Real estate trends point toward stable growth even after Austin loses ‘supernova’ status

While Austin has moved out of the “supernova” growth phase among real estate markets across the nation, real estate and development professionals expect the Central Texas region to remain a hot spot in 2025 for many types of construction and property development.

Urban Land Institute Austin’s monthly breakfast panel last week looked at what’s forecast for the area in 2025, with industrial and housing units expected to remain strong while the local office market grapples with a slowdown seen in many other major metro areas.

ULI’s national Emerging Trends in Real Estate 2025 report looked at the population and demand expected to shape the city’s development economy, which panelists said is still recovering from the inflation and labor pressures that caused building costs to spike in recent years.

The report showed Austin has benefited from its growing tech economy, its position as a regional logistics hub and consistent business migration into Texas. Industrial transaction volumes for 2024 year to date are $872 million, pointing to sustained investment in this sector.

Housing remains an ongoing concern as the city’s supply of new units has not kept pace with population growth.

The completions-to-household formation ratio of 0.91 is below the national benchmark of 1.14, signaling an undersupply that continues to drive up costs. At the same time, median home prices have risen relative to incomes, with Austin’s price-to-income ratio now at 4.55, well above the pre-pandemic standard of affordability. The report notes that a constrained housing supply affects affordability across all price points and that adding supply at scale could help address these pressures over time.

Sergio Negrete, vice president of development for Catellus, said the need for new homes, multifamily units and commercial space will continue to attract builders to Austin.

“We’re seeing strong interest from residential builders right now just based on the amount of supply in the market compared to the demand,” he said. “We’ll continue to see the home builders flock to well planned, well designed master-plan communities and look to deliver more housing stock on the retail front. Historically, in Austin we’ve been undersupplied with retail and the development has started moving to the tertiary market. So Round Rock, Kyle, Buda, Georgetown, Liberty Hill are seeing a lot of growth from a retail perspective, and those typically are going to follow the rooftops as well.”

The office market continues to show signs of strain, with high vacancy rates in central business districts and the impacts of hybrid work patterns persisting. Suburban office properties and specific subsectors such as medical office spaces appear to be faring better, but overall demand for office space remains uneven. Multifamily real estate, meanwhile, continues to attract investor interest, with transaction volumes reaching $1.89 billion in 2024. However, concerns over pricing and the potential for oversupply have tempered expectations for the sector.

“The jury’s still out on where we’re headed on office,” said David Knoll, senior director of real estate development for Ryan Properties. “In my opinion, we left somewhere at Covid and we haven’t ended up where we’re going to be with office. … What I’m hearing from some of our equity sources, and as I talk to other folks like the Texas Real Estate Conference at McCombs, is that we’re in for a bit of a long haul in terms of office and where we’re going to end up.”

The report emphasizes that cities like Austin will need to balance growth with long-term affordability and infrastructure needs. Housing supply remains a focal point, as undersupply threatens affordability for current and future residents.

Darlene Louk, a director for the Hines development company, said recent industry data show even with recent increases in building Austin needs to increase its housing pace by roughly 40 percent to keep up with expected population growth.

“Austin typically does about 18,000 to 20,000 home starts per year. The current projection was that for the next 30 years, Austin would need to deliver 28,000 homes every year to meet the demand,” she said, “We’re at 20,000 right now and we are struggling to get land to build those lots to deliver to builders. So there’s a big, big gap in us being able to supply enough lots to the home builders to meet demand.”

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