Six months after opening Abacus Southside, Property Manager Isaac San Miguel is optimistic about the future of the apartment complex.
Construction ended in November and the William Cannon Drive complex is already half full, he said.
He credits the high level of interest in Abacus to delivering the right product in the right place. Why spend $2,100 for a two-bedroom apartment downtown, he reasons, when you can get a similar place a few miles away for $1,500 to $1,600?
"I think we fill a niche by offering a luxury product in a good part of town," he said. "We are very close to [downtown] but [can rent at] less of a cost because our land cost was a lot less expensive."
Abacus is part of a trend of new and proposed multifamily housing developments in Southwest Austin. Real estate professionals count at least nine major projects actively under construction including Jefferson South Congress' 352 units, Landmark Double Creek Phase III's 276 units and Legacy at Southpark's 250 units with more on the horizon.
Some of this development is a bounce back from the 2008-2011 lull in the multifamily housing market, CBRE Inc. sales associate Michael Wardlaw said. The rest is all new, spurred on by low-interest rate loans and the promise of long-term returns.
The demand for housing is so strong citywide that tenants are securing leases on the new supply as it soon as it comes onto the market, said Charles Heimsath, president of Capitol Market Research.
"The question that often comes up is, 'Are the number of new units too many for the market to absorb? Are we doing too much?' and the answer is no," he said. "We seem to be meeting the demand, and with very few exceptions, not exceeding it."
Southwest Austin's apartment occupancy rate remains at around 95 percent, city of Austin demographer Ryan Robinson said.
Supply and demand
Southwest Austin has some of the lowest housing density in the city because of regulations limiting development over groundwater resources, Wardlaw said.
"The impervious cover rules are generally closer to 20 percent meaning you can only build on 20 percent of your property whereas they are generally around 40 percent elsewhere in the city," he said.
There is limited residential development potential along Southwest Parkway, thereby increasing the demand for properties there, said Brian Talley, real estate broker and owner of Regent Property Group LLC.
The Southwest Parkway area has been attractive because of its private schools and access to downtown, he said.
Proximity to highly ranked public schools in the Austin and Dripping Springs ISDs also draw tenants to the area.
"I am very bullish on the residential real estate market for west [and] Southwest Austin as the most affordable housing close to downtown, Talley said.
Another way to explain the area's desirability is to compare it to other cities, he said.
"Compared to a big city, if you live right near downtown—I can get to downtown in 15 minutes without any traffic that is highly desirable," he said. "In 15 to 20 years, you are going to see those [Southwest Austin] areas continue to increase in value."
Most of the new developments are high-end apartments and condominiums, Wardlaw said. Developers are including granite countertops, stainless steel appliances as well as resort-style pools to entice residents.
Impact Developers LLC, the group behind Skybridge Lofts on South Congress Avenue, is working on Trillium Terrace and the 46-townhome-unit Cooper Villas in Southwest Austin, said Melissa Brown, Impact director of sales and marketing.
"The reason we chose this area is because it's a developing area," she said. "You can find these [properties that are] golden nuggets, these little pockets where you are able to build a good product and deliver it to a missed market."
Brown said there are few options between expensive and low-end housing.
Impact's customers want to own their homes but do not want to move to the suburbs or have the responsibility of owning a yard, Brown said.
"Our population is growing every day," she said. "It's about [building] infill housing, giving more options to the community and utilizing the space that is around."
Future growth
Proposed future projects include Stratus Properties Inc.'s 1,860-unit Tecoma project, LedgeStones 273-unit project, GroundFloor Developments 200-unit St. Elmo's Market and Loft project and Foundation Communities' 123-unit Garden Terrace project.
Talley said Southwest Austin is not yet at the point where builders are tearing down existing properties to redevelop.
Builders and remodelers are having difficulty finding great deals on the land they buy, but they are still earning a premium on what they bring to market, he said.
Meanwhile, investors who purchase aging complexes are attempting to compete with the new complexes.
"[Investors] are really trying to renovate and revitalize the property to more luxurious standards [to match] what the new construction is delivering," Wardlaw said.
Robinson said 3,000 new housing units were proposed citywide in the third quarter of 2014 alone.
"Not all of them will make it to market. A lot of them will die on the vine. But it makes the point that we have not seen the top of this market," he said.
Southwest Austin has some of the lowest housing density in the city because of regulations limiting development over groundwater resources, Wardlaw said.
"The impervious cover rules are generally closer to 20 percent meaning you can only build on 20 percent of your property whereas they are generally around 40 percent elsewhere in the city," he said.
There is limited residential development potential along Southwest Parkway, thereby increasing the demand for properties there, said Brian Talley, real estate broker and owner of Regent Property Group LLC.
The Southwest Parkway area has been attractive because of its private schools and access to downtown, he said.
Proximity to highly ranked public schools in the Austin and Dripping Springs ISDs also draw tenants to the area.
"I am very bullish on the residential real estate market for west [and] Southwest Austin as the most affordable housing close to downtown, Talley said.
Another way to explain the area's desirability is to compare it to other cities, he said.
"Compared to a big city, if you live right near downtown—I can get to downtown in 15 minutes without any traffic that is highly desirable," he said. "In 15 to 20 years, you are going to see those [Southwest Austin] areas continue to increase in value."
Most of the new developments are high-end apartments and condominiums, Wardlaw said. Developers are including granite countertops, stainless steel appliances as well as resort-style pools to entice residents.
Impact Developers LLC, the group behind Skybridge Lofts on South Congress Avenue, is working on Trillium Terrace and the 46-townhome-unit Cooper Villas in Southwest Austin, said Melissa Brown, Impact director of sales and marketing.
"The reason we chose this area is because it's a developing area," she said. "You can find these [properties that are] golden nuggets, these little pockets where you are able to build a good product and deliver it to a missed market."
Brown said there are few options between expensive and low-end housing.
Impact's customers want to own their homes but do not want to move to the suburbs or have the responsibility of owning a yard, Brown said.
"Our population is growing every day," she said. "It's about [building] infill housing, giving more options to the community and utilizing the space that is around."
Future growth
Proposed future projects include Stratus Properties Inc.'s 1,860-unit Tecoma project, LedgeStones 273-unit project, GroundFloor Developments 200-unit St. Elmo's Market and Loft project and Foundation Communities' 123-unit Garden Terrace project.
Talley said Southwest Austin is not yet at the point where builders are tearing down existing properties to redevelop.
Builders and remodelers are having difficulty finding great deals on the land they buy, but they are still earning a premium on what they bring to market, he said.
Meanwhile, investors who purchase aging complexes are attempting to compete with the new complexes.
"[Investors] are really trying to renovate and revitalize the property to more luxurious standards [to match] what the new construction is delivering," Wardlaw said.
Robinson said 3,000 new housing units were proposed citywide in the third quarter of 2014 alone.
"Not all of them will make it to market. A lot of them will die on the vine. But it makes the point that we have not seen the top of this market," he said.
