After a slight pandemic slump that was a rare boon to tenants, Austin’s rental market has rebounded. Fueled by job growth, relocations and an increasingly pricey housing market, the average monthly rent in the Greater Austin area rose to $1,335 in April, exceeding pre-pandemic rates, according to the latest market report from ApartmentData.com.
Bruce McClenny, president of ApartmentData.com, attributes this change to increasing demand, which gives landlords the confidence to raise rents. Since January, the Austin market has absorbed a monthly average of 1,403 units, meaning that renters have leased that many more units than were vacated. This absorption rate is significantly higher than that of the first four months of 2020. “Absorption is demand,” he said.
Other metro rental markets are seeing similar gains, McClenny said, but Austin has some specific advantages. Job creation by companies such as Tesla, Oracle and Samsung and the return of some leisure and hospitality sector positions fuel demand. So too does a steady rate of relocations. Data released by the U.S. Census Bureau on Tuesday shows that the five-county Austin-Round Rock metro grew faster than any other metro area in the country between 2019 and 2020.
Up until early this year, the local rental and housing markets were on divergent post-pandemic paths. Renters were more likely to have suffered job loss as a result of the pandemic or to work in impacted industries, such as hospitality. A glut of new construction in recent years also meant that supply outpaced demand.
The housing market, on the other hand, saw increased demand due to continued job creation, especially in the tech and professional sectors; a millennial-heavy population, with many members starting families and looking for more spacious residences; and record-low inventory.
The scorching housing market may now play a role in the rental market rebound as record-high sales prices and record-low inventory prolong, or even halt, some prospective homebuyers’ searches. “Austin’s home market is probably hotter than ever,” McClenny said. “That has to play into the rental market right now.”
The rental market rebound appears to be spread out across suburban and urban core areas. The fastest growing submarkets, according to the ApartmentData.com report, over the past three months are:
- Cedar Park-Leander-Four Points
- Downtown-South Congress-Barton Springs
- The University of Texas at Austin-Mueller area
During the pandemic, residents flocked to the suburbs in search of more space. Despite this urban flight, Austin’s urban core submarkets are rebounding more quickly than those in other Texas metros. “Austin has such a unique, desirable urban core,” McClenny said, adding that the city’s mobility challenges may also be at play as renters return to the office—and their commutes.
The ongoing reopening process is one reason to believe the Austin rental market will continue to grow this summer, which is a typically strong leasing season. One concern, however, is the relatively high number of apartments under construction—nearly 16,000, according to the report—which could temper growth if there isn’t enough demand to absorb them.
“You’ve got a few competing elements here,” McClenny said. “I could see a scenario with reopening where it just pushes demand and rents higher.”