September 2007 Texas Apartment Market Overview
OCCUPANCY AVG RENT
AUG 2005 AUG 2007 %CHANGE AUG 2005 AUG 2007 %CHANGE
AUSTIN 92.0% 92.7% 0.8% $719 $771 7.2%
DALLAS 89.2% 91.1% 2.1% $722 $746 3.3%
FT WORTH 87.7% 89.3% 1.8% $640 $659 3.0%
HOUSTON 87.9% 90.7% 3.2% $676 $723 7.0%
SAN ANTONIO 90.8% 91.2% 0.4% $652 $674 3.4%
TEXAS HIGHLIGHTS:
In the aftermath of last year's hurricane evacuee housing crisis, the five major apartment markets in Texas have become healthier and stronger.
Over the last year, the largest gain in apartment occupancy among the five major metros in Texas was a 3.2% improvement which occurred in the Houston metro area. Looking back to just before last year's hurricane crisis, the area's occupancy was just 87.9%. At one point, during September 2005, the area's occupancy surged to 96% in response to the need for emergency housing. After adjusting to the subsequent changes in the market, occupancy for the area was 90.7% at the close of this August.
The biggest news among Texas metros is that overall average quoted rental rates have increased over the last year in all five major apartment markets.
The largest gain in the average quoted rent among Texas' major markets was a 7.2% jump in Austin. In August 2005, the average apartment in the Capital metro had an average asking rent of $719 per unit per month. Twelve months later, at the close of August 2006, that amount had increased to an average of $771.
Ranking in second place, Houston had a 7% gain in average rent over the past year. The area's average rent went from $676 up to $723 at the close of this August.
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Rents rise but apartment units don't
Job and population growth along with high building costs behind price jumps.
June 24, 2006
Apartment-finder Louie D. Divino called to check on the rent for a one-bedroom apartment at a complex Friday morning in South Austin. He was quoted $709 a month. But when Divino and his customer, Stephen Aarons, arrived at Falcon Ridge Apartments 15 minutes later, the price had jumped to $729.
The increase is indicative of the continued upswing in Austin's apartment market, said Divino."Across the board, that's what's happening," Divino said. "We've moved into an aggressive market where the landlords have the upper hand."
Apartment rents have been on the rise for more than a year, said Charles Heimsath, president of Capitol Market Research, an Austin-based real estate consulting firm. Healthy job and population growth, coupled with developers' restraint in starting new apartment projects, are continuing to drive up rents and occupancies.
As of June, the average rent for a two-bedroom apartment rose to $861, up $50 from mid-2005. Occupancy rates are now 95 percent, a four-year high, according to Capitol Market Research, which tracks the apartment market. "We are entering a prolonged period of rent increases, at least for the next couple of years," Heimsath said.
At one South Austin apartment complex, starting rents for a two-bedroom soared to $960 a month from $720 about three months before, Divino said. Heimsath said high construction costs are curtailing the supply of new units. With a growing demand, apartment communities can raise rents and still be competitive. About 1,110 new units have been added in Central Texas through the first six months of this year. In 2005, 1,819 new units were added.
"That is an extremely low number," said Robin Davis, manager of Austin Investor Interests LLC, which compiles statistics on Central Texas apartment rents and occupancy rates. "We have not added many units in the last two or three years."
In 2001, nearly 10,000 new apartment units were added to the market, leading to a dip in rental prices that lasted about three years. Now, rental rates are climbing toward a high not seen since 2000, when the average rent for a two-bedroom apartment that year was more than $900, Heimsath said. "Rents are still quite low by historical standards," he added.
Renters took the driver's seat during the tech bust, as tens of thousands of jobs vanished, population growth flattened and the region had a glut of apartments. Occupancy plunged to 88 percent in December 2002; by mid-2004, rents hit bottom, averaging $784 a month. But as the economy has rebounded, so too has the apartment market. Two years ago, it was common for apartment communities to offer one or two months free with a lease. Now, most apartments aren't offering signing deals, except for outlying areas such as Round Rock, Heimsath said.
People are moving to Austin from California, the East Coast and overseas, Divino said. A portion of these transplants rent before buying, adding to the increase in demand for apartments. "We have not seen this type of migration into Austin since the high peak of 2000," Divino said. "The buzz you heard in the late '90s that Austin's the place to be, that drumbeat is starting to magnify again."
The rental market also is being fueled by rising mortgage rates, which are forcing some existing homeowners — who may not be able to keep with increasing payments under adjustable rate mortgages — to become renters, and pricing some prospective buyers out of the housing market. "As interest rates have gone up, it's gotten tougher for people to buy," Divino said.
He predicts rents will continue to rise through this year by 3 percent to 5 percent at a minimum.
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Renting in Central Texas
Rents are for 2-bedroom, 2-bath apartments. Occupancy rates are for all apartments.
Date Average rent Occupancy rate
June 2000 $913 98%
June 2001 $951 93%
June 2002 $868 90%
June 2003 $812 88%
June 2004 $784 89%
June 2005 $811 93%
June 2006 $861 95%
Source: Capitol Market Research
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Central Texas predictions
August 15, 2006
Mark Dotzour, chief economist and director of research at the Texas A&M Real Estate Center, predicted the following for Central Texas in 2007.
APARTMENT MARKET
New space added: 5,100 units
Occupancy rate: 94 percent, down 1%
Avg. rent: 92 cents per square foot, up 5 cents
AUSTIN APARTMENT MARKET UPDATE
Not many bargains for renters this year
Austin apartment rents rising
A year ago, Austin apartments were offering cruises and two months' free rent to lure tenants. Now the Austin', Round Rock and Cedar Park's continued job growth, together with a sharp decline in the number of new apartments units being built, has boosted occupancies to their highest level in more than three years.
Austin metro area rental rates are expected to increase about 3 1/2 percent this year, with rentsaveraging $748 per month by the end of the year, according to M/PF, which tracks the apartment market in 58 cities nationwide.
"Rents are going up, and specials are going down," said Mike Stotts, owner of HomePlace Apartment Search, an Austin-based apartment locator service. "The market is definitely on the upswing."
About 60% of the apartment communities surveyed are offering incentives, the specials offered aren't nearly as great. Apartment landlords' positions have strengthened as occupancy levels have increased.
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Cedar Park's first major retail center will open this year
Mixed-use project is expected to rival Lakeline Mall in size.
Where cattle once roamed on 90 acres, the $125 million 1890 Ranch center will offer 800,000 square feet of stores, 100,000 square feet of offices, 50,000 square feet of restaurants and a 12-screen movie theate
Movies, shopping and dining are headed to Cedar Park, as Austin-based Endeavor Real Estate Group prepares to break ground in October on the town's first major regional retail center, which when completed, will rival Lakeline Mall in size.
A 12-screen Cinemark Inc. theater and other tenants including a SuperTarget, OfficeMax and Petsmart, will anchor the $125 million mixed-use project, marking the first significant push of Central Texas' retail boundary north of Lakeline Mall. The shopping center, including the cinema, are expected to open in October 2007 at the northeast corner of RM 1431 and the new U.S. 183-A tollway.
The shopping center will include a food court and large plaza designed to serve as a gathering spot for the town, a growing bedroom community northwest of Austin.
Endeavor is calling the project 1890 Ranch, a tribute to the original name of the site, which once was a cattle ranch. The finished project will have 900,000 square feet, nearly as much as the 1.2-million-square-foot Lakeline Mall about five miles south on U.S. 183.
The project will be developed in two phases on 90 acres. The first phase will have 530,000 square feet of retail, plus 100,000 square feet of office and medical office space. The second, which Endeavor expects to start in the first quarter of 2007, will have 270,000 square feet of retail.
The project will be an important addition to Cedar Park's economy, allowing it to capture sales tax dollars that otherwise would go elsewhere, said Charlie Northington, a principal with Endeavor who is overseeing the project.
The project is expected to generate several million dollars a year in sales taxes for the city, said Phil Brewer, Cedar Park's director of economic development.
The nearby hospital, scheduled to open in March 2008, "will add a daytime population that wouldn't be there otherwise," Ellis said.
Ellis said the site has "all the makings of a strong retail location."
The extension of Parmer Lane and construction of the U.S. 183-A toll road "create a brand new regional intersection for Cedar Park," Ellis said.
About 82,000 people live within five miles of Endeavor's planned shopping center, Ellis said. The average annual income of those households is $80,900, more than in the heavily retailed Arboretum area in Northwest Austin, where many national chains have stores that are among their highest-grossing.
Ellis added that the growth in Cedar Park "is going to be substantial in the near future with new residential," which in turn will drive demand for retail.
Endeavor is developing several retail and mixed-use projects throughout Central Texas including the upscale Domain center that Endeavor and Simon Property Group are building near the Arboretum, and Southpark Meadows, a 425-acre retail and residential development at Interstate 35 and Slaughter Lane.
Cinemark plans to open a 14-screen theater at Southpark Meadows in March. That, along with the Ranch 1890 cinema, will be two of four theaters with 54 total screens that the company plans to open in Central Texas in the next year, Cinemark President Alan Stock said.
Other projects on tap for far Northwest Austin include Lakeline Station, a mixed-use development planned by Pacific Summit Partners for 335 acres near U.S. 183 and RM 620. The $400 million project is slated to include up to 3,000 homes, plus 150,000 square feet of neighborhood retail and would take up to eight years to complete.
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