DATA POINTS
By
THE CAPITAL AREA COUNCIL OF GOVERNMENTS
[Link] FEBRUARY 2012
METRO AREA INVESTMENT PROSPECTS 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
URBAN LAND INSTITUTE INVESTMENT SCORE INDEX
THE DOUBLE EDGE SWORD OF ECONOMIC RESILIENCY
Austin dominates the list of best real estate markets in the most recent edition of Emerging Trends in Real Estate, an annual publication by the influential Urban Land Institute (ULI). Overall, Austin was named the countrys second best real estate market. The Austin region ranked in the top ten in each of three important categories: Investment Prospects for Commercial/Multifamily Properties by Market (2); Development Prospects for Commercial/Multifamily Properties (4); and For-Sale Homebuilding Prospects (2). Although the region remains relatively small compared to other leading real estate regions such as Los Angeles and New York City, Austin notably registers significant interest on investor radar screens. This moderately sized city features all the other ingredients needed for local economy to deal successfully with the nations early-21st-century realities. Nationally, the ULI report predicts that apartments will be the lone bright spot among property sectors. As the report states, expect a ramp-up in apartment development across many markets justified by plunging vacancies and continuing rent increases. Nowhere is this more true than the Austin region. While the strong real estate market may be welcome news for investors, those living in apartments will likely be less thrilled by recent trends. In the 4th quarter of 2011, apartments occupancy rates in Austin hit an extraordinary 95 percent. Regionally, occupancy rates havent been this high since the halcyon days of the 1990s technology boom. Unsurprisingly, extremely low vacancy rates have put significant upward pressure on rents. The average price per square of an apartment today is $1.05, a steep jump from two years ago, when the figure was just $.91 cents. Higher rents are largely the result of the twin forces of sustained population growth and a lack of new multi-family product. Despite the recession and lingering aftermath, Austin continues to attract new residents by the tens of thousands. During the past several years, however, relatively few apartment units have been constructed. In 2009 and 2010, for example, there were a combined 4,666 permits issued for multi-family units. This is just 55 percent of the number of permits issued in 2006 alone. It will likely take several years for supply to catch up with demand, forcing apartment dwellers to pay increasingly higher rents for the foreseeable future. Until then, as the ULI report suggest, it will be great to be a landlord in Austin.
Source: Emerging Trends in Real Estate 2011
AUSTIN MSA RENT & OCCUPANCY RATES
OCCUPANY RATE PRICE PER SQUARE FOOT
100% 80% 60% 40% 20% 0% 02 03 04 05 06 07 08 09 10 11
$1.25 $1.00 $0.75 $0.50 $0.25 $0.00
Source: Austin Investor Interests
MULTI-FAMILY PERMITS ISSUED IN AUSTIN MSA 10,000 8,000 6,000 4,000 2,000 0 2006 2007 2008 2009 2010
Source: U.S. Census Bureau
DATA POINTS
By
THE CAPITAL AREA COUNCIL OF GOVERNMENTS
[Link] WALKABILITY: THE NEXUS OF HEALTH & WEALTH
In addition to strong job growth, virtually every region in the top 10 of the ULIs 2012 Emerging Trends in Real Estate ranks highly on measures of walkability. As the ULI report notes, markets with high levels of walkability excel at attracting businesses, talent, and upper-income residents in outsized proportions. One noteworthy exception is Austin. Despite its second-place ranking among the nations strongest real estate markets, Austin features the lowest walkability score of any region in the top ten. So what is walkability and how is it defined? The ULI report relied on Walk Score, perhaps the most popular measure of walkability. According to the organization that calculates Walk Score, walkability is defined by the ability of individuals to run errands on foot. A Walk Score of zero suggests that all errands require a car. If daily errands do not require a car, a Walk Score of 100 is awarded. The precise methodology of Walk Score is fairly straightforward. Walk Score measures the walking distance to nine different amenity categories (grocery stores, restaurants, retail outlets, coffee shops, banks, parks, schools, books, and entertainment venues). Walk Score also calculates pedestrian friendless using two metricsintersection density (intersections per square mile) and average block length. Despite the simplicity of Walk Score, its validity has been affirmed in several academic studies. There is also a rather strong correlation between a regions Walk Score and the percentage of people who commute to work alone in an automobile each day. Additionally, high Walk Scores are associated with healthier residents. In the most recent GallupHealthways Well-Being Index, 7 of the 10 regions with the lowest rates of obesity among metropolitan areas with more than a million residents were also among the ULIs healthiest real estate markets. Austin and Houston, the two regions with the lowest Walk Scores among the 10 healthiest real estate markets, were notably absent from this list. In many respects, the Austin region has prospered during the past quarter century despite the lack of a greater level of walkability. If the examples of other metropolitan areas hold true for Austin, however, we could enjoy even greater levels of economic success while simultaneously lowering levels of obesity among our residents by becoming more pedestrian friendly. While its clear from the regions Walk Score that we have a long ways to go until Austin is considered a walkers paradise, the promise of greater wealth and greater health could motivate us all to reconsider our existing development patterns. 80% 70% 60% 50% 40% 30% 20% 10% 0%
FEBRUARY 2012
WALKABILITY FOR TOP 10 ULI REAL ESTATE MARKETS 100 80 60 40 20 0
0 = CAR DEPENDENT, 100 = WALKERS PARADISE
Source: Walk Score
PERCENT OF COMMUTERS DRIVING ALONE TO WORK
Source: XXX
TEN LEAST OBESE METROPOLITAN AREAS*
PERCENTAGE OF ADULTS WHO ARE OBESE
25% 20% 15% 10% 5% 0%
METRO ALSO ULI TOP 10 REAL ESTATE MARKET
* Metros with > 1 Million Residents Source: Gallup Healthways Well-Being Index
