Austin Business Journal writes, "There's likely to be a multiyear pause in new residential construction in downtown Austin in the wake of a recent building boom, experts say.
Downtown residential projects completed in recent years include the 56-story The Modern Austin Residences developed by Urbanspace, the 41-story Vesper condo tower developed by Pearlstone Partners and The Linden, a 28-story condo tower developed by Reger Holdings LLC and the Armenia Group.
The area has been a big draw for wealthy Austinites, lured by its unique combination of nightlife attractions, dining opportunities, residential development and office buildings that make it possible to live close to work. That has made the main downtown ZIP code — 78701 — the wealthiest ZIP code in the metro for the second straight year.
That's according to the Austin Business Journal’s 2025 ranking of the wealthiest ZIP codes in the Austin metro, which pegs per capita income in 78701 at $137,841 and the median home value at $703,178. The list is below this article. Over 11,000 people call downtown home, according to list research.
But downtown's momentum could stall in the future. Chris Zaiontz, president and partner at Pearlstone, said he doesn’t expect many new condos or residential units to be added downtown for the time being. Experts have predicted a similar trend for office tower projects.
“The pipeline is really small,” Zaiontz said. “Looking forward, there's really a very limited number of new construction residences, at least for sale, for the entire downtown market.”
One key project that will add more apartments downtown is the 74-story Waterline, developed by Lincoln Property Co. and Kairoi Residential, which is set to deliver in 2026 with 352 luxury units. When it comes to condos — which are owned rather than rented — Zaiontz said he doesn't expect any new deliveries in the next 24 months, estimating that 260 new units are unsold between the Linden, Modern and Vesper towers.
Zaiontz also said high interest rates and cautious capital markets are making it difficult to get new condo projects financed.
In the apartment market, downtown's vacancy rate has been over 10% since the third quarter of 2021, according to CoStar data. According to the figures, more than 3,000 units were added downtown from the third quarter of 2021 to the second quarter of 2025, increasing inventory by 77%. The vacancy rate downtown hit 14.8% in the second quarter this year.
Kevin Burns, CEO of Urbanspace, said most new projects downtown are apartments. He expects the condo market to see a long pause before new product is delivered, saying it generally takes three years for a high-rise to get started. Still, he said the market will benefit from a pause in new supply.
“We're stable for the next six months, and then I feel pretty strongly that we're going to see a cut in interest rates,” Burns said.
If interest rates fall, Burns said more buyers will enter the market, shifting the downtown condo market to a seller's market in the next six to 18 months and potentially spurring new projects. But even if financing loosens, Zaiontz said it could be close to 2029 or 2030 until any new projects are delivered.
As for the downtown ZIP code's status as the wealthiest in the Austin area, Burns said he isn't surprised, given downtown's numerous attractions. He expects it to only become more coveted, especially as more office leases are signed.
“I just think it's getting better and traffic is not going to get any better, right?” Burns said. “As they tear up I-35, which has already begun, more people will want to live downtown, because they're trying to avoid having to drive.”
Zaiontz said Pearlstone is optimistic about downtown's long-term future, as well. The company owns two properties, one in the Rainey Street district and another near the state Capitol, that it plans to develop into residential projects when market conditions improve.
“People are always going to live downtown — it has so much to offer, from the food and beverage scene to the entertainment scene,” Zaiontz said. “You have a major university and a state Capitol, all within a few square miles of each other. We're very bullish on the continued success that downtown Austin has seen.”
While more high-rises could come downtown, Burns said there's a limit to what can be added.
"We're not like Houston or Dallas, where there (are) countless sites that you can build a tower on," Burns said. "There's literally only a handful of sites that you'd want to build a high-rise condo tower on” in downtown Austin.
Still, both Burns and Zaiontz said the South Central Waterfront area — which is directly south of Lady Bird Lake and includes the former site of the Austin American-Statesman — could be a great place to build more high-rises and expand downtown. Major projects in the South Central Waterfront include Endeavor's plans to redevelop the Statesman site, Related Co.’s plans to build several towers on six acres that currently hold Ego's karaoke bar, and the Hunt Companies plans to build three towers along Riverside Drive.
But Zaiontz said he expects the bulk of high-rise development to continue to be concentrated in the 78701 ZIP code before buildings go up south of Lady Bird Lake.
“I just think it's going to take a longer period of time, one, to capitalize projects that big,” Zaiontz said. “I just think there's a lot of projects north of the river that have been on the sideline waiting to go. If both opportunities were available to buyers, tenants, office users, hotel guests, I still think people are going to prefer north of the river.”"
Source: Austin Business Journal
Written by: Sean Hemmersmeier
Published: September 6, 2025
Posted by Grossman & Jones Group on
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