Investors Find Opportunity in Austin’s High Apartment Vacancy

Austin’s multifamily market is wobbling under the weight of too much supply, but some investors see the moment as the best buying window since the Great Recession.

Occupancy dipped to 85 percent in August, with rents sliding 7.5 percent year-over-year to an average of $1,405 to try and reduce those vacancies, according to ApartmentData.com. The rent drop has taken property values down along the way, making financing more difficult, the Austin Business Journal reported.

But the reset is creating opportunities.

“There are a ton of buyers coming to Austin, but not many sellers, so there’s a real scarcity of quality listings,” Newmark Group’s Patton Jones told the outlet.

The slump stems in part from a construction rush that left Austin among the most oversupplied Sun Belt markets, and high interest rates that curtailed investors’ ability to borrow. With the 30-year fixed rate averaging 6.58 percent last week, capital is tight.

The tide could turn quickly, however. Construction starts are down roughly 80 percent as lenders shut off financing for new projects. At the same time, demand hasn’t vanished — more than 21,900 units were absorbed in the past year. Analysts project that beginning next year and through 2029, much of the glut could be burned off, setting the stage for tighter vacancies and rent growth.

Meanwhile, deals are getting done. Washington-based Weidner Apartment Homes recently bought The Alden, a 349-unit complex in Cedar Park, most recently appraised at $76 million. In nearby Leander, sponsors Beacon Real Estate Group and Constellation Group recapitalized The Conley, a 259-unit property built in 2020, through a loan from LaSalle arranged by Berkadia.

“Occupancy, rents and concessions certainly present a challenge in the near-term, but in the mid- to long-term, the capital markets see value in Austin,” Matt Nihan, senior director of mortgage banking at Berkadia.

— Eric Weilbacher