Capital value growth rates similar to Toronto, Vancouver and some 2nd tier cities in China.
Austin has exploded in the past seven years, driven by a potent combination of high population growth and low new development volume. The tech sector has boomed, attracting new high and low-income earners (about 150 net migration per day, and counting...), which has triggered high demand for real estate. On the flip side, new real estate development has been relatively restricted due to low-density zoning, low height restrictions and high environmental boundaries (not withstanding the above photo!).
With the warm Texas weather and 0% tax rate, people are still coming and this shows no signs of slowing down. Since 2012, single family home values have increased +100-140% in some neighborhoods, and commercial properties have recorded similar gains. Simply put, Austin is one of the best real estate markets in the country for income and capital value growth if you can find the right property.
The bad news is good real estate deals are hard to find. Most properties are bid up substantially, with income barely covering a loan payment (if at all!). And since occupancy has been so high, landlords have deferred maintenance, and thus in most cases assets need work. Pricing can get out of hand; competition for properties is extremely high, and even the smaller assets in high demand locations sell for 4-4.5% yields. Most accretive deals are off market and incredibly difficult to find.
But we are home to the best restaurants in Texas, the best BBQ (maybe), the best music scene, and a population of some of the most open minded and tech-savvy citizens in the nation. All at the doorstep of Hill Country. We've added 8,600 hotel rooms in the past several years - plenty of room for SXSW and the ALC Music Festival. Come visit!
Fun Austin Facts - The city's slogan is "Keep Austin Weird"...it is the fastest-growing, youngest, safest big city in the U.S (average age is 28) and has one of the the highest percentage of millennials of any US city....Austin has the largest urban bat population on the continent!?
Residential hotbed - Apartment rents have grown 5-8% per year since 2012 and while moderating, rent growth is expected to remain elevated above the US average and Austin remains 96% occupied. We are a top 15 exposure for multi-family REITs. There is a chronic lack of affordable housing anywhere near the CBD and transit routes.
"Silicon Hills" - Tech jobs are creating booming office demand. In 2016 Austin had the highest office net absorption in the country as a % of inventory, 1.6% vs. 0.2% national average, according to JLL. Whole Foods is headquartered here, and Amazon, Facebook, Google and AthenaHealth have all leased large blocks of space in the past 24 months.
The Domain - One of the largest mixed-use developments in the country, operated by Simon and Endeavor Real Estate, continues to grow at a rapid pace. Class A office rents here are now what they were downtown three years ago (low $30s/SF). Other prominent redevelopments are the Seaholm Power Plant, Dell Medical Center and Mueller Airport, driving growth and attracting more national interest.
Fundamentals - Over 150 people move to Austin per day on a net basis, driven by good jobs, warm weather, and corporate relocations. Analysts expect 8-10k household formations per year for the next several years. Not bad for a city the size of Madison!
We will be posting the best tidbits and charts in the months ahead. Please bookmark or sign up for our mailing list so you are updated with the latest posts.
