We are pleased to feature some commentary from Rosey Miller, CEO of Regional Investments & Management, on the growing Central Texas housing markets as it relates to commercial real estate investing. Learn why San Antonio and Austin have been the focus of RIM’s investment strategy. You can view RIM’s latest investment opportunity in San Antonio here.
The following are solely the opinions of Mr. Miller and do not constitute financial advice or counsel from RealCrowd. As always, please consult your investment advisor prior to making any investment decisions.
As home pricing gradually ascends, new construction lags and lenders continue to abide by stringent underwriting criteria, US home ownership has declined to 63.7%. Data shows that the millennial and generation x segments bide their time preferring the flexibility, amenities and social aspects of multifamily housing. This structural demographic shift of rent-versus-own supports continued investment opportunity in the multifamily sector.
Young professionals are increasingly moving into these metros as job openings and hiring increase, creating increased demand for rental housing. While for-sale housing remains affordable, most of these young adults prefer or are economically required to remain renters, particularly in live-work-play neighborhoods as the cost of home ownership is typically more expensive than the metro median-priced homes.
The central markets of Texas – Austin and San Antonio have been ripe beneficiaries of these trends. That coupled with the area 2.6% and 3.2% respective unemployment rates, plus 3% forecasted job growth and declining 2016 apartment deliveries, both markets are projected to maintain robust multifamily investor demand in search of attractive returns.
Value-add assets remain in high demand and are being aggressively sought by investors with local, regional and national platforms. Value-add enhancements range from proper general maintenance to comprehensive interior and exterior renovations to achieve alpha returns. San Antonio deliveries are expected to sharply decline in 2016 paving the way for potential improved operational performance as rental rates are forecasted to increase some 3.8% during the next one-year cycle.
According to ALN-Apartment Data, Inc. – an independent multifamily research firm, San Antonio received an “A” performance for the first half of 2015. Average occupancy increased 1.9% over prior six months on top of 3,600 net unit absorption.
Austin received an “A-“ as net absorption in Austin outpaced new construction as average occupancy grew to 91.4% at the mid-year point. Close eyes remain on future deliveries which are expected to be absorbed but cause a moment of pause for investors. Effective rents rose some 7.3% over the last year with approximately one-half of those gains in the last six months.