In the country’s largest apartment markets, living downtown is, on average, 28 percent more expensive than living outside it. Though it has been widely understood that urban living is pricier than suburban living, the premium that downtown living commands range widely.
Called the central business district (CBD) for good reason, downtowns often house the market’s job center. And, increasingly, downtowns are becoming culturally significant submarkets as well. These trends translate to higher premiums in some markets more than others.
Austin serves as the prime example of this trend: It costs nearly double to live in the Downtown/University submarket than it does to live in the rest of the metro.
Like many other maturing markets across the nation, downtown Austin’s allure has solidified during this real estate cycle as the urban core has added more live, work and play options.
Even as early as 2005, living downtown was about 60 percent more expensive than everywhere else in Austin, on average. Yet, that spread peaked in early 2012 as downtown rents were on average 119 percent more expensive than the rest of the market. Today, to live in the Downtown/University submarket, which is more than 22,000 units, it will cost just shy of double the market average of $1,257 per month in Q1 2019.
Being the economic and cultural center of the metro makes downtown Austin a highly desirable area in which to live – especially considering that accessing the area from other parts of the metro can be cumbersome. With only one primary route into the area – Interstate 35 – commute times in Austin are long and increasing due to overcrowded road infrastructure. The average one-way commute time in Austin is about 25 minutes, according to the Census Bureau. Living close enough to a job center to negate a car commute commands a premium.
Some of the advantages Austin’s downtown enjoys are present – but to a lesser degree – in Philadelphia, Houston, Chicago and Cleveland, where urban cores also have serious pricing power over the rest of the market.
- Philadelphia’s urban core, called Center City Philadelphia, has evolved quite a bit in the past decade. In addition to long-standing anchor employers such as Aramark and Comcast, the submarket has quadrupled the number of employees in the area since 2005.
- Houston’s CBD premium can be attributed to sprawl more than any other market on our list. Downtown Houston’s three submarkets: Downtown/Montrose/River Oaks, Greenway/Upper Kirby and West University/Medical Center/Third Ward, make Houston’s area geographically much larger than any other area RealPage’s report lists.
- Chicago has a defined difference between the urban core – Streeterville/River North and The Loop – and everything else. River North is a lively cultural neighborhood, business hub and shopping and entertainment destination. Streeterville lies just north of The Loop, home to most of the city’s most recognizable buildings—and employers.
- Cleveland has been on the steady uphill climb. The submarket now employs more than 100,000. Central Cleveland has grown its inventory by 27 percent since 2010, accounting for more than 2,500 new units. As a whole, Cleveland has grown inventory by less than 5 percent since 2010.