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‘We Kid Ourselves’ That Austin Rents Are Affordable

Alliance Residential's Brandon Easterling, Aspen Heights' Ryan Fetgatter, Sutton Cos.' Mac Pike, CWS Capital Partners' Mike Engels, ARA Newmark's Pat Jones

Sutton Cos. chairman Mac Pike can summarize all of Austin’s population growth statistics in three words: Austin got discovered.

Multifamily experts at Bisnow’s Austin State of the Market event agree that because of its explosive growth, multifamily development has gotten tougher to build affordably.

“We’ve seen such an influx of product for $2 or more per square foot. That’s not affordable, though we kid ourselves that it is,” Aspen Heights vice president of development Ryan Fetgatter said. He worries that if developers erode the value proposition for why Millennials want to move here, they will stop coming. 

When those $2/SF products become the norm and laborers and materials demand a certain price, it gets tougher to achieve reasonable rents, Pike said.

Faux affordability has driven Alliance to the suburbs for some projects. Renters will move to the fringe if that is all they can afford. Someone has to pay attention to the demand for the $1.40/SF product, Fetgatter said.

Alliance Residential managing director Brandon Easterling already is. “I prefer to do more suburban deals than urban,” Easterling said. They are a quicker and less expensive build. Suburban products are easier to pitch to investors that require a certain return rate, he said.