Rents, occupancies in Central Texas hit all-time highs as growth drives sizzling market. By Shonda Novak SNOVAK@STATESMAN.COM

Here’s some news that won’t come as a surprise to Central Texas apartment dwellers: Rents in the area keep going up, continuing a three-year climb. And here’s something many apartment-hunters already know: It’s hard to find a place, much less one that fits their budgets.

What gives? It’s Supply and Demand 101: Despite an ongoing boom in apartment building, the new units under construction aren’t going up fast enough to meet the continued growing demand.

The recession dried up funding for new apartment construction during the past few years, so very few new units were added to the market. And even though thousands of apartments are under construction or in the planning stages now, it will take time to catch up to the pace set by the Austin region’s job and population growth, experts say.

All of which means apartment rents and occupancies are likely to keep going up for the foreseeable future.

“If you want to live in one of the most popular cities in the country, you have to expect it to come with a price tag,” said Tori Shaw, a real estate agent with Austin City Realty. “You can’t have sticker shock. Austin is on every major tourist blog and website as one of the greatest places to move. You don’t get to that point because it’s crappy and there’s nothing to do here. I don’t expect that people walk into a car dealership with $1,000 and expect to walk out with a Lexus.”

Charles Heimsath, a local real estate market expert, tracks rents and occupancies in Austin’s apartment market. Last year, Austin’s occupancy rate citywide hit an all-time high of nearly 98 percent in June, settling slightly lower by year-end at 97.4 percent, Heimsath said. Rents peaked in December, averaging $842 for one-bedroom units and $1,115 for two-bedroom units, Heimsath’s research shows.

Last year, 3,528 new apartment units were built in the Austin region, said Heimsath, president of Capitol Market Research. Currently, 12,592 units are under construction in Central Texas. Nearly 8,000 of those will open in 2013, and the rest in 2014, he said.

At the current level of apartment construction, Austin’s inventory will climb 6.7 percent during the next 18 to 24 months, said Greg Willett, vice president of research and analysis at MPF Research, which tracks the apartment market locally and nationally.

"That’s drastically more aggressive than the rates seen anywhere else across the country,” Willett said.

Heimsath said the staggered delivery dates for the various apartment product types should keep the market healthy, though certain areas will face challenges. He said he expects one of those to be the South Lamar Boulevard area, where he said 2,500 units are now under construction within 1 mile of each other. Those include several projects on South Lamar as well as projects on either side of Chuy’s restaurant on Barton Springs Road.

When you have that many units competing in a small area in a short amount of time, you’re going to end up with rent concessions,” Heimsath said. Still, in the market overall, “I feel pretty confident we will absorb all or most of the units we’ll deliver in 2013,” Heimsath said.

Tough on renters

Sean Fox has experienced Austin’s rental squeeze firsthand. He and his wife, LauraBeth, moved to Austin from Denton last summer. After various living arrangements in their first few months here, the couple recently found themselves looking for their next rental. It was particularly challenging because Sean has a credit blemish, but he said he finally found an agent — Shaw, with Austin City Realty — who was willing to work with him and the spot on his credit.

After a monthslong search, Fox, a delivery driver for Dine on Demand, and Laura-Beth, an activist with the Texas Campaign for the Environment, ended up renting a four-bedroom duplex in Austin’s Crest-view neighborhood that they share with three other people, paying $450 as their portion of the $1,800 monthly rent.

“We finally got into a place that is affordable, but it took a long, long time,” Fox said. Shaw said locals who rent are more prone to sticker shock than the influx of people moving here from other states like New York, Florida and California. \"Their cost of living is so much higher, they don’t even bat an eye,” Shaw said. By contrast, Shaw said, she has a client who has lived in the same one-bedroom studio in the Bouldin Creek area just south of downtown, who has been paying $790 a month. Now she is having to move and “she’s completely flabbergasted that it’s not possible live in Bouldin Creek for under $1,100 a month,” Shaw said. We had to lift the budget to $1,050,”

Shaw said. “It’s not going to get her a luxurious little place in the area she wants to be in, but it’s important for her to be in (that) area.” Shaw said $800 a month is a sweet spot in the rental market, a price point many renters are seeking to be in. “That niche is what everyone’s after, but they’re few and far between. We’re all at the mercy of what’s available. I don’t want to say it’s impossible to find an $800-a-month studio, but it’s probably not going to be right downtown and have the fancy interiors everyone wants.”

Caprice Capri, a 43-year-old cook at Austin’s Pizza on South Lamar, said she has had a tough time finding an affordable apartment as her living arrangements have changed during the past year. She’s currently in a two-bedroom unit on Manchaca Road, off South Lamar, paying $750 a month, half of the total.

Market forecast

Robin Davis, manager of Austin Investor Interests, which researches the local apartment market, said it is a portrait of boom and bust. Although conditions have been stable the past three years, with steady occupancy and slowly rising rents, “this will change in 2013 and familiar Austin will be back,” Davis wrote in her most recent report on local market conditions.”

“New development has descended on Austin,” Davis said, noting that the past 18 months have seen 18,442 units start construction. Although the supply of new units opening this year will come into a strong market with 4.3 percent annual job growth, Davis notes that they will face some obstacles, the biggest being home ownership.

After nearly three years of incremental rent increases, “we’re starting to see a change from that pace,” Davis said.

"I don’t think we’re going to continue to see the rent growth that we have seen, but rents are still expected to remain at healthy levels,” Davis said. “I think we’re going to be in fine shape for the next 12 months.”

Contact Shonda Novak at 445-3856.

Source: Austin American Statesman