Monday Morning Scoop - Austin real estate market still burning hot, according to Urban Land Institute study
Austin real estate market still burning hot, according to Urban Land Institute study
Austin’s real estate market is still burning at a supernova level, according to a new study.
The Urban Land Institute, which focuses on real estate and land use, released its widely respected 2024 Emerging Trends in Real Estate report on Oct. 31. The report compiled data and insights from over 2,000 real estate industry experts to explore shifts and trends in the property sector and predict 10 markets to watch for the coming year.
Austin ranked fifth on the list this year, down from No. 3 last year. The rest of the top five was rounded out by other Sunbelt cities: Nashville at No. 1, then Phoenix, Dallas-Fort Worth and Atlanta.
ULI conducted the study in partnership with PricewaterhouseCoopers, a professional services firm.
Austin was classified as a “magnet city” in the report, or a city that’s a migration destination for both people and companies. Further, Austin kept its moniker of a supernova city, considered by ULI to be among the fastest-growing markets consisting of 1 million to 2 million residents.
Industrial is a rising star
There’s certainly been no shortage of big names taking up real estate in the Austin area in recent years.
Manufacturers such as Tesla Inc., with its electric vehicle plant along State Highway 130, and Samsung Electronics Co. Ltd., which is building a sprawling new factory in Taylor, have already drawn plenty of business to the area. Those big corporate names are also mentioned in the property brochures for most of Austin’s many industrial developments to help attract business.
As far as new industrial developments go, production is only slightly down from this time last year. There was 17 million square feet of industrial space under construction in the third quarter of 2023, down from 19% the same time last year, according to commercial real estate firm Partners. For reference, there is a total of 124 million square feet of industrial inventory across the metro.
And the companies filling that industrial space have an ever-growing pool of potential employees to pull from, too.
The city of Austin’s population grew from 790,390 in 2010 to an estimated 974,447 in July 2022, according to U.S. Census Bureau data. Georgetown, a suburb north of Austin that is a notable contributor to the metro’s industrial market, grew from a population of 47,400 to an estimated 86,507 in that same time period. Leander, also north of Austin, experienced population growth from 26,521 to 74,375 from 2010 to 2022, and Liberty Hill’s exploded from 967 to 9,099 in that same time period.
While Austin is still growing at a “supernova” pace, the report did point out a specific area that all cities, Austin included, must address: downtowns need to be “reinvented.”
“In the post-pandemic landscape, there’s a consensus that a return to pre-pandemic office occupancy levels is unlikely,” the report stated. “Larger cities are struggling with the challenges of underutilized office spaces in downtown areas. Some anticipate a potential economic decline due to reduced foot traffic, while others are more optimistic, citing cities’ historical adaptability.”
That’s not news to downtown’s office landlords and developers who have seen vacancy rise and occupancy plummet over the past few years.
Office is a falling star
The office market remains in a state of flux due to hybrid work schedules, mounting loan maturities and other macroeconomic factors that are making corporate leaders tighten their spending. A host of retailers and other small businesses have struggled due to losses in foot traffic. And in downtown Austin, a handful of office towers sit empty.
But while occupancy in downtown offices may be down from pre-pandemic levels — and may not reach those heights in the foreseeable future — there is data to suggest Austin’s downtown recovery is right around the national average.
That’s according to new data from the University of Toronto School of Cities and the Institute of Governmental Studies at UC Berkeley, which have been analyzing GPS data from more than 18 million North American smartphones to determine how downtown visits compare to pre-pandemic totals.
In Austin, downtown visits are now 73% of their 2019 levels, according to that data. By comparison, the national average is 74%.
Only Las Vegas reported a full recovery, with a 103% increase from 2019. Other major metros that outpaced Austin’s recovery include Nashville, Atlanta, Los Angeles and San Antonio. On the other hand, Austin beat out Dallas, San Francisco and New York City’s recoveries.
“It’s about the diversity of the downtown economy,” said Karen Chapple, director of the School of Cities program and a professor of geography and planning at the University of Toronto. “There are places that were specialized in finance and tech but still came back because of very strong entertainment sectors, or education or health. Those are the drivers of recovery.”
By: Cody Baird
Source: Austin Business Journal