Austin

Q1 2015 | Austin Industrial | Market Report

Since the first quarter of 2014, citywide rates have been on the rise after years of stagnation. The citywide average quoted industrial rate increased by 4.5% between quarters from $7.99 to $8.35 per SF NNN, and increased 21% on a year-to-year basis from $6.90 per SF NNN. 

Though vacancy increased slightly over the quarter from 8.4% to 8.8%, likely due to the high amount of industrial product delivered last year, Austin’s citywide vacancy rate has been steadily decreasing since Q1 2010. 

Only one building, totaling 199,865 square feet, delivered in the first quarter and 692,895 square feet are currently under construction. All but one of these buildings is scheduled to deliver in the second quarter of 2015. 

According to the Texas Workforce Commission, the Texas economy and employment across all major industry sectors continue to grow. Austin’s unemployment rate fell to 3.4% from 4.6% over the year, lower than both the state and national average. 

Austin was the third fastest growing metro area in the nation during the past year with the population expanding by 3% between July 2013 and July 2014, according to the U.S. Census Bureau’s recent data.

  

Rental Rate & Vacancy Percentage

Vacancy & Availability

Austin’s average industrial vacancy rate rose by 40 basis points over the quarter from 8.4% to 8.8%. However, since the first quarter of 2014, vacancy has decreased from 9.6%. At the end of the first quarter, Austin had 5.9M SF of vacant industrial space. 

Among the major industrial submarkets, the Southwest submarket has the lowest vacancy rate at 1.7%, followed by the South submarket at 2.7% and then the East submarket at 4.2% vacancy. The largest concentration of vacancy was located in the Round Rock submarket, with a 17.6% vacancy rate. 

Austin’s industrial construction pipeline had 692,895 SF of projects underway at the end of the first quarter, the majority of them being spec development. The Southeast submarket saw the largest volume of buildings under construction with 399,205 SF underway at Met Center Building 3 and Expo Park buildings 10 and 11. 

A list of buildings currently under construction can be found on page 3 of this report.

Rental Rates

According to CoStar, our data service provider, the citywide average quoted industrial rental rate increased by 4.5% between quarters from $7.99 to $8.35 per SF NNN, and increased 21% on a year-to-year basis from $6.90 per SF NNN. 

Average rental rates in the Southwest submarket were quoted at $14.13 per SF NNN at the end of the first quarter and have increased by 1.7% since Q4, and by 6.9% from $13.21 per SF NNN since the first quarter of last year. 

After the Southwest submarket, the highest rental rates at the end of the first quarter were in the East submarket at $13.39 per SF NNN. Rental rates in the East submarket have increased by 30% quarter-over-quarter and 145% over the year from $5.46. Vacancy rates in the East submarket were at 4.1% at the end of the first quarter and have been steadily decreasing since 2011. 

The submarket with the lowest rental rates was Hays County who quoted an average rate of $5.69 per SF NNN at the end of the first quarter. This was most likely due to the high volume of available sublet space.

Absorption & Demand

Austin’s industrial market posted 19,898 SF of negative net absorption in the first quarter. The Southeast submarket contributed the largest amount with 387,327 SF of negative net absorption. 

The Far Northeast submarket saw the highest level of positive net absorption, contributing 327,702 SF.

Leasing

Austin’s industrial leasing activity, which includes renewals, reached 228K SF in the first quarter. The largest lease occurred in the Northwest submarket where Marquee Event Group signed a lease for 101,190 SF of warehouse space at Northtech Business Center 4. 

A list of select first quarter industrial lease transactions are included in the table below.

 

Q1 2015 Top Industrial Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
NorthTech Business Center 4
Northwest
101,190 Marquee Event Group
Jan-15
SouthTech 3 - 2101 E. St. Elmo Road
Southeast 42,504 U.S. General Services Administration / Internal Revenue Service1
Feb-15
3206 Industrial Drive
North
27,830 Greg Smith Equipment Sales Inc.1
Feb-15
2300 Grand Avenue Parkway
North
22,100 United Auto Parts1
Feb-15
2251 Piccadilly Drive
Far Northeast
20,132 Mach 1 Global Services Inc.
Jan-15
3500 Wadley Place
North
14,738 Drilling Info Inc.
Feb-15

Q1 2015 Sales Activity


IndCor Properties Portfolio

RBA: 2.4M SF
Built: N/A
Buyer: Global Logistics Properties
Seller: IndCor Properties Portfolio
Tenant: N/A
Price: $145M or $58.00/SF
Cap:
Unknown



Met Center - Austin Data Center III

RBA: 172,800 SF
Built:  2012
Buyer: CyrusOne, LLC.
Seller: Zydeco Development
Tenant: CyrusOne
Price: Unknown
Cap: Unknown


Q1 2015 Industrial Under Construction - 20,000 SF or Greater

SUBMARKET BUILDING ADDRESS RBA % PRE-
LEASED
DEVELOPER EST.
DELIVERY
Southeast Ind
7000 Metropolis Dr. 
160,000 0.0% Zydeco Development
Oct-15
Southeast Ind 6301 E Stassney Ln - Expo 11
130,002 0.0% Unknown Jun-15
Southeast Ind  6301 E Stassney Ln - Expo 10 109,203  0.0%  Unknown  Jun-15 
Hays County Ind 1600 Clovis Barker Rd - Bldg 4 94,800 0.0%  Bearden Investments May-15 
Northeast Ind 8024 Exchange Dr
89,600 0.0% McShane Development Co.
May-15
Hays County Ind 1600 Clovis Barker Rd - Bldg 3 67,670  0.0%  Bearden Investments May-15
Southeast Ind 4200 Burch Dr - Bldg A 21,120  1.5%  Sterling Howry May-15
Northeast Ind
9530 Brown Ln - Bldg 4 
20,500 
100.0%
Dalton
Apr-15


Click here to download the report as a PDF.

Austin Industrial Market Indicators


Q1
2014
Q1
2015
CITYWIDE NET ABSORPTION (SF) 728K
207K
CITYWIDE AVERAGE VACANCY 9.7% 9.6% 
CITYWIDE AVERAGE RENTAL RATE $28.20 $27.79
CITYWIDE DELIVERED INVENTORY (SF) 0 131.5K
CLASS A RENTAL RATE

     CBD $41.57 $41.62
     SUBURBAN $30.81 $29.99
CLASS A VACANCY

     CBD 12.1% 10.5% 
     SUBURBAN 10.1% 10.5% 


Job Growth & Unemployment (Not Seasonally Adjusted)

UNEMPLOYMENT 10/13 10/14
Austin 5.2% 4.0%
Texas 6.1% 4.8%
U.S. 7.0% 5.5%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 3.4% 29.6K
Texas 3.9% 436.7K
U.S. 2.0% 2.8M

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