Austin Apartment Market - Dropping on National Lists - Rent Increases Project in 2014

Posted by David Kanne on Monday, January 27th, 2014 at 10:40am.

The explosive construction of apartment communities in Austin the past two years is not necessarily a signal that this market is a top pick for developers or investors, according to a new national multifamily report by Marcus & Millichap. In fact, Austin dropped down three notches in the real estate firm’s National Apartment Index from 15th to 18th place. The index measures economic and supply and demand variables for the upcoming year. Some of the factors include employment growth, vacancy rates, construction rates, housing affordability and rents. Though job growth should continue to be strong, some 11,500 units will be completed this year, about double last year’s additions. Vacancy rates should climb, but that isn’t likely to result in rent decreases. In fact, Marcus & Millichap estimates that rents in Austin will rise 4.6 percent to an average of $1,065 per month. Last year, rents climbed about 5.7 percent. Investors should look to the north and northeast markets in the path of gentrification, where opportunities should be available for repositioning properties. Nationally, Marcus & Millichap said the big story of 2013 was the stellar performance of B and C class properties, which has been true in Austin, as well. There is the threat of too much new, high-end supply that could result in “price fatigue” for renters.

Here’s a look at Marcus & Millichap’s projections for the top apartment markets this year:

1. New York City

2. San Francisco

3. Denver

4. Minneapolis

5. San Diego

6. Northern New Jersey

7. Seattle

8. San Jose, Calif.

9. Oakland-East Bay, Calif.

10. Portland, Ore.

Meanwhile, National Real Estate Investor drew up its top multifamily market list based on

projected rent growth and continued high occupancy rates. Here’s a look at their rankings:

1. Oakland-East Bay, Calif.

2. Portland, Ore.

3. San Francisco

4. San Jose, Calif.

5. Miami

6. Houston

7. Denver

8. Seattle

9. Orange County, Calif.

10. San Diego

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