Austin: Demand tailwinds emerge for downtown and university-adjacent rentals

With entertainment districts opening up and students searching for nearby, residences there is a renewed demand for the Austin metro area multifamily market, according to Marcus & Millichap. Vacancy fell 400 basis points year-over-year in the Downtown-University submarket to 3.9 percent in June, fueling a nearly 10 percent annual rent surge.

Austin’s inventory will expand by 4.9 percent in 2021, the fastest growth rate among major U.S. markets. This could weigh on rent in certain areas if demand fails to keep pace and operators utilize concessions to lure tenants. Challenges will be localized, though, within a few submarkets. Annual stock enlargements of 8 percent-plus are expected in East Austin, Round Rock-Georgetown and Riverside. Supply growth in East Austin may even exceed 18 percent this year. Nevertheless, the workforce of Tesla highlights improved demand drivers here, and new employers may be drawn, supporting household creation to help absorb the new supply.