Apartment rents in Central Texas reached record highs in 2015, despite more than 9,500 new units being built across the region, new figures show.
Austin-area tenants can expect to see rents rise again in 2016, though perhaps at a slightly slower pace, experts say.
In its year-end apartment market report, Austin-based real estate consulting firm Capitol Market Research said that rents for all apartment sizes in the Austin area averaged $1,190 a month, an all-time high for the market. The average is up 7.5 percent over December 2014, when the average monthly rent was $1,107.
“I think rent growth will continue this year, probably in the 5 to 6 percent range,” said Charles Heimsath, president of Capitol Market Research, which tracks the apartment market. “It looks like things will continue on a very strong pace of growth.”
The Austin metro area — stretching from Georgetown to San Marcos — has been experiencing an apartment building boom for several years amid the region’s robust job and population growth, and 2015 was no exception.
In fact, 2015 set a record in leasing activity, pushing the overall occupancy level to 94.5 percent.
Developers built 9,554 apartment units in the Austin area in 2015, slightly fewer than the 10,371 units added in 2014. However, leasing activity surpassed 2014’s level, Heimsath said.
Last year 9,347 net new units were leased, almost equal to the 9,554 units that were built, and that balance “is an indication of a very strong market,” Heimsath said.
John Martin, assistant manager in the South Austin office of Apartment Experts, said that, although some skeptics thought the area would end up with an apartment glut, “as a whole, everything’s getting filled up like crazy.”
“Cities in Texas, California, New York, Seattle, you name it — people are just flooding here from all over,” Martin said.
Zumper, a nationwide apartment rental website, rated Austin the 19th most expensive rental market in the country in the third quarter. Prices for a one-bedroom apartment were up 12 percent in the third quarter from the previous year — one of the largest increases in any major city in the U.S., the report said.
Jim Gattis, a real estate agent with HomePlace Apartment Search, said many people relocating to Austin are shocked when they realize what they’ll have to pay in rent.
“They arrive expecting to apples-to-apples between a city like Denver and Austin, and it’s an eye-opener and reality check,” Gattis said. “At first they want to live in Central Austin, and then it’s ‘Holy cow, I can’t afford anywhere in Austin.’”
Gattis recently worked with a new University of Arkansas graduate who accepted a job in Austin. “He couldn’t believe it because he was used to paying $500, and here the average is $1,100 for a one bedroom,” Gattis said. “He ended up finding something in Pflugerville, which is one of the fastest-growing markets for renters because there is so much new construction.”
In addition to Pflugerville, renters are heading to Round Rock, Manor and Hutto, Gattis said.
“They just can’t build apartments fast enough with all the influx of people coming into the market,” he said.
Martin said the renters he sees who experience the most sticker shock are moving here from other Texas metro areas, including Dallas, Houston and San Antonio.
“Their markets offer a lot more bang for the buck,” Martin said.
Heimsath said the Austin metro area currently is seeing more apartment units being built in suburban areas than in the central city. The suburban units are less expensive to construct and have lower-than-average rents, he said.
Heimsath said he would advise apartment dwellers to lock in leases of 12 to 15 months, “just to keep your rents from accelerating over that period.”