Last week, construction began on RiverView, a 280,000-square-foot apartment complex on four acres near downtown Austin, Texas, which when completed will have 302 rental apartments in four buildings.
RiverView is the latest in a spate of apartment and condo projects that have sprouted in Austin over the last several years, as that city’s high-tech and research employers have become people magnets.
Austin is among the nation’s fastest-growing cities, and ranked 33rd out of 146 markets nationwide in August for online searches for real estate listings, according to Realtor.com. In response to this influx, builders have been busy, and housing starts rose by 27% in the third quarter, compared to the same period a year ago, to 1,706 homes, according to the market tracker Residential Strategies.
Austin has been trying to divert more of its burgeoning population into its city center. Its general plan calls for having 25,000 residents living in the 1,000 acres that make up downtown Austin by 2015. “It’s about halfway there,” observes Eric Van Hyfte, a project manager for BOKA Powell, RiverView’s architectural designer. However, he points out that the bargains for developers and builders are just outside the city’s downtown. “That’s where most of the money is going today,” he says.
Several of BOKA Powell’s recent projects in Austin are located near downtown, including the 200-condo W Residences, the 270-condo Barton Place, and the 118-unit Cole Apartments. BOKA is also readying the start of Lamar Plaza (its name will probably change, says Van Hyfte), a nine-acre complex whose wood-frame-over-podium buildings will house 441 rental units.
Near downtown is attractive because land in the city center “isn’t cheap,” says Van Hyfte. A half block goes for between $8 million and $9 million, whereas near downtown, “you can get 10 times the amount of land for that price,” he says. The same trend holds true with rents, which are rising in Austin in general and in its downtown in particular. In August, rents in Austin averaged $842.94, up $19.60 over the same month a year ago, according to O’Connor & Associates, a real estate service company that monitors rent movement in Texas’ major cities.
Van Hyfte notes that rents are going up even faster in Austin’s downtown, where rental units fetch between $2.15 and $2.25 per square foot. Near downtown rents, on the other hand, range from $1.50 to $2 per square foot. (Rents at RiverView will be at the upper end of the near-downtown range, he says.)
Regardless of the location, Austin can pose the same challenges for developers as most other cities, although Van Hyfte says the city has made it a bit easier to develop mixed-use properties.
That being said, RiverView—a waterfront property along Lake Lady Bird across from downtown Austin, which is accessible by public transit, bike trail, or even walking—took nearly six years to get off the ground. The project was initiated in 2006 under a different developer that was planning 200 for-sale condos. Construction began in 2009 but halted when the market’s condo sales went sour. The project fell into foreclosure, but one of its original investors, the Dallas Police & Fire Pension Fund, bought the note from the bank and hired local developer Bill Whitworth to complete the buildings. BOKA Powell redesigned its plans to get more density; the apartments will average 825 square feet, says Van Hyfte.
With land, RiverView will cost $75 million to complete, Van Hyfte estimates.
John Caulfield is senior editor for Builder magazine.
Learn more about markets featured in this article: Austin, TX.