April 2025

I talk a lot about housing in this blog. I try to focus all across Texas – but I live in Austin so that is the focus more often than not. Plus Austin’s housing is the most expensive of the Texas cities. Its been a problem for a while here – housing prices have risen drastically in the last ten-plus years. But credit where credit is due – the Austin City Council has recently taken a number of steps and passed ordinances to try to help the housing crisis. 

That trend continued again this month when the Council passed an ordinance allowing the construction of single-stair apartments. This seemingly subtle change in building codes has the potential to unlock a new wave of development and reshape the city’s housing landscape.

So, what exactly are single-stair apartments, and why is this ordinance a significant step for Austin? Let’s talk about it.

Single-Stair Building Should Benefit Many

Traditionally, building codes in many cities, including Austin, have mandated two independent stairwells for apartment buildings exceeding a certain height or number of units. This requirement, while prioritizing fire safety in larger structures, often made smaller, denser housing projects economically unfeasible. Single-stair apartments, as the name suggests, are multi-unit residential buildings that rely on a single internal staircase for access and egress. Modern fire safety measures, such as enhanced sprinkler systems, robust fire-rated construction materials, and interconnected alarm systems, are integrated into the design to ensure resident safety in these buildings.

By passing this ordinance the City Council has opened the door for a wider variety of housing types to be built across Austin. Previously, the two-stair requirement often pushed developers towards larger, more expensive apartment complexes to achieve economies of scale. Now, with the single-stair option available, developers can pursue smaller, more infill-oriented projects. This could lead to the construction of:

• Smaller apartment buildings: These buildings, often ranging from a few units to a dozen or so, can be integrated into existing neighborhoods more seamlessly, utilizing smaller or irregularly shaped lots that were previously unsuitable for larger developments.
• “Missing middle” housing: This term refers to a range of multi-unit housing types that fall between single-family homes and large apartment complexes. Single-stair construction facilitates the development of duplexes, triplexes, fourplexes, and small apartment buildings that offer more density than single-family homes while maintaining a neighborhood scale.
• Accessory Dwelling Units (ADUs) with multiple units: While ADUs have gained traction in Austin, the single-stair ordinance could potentially allow for the construction of ADUs with more than one rental unit in certain configurations, further increasing density on existing single-family lots.
• Adaptive reuse projects: Older buildings that might have been challenging to convert into multi-family housing due to the constraints of fitting two stairwells could now be viable for residential use with a single, well-designed staircase.

The fundamental goal of allowing single-stair apartments is to increase the overall housing supply in Austin. By making it economically viable to build a wider range of housing types on more diverse parcels of land, the city aims to accelerate the pace of development. The logic is straightforward: when the supply of housing increases, there is less competition for available units, which, in turn, can help to stabilize and eventually lower housing costs.

City Council Has Been Pro-Housing Lately

For years, Austin’s rapid growth in population and employment has far outpaced the creation of new housing units. This supply-demand imbalance has been a primary driver of the city’s affordability crisis. By enabling the construction of more units, including smaller and potentially more cost-effective options, the single-stair ordinance directly addresses this imbalance. Smaller buildings often have lower per-unit construction costs, which can translate to more affordable rents and sale prices. Moreover, infill development in existing neighborhoods can reduce the need for extensive new infrastructure, further contributing to cost efficiency.

As I mentioned above, the approval of the single-stair ordinance is not an isolated event but rather part of a broader trend in Austin towards adopting policies aimed at boosting housing supply. In recent years, the city has taken several significant steps to reform its land development code and streamline the permitting process. Some notable examples include:

• HOME Initiative – The Home Options for Middle-income Empowerment (HOME) initiative has been implemented in phases:​ 
  • Phase 1: Allows up to three units on lots previously zoned for single-family homes. 
  • Phase 2: Reduces the minimum lot size for single-family homes from 5,750 to 1,800 square feet, facilitating the construction of smaller, more affordable homes.

• Parking Requirement Elimination
  • In 2023, Austin became the largest U.S. city to eliminate mandatory parking minimums for new developments. This change reduces construction costs and encourages the use of public transportation.​ 

• Density Bonus Programs
  • The Density Bonus 90 (DB90) program allows mixed-use buildings to reach up to 90 feet in height if a portion of units are designated as affordable housing. This incentivizes developers to include affordable units in their projects.​ 

These cumulative efforts, including the recent single-stair ordinance, signal a growing recognition within Austin’s leadership that a multi-pronged approach is necessary to tackle the housing crisis. While no single policy change will be a silver bullet, the combination of these reforms aims to create a more favorable environment for housing development across the spectrum.

The hope is that these recent ordinances will collectively create a significant increase in the supply of diverse housing options throughout Austin. Whether these efforts have had any effect yet, rents have come down in Austin. And as more units come online, the intense competition for existing housing should gradually ease, leading to a stabilization and eventual moderation of housing costs. This will not be an overnight fix, and the effects of these policy changes will take time to fully materialize. However, the willingness of Austin to embrace innovative solutions like single-stair apartments and to reform its land development regulations demonstrates a commitment to addressing its housing challenges head-on.

A couple of months ago, I wrote in this blog that maybe things are changing in the office market. If there are back to work efforts, is it possible that the office market could be on the mend? Well little did I know what a soothsayer I am.

According to a recent article, Dallas-Fort Worth has recently witnessed a significant surge in new office construction. Are developers optimistic about the future of DFW office? Possibly. But there are potentially a lot of factors influencing this increase – including economic resilience, corporate migration patterns, and evolving workplace dynamics.​ So lets talk about it.

Recent Dallas Office Market Developments

In 2024, the DFW office sector demonstrated remarkable stability and growth. According to data from CommercialEdge, over 2.9 million square feet of office space were under construction, with 2.8 million square feet delivered across 18 properties. Notably, Dallas office construction starts experienced a 50% year-over-year increase, with 1.7 million square feet breaking ground during the year.

However, it wasn’t all good news. This construction has been accompanied by rising vacancy rates. The market-wide vacancy rate increased to 26.8% in 2024, translating to just over 61 million square feet of unoccupied office space spread across DFW.  This juxtaposition of robust construction activity and increasing vacancies is strange. It underscores the nuanced dynamics at play in the Dallas office market.​

How Does Dallas Compare to Other Cities?

But this isn’t completely odd. Is Dallas similar to other cities or is it an outlier? When comparing Dallas’s office construction activity to other major Texas cities and national trends, distinct patterns emerge. While the U.S. commercial construction sector experienced a 13.5% year-over-year decline in spending as of June 2024, DFW defied this trend with over six million square feet of new office space underway at the start of the year, representing nearly 10% of all commercial space under construction nationwide. ​

In contrast, cities like Austin and San Antonio have not seen much growth in office space. Instead, their growth has been focused in things like data center development rather than traditional office spaces. Over the past five years, data centers in these regions have quadrupled, driven by the demand for artificial intelligence and cloud services. This expansion, led by companies like Microsoft, highlights a shift towards specialized commercial real estate developments in these markets. ​

Will Dallas Office Continue to Surge?

Several factors contribute to the rise in new office construction in Dallas:

1. Corporate Relocations and Expansions: Dallas has become a magnet for corporations seeking a business-friendly environment. Notably, Goldman Sachs is investing $500 million in a new office campus in Dallas, expected to open by 2028 and house up to 5,000 employees. This development reflects a broader trend of companies relocating to Texas due to its favorable business climate. ​
2. Economic Resilience: DFW has demonstrated economic stability, attracting investments and fostering a conducive environment for commercial development. This resilience has instilled confidence among developers and investors, fueling new construction projects.​
3. Evolving Workplace Dynamics: As companies adapt to hybrid work models, there is a growing demand for high-quality, amenity-rich office spaces that can entice employees back to the workplace. Developers are responding by constructing modern offices equipped with features that promote collaboration and well-being. For instance, the planned Goldman Sachs campus emphasizes a campus-like atmosphere with rooftop gardens, a 1.5-acre park, and various amenities aimed at supporting workforce health and wellness.

Projections for Future Office Construction in Texas

Looking ahead, the trajectory of office construction in Texas will likely be influenced by several factors:

• Sustained Corporate Migration: The continued influx of companies into Texas is expected to drive demand for office spaces, particularly in markets like Dallas that offer a favorable business environment.​
• Hybrid Work Models: While remote work remains prevalent, many companies are adopting hybrid models that necessitate physical office spaces. This shift may lead to a reconfiguration of office designs and sustained demand for new constructions that cater to these evolving needs.​
• Market Saturation and Vacancy Rates: The current high vacancy rates in markets like Dallas may temper the pace of new construction in the short term. Developers might adopt a more cautious approach, focusing on pre-leased projects or repurposing existing spaces to align with market demand.​

One potential offset to this is the demand for smaller space. While companies may be coming back to the office, its entirely possible that they footprint they want or need is smaller than what it was previously. That could reduce the demand.

While the Dallas office market has experienced a notable surge in construction activity, the interplay of economic factors, corporate behaviors, and workplace trends will shape the future landscape of office development in Texas. Stakeholders should remain attuned to these dynamics to navigate the evolving commercial real estate environment effectively.​