Existing Multifamily Feeling Some Pain
New deliveries to Austin’s multifamily sector have been less condensed than everyone feared, but they’re still starting to have an impact, AMLI VP Marcy Phillips announced at Bisnow’s Austin Multifamily Summit last week. After a few years of solid rent growth, her portfolio’s year-over-year rents are flat now. She says development slowed largely because of the City—she’s working on a Southwest Austin project that has such complex coding (and an unpredictable process from the City) that it’s taken years to try to get it permitted. Above, we snapped our design/development panel: panelists Lord Aeck Sargent principal Mark Lange, CohnReznick office managing partner Chris Thomas, Marcy, and dwg partner Eric Schultz.
CWS Capital Partners prez Gary Carmell (pictured here with Capital One’s Jason Qunell) says his Austin portfolio got a 24% rental rate increase in the last three years, which has dropped to 5.8% from Oct ’13 to Oct ’14. Meanwhile, his occupancy is down 1% YOY. He’s expecting things to slow a bit more next year to 3%-4% rent growth next year. That said, Gary (whose firm is the largest Class-A multifamily owner in Texas, including 18 properties totaling 4,300 units in Austin) is cautiously optimistic about Austin overall and says it’ll be bigger and more dynamic in five to 10 years.
JLL managing director Scott Lamontagne says Austin’s overall multifamily market has posted 3.7% YOY rent growth. But same-store rates have only gone up 1.9%, so most of the movement is from renovations and new deliveries. That’s largely because some areas had no new product for years, so any new deliveries are boosting average rent.
Eric (pictured with co-panelists Mark and Brass Enterprises managing director Mark Zolty) stresses that Austin’s permitting and coding is a big mess that needs a comprehensive overall. That’s why Code Next is important, even though he’s sure it’ll be difficult and controversial. To combat the recent slowdown in getting development done, he recommends getting really innovative at the front end, rather than going in with a standard project and reacting to the City’s comments.
Mark (an Atlanta guy with Texas roots—he’s a Rice Owl) says he’s excited to see coding get clearer, but he also likes that Austin preserves its culture and doesn’t try to be anyone else. He says the hot new amenity these days might surprise you: 10-foot ceilings. Developers are choosing to do fewer units to get that roomier ceiling height. He’s also seeing units get smaller as amenities like living and dining rooms are pushed out to shared spaces.