Austin Real Estate Investment Update Q2 2023

Austin Real Estate Investment Update Q2 2023


This Austin Investment Update provides valuable insights into the current trends and opportunities in the real estate market in Austin. Staying well-informed about the latest city developments is crucial for making informed and strategic investment decisions.


Project Connect: Austin Light Rail Project Enhances Transit in the City


One particularly noteworthy development is the Austin Light Rail Project, also known as Project Connect, which aims to significantly improve the transit system in the city and connect downtown Austin to the northern suburbs.

Project Connect is a major infrastructure project focused on enhancing travel efficiency and convenience for Austin residents. Austin Transit Partners (ATP) presented five light rail options for citizen consideration and actively sought public input through virtual meetings and an online survey. The initial phase of the plan, which was recently adopted, involves the construction of two light rail lines: the Orange Line and the Blue Line.


Spanning approximately 21 miles, the Orange Line will connect North and South Austin along North Lamar Boulevard and South Congress Avenue, featuring 22 stops along its route. This line will greatly enhance transportation options for residents and commuters in the area.

On the other hand, the Blue Line will connect downtown Austin to the east, running along Riverside Drive and Airport Boulevard for approximately 15 miles and encompassing 17 stops. This connection will significantly improve accessibility to key areas of the city.


The first phase of construction, covering 9.8 miles and comprising 15 stations, is expected to commence in 2024 and conclude by 2029 or 2030. The estimated cost for this phase ranges from $4.5 billion to $4.8 billion. Once completed, the new light rail service is anticipated to benefit an average of 28,500 passengers per day. The plan prioritizes downtown Austin and areas with high population and employment density, ensuring that it serves diverse communities, including minority and low-income groups. It is expected that the implementation of the light rail plan will have a significant impact on the downtown Austin real estate investment landscape, potentially leading to an increase in land and home prices in the surrounding area.


Texas Launches 403 Tax Incentives to Attract Businesses


In addition to the transportation improvements, Texas has recently introduced a new tax incentive, the 403 Tax Credit, to attract businesses and investors to the state. Known for its business-friendly environment, Texas aims to stimulate economic growth, create more job opportunities, and strengthen the local economy through this initiative. The 403 Tax Credit offers qualified businesses deductions for real estate taxes, sales taxes, and other operational expenses. This tax credit follows the expiration of the previous 313 tax incentive, which had successfully attracted numerous large companies to Texas.


However, businesses must meet specific eligibility requirements to benefit from the 403 Tax Credit. These requirements include job creation in designated areas and meeting certain investment capital thresholds. The extent of the credit and the exact amount will vary based on factors such as the size and type of the business.


The 403 tax incentive has already generated considerable interest from the business community and investors. Eligible businesses will enjoy tax relief and benefits, which are expected to attract more investment and foster economic growth. It remains to be seen which out-of-state business will be the first to leverage the 403 tax credit and establish a presence in Texas.


Mega-Communities Approved for Construction Around Austin


Moreover, the development scene around Austin is experiencing a significant boom, with the approval of two mega-communities for construction. These projects have the potential to transform their respective areas and offer exciting opportunities for businesses and investors.

The Adelton mixed-use community project, located in Bastrop on the east side of Austin, is already underway. This ambitious project aims to create a 348-acre mixed-use community featuring 1,200 homes, 125,000 square feet of commercial space, four miles of scenic trails, and 50 acres of parkland. Construction began last October and is expected to span 10 to 15 years. Currently, the project is actively seeking commercial tenants for various commercial sites, providing excellent opportunities for business development. These sites offer convenient access and high visibility, making them attractive options for businesses.

Bastrop has become increasingly appealing as a business destination, partly due to its proximity to the Tesla Giga Factory. Furthermore, Elon Musk’s companies, including the Boring Company and SpaceX, have chosen to establish a presence in Bastrop. These factors contribute to the growing interest from businesses and investors in the area.


Another significant development is the approval of a “new town” on Solana Ranch, located north of Jarrell. An Arizona-based developer has received the green light to build on this 7,000-acre site, which has the capacity to accommodate up to 14,000 homes and establish the Solana Municipal Utility District No. 1. The Texas government will provide infrastructure funding for this project, aligning with the recently passed Texas House Bill 5367.

Situated approximately 45 miles north of downtown Austin off I-35, Solana Ranch spans 9,000 acres and encompasses ranch and wildlife habitat. The total investment for this project is estimated to reach $20 billion. The approval of this new town paves the way for future development and potential growth in the region.