Q1 2025 Austin Multifamily Market Report

Key Findings

• A large wave of newly delivered units overshadowed high demand, increasing the market’s vacancy rate to 14.9%, the highest in the country.
• After a record 31,000 units were delivered in 2024 and construction starts fell, completions are anticipated to fall by 65% in 2025.
• Demand in the market is forecast to moderate in 2025, with the absorption rate estimated at 3.3%.

By the Numbers

Source: CoStar Group

Austin Demographics

• Unemployment Rate: 3.5%
• Current Population: 2,580,136
• Households: 1,083,374
• Median Household Income: $101,812 | Source: CoStar Group

At 1.4% total employment, Austin’s labor market is still at its lowest point since early 2021. Non-cyclical industries including government, healthcare, and education have contributed to growth over the previous year, creating 40% of the 17,300 jobs created since August 2023. Since the state capital employs 15% of the workforce, state and municipal governments offer steady jobs.

Market Performance

Austin continues to navigate excess supply, which has increased the vacancy rate from 14.3% in Q1 2024 to 14.9% in Q1 2025. After delivering a record 31,000 units in 2024, a reduced pipeline for deliveries in 2025 is expected to move the market towards equilibrium. Completions are predicted to fall by 65% in 2025. Overall, Austin’s supply has grown by nearly 11%, topping all major U.S. markets. It is expected to drop to 3.5% by the end of 2025 and 1.6% in 2026 if current trends continue.

Given the abundance of newly developed units, tenants have maintained pricing power. Over the last year, average asking rents have fallen by -4.3%, the largest drop in the U.S. Fortunately, a consistent decrease in units delivered from around 5,500 units in Q4 2024 to roughly 3,600 units in Q1 2025, signals a possible turning point for rent trends.

Construction

With 25,000 units constructed in the last 12 months, Austin’s latest supply surge has dramatically disturbed the supply-demand equilibrium. However, the development cycle has reached its peak. Deliveries declined by 45% in Q4 2024, with another 20% drop in Q1 2025. The market’s pipeline is also shrinking. However at 22,000 units, it is still significantly larger than the 13,400-unit 2015 to 2019 average.

Sales

The rapid expansion of supply, particularly over the last year, has increased competition and reduced asking rents. With top-line growth under strain, rising property taxes and insurance costs are further reducing NOIs. One strategy for making deals more appealing is to assume the agency loan on the target property, which allows buyers to avoid greater capital expenditures. A notable example of this strategy is UDR Inc.’s purchase of the 300-unit, 96% occupied Palo Verde for $220,000 per unit, or $65.3 million. The buyer assumed the 3.2% fixed-rate agency loan, which was augmented by cash and REIT shares.