Apartment Oversupply Spurs Rental Concessions in Central Texas

Central Texas is a renter’s market, as oversupply of apartments is leading to widespread concessions.

Thousands of units have been delivered in San Antonio and Austin without sufficient demand to keep occupancy levels stable, the Austin Business Journal reported, citing MRI ApartmentData. The supply imbalance has shifted the dynamic, giving renters the advantage.

In San Antonio, 14,500 units were delivered in the past year, yet only 7,630 were absorbed. Average rent in the city dropped 5 percent to $1,168 in January, down from a peak of $1,230 in mid-2023. With 9,000 units under construction and 16,700 more proposed, landlords are struggling to fill vacancies.

Austin faces a similar challenge, with average rental rates plummeting 12.5 percent from a two-year high of $1,640 in mid-2023 to $1,435. The city has added 36,000 apartments over the past year, and only 19,000 units were absorbed.

The occupancy rate of 84.1 percent in Austin is a slight improvement over the low of 83 percent in July, while 16,500 are units under construction and 36,000 proposed.

The excess has compelled landlords to compete for tenants. Seventy-two percent of Class A properties in Austin are offering concessions above 10 percent, often translating to at least one month of free rent.

The rate of discounts exceeds those in Dallas and Houston, where only 55 percent of high-end apartments provide incentives, averaging 9.2 percent and 8.7 percent respectively.

Meanwhile, developers are pushing forward. CSW Development, for example, is demolishing the former Strait Music Company building in South Austin to make way for a five-story apartment building at 4215 South Lamar Boulevard.

— Andrew Terrell