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Austin's Multifamily Fundamentals Set to Improve in 2025 Despite High Supply

Austin's multifamily sector is expected to benefit from a strong labor market and a return in investor confidence, a report from the Marcus & Millichap finds.

Particularly, the CRE firm expects two key fundamentals to improve in 2025. While vacancy has seen an uptick due to high supply, it is projected to fall 10 basis points to 7.7 percent. That comes even as metro inventory in Atlanta is expected to tick up by more than seven percent for the second consecutive year, representing the highest increase among all major markets in the U.S.

Also, rents are finally expected to increase after two straight years of declines. By December, the category is forecasted by Marcus to reach $1,556 per month, up 1.5 percent from 2024.

In part carrying the fundamentals will be thanks to Austin staying as one of the fastest-growing metro areas for both population and employment. The city is expected to add 29,000 jobs in 2025, according to Marcus. For example, it lists Tesla's 1.4 million square foot battery facility and Samsung's $17 billion semiconductor plant as two major hubs that will continue to strengthen the economy and help drive housing demand.

The other factor is the development pipeline may begin to wane in the coming year, which could lead to an increase in investor sentiment in Austin's multifamily sector, even as high interest rates remain.

"Multifamily permitting in 2024 reached its lowest level since 2019, suggesting a measured delivery pace over time," Marcus wrote.

"Prospective investors could consider submarkets like Round Rock, Georgetown, Cedar Park and Leander, where steady employer commitments bolster rental demand. Despite tighter debt markets, Austin’s strong rental base and demographic momentum ensure long-term investment potential, even amid 2025 challenges."

Marcus added that investors could seek transit corridor assets affected by the Density Bonus Program, which allows for more development of affordable units.

Reprinted with permission from the Tuesday, 04 February 2025 17:13:10 EST online edition of GlobeSt © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.