Article by: StorageCafe
Austin To Register Booming Levels of Construction Across All Real Estate Branches, But Residential and Office Are Its Brightest Stars
Austin has gradually garnered a reputation as one of the hottest places to move to thanks to a combination of employment opportunities, more affordable housing than in other cities and a well-rounded array of city amenities. In the decade ending in 2020, Austin’s population increased by 33%, making it one of the fastest-growing places in the U.S., whether it’s because of the many Californians moving here or people from other states who also relocated here. They’re attracted by the lower cost of housing and the multitude of employment opportunities, mainly in tech, finance and healthcare. As many of them moved here throughout the years, the local real estate market saw demand across the board as the need for housing and an increased expenditure powered construction on the residential, commercial and industrial levels.
As such, thanks to the newly created demand, Austin amped up its development efforts across on all real estate fronts. That’s according to a StorageCafe study looking at the real estate development activity in the hundred largest cities by population for the 2013 to 2022 decade. They created a ranking based on a combined score that considered residential and commercial construction, including the self storage sector. As it turns out, Austin ranks third for its construction performance across the entire real estate spectrum. While all sectors yielded large volumes of construction, it’s the multifamily, single family and office construction that set Austin apart from the crowd, as the city registers the third-highest construction volumes in the country across these three real estate classes.
Multifamily is the best construction sector in Austin for the decade
With its population swelling over the past ten years, the need for local housing grew accordingly, leading to an impressive boom in the multifamily sector. Consequently, Austin issued close to 99K building permits for apartments for the 2013 to 2022 period, the third-highest construction volume in the country. Construction was steady throughout the decade, but beginning with 2017, construction levels continued on an uninterrupted climbing path. That year, the city issued 7K permits, and by 2021, that number more than doubled. However, it was 2022 when permitting peaked, with 15K permits for multifamily use registered in Austin, representing a 63% jump compared to 2013 deliveries.
Among Texas cities, Austin is the best performer for apartment construction based on apartment permits issued during the past decade. Houston comes second, with close to 90K permits for multifamily, and Dallas is even further behind, with about 69K apartments permitted for the same period. San Antonio (38K permits) and Fort Worth (37K permits) registered similar levels of apartment deliveries.
Single-family sector follows in the footsteps of multifamily on the construction front in Austin
The multifamily sector tells just one side of the housing story in Austin – they’re ideal for newcomers and locals who are not quite ready to settle down yet but need a place to live close to downtown. An apartment is also ideal for people who wish to live in neighborhoods located in the vicinity of their place of employment if remote work isn’t on their radar. However, as people who also wish to buy homes planted roots in Austin, the need for single-family homes became equally great. As it turns out, thanks to the intense development activity in this respect, Austin comes third nationally for single-family home construction, recording over 37K permits in the past decade. 2019 was a record year for construction, with about 4,570 single-family homes permitted. Previous years – 2017 (4,440 permits) and 2018 (4,430 permits) – recorded similar levels of construction. Close to the end of the decade, construction continued but at a slower pace, with 3,340 single-family home permits issued in 2022.
At the state level, Austin’s single-family development activity is remarkable, with only Houston and Fort Worth surpassing it by construction volume. Houston also comes first nationally for single-family home development, with about 56K permits delivered for the decade, followed by Fort Worth (51K single-family permits).
The booming business environment fuels decade-long office construction in Austin
People are not the only ones seeing opportunity in moving to Austin, but so do some businesses, with Tesla and other tech companies calling the “City of the Violet Crown” home now. Whether they’re local or moved from another place, the presence of businesses creates the right context for the expansion of office space. Austin delivered an impressive 25M square feet of office space, the third highest for the 2013 to 2022 decade. The city added an impressive 1.2M square feet of office space in 2019, the record-breaking year for the decade. Construction carried on at impressive levels throughout the decade, with 2017 (1.2M square feet) and 2020 (1.1M square feet) also registering booming levels of new development.
At the state level, only Houston is better positioned than Austin in terms of office construction, with 27M square feet of office space added to the local inventory for the last decade. Interestingly, Austin and Houston are the sole Texas cities to crack the top five most active markets for office construction across the nation.
Solid residential development supports the self-storage activity in Austin
The self-storage sector typically tails residential construction as people living in either apartments or single-family homes can make use of the service, whether they’re moving, downsizing, forming a multi-family household or need to keep an organized home while staying put. With Austin experiencing a whopping population growth for the decade, demand for self-storage was through the roof. Instead of keeping additional furniture, appliances and seasonal items in their homes, locals can turn to self-storage to help them store these items outside the home. Renting an Austin, TX, storage unit costs $120/month.
To respond to the existing demand for the service, Austin delivered an impressive 4.2M square feet of self-storage space, landing it in the top ten nationally for construction volume in the last decade. The city is shaping up to be one of the best self-storage performers of the decade in Texas, surpassed only by Houston (5.7M square feet) and San Antonio (5.6M square feet). Interestingly enough, Austin’s self-storage deliveries are ahead of those in Dallas, which boasts one of the largest self-storage inventories in the country.
Zooming in on Austin’s self-storage performance for the 2013 to 2022 decade, it turns out that 2017 was the highest point, with over 1M square feet of self-storage space delivered. While the sector was mostly active throughout the decade, 2015 and 2022 were the sole years to record no new deliveries. That’s because the city already boasts an impressive inventory of 9.7M square feet that boils down to 7.7 square feet per capita, a little over the national benchmark for per-person distribution of self-storage. With self-storage supply meeting demand, construction temporarily came to a halt. However, after the 2022 hiatus, new demand emerged, prompting new construction projects for 2023, and Austin is set to deliver as much as 90K square feet of self-storage space by the end of the year.