine new projects for a total of 1,344 units deliver over the past two years. Note that all projects which delivered in 2014 and 2015 have stabilized.  

With another 1,000 units underway right now, will there be demand enough? Our answer: most likely. Unlike Downtown/University, developers here aim for renters with incomes within a stone’s throw of the submarkets median income.

Also with occupancies over 95%, and with only 3% of current inventory underway, Northwest appears to be a submarket that could use more apartments. Apple recently built a new campus there, and plans to add 3,600 jobs over the next few years.

Finally, the new projects currently underway in Pflugerville should be met with strong demand. While occupancy trails Far North and Northwest at around 94%, the majority of the vacancy lies in two communities which delivered this year: NXNE and The Mansions at Stone Hill 2. Adjacent to Northwest, developers in Pflugerville no doubt intend to attract Apple employees.

In all, there are a total of 53 projects for a total of 10,506 units underway in the Austin market outside of Downtown/University. That compares to four projects for a total 620 units in Downtown/University currently under construction—a hugely smaller proportion of core construction than other metros we’ve highlighted, such as LA and Washington DC.

When CoStar’s analysts spoke at length about apartment demand in the suburbs at the CoStar Portfolio Strategy Client Conference in November, some of the audience pushed back, suggesting that projects in the suburbs “wouldn’t pencil out.” But developers in Austin seem to be betting big on the burbs, where it seems renters both want to live, and have the incomes to afford luxury apartments. Austin should make for an interesting case over the next year or so, and could serve as a model for other metros moving forward.


This post may include "forward-looking statements" including, without limitation, statements regarding CoStar's expectations or beliefs, which are based on our current beliefs and various assumptions concerning future events and circumstances that are subject to change.  Actual results and events may ultimately be materially different.  All forward-looking statements are based on information available on the date published, and we assume no obligation to update these statements.  You should not construe this post as investment, tax, accounting or legal advice.