Since the big announcement of the $1 billion Apple campus in NW Austin, I’ve been inundated with questions about how this will affect home values all over NW Austin but especially the Rattan Creek/Hunters Chase area where I live.
There has been a lot of speculation on how much property values (and taxes) will go up. As the ‘Realtor expert’ for NW Austin and especially the Rattan Creek area where I’ve sold over 275 homes in the neighborhood over the past 10 years, I wanted to share what we’ve been told and even more importantly what we don’t know.
What we’ve been told
Starting in 2019 Apple plans to spend $1 billion dollars to develop 3 million sqft of office space to initially house 5000 new employees who will move in 2021 with the capacity to grow to 15,000. Perhaps the 15,000 includes consolidating their existing office space (and current 6000+ employees) further down Parmer Ln into this new campus for a net of 9000 new hires.
Besides Apple, the corporate campus just to the north of the new Apple campus (Electronic Arts, PayPal, Polycom, eBay, etc.) was recently given the green light to add another 800,000 sqft of office space. That is enough space to house several thousand additional employees.
What we don’t know
What other developments will happen on the Robinson Ranch property? Will the Robinsons’ quickly sell off more land for ancillary development like retail, restaurants, hotels, or housing? While the new development will surely be denser than surrounding areas, (think mid-rise and eventually high-rise ‘live-work-play’ type development similar to The Domain and Mueller areas) when those get built will greatly affect how much demand will be put on existing nearby housing and businesses.
How much longer can this current 9 year economic expansion continue? It’s the second longest expansion since the great depression trailing only the 10 year expansion which ended in 2001. While I don’t expect a ‘tech crash’ like we had in 2001, market downturns have definite impacts on employment expansion plans and the real estate market.
For example, my husband and I purchased our first home in Rattan Creek in 1998 and sold it in 2001 for 50% more than we paid for it. In 2001 I was working at Vignette software. They were planning a downtown high-rise for their 1000+ current employees and all their new hires. Fast forward a couple of years, there was no downtown tower with 1000s of employees and the house we bought a few blocks away from our first house took 10 years to finally be worth more than we paid for it. By no means am I comparing Apple to Vignette, I only want to point out that various economic factors beyond our control could impact the best-laid plans.
When will the 15,000 Lamborghini drivers arrive?
There is a good comparison for what the new Apple campus might do for NW Austin real estate by looking at what affect the current Apple campus had. In 2012 Apple agreed to build a new campus in 78727 and create 3600 new jobs while retaining the 3100 jobs they already had.
The jobs Apple is proposing at the new campus are similar to jobs at the existing campus. Apple’s agreement in 2012 was for the average wage of new jobs to be $54,000 a year in the first year and grow to $73,500 in year 10. Apple recently said the average salary at their existing campus has surpassed the $73,500 goal. Tim Cook (CEO of Apple) recently said over 50% of Apple’s Austin employees work in customer support and online sales.
It’s good to remember that Apple’s employee headcount in Austin has grown steadily over the years. Unlike Amazon’s HQ2 search that wanted to immediately hire or transfer large numbers of employees at once, in 2012 Apple agreed to have 93% of their jobs hired locally. According to a 2017 Austin Business Journal article, Apple had averaged 460 full-time hires per year between 2013-16.
I don’t have insider knowledge on Apple but my best guess is that they will continue hiring at a steady pace until the new campus is ready in a few years. I don’t anticipate a huge rush of hires that will spike the nearby housing demand. It’s also possible if the economy cools that hiring will slow down or the headcount could even decline. Apple is a great company that should be around for a long time but it’s always possible these hires might take longer than they’re predicting.
So how did the current Apple Campus affect NW Austin real estate values
To find out the impact of Apple’s 2012 announcement for their 78727 campus with 3600 new hires had on nearby neighborhood home values, I picked 6 of the largest home subdivisions near the campus. From there I looked at what the median sales price was in 2012 and then again in 2018 for all single family homes built before 2010 (ensuring all values were for existing and not new home sales).
As expected most all the neighborhoods that had less expensive homes had greater appreciation. The neighborhood with the highest sales price in 2012 (Avery Ranch) appreciated the least. There is almost a perfect correlation between the lower the 2012 sales price the higher the appreciation by 2018. That is very common in the whole Austin area since the greatest buyer demand has been for homes under $300,000.
Which neighborhood was the outlier?
The only exception to this correlation is Milwood 78727 (not to be confused with the ‘Milwood’ north of McNeil Rd. which is now called Rattan Creek). The school district boundary runs through the middle of the neighborhood with the Austin School District (AISD) portion SE of Apple and Round Rock School (RRISD) portion NW of Apple (see map).
The AISD section of Milwood was priced near the middle of the neighborhoods in 2012 and shot up a surprising 74% by 2018. Had it appreciated in line with the similarly priced neighborhoods of Scofield and Cat Hollow, it should have only appreciated about 55%.
The RRISD section of Milwood had the lowest sales price of all the neighborhoods in 2012. You’d expect it to appreciate the most. It didn’t disappoint with the highest appreciation of any neighborhood at 84% (13% more than any ‘non-Milwood’ neighborhood).
My concluding thoughts
Looking more specifically at the neighborhood data in closer proximity to the current Apple campus, it seems that a housing appreciation premium for proximity to a major employer only really matters if you’re in a ‘5 minute commute area’. Even though some of these neighborhoods are closer to the existing Apple campus than others (Scofield and Rattan Creek) their appreciation rates are very comparable to similar priced neighborhoods further away from the campus.
This data aligns nicely with my experience working with buyers over the years. Most home buyers don’t mind a short commute. 15-30 minutes is acceptable to most. Then there are the clients who like to walk or bike to work or simply like the idea that they are never more than a 5 minute drive to work. They can come home for lunch, get dropped off by a partner if they share a car and experience many other great benefits. Those clients don’t mind paying a housing premium for the luxury of having an extra hour each workday to spend somewhere besides sitting in traffic.
Because of this I anticipate the neighborhoods directly across from the new Apple campus (those that can access the campus by Dallas Dr. without having to get on any major roads – Rattan Creek, Hunters Chase, and Los Indios) will see a greater appreciation of home prices in the coming years than the other neighborhoods in the area.
I’ve already had several investors contact me about those neighborhoods in hopes of buying now and hanging onto the houses until the campus gets built and populated. There will probably be a quick jump in prices on the lower priced homes in the area from investors and other buyers who may have wanted to get in the neighborhood and now realize they can’t drag their feet. The higher priced homes may not rise as quickly and will appreciate more over time as the campus is completed and employees start moving in.
The 15-20% appreciation premium that Milwood had over the past 6 years compared to the surrounding neighborhoods maybe more or less than can be expected in the Rattan Creek area but there’s no denying that an ‘Apple premium’ will be real.