Northwest Austin’s apartment rental market might be finally showing signs of stabilization as occupancy rates and rental rates have begun trending downward.
For the last two years, the city of Austin has seen an increase in the number of new apartment units coming online, totaling about 11,000 per year in 2016 and 2017, but construction is showing no signs of slowing down, said Bruce McClenny, president of Houston-based ApartmentData.com, a site that tracks occupancy and rates of apartments in major Texas and U.S. cities.
“That kind of supply, even in the face of very good job growth and a very good economy, is a little too much,” he said.
ApartmentData.com staffers follow up with apartment complexes each month to obtain occupancy and rental rates. The company is able to provide data based on the ZIP code.
Since June 2017, rental rates in Northwest Austin—which includes the ZIP codes of 78726, 78727, 78729, 78750, 78758 and 78759—have begun trending downward. McClenny did caution that apartment leasing is seasonal, and the winter months are typically slower.
“Is this the traditional pause, maybe a little bit more of a pause, or will it pick back up when leasing season begins in March?” he said.
Rent prices typically increase 3 percent per year, and Northwest Austin has seen an average increase of 5.73 percent per year since 2012, according to ApartmentData.com.
McClenney said because occupancy is also declining and supply is increasing, many apartment complex operators are offering more concessions, such as free rent for one or two months.
“2018 is likely to be another year of working through that [new] supply [of units],” McClenny said. “I would expect rents to be flat and trending down a little bit more.”
Studios, or efficiencies, have seen the greatest increase in price, averaging 14.84 percent growth per year, according to ApartmentData.com. One- and two-bedroom units have seen annual increases of about 4-5 percent per year.
Apartment complex operators typically want to stay around 94 to 95 percent occupied, but Northwest Austin has seen occupancy trending downward since peaking at 94.9 percent in June 2013.
“It all of a sudden becomes more of a renters market,” McClenny said.
New construction growth also typically increases by 3 percent per year, McClenny said. Northwest Austin has seen more than 6,000 new units, or a 16.5 percent increase, since 2012. The last couple of years represented growth of around 1.7 percent per year in Northwest Austin, which is higher than the years prior to 2012. Much of the new construction in Northwest Austin occurred in the 1990s and early 2000s, according to ApartmentData.com.
Much of the new apartment construction in Northwest Austin has been near The Domain. Community Impact Newspaper tracked 11 apartment complexes either under construction or in the permitting stage in Northwest Austin. Six complexes are near The Domain, and only two are west of MoPac. This construction means more than 2,800 units are coming soon in the next couple of years in Northwest Austin.
“These properties that are coming on are really amazing products,” McClenny said. “In The Domain, those properties going in are having a live, work, play [environment]. That is an exciting thing to me to be offering renters today. That is a fabulous product and environment.”
Editor's note: This post was updated to correct the headline of the Rental rate per month chart.