Daily Briefing: 🎂 Austin Takes the Cake in Nationwide Construction Boom! 🏢

September 13th, 2023 News Brief TLDR:

1. Pearlstone's $700M Urban Housing Blitz Reinvigorates Austin. 🏗️

2. Nationwide Construction Boom Stays High Until 2025, Austin Leads. 📈

3. Transwestern Sells 336-Unit 'The Warner' in Texas Hotspot. 🏠

4. U.S. Recession Odds Dip, but Watch Out in West, South! ⚠️

REAL ESTATE DEVELOPMENT & INVESTMENT

Pearlstone envisions denser Austin, forges ahead with $700M in urban housing

Source: BizJournals.com

Summary: Pearlstone Partners loom large on Austin's commercial real estate front with an exclusive focus on urban housing. Three new projects worth about $700 million are underway atop other under-construction projects. With Robert Lee's vision leading, the shear about-turn from a year of muted activity to presently one of massive developments is strongly indicative of the unceasing allure Austin holds for not only immense development plans but also future investor potential.

Why this matters: With the information about Pearlstone Partners' ambitious plans, Commercial real estate professionals in Central Texas can glean the escalating potential Austin holds, thereby advising their clients effectively on investment opportunities in the burgeoning urban housing sector and staying competitive.

Nationwide Construction Boom Expected to Remain High Until 2025

Source: ThemReport.com

Summary: The U.S. is seeing one of the brightest apartment construction booms on record, opening 1.2 million apartments in the last three years with an expectation that growth will remain high till 2025, where it will slow due to "tightening bank-banking standards and increased construction materials costs." Developers are assembling to complete the projects that were approved during the peak of the pandemic to meet the increasing demand from renters seeking more living space. Austin, TX is one of the leading metropolitan areas in this endeavor, ranking third in U.S. metros for new apartments in 2023, marking it as a central player in the nationwide boom.

Why this matters: The apartment construction boom in Austin, TX symbolizes a significant escalation in real estate development and urban population growth suggesting wide-ranging business opportunities in verticals such as residential leasing, property management, real estate investment, and ancillary commercial services.

TRANSWESTERN INVESTMENT GROUP SELLS 336-UNIT MULTIFAMILY ASSET IN ROUND ROCK, TX

Source: PrNewsWire.com

Summary: Transwestern Investment Group has announced the sale of 'The Warner', a 336-unit multifamily community property, at 2670 S. AW Grimes Blvd. in Round Rock, Texas. The high occupancy estate, built in 2022 and flush with numerous amenities, is conveniently located near major tech-employers city highlights, suggesting a strong multifamily market in the Austin region. Last year, the company closed its largest fundraise of $325 million with Transwestern Strategic Partners Fund III, outlining investment opportunities focused on strong job growth and supply chains.

Why this matters: Knowledge of successful deals like 'The Warner' property reassures commercial real estate professionals in Austin of the continued demand and robust nature of the multifamily market in the area, aiding strategic client advisory in investment decisions.

Strike Fast, Be First: Senior Living Developers Prepare for Demand Influx Around the Corner

Source: SeniorHousingNews.com

Summary: Many senior living developers are maintaining development activities and making creative adjustments to overcome hurdles of debt and building costs amid growing demand driven by the rising population of baby boomers. Some businesses, like Watermark Retirement Communities and Confluent Development, showcase resilience by focusing on renovation projects and sustainability measures in their expansion plans. Despite the ongoing issues of high construction cost and labor shortages, these companies believe their early groundwork brings advantages over competitors in preparing for future project opportunities.

Why this matters: Given the aging population's continued growth and challenging economic conditions, acting strategically and early to secure locations and partnerships for future senior housing projects could position Austin-area real estate professionals for success and their clients with desirable opportunities as market recover.

Griffis at Riata rebranding under new ownership

Source: Recenter.tamu

Summary: The Griffis at Riata, a 307-unit multifamily property in Austin's tech district, has been acquired by Draper and Kramer. The property, built in 2017, spans over 16 acres and is located near Apple's office complex. The community, now renamed as DK Riata, offers one-bedroom and two-bedroom units along with multiple amenities. The property was 95% leased at the time of purchase.

Why this matters: The purchase and rebranding of this property highlight opportunities in strategically located multifamily real estate within notable tech districts, which professionals can leverage to intrigue investors looking for prominent locations in Central Texas.

HOUSING & REAL ESTATE MARKET TRENDS

Recession in U.S. becomes increasingly less likely, but odds are highest in West, South

Source: USToday.com

Summary: The likelihood of a US economic recession by mid-2024 has further decreased in light of robust job and economy growth despite eased inflation. However, some regions are more recession-prone than others. The West and South regions should particularly prepare for a potential economic decline due to their extensive growth recently, specifically in home pricing and inflation. According to Moody's, another cause of this is a significant migration trend among Americans to these regions with appreciable climates and cost-of-living considerations. Austin-natives are likely amidst cities that gravitate to a 50% chance of experiencing a recession. Realistically, this scenario may lead to a ripple effect in neighboring localities resulting in a nationwide financial slump.

Why this matters: This probability of recession in Austin indicates a potential reset due to overheating properties market sales, which might trigger a short-term pause for local commercial real estate investors focusing on mid-2024 investments. Simultaneously, professionals can use this as an opportunity to advise clients on resiliency and recession strategies.  

Rent remains near record highs, but the balance of power is shifting

Source: InMan.com

Summary: Rent prices have held near all-time highs since the pandemic, but indications point toward a renter's favor shift, with concessions becoming more commonplace as landlords deal with increased competition. While high-end unit demand has pushed most construction towards class A apartments, competition has started affecting lower-priced rentals, pushing them into shorter supply and increased demand. The impact on supply-demand dynamics has tilted property owners to delay rent increment for renewing leases. Notably, Austin had one of the major year-over-year reductions in rent for Aug. 2023, down by 4.9%.

Why this matters: Austin property managers and commercial real estate investors could benefit from these ongoing shifts by reevaluating the balance between higher-end and affordable units in their portfolios and regarding their individual leasing or marketing approaches. Permanent insights from rent and vacancy dynamics could enhance client relationships through providing expert advice, potentially giving an excellent negotiation advantage.

Construction Starts Wane, Rents Gain

Source: MultiHousingNews.com

Summary: Decreased access to development capital is causing a marked decline in multifamily housing construction across the U.S., particularly in Texas' key building centers including Austin. As early-stage building activity drops due to insults like economic unpredictability and escalating interest rates, there's consequential modification in aspects like rent growth; Houston, Dallas-Fort Worth and Austin buttress this claim as they've reportedly witnessed groundbreaking starts plunge gradually this year. This trend, however, might not supersede indefinitely: house supply remains undersupplied nationwide, hence a sudden, significant inflow into the construction turf around 2025 along with rent growth during spring of 2024 and its subsequent year is speculated.

Why this matters: To stay attuned with the balance between demand and supply, real estate professionals based in Austin can leverage this inflation in rent growth due to falling apartment construction activity for meticulous rental rate suggestions and client consultations while safeguarding their strategic plans for anticipated resurgence in construction.