Why You Can't Say Austin's Multifamily Is Booming
Austin’s multifamily market is quite healthy, but don’t call it a boom. Gables Residential development director Jennifer Wiebrand (who spoke at Bisnow’s Austin State of the Market, pictured) says that suggests an abrupt landing, but Austin’s multifamily market is three years deep into this trend and there’s no sign of it crashing. Young professionals are still the bread and butter of multifamily demand, Jennifer says, but their parents are increasingly renting. Regardless of which demographic you’re targeting, amenities are striving to create community. Conference rooms are becoming more popular as more people work from home, and studios (art, music, yoga) are big. Her favorite amenity she’s seen in Austin but hasn’t yet tried: a bar.
ARA Newmark executive managing director Pat Jones (snapped with Allen Harrison’s Glenn Crabbe) says 8,500 units delivered in Austin in the trailing 12 months, but right about that amount has been absorbed. 2015 was far and away a record for sales—$2.9B of Austin apartments traded, well above last cycle’s peak of $1.6B. There’s an influx of foreign capital into Austin because its growth and young population are seen as a safe haven. But financing has stayed very strict with lower LTV and lots of safeguards. But Pat admits the party could end: If job growth slows, it’d be a problem for Austin’s multifamily pipeline.
Berkadia senior managing director Brant Smith (with the mic) says Austin is historically an elastic market with big highs and quick downturns, but that’s not happening now. He agrees the multifamily financing foundation is fine; he thinks the danger now would be general economic headwinds like China or terrorism, not fundamentals or any problems we’ve created. And Central Texas would weather those problems better than the rest of the US. But steer clear of CMBS, which is very dysfunctional now. CMBS coupled itself with corporate bonds and there’s no demand for those, so although underlying property collateral is healthy, no one knows how to price the deals. On top of everything, heavy regulations are coming down. The result: Spreads are blowing up.
Pictured is the multifamily panel at our Austin state of the market event: moderator CohnReznick partner Mike Celkis, Brant, Jennifer, Pat and Cadence McShane VP Srinath Pai Kasturi.