The Wildhorn Team is going to be jumping into the numbers in today’s post. One of the beauties of focusing on a select few markets is that we can target our research efforts and truly see if what’s being reported is in line with how we understand what’s going on from a micro market level. A report that we eagerly await for every quarter’s end is Yardi’s Multifamily analysis for Austin, San Antonio and Houston. The Austin report came out a few weeks back and while I highly recommend you to dig in and read the whole thing, I wanted to provide some of the most interesting highlights and how they relate to our business.
Austin Rent Trends
Rent, arguably the most important metric of any multifamily business, is always the first thing we go straight to.
- The last year has seen impressive growth across Austin, with average rent gains growing over 5%. Austin is outpacing the rest of the US and these gains position Austin as the 4th fastest growing metro in the nation. We’ve certainly see this true (and more) on our Austin assets.
- Average rent across Austin sits at $1,416. This sits in between the average rent of “Lifestyle Renters” (renters by choice) at $1,554 and the average rent of “Renters-by-Necessity” at $1,140. While we always need to take submarket factors into account, this is very much in line (even a bit higher) than the average rents we’re seeing across The Reserve and The Baxter.
- Per Yardi analysts this strong growth is expected to maintain: “Rents have steadily increased, while significant deliveries have done little to put a dent in the strong demand for apartments. As a result, the average rent—at $1,416 as of August—accounted for 21% of the area median income. “ With home prices in Austin increasing at a dramatically faster rate (the Median home price is $312,720 a 59% increase in the last 10 year) the need to rent will maintain
Austin Population Growth Trends (Demand)
Rent price is a factor of supply and demand. So how did the demand side of things change in the last year? In short the answer is fantastic
- Austin remains the fastest growing major metropolitan area in the country. Population growth in 2019 is expected to pass the 50k mark for the 9th year in a row ! That’s about 150 new Austin transplants every single day, with many of them looking for an apartment to move into-at least for the first year while they find their bearings.
- Why are people moving here? Great jobs is the biggest culprit. Employment Growth remained well above national average with 22,800 jobs coming online in the last year many in the office using sectors of industry
Austin Multifamily Unit Growth Trends (Supply)
On the other side of things Austin’s supply of new rental units has done it’s best to keep up with strong population growth, but hasn’t yet satisfied the need.
- So far in 2019 5,800 new units have been delivered, almost all targeting “Lifestyle Renters” as Class A luxury buildings. There are another 13,000 units expected to be delivered by year’s end. We expect this to help but not come close to satisfying the demand from all the newly relocated Austinites
- We’re seeing this in the secondary markets also! The buying and selling of existing assets is tight. $1.7B in multifamily assets have been traded so far this year. This represents only 41 properties however, showing that the average price per unit has increased 17% YoY. The average purchase price per unit so far this year is $157,313. This makes the Wildhorn Team feel pretty great about our acquisition of The Baxter in September at well below that rate.
So what are our big takeaways? Demand remains strong (and is getting stronger), Supply remains stunted and it is a GREAT time to hold Austin assets in your portfolio.
The only downside to this report? Clearly everyone else reads the data too-and deals in Austin have low cap rates and lots of competition. While new deals in Austin may come with a slightly lower return, the data suggests the risk profile is pretty low with market fundamentals like these. We’re glad we’re able to call Austin home, And leverage our strong local presence and team to make deals work.
Andrew Campbell is a native Austinite and Managing Partner at Wildhorn. He is a real estate entrepreneur who first broke into the business in 2008 as a passive investor. In 2010 he transitioned into active investing and management of a personal portfolio that grew to 76 units across Austin and San Antonio. He earned his stripes building and managing his personal portfolio before founding Wildhorn Capital and focusing on larger multifamily buildings. At Wildhorn, he is focused on Acquisitions and maintaining Investor Relations, utilizing his marketing and communications background to build long-term relationships.
