Occupancy & Rent Trends

Metro Occupancy Overview

After falling during the second quarter, overall occupancy rebounded in the third quarter, increasing 0.42 points to 93.39%.   Overall occupancy is 0.20 points higher than it was one year ago.  Class A occupancy surged ahead a full 1.24 points over the quarter to 93.81%, which represents a 1.22-point annual gain. Class B occupancy fell 0.23 points over the third quarter to 93.85%.  Despite the fall, Class B occupancy remains 0.04 points above last year’s level.     Occupancy in the Class C market registered a 0.62-point quarterly gain to 92.27%, but is down 1.20 points over the year. Class D occupancy fell 3.79 points over the quarter and is down 1.41 points over the year to 89.91%, which is the weakest occupancy figure of all classes.

Of the submarkets with more than one property, San Marcos reported the highest Class A occupancy at 97.31%, while the lowest Class A occupancy was reported in the East submarket at 36.00%. In the Class B market, UT Campus reported the highest occupancy at 98.48%, while the Southwest submarket posted the lowest occupancy at 79.62%. In the Class C market, UT Campus, which was near full, recorded the highest occupancy, while the East submarket reported the lowest occupancy at 82.35%. In the Class D market, the East submarket reported the highest occupancy at 94.54%, while the South submarket posted the lowest occupancy 85.18%. 

Submarket Performance
Of the 22 Austin submarkets, the Southwest submarket reported the highest absorption over the quarter, at 181 units, followed by the Cedar Park/Leander submarket, which posted absorption of 173 units.  The weakest demand was found in the Arboretum submarket, which absorbed -163 units over the quarter. 

Within each of the classes, the Southwest submarket reported the highest Class A absorption over the quarter with 180 units absorbed, while Arboretum reported the weakest absorption with -45 units absorbed.   Absorption in the Class B market over the quarter was highest in San Marcos at 52 units and lowest in the Arboretum submarket at -31 units.  In the Class C market, the Far West submarket posted the highest absorption, as 91 units were absorbed over the quarter.  The weakest Class C absorption was posted by the Arboretum submarket, with -87 units absorbed.  Class D absorption was strongest in South submarket, with 20 units absorbed, and weakest in the Southeast submarket, with -64 units absorbed. 

Apartment Inventory
There are a total of 676 operating or under-construction projects (greater than 25 units) in the Austin metro market with a total of 145,923 units. Approximately 43% of the total units is Class A, 35% is Class B, 19% is Class C, and 3% is Class D. The chart and table below display Greater Austin apartment market inventory by class.

* Class B also includes Affordable Housing developments
** There are additional Unclassified (Class U) projects

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Economic Fundamentals

Job Growth
The civilian labor force unemployment rate in the five-county Austin-Round Rock MSA increased to 3.5%, while the total number of nonagricultural wage and salary jobs increased to 749,600 in August 2007, according to the Texas Workforce Commission. This month’s total is 29,500 jobs more than at this time last year.  Of the nonagricultural employers, the Government sector gained 6,600 jobs over the previous 12 months; Trade, Transportation, & Utilities’ employment increased by 4,900 jobs; Leisure & Hospitality added 4,400 jobs; Mining & Construction employment increased by 3,500 jobs; Professional & Business Services added 2,800 jobs; Other Services gained 2,000 jobs; Financial Activities gained 1,700 jobs; Manufacturing and Education & Health Services each added 1,600 jobs; while Information employment increased by 400 jobs over the last year. 

Interest Rates
The yield on the 10-year Treasury note rose to 4.58% in September 2007, which is down 0.05 points from its 4.63% yield one year ago.

The 30-year fixed-rate mortgage (FRM) averaged 6.38% in September 2007.  One year ago, the 30-year FRM was at 6.40%.  The average for the 15-year FRM in September was 6.05%, up 0.02 points from a year ago.

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Austin Market Map

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Methodology

Data Collection
Our in-house research team continuously updates over 100 fields of data for nearly 6,000 apartment complexes in our database. We update at least 90% of properties on a monthly basis to generate accurate market trend reports on rents, concessions, occupancy, etc. Our monthly surveys also update other property-specific data such as fees, policies, management, and owner information. On a less-frequent basis we update amenities, schools, and other data fields that change rarely. We perform current and historical data audit after we close each month's survey to identify any data inconsistencies or incorrectly keyed values.

Research
We monitor various news media, press releases, marketing materials, web-sites, CAD records, permit issuance, and other sources to capture new construction, planned projects, financing, and sales. Our researchers conduct phone interviews with relevant developers, brokers, or lenders to gather information on new construction and sales. We add properties to our database on a regular basis to ensure we offer the most up-to-date and complete apartment database.

Market Coverage
Our online apartment database covers all four major Texas metro markets - Austin, Dallas-Fort Worth, Houston, and San Antonio. The Austin market includes Caldwell, Hays, Travis, Bastrop, and Williamson counties. The DFW market covers Dallas, Tarrant, Wise, Denton, Collin, Hunt, Rockwall, Kaufman, Ellis, Johnson, Parker, and Erath counties. The Houston market includes Harris, Montgomery, Fort Bed, Brazoria, and Galveston counties (Brazos county is also included in the database but excluded from the trend reports). San Antonio includes Bexar, Comal, Guadalupe, Kendall, and Kerr counties.

We subdivide each market into submarkets (see map above): Austin has 23 submarkets, DFW has 50 submarkets, Houston has 53 submarkets, and San Antonio has 26 submarkets. The submarkets are based on neighborhood-style areas with defining boundaries such as major roads and other factors that establish a neighborhood. This approach allows the user to view distinct areas of properties that have evolved into their own sections of town and can be identified together.

Glossary
Absorption = Change of Occupied Units, including new construction. Absorption is a proxy for demand.

Occupancy = Percentage of physically occupied units on property.

Pre-leased = Net of percentage of units that have been pre-leased but not yet occupied and units on notice to be vacated.

Rents = Market rents (excluding concessions).

Class = Properties are classified as A, B, C, D, or Unclassified (U) based on various factors, such as age, location, amenities, curb appeal, overall condition, rents, etc. Class A properties are generally less than 10 years old, have excellent amenities, prime location, and great appeal, thus they tend to have the highest rents. Older properties built in early 1900s that were converted from warehouses or office buildings, or older apartment projects that have had major renovations may also be classified as A. Class B properties are generally 10 to 20 years old, have good locations, good level of amenities, are somewhat less appealing than Class A projects, and are in overall good condition. New affordable projects are also classified as B. Class C projects are usually 20 to 30 years old, have few amenities, are in poor locations, and are not well maintained. Class D projects are generally more than 30 years old, in poor condition, have no or limited amenities, are in poor locations, and have poor curb appeal. They tend to have the lowest rents per unit (although per-square-foot rents may be high since the units are usually small). Unclassified or Class U projects are senior housing, student housing, or other properties that have unusual lease terms, include meals with the rent, or other services, so their rents and occupancies are not representative of the actual market. We exclude these from our statistical reports as they skew the averages for the other classes.

Reporting
Occupancy, Rent, and Absorption trend data is based on Operating, Under-construction, and Under-renovation projects, Classes A, B, C, and D (excluding Class U).

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