The City is Hitting on all Cylinders

Austin faces challenges in affordable housing and transportation.

AUSTIN, TX—Austin’s hot button issues include transportation, infrastructure and the environment, with developers at the mercy of each. There are struggles of keeping up with supply and demand in the capital city. In preparation for RealShare Austin coming up on June 2, Jamil Alam , managing principal, Endeavor Real Estate Group , discussed the area’s transformation including the latest trends and general issues facing Austin today, in this EXCLUSIVE . In the short term, the city is in good shape on the fundamentals and job growth remains steady, says Alam. The hot locations are downtown and Domain , with high walkscores being critical. The office and multifamily supplies are healthy, but absorption remains quite strong. Alam tells GlobeSt.com: “Generally, the city is hitting on all cylinders, however, I see a window in 2018 where new supply dries up with not much of a pipeline.” Despite this boom time, some of the challenges are in affordable housing and transportation. “These are Austin’s Achilles heels,” Alam tells GlobeSt.com. “Affordability has become an acute issue, and I fear will continue to get worse. The two biggest obstacles to addressing affordability are property taxes and land use constraints.” Alam says property taxes have reached a point where they are creating some serious issues for property owners of all types, in both commercial and residential real estate. “We have had tenants tell us they will be closing their businesses, property owners who have chosen to sell their properties, and residential tenants who can’t afford escalating rents (heavily driven by tax increases) so they are moving down in size, moving further out to burbs, or moving in with their parents,” he says. City of Austin land use constraints are choking the supply side and driving up costs. Construction lending on the multifamily side has pulled back significantly since first quarter 2016 due to regulatory pressure and banks needing to maintain ratios. And, larger projects with larger loans are much more difficult to get financed, Alam says. “Overall LTCs with banks have pulled back, interest rates are up and recourse is up,” Alam tells GlobeSt.com. The lack of transportation alternatives due to the vacuum in the market created by the exit of Lyft and UBER is influencing people’s housing choices. The three groups affected the most are the handicapped, downtown dwellers and those who are too inebriated to drive late at night. “Quite simply, people don’t view taxi cabs as a local transportation alternative that can be used on a daily basis,” Alam says. “Suburban dwellers already own cars. But, downtown dwellers now need to buy or rent cars, and if they have to buy or rent a car, then they have to pay for a parking space in a garage or possibly pay for spaces in both their apartment and their office building garages.” Finally, Alam says there is very little need for retail development unless it is grocery-related, service-related, a bar/restaurant or has an entertainment component (i.e. Domain–Rock Rose). “Retailers with heavy brick and mortar presences are getting crushed by e-tailers,” he says. Austin development is abundant. What are the active markets? Who are the key players? Join us at RealShare Austin for market intelligence and the best networking in the biz.