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Governor Abbott’s Tuesday Executive Order clears the way for contractors in Austin to get back on the job. Mayor Adler agreed late Thursday after initially banning construction in Austin on March 24th.
The previous ban on construction by Austin was in contrast to other metro areas in the state where construction work was deemed essential. The mayor’s back to work guidelines include “numerous employer requirements for all construction work. Those include social distancing guidelines and healthy work practice requirements, including pre-screening the “general health” of workers, limiting crew sizes and rotating shifts for sites with more than 10 workers on the job a time.”
ECONOMY – Austin job growth has continued to outpace national averages and our unemployment rate is one of the lowest in the country at 2.5% Major tech expansion included companies such as Facebook, Google, Amazon and Indeed. The growth trend is likely to continue as more companies look to expand their operations in Austin.
CONSTRUCTION – Over 2.1 million square feet of new office space was delivered during 2019. Another 6.1 million square feet is still under construction. Office development is at an all time high. Class A downtown lease space remains in high demand with vacancies below 6 % and pre-leasing of new construction at 70%+.
RENTAL RATES – The overall asking rate increased to $39.21 / square foot up $2.95 per square foot compared to the last quarter of 2018. Class A space is at $44.14/ square foot a year over year increase of 7.4%. As demand continues and more companies move to Austin, asking rates are forecasted to maintain the rental rate increases.
In December the Austin Board of Realtors released their monthly report and home prices and sales have hit another historic high. Based upon November sales numbers it appears that 2019 sales will surpass the total number of homes sold last year. Last month sales rose 4.5% to 670 sales totaling 30,561 sales. This is just 300 less than 2018’s total sales volume. By looking at trends it appears that Austin will surpass 300 sales in December and thus exceed 2018 numbers.
Austin’s November median home price for a single family home rose 10.6% year over year to $405,000 an all time high for November. The Austin/Round Rock metro rose by a modest 1.7% increase to $305,000 while Travis County rose .6% to $355,000.
Land in Austin continues to be severely constrained and so home builders are moving outward in search of lower land costs and development opportunities according to Vaike O’Grady, Austin regional director for Metrostudy.
In November Williamson County home sales increased 13.2% while Hays County increased 17.8%.
“Limited and pricey housing within the urban core is driving residents to relocate to the suburbs”, according to Kevin P Scanlan, Austin Board of Realtor’s 2019 president.
Rent decreased and vacancy increased in the third quarter of 2019 Austin office market with a total of 1,250,402 square feet of negative net absorption registering in the Class A market. Class B had 180,000 square feet of positive net absorption while Class C properties had 46,670 square feet of negative net absorption. This resulted in citywide vacancy of 11.5% up from 9.3% in Q2 of 2019. Class A CBD vacancy was up from 5.7 to 5.8%.
There is currently 5,000,000 + square feet of office space
under construction with about 45% pre leased.
The fourth quarter of 2019 is forecasted to deliver over one million square
feet of office space with 800,000+ pre leased.
The average rental rate decreased over the quarter compared
to Q2 of 2019 from $35.72/sf to $35.38/sf.
Rent for Class A lease space dropped by 6.2% to $49.47/sf from $52.78 in
Q2 of 2019.
Home sales and median sales prices hit an all time high for
the month of September according to a recent Austin Board of Realtors report. In the Austin metro area, sales increased by
13.4% with 2,654 homes sold resulting in the busiest September ever. The median sales price for September was
$320,000, a 7% year over year increase and the highest September median sales
price ever. Pending sales were up as
well which suggests October will be another strong month.
Looking at the Austin market alone, 798 houses were sold which is a 15% increase over September 2018. The median sales price totaled $406,000, an all time high for September. Housing inventory decreased by ½ month year over year to leave it at 18 months of inventory currently. Home prices continue to rise in the area because of these strong sales and the limited amount of inventory.
Retail development is booming in Austin metro area with 1.28 million square feet of new space under construction in the area. 890,000 of the total is located outside the city in the suburbs. Occupancy remains steady at 96% although the average asking rate has dropped to $20.50/square foot.
Location: One block east of Mopac at NE corner of Steck Avenue and Shoal Creek.
Description: Traditional office condominium design with atrium elevator lobby, abundant natural light and updated modern restrooms serving each floor. Suite 200 includes 9 offices, an open work area, break room, IT closet, and conference room. 4 parking spaces in first floor parking garage and 11 in parking lot.
PricewaterhouseCoopers and Urban Land Institute have released their annual real estate investment outlook and for 2020 Austin is projected as the tops in the U.S. This is an improvement over 2019’s #6 finish. In 2018 Austin ranked #2 and was number 1 in 2017.
Details of the reasons for the ranking include:
Apple Computers plan for a $1 billion campus
The planned re-development of the Austin American Statesman site on South Congress
A major expansion of the Airport
Austin’s population growth including annual growth of about 45,000 people a year or 145 persons a day
The number of businesses with one million dollar + in revenue is growing faster than any other major metro in the U.S.
The biggest challenges according to the report are traffic and the rising cost of housing.
Austin area home sales set a record for number of sales in July with an 11.7% year over year increase to 3,439 homes sold according to the Austin Board of Realtors. Sales in Austin remain flat due to limited inventory.
The median price for homes rose by 3.2% to $325,000
Sales dollar volume increased 15.4% year over year
New lisings in the greater Austin area increased by 4%
Monthly housing inventory decreased year over year by .2 months
Condominium and townhome sales fell from 2018-2019 in Texas according to a report released by Texas REALTORS. Condo sales are down 8% and townhome sales are down 3% in the last year.
Tray Bates, chairman of Texas REALTORS notes that the lower price compared to single family homes, the decreased maintenance and the typical closer proximity to work, schools and city life keep these housing types as a popular choice among buyers.
“The statistics from the Texas Condominium Sales Report prove that all types of housing in our Texas real estate market is in demand, especially more affordable options for first time homebuyers,” said Jim Gaines, Ph.D., chief economist with the Real Estate Center at Texas A&M.
Prices increased moderately for condominiums and townhome sales prices went down slightly. The median sales price for condominiums currently sits at $189,000 and townhomes is at $226,000.
Austin MSA outpaces City of Austin Single Family Sales
During the first half of 2019 sales experienced strong growth in the Austin MSA but declined in the City of Austin. ABOR President Kevin Scanlan explained that the limited housing inventory (less than 2 months supply) in June and the increase in home prices combined to reduce sales in the City of Austin. This limited inventory and increase in prices has pushed more and more buyers to the suburbs.
Austin / Round Rock MSA in first half of 2019 Single family home sales increased 4.3% year over year Median Home price increased 1% to $315,000 New listings increased by 1% Active listings increased 4.8% Pending sales increased by 7.9% Sales volume increased 6% year over year
Austin / Round Rock MSA in June of 2019 Single family home sales increased .5% year over year Median home prices rose 3% Housing inventory decreased by .2 months to 2.7 months, well below the 6 month balanced housing market time frame
City of Austin first half of 2019 Sales decreased 1.6j% year over year Median price increased by 3.2% to $387,100 New listings decreased by 3.4% Active lsitings decreased 5.7% Pending sales increased by .2%
City of Austin June of 2019 Sales decreased 2.3% Median price jumped 10.9% to $420,000 Inventory decreased .2 months to 1.9 months
Asking rates for Industrial property rent are at a historical high according to CBRE’s first quarter Austin market report. $10.79 per square foot per year is the new high water mark driven mostly by Class A Flex space. In addition:
Absorption totaled 470,000 square feet
Vacancy increased to 10.6% (primarily due to the delivery of 1.3 million square feet of new lease space
13 additional projects are under construction with more than 1.1 million square feet in Southeast Austin and Hays County
The far Northeast submarket had the largest absorption of lease space at 141,113 square feet
Office rents in the first quarter of 2019 have hit a record high at $41.83 per square foot per year for Class A according to Cushman & Wakefield and as reported by the Statesman recently. Local brokers are expecting the market to remain strong with continued job growth anticipated for the area. Vacancy is right around 10%, the same as it was Q1 2018.
CBRE measuring the market as an average rental rate also reports a record high of $37.62 per square per year. New construction is at an all time high as well with 5.6 million square feet of office space under construction.
NAI Partners another local brokerage firm is quoted as saying that “large leases dominated in 2018 and all indications point to that trend continuing in 2019.”
Ever wondered how much apartment you can afford if you are making the median income in a large U.S. City?
If you make the median income in Austin, Texas you should be able to afford a 751 square foot apartment and expect to pay about $1,369 according to new data from Yardimatrix.
Focusing only on Texas, renting in Plano on a median income gives you the most bang for your buck, with 1,137 square feet, the equivalent of a large 2-bedroom and 2.5-bath apartment. Irving comes in second with a 912-square-foot apartment with 2 bedrooms and 1.5 baths.
By comparison, other cities in Texas offer a 1-bedroom apartment that varies in size from renting in Houston (757 square feet), San Antonio (756 square feet), or Dallas (679 square feet).
I recently listed three (3) properties in East Austin that were previously single family rent homes. They are all in need of some TLC but are great investment properties. The activity for these properties has been amazing and I can confirm first hand that the East Austin single family market is hot!
The first (pictured above) is at 1183 Coleto and we are asking $285,000 (update – this property is now under contract). The next property is at 2935 Moss St and we are asking $299,000. The final property is located at 903 Mansell and is currently under contract as well. We are asking $340,000 for the Mansell property.
Email me at firstname.lastname@example.org if you are interested in selling your E. Austin property or if you are interested in purchasing 2935 Moss St.
Austin #11 in U.S. for new office development in 2019
Austin barely missed the top ten in new office development for 2019 with a #11 projected finish. 3.2 million square feet from 21 different projects makeup the Austin number. Oracle Phase II is the biggest office project expected to deliver this year at 420,000 square feet set for a December delivery. In comparison last year saw 2.7 million square feet in 34 projects delivered in Austin. The 2018 Oracle Waterfront campus was the largest project at 560,000 square feet.
Commercial Real Estate Projected Vacancy and Changes in Rent
The Texas A&M Real Estate Center has started providing more content for Commercial Real Estate markets in Texas that is very helpful to those of us following the Commercial Real Estate Markets.
This graphic for our Austin market shows that we are below the natural vacancy rate for all three Commercial Real Estate (CRE) types and that rents look like they will continue to rise. Retail rent growth however is projected to slow down in comparison to the last couple of years.
It’s helpful to keep in mind the definition of “Natural Vacancy Rate”. The natural vacancy rate is the average percentage of rental properties that are not occupied when there is balance in demand and supply.
Austin City Council has initially approved a program that would allow an increase in affordable housing development by relaxing regulations for properties that meet certain criteria.
District 4 Council Member Greg Casar introduced the plan earlier this month. “Our city’s potential to build more affordable housing for families is currently locked up by needless restrictions, … It’s time to change our policies so that every dollar of the successful $250 million affordable housing bond goes to help as many people as possible.”
The proposal would allow at least six (6) housing units to be built on any feasible lot by waiving density, setback, height and parking regulations. All zoning categories with the exception of industrial zoning would be eligible for these affordable housing projects.
The fourth quarter of 2018 ended on a high note for the Austin area Industrial market. Annual market absorption was 1.7 million + square feet and vacancy fell to 9.4%. Similar absorption levels have not been seen since 2012. Over 2 million square feet remains under construction with the fourth quarter delivery of new buildings totaling 222,800 SF. Net absorption exceeded 800,000 SF and the average annual asking rate is up to an average of $10.53/SF. Click here for CBRE Q4 2018 Austin Industrial Market Report.