The Wall Street Journal named Austin again as one of the few appreciating markets in the country last week. More importantly, the article made a key point: In difficult times, go back to the basics….and in real estate that means one thing:
Location. Location. Location.
The article made interesting notes about the difference in appreciation within different areas in a city. Round Rock is compared with south Austin in the chart below.
So what’s the difference in the areas in the charts? Schools, employers and infrastructure certainly play a factor, but for Austin I believe it is available land.
As national level builders are suffering in the coastal markets, they’re scaling back production and selling inventory in Texas and more stable areas to help recover some of their losses elsewhere. As a result, they are cutting prices locally to quickly sell their inventory which affects the re-sale markets in suburban Austin. In the end, pricing all comes back to supply and demand, and Central Austin is remains stable because there are few sizeable tracts available for development which constricts the supply, while demand continues to grow as job growth remains high. Read the WSJ article.
Case in point, WPP Advertising announced a 70,000 SF lease downtown last Friday. The new branch agency was formed in conjunction with Dell to consolidate all of Dell’s advertising. When they open their doors, they will house 200 employees and will be the second largest ad agency in Austin behind GSD&M. My prediction: as long as job growth remains stable, Austin (especially central) will continue to thrive. Dell ad agency announcement.
