Austin isn’t just about live music — word is getting out about our lively real estate market and exceptional growth rate. Residential and commercial investors are discovering that the Texas state capital is one of the hottest real estate markets in the U.S., with expansion continually fueled by a rising population, tax benefits, industry influx, affordable housing, available jobs and highly rated schools.
Market And Population Growth
Austin is known as much for its stable and dynamic real estate market as for its role at the center of Texas history and politics. The steady growth in this metropolitan statistical area (MSA) is the result of numerous factors that make the city a nurturing environment for artists, tech professionals and executives alike and the No. 1 place to live for affordability, jobs, safety and income.
From 2017 to 2018, more than 50,000 — or approximately 145 people per day — moved to Austin. Ranked the highest-growth city in the country for that year, we’ve experienced population growth of 20% over the last eight years. The influx of migrating talent pursuing employment opportunities may be the key driver of population growth. Unsurprisingly, Austin’s July unemployment rate was 2.9%, compared to the national rate of 3.7%.
The greater metropolitan area is experiencing the same effects. Neighboring communities, including Round Rock, Buda and Kyle are experiencing the trend and also presenting excellent investment opportunities. New residents find greater affordability of housing with median home prices of $315,000, creating unique appeal for young professionals and families transitioning to Austin.
Investors looking for favorable cap rates, stable returns and low vacancy rates see Austin as a social and economic environment with excellent demand factors. Potential deals exist across the range of values and property classes, and you can find value-add opportunities with numbers that cash flow — not an easy thing to do in a hot market. Seek a knowledgeable broker and conduct your due diligence to ensure a viable acquisition when you evaluate investment properties in Austin.
Industry Growth
There’s been much talk about the major companies that are moving here. Some notable firms with national and regional HQs in Austin include Facebook, Whole Foods, Dell, Apple, IBM, Oracle, GM, Home Depot, HP, Zoho … the list goes on. These are top companies setting up shop for the long haul in Austin. Google is also planning to move into a future 35-story tower downtown by 2023, and Amazon has similar plans for its second HQ. A huge bonus that plays heavily into corporate location decisions is the fact that Texas has no state income tax.
Austin’s creative, scholarly and tech-focused environment appeals to upstart and growth firms pursuing organic and transformational organizational strategies. Executives, young professionals and laborers who support industry and the underlying community infrastructure are migrating en masse to this professional nexus, creating vast opportunity in multifamily and single-family residential development. Fortunately, there’s no dichotomy present between the growth of the commercial and residential sides of the real estate market. Intense demand exists for office, retail and industrial properties to meet the needs of the growing population, workforce and commercial tenant base.
Quality Education
With excellent school districts, colleges and available jobs for working students, Austin presents the opportunity for top-tier education and numerous employment and internship positions in in-demand fields like tech, life sciences and manufacturing. Contributing to the highly educated and creative local workforce is the University of Texas-Austin, a national top-50 university and in the top 10 for its business programs (including No. 1 for accounting).
Austin is also home to some of the best-rated primary and secondary schools. A notable example, Eanes School District, is rated the No. 11 Best School District in America and No. 1 in Texas by one analysis. It’s in the middle of the City of Westlake – the Beverly Hills of Austin. The community is beautiful and lush, and you can get a high-quality education at a public school.
The community’s focus on education attracts leaders in tech and life sciences to Austin. As an investor conducting due diligence, a market that shows a strong demand for and availability of skilled labor indicates a feasible market for both commercial and residential investment.
Commercial Versus Residential: Where’s The Peak Opportunity?
So many people are moving to Austin that it’s an ideal market for rental property investors. Students and professionals are moving here for their education and careers and aren’t in the position to buy a house upfront; they rent to start out.
It’s a growth market for the single-family and small multifamily investor. You can own a pocket of homes or a vintage multifamily to garner prime rents and positive cash flows. There’s tremendous opportunity to make healthy margins and still provide an accessible price point for the tenant.
We see a boom in residential, yet it’s still affordable compared to other major metropolitan markets in the U.S. In Austin, you can buy a great house or condo in the $300,000-500,000 range and live in the city. However, there’s still room to grow. You can buy a starter house and still expect to have excellent equity growth in your property.
Commercial real estate in Austin is keeping up with the growth trend. The expansion in the life sciences and other tech industries is driving demand for new space. Facebook, Amazon and Google acquired their new space in Austin on prelease to preclude competition and bidding for space. If you’re thinking about Austin, start looking at least 24 months in advance.
Austin is a foodie city too (it’s not all tech and boogie), so there are ample opportunities to open all kinds of new restaurants. Whether you’re operating a commercial property or running a food service business, there’s the opportunity to generate margins. Retail does exceptionally well here as well. You can easily own a strip center and make an excellent margin without significant risk.
All The Right Factors
Austin has it all: a booming economy, a scholarly environment, a creative culture, an educated workforce, tax advantages and more. For the same reasons that residents and corporations choose Austin, insightful real estate investors and developers should position themselves to meet the growing demand for residential and commercial space.