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AUSTIN-Apartment builders are busily adding to the capital city’s apartment inventory with 12,194 units under construction, according to the new US Apartment Market Report from M/PF Research.

When those units are ready for tenants, they will increase the city’s base by 9.4%. Overall, Austin ranks fifth nationally in current apartment construction.

“If you were going to pick one market across the US where construction is too aggressive at this point, it’s Austin,” Greg Willett, the director of research products for Carrollton, TX-based M/PF Research, tells GlobeSt.com. Willett suggests that apartment developers follow the advice recently offered to Austin office developers: Stop building.

Occupancy rates for office buildings and apartments are falling, according to M/PF. Over the past year, the occupancy rate dropped almost 4% to 94.1% in the year from July 1, 2000 through June 30, 2001. The pace of rent increases for comparable apartments fell to a moderate 4% from a peak of just less than 10%. A 4% to 5% increase is a more normal rate, Willett says.

Most of the new apartments are high-end, luxury units, he says, with just one of the projects a tax-credit complex. That means concessions and even slower rent increases. “A lot of places giving increased concessions are lowering their rates,” he says. “It wouldn’t be surprising to see at least flat rents in Austin.”

While the market is on its way to becoming overbuilt, Austin’s size usually means a fast reversal. “Because it (Austin) is a fairly small market, it can get overbuilt pretty quickly, but it can also then recover very quickly as well,” Willett says.

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