Within the next 30 days, Standard Pacific Homes is expected to break ground on a 52-unit condominium development in Catellus Development Group’s 711-acre (288 ha), mixed-use project on the former Robert Mueller Municipal Airport site in Austin.
“It’s a condo project called Mueller Homes—each building is four to six condo units that looks like one large home—that 18 months ago we could not find an interested builder,” says Gregory J. Weaver, managing director of Austin-based Catellus Development Group. “The real estate market in Austin has certainly changed for the better. Another Mueller development, the 36-unit Greenway Lofts, started construction this year and has a significant amount of sales already. The multifamily market in Austin has significantly improved.”
Austin is one of the fastest-growing cities in the nation, and has relatively low unemployment and a housing market that was spared the recession’s worst impacts.
The city’s economy is doing fairly well in spite of the downturn, says Todd C. LaRue, principal in the Austin office of RCLCO Real Estate Advisors, which provides real estate solutions to clients; he is also on the executive advisory board for ULI Austin. “Over the next three to four years, we’re looking in the ballpark of 28,000 to 32,000 new jobs annually, assuming the national economy picks up and confidence returns to the market,” says LaRue. “That will spur demand for real estate.”
New jobs are coming at a rapid clip. Four months ago, Samsung Austin Semiconductor announced a $3.6 billion expansion of its semiconductor fabrication plant in the area and the hiring of an additional 500 employees. Applied Materials is adding 200 jobs in Austin over the next several months. The leisure and hospitality sector has also been hiring at a rapid clip, contributing to demand in the multifamily sector, LaRue says.
The multifamily and condominium markets are robust. In downtown Austin, Benchmark Land Development recently completed a luxury condominium project, the 56-story, 166-unit Austonian. Designed by Ziegler Cooper Architects of Houston, it is the tallest and most expensive building in the latest wave of high-rise condominium towers that is reshaping the city’s skyline. Also in this wave is the W Austin Hotel & Residences, located north of City Hall, which is expected to open in December.
“People are being more optimistic about Austin and the future,” says Weaver. “There is a lot of activity in multifamily, especially in well-located infill sites. The multifamily market is improving, both in financing and overall fundamentals such as lease rates and occupancy. It’s expected to continue over the next couple of years.”
Some advice to those interested in developing in Austin:
Look at all the real estate sectors. “But right now, multifamily seems to be the strongest for demand and available financing,” advises Weaver, a member of the ULI Austin executive committee and the ULI Community Development Council, Green Flight. “Do your research carefully.”
Know your market audience. “Austin is a young city demographically, and products and locations that appeal to those key demographics will find the most success,” says LaRue. “Locations within or in close proximity to employment centers will likely thrive in the near term, while more distant, exurban locations will lag in appeal.”
Be cautious about locations. “Picking a well-located site is extremely important,” Weaver says. “If you choose the wrong site, your project may suffer. And make sure your entitlements are in place.”