Texas: Bucking the Trend
Nov 1, 2008 12:00 PM, By Patricia Kirk
DEMOGRAPHICS
Population
Austin Metro: 1,557,829; Dallas/Fort Worth Metro: 4.8 million; Houston Metro: 5.3 million
Median Family Income
Austin: $58,241; Dallas: $41,281; Fort Worth: $51,53; Houston: $42,925
Unemployment
Austin: 4.5%; Dallas/Fort Worth: 5.1%; Houston: 5.0%
Retail Construction 2008
Austin: 2 million sq. ft.; Dallas/Fort Worth: 7.8 million sq. ft.; Houston: 9.1 million sq. ft.
Average Rent (asking)
Austin: $20.80; Dallas/Fort Worth: $15.77; Houston: $16.02
Sources: State of Texas Office of State Demographer, 2007; U.S. Bureau of Labor Statistics, Aug. 2008; Marcus & Millichap
Austin Rocks
The seat of Texas government and progressive pop culture, Austin has experienced a tremendous in-migration of professionals and well-paying jobs. The area's large, highly educated workforce has been particularly attractive to high-tech companies, which now number 3,000 and account for 14 percent of the region's jobs. Austin added 16,300 new jobs over the previous 12 months, according to a Marcus & Millichap third quarter report. It noted job growth in other areas too, including trade, transportation, utilities, and leisure and travel. The region will end the year with 10,000 new jobs; however, this is a decline from 2007 and 2006, when employers generated 25,400 and 33,100 positions, respectively. Residential and retail construction also declined. Retail construction slowed in 2008 to 2.0 million square feet delivered, compared with an annual average of 3.4 million square feet over the past five years according to Marcus & Millichap. Home starts dropped 30 percent in the first three quarters of 2008, to 7,546 units, according to Residential Strategies, Inc. Nevertheless, the Marcus & Millichap report predicts Austin retail rents will rise 4.7 percent by year's end, to $20.80 per square foot, and the vacancy rate will stabilize at 11 percent. Well-located properties are still trading at capitalization rates in the high 6s, but single-tenant properties are going in the 7s, which is attracting “cash heavy” buyers, the report notes. Good demographics, strong economic fundamentals and long-term growth are keeping retail investors interested in Austin, says Alan P. Rust, investment advisor for the Irvine, Calif.-based brokerage Sperry Van Ness. “The biggest problem now is underwriting debt,” he says. “It's dramatically different from a year ago.” In the meantime, the second phase of Indianapolis-based Simon Property Group's Domain project has broken ground. It will add 300,000 square feet of retail and double the number of residential apartments to 700 and office space to 90,000 square feet. This new town-center community is located in the affluent high-tech corridor, where toll roads are generating lots of residential and retail growth. Mixed-use developments downtown have also boosted the population there to 5,978. More than 5,000 units have been completed since 2000, and 12 projects are either under construction and/or planned. By 2015, Austin's downtown population is expected to reach 25,000, according to Austin mayor Will Wynn. Capitol Metrorail's new 32-mile rail system is driving transit-oriented development. Midtown Commons at Crestview Station is a $100 million development by Trammel Crow's High Street Residential. When completed, the project will have 64,000 square feet of commercial space, 50/50 retail and office, 900 apartments and 500 single-family homes and condominiums. Most of the commercial space and 300 of the apartments are expected to be ready for occupancy when train service begins in March. Transit-oriented development is also in pre-development in the affluent Westlake neighborhood at the end of the line and east of Austin's Mueller mixed-use development.
— P.K.
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