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Austin Approaches Peak Multifamily Completions

Austin, Texas, is experiencing its largest influx of new apartment units in its history.

Forecasts show that completions for the trailing 12-month period will reach 27,300 units by the end of the second quarter, the nation’s second-highest total. But Austin is on a path to see completions slow in the coming year as higher borrowing costs impede new groundbreakings.

The suburbs represent two-thirds of developed units over the past year, equivalent to 18,700 units. Some of the most active areas include Georgetown, Round Rock, Leander and Pflugerville. Southeast Austin also added 3,000 units during the same period. This region has emerged as a high-growth area within Austin, expanding its inventory by over 30% in the past year.

The suburbs have proven to be an appealing location for renters. Factors such as lower rents, proximity to employment centers, desirable school districts and more space continue to drive renter demand. This trend has fueled outsized development activity in suburban areas over the past decade.

Urban areas have also seen a sharp inventory expansion. Completions for the trailing 12 months will total 8,600 units, with most growth attributed to neighborhoods such as North Austin, East Austin and Riverside.

However, forecasts indicate supply growth will begin to slow beginning in the second half of 2024. Construction starts year to date are down 87% compared to the first half of 2023.

Despite completions tapering, they are anticipated to remain elevated over the next 18 months. About 11,400 units will likely come to market in 2025, above the three-year pre-pandemic average of 9,300 units. In 2026, an anticipated 10,000 units will be completed, aligning more closely with the historical average.

The surge in development has ultimately led to an excess of units and increased the vacancy rate by over 4 percentage points over the past year. The suburban vacancy rate is highest at 15.6%, slightly above the urban vacancy rate of 14.4%.

As supply growth slows, the vacancy rate is expected to begin drawing down, driven by robust renter demand. Strong population growth and job growth will remain important factors in shaping this trend.

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