6 real estate trends to know in Central Austin in 2019

The median price of a single-family home hit a record high in May 2019. Keep an eye on these six trends in the residential and commercial real estate world in Central Austin.

The median price of a single-family home hit a record high in May 2019. Keep an eye on these six trends in the residential and commercial real estate world in Central Austin.

The median sale price of a single-family home in Austin was $407,400 in May—up 5.8% year over year, according to the Austin Board of Realtors. However, it is not just the residential housing market that is changing in the city. Here are six Central Austin trends to watch in 2019.

1.Office rent prices on the rise in Austin as new buildings open on East side

According to reports from commercial real estate firm JLL, average rents asked by landlords for office space across the city of Austin are up to $45.22 per square foot in the first quarter of 2019, up from $37.85 per square foot at the same time last year.

Some of that increase has been driven by new offices on the east side. Between the second quarter of 2018 and the first quarter of 2019, more than 280,000 square feet of office space was added to the East Austin market, according to JLL, including major office developments at 901 E. Sixth St. and 1801 E. Sixth St. In the second quarter of 2018, East Austin asking rent was $27.71 per square foot, according to JLL. In the first quarter of 2019, asking rent in the same area was $51.71.

Will Douglas, executive vice president at JLL’s Austin office, said high demand in the downtown and East Austin area—particularly demand driven by the tech industry—makes constructing office space relatively low-risk for developers, and most of the new construction is already leased by the time it is built.

“You’re seeing a lot of space deliver. A majority of it is preleased,” Douglas said. “Very few are going on a speculative basis.”

2. Study: Austin lost 65.17% of low-cost rental units between 2011 and 2017

A report released June 25 from the Joint Center for Housing Studies of Harvard University found that certain markets in the U.S., including Austin, saw significant losses in their stock of affordable apartments.

According to the report, titled “The State of the Nation’s Housing 2019,” demand for low-income units—defined as those with rental rates of less than $800—is outpacing supply across the entire country.

Rents were compared between 2011-17 and adjusted to 2017 dollars using the Consumer Price Index for All Urban Consumers minus the index for shelter—data that measures the price of consumer goods and services.

3. City Council wants to make dramatic changes in new land-development code

Austin has been trying to update its land-development code—the rules governing what can be built in the city and where—since 2012, when the community agreed the existing laws were outdated and complex.

After the city fell short with CodeNEXT, an effort that city leaders voted to kill in summer 2018, City Manager Spencer Cronk took over the process to reshape the code.

According to city staff, Cronk’s team is working toward providing City Council with a first reading of the new code proposal by the fall.

4. Median sale prices for existing homes in Austin metro catching up to new construction

As market forces drive housing prices up locally and continue pushing demand out to the suburban areas of Austin, Vaike O’Grady, Austin regional director for Metrostudy, said many builders are doing what they can to make new housing stock affordable to homebuyers locally.

“Builders have done a pretty good job of trying to meet the need by scaling down the size of the homes they’re offering,” O’Grady said.

According to Metrostudy, the average lot size for new homes sold in the Austin area in 2018 was 12,574 square feet, while the average lot size for existing homes was 25,849 square feet.

Metrostudy data shows this trend is not present in other major Texas metros. The median housing price for new homes is 2.8% higher than existing homes in Austin in 2018, while new construction prices in the San Antonio, Dallas and Houston areas have hovered between 25% and 50% more expensive than existing homes over the last five years.

5. Travis Central Appraisal District expects record number of protests amid soaring price of area homes

Local homeowners are on track to set a new record for property appraisal protests to the Travis Central Appraisal District in 2019, according to TCAD officials.

“Any time we see an appreciation in values, we also see an appreciation in the level of protests,” TCAD Chief Appraiser Marya Crigler told Travis County commissioners April 30.

Between 2017-18, the median home value in the city of Austin increased from $305,510 to $332,366.

TCAD is required to resolve most protests by July 25, but Crigler said the district is likely to miss the deadline because of increased protests.

6. Local hotel Industry supports influx of projects

When travelers visit downtown Austin, they will notice construction projects that will soon become six new hotels.

According to the Hotel Horizons report from commercial real estate firm CBRE, there are 2,181 hotel rooms in the pipeline in Austin’s Central Business District—including rooms under construction and in the planning stage. In the city as a whole, Jeff Binford, managing director of the central division for CBRE Hotels, said Austin has 14,115 rooms in the pipeline.

If all those hotels in the pipeline are built, the hotel room supply would grow by 20.17% in the 2.9-square mile CBD, and the overall market would expand by 34.9% percent, but Binford cautioned that not every hotel in the pipeline is a sure bet to be constructed.

For now, however, hotel growth remains strong. By the end of 2019, CBRE projects a 2.8% increase in revenue per available room—a metric the industry uses to measure a hotel’s financial strength.

“We’re not seeing much of a decline in occupancy, which tells me all these rooms that have been added are readily absorbed,” Binford said.