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Q2 2015 | Austin Industrial | Market Report

Austin’s industrial market continues to progress as rental rates rise yet again in the second quarter. The citywide average quoted rental rate increased by 1.6% between quarters from $8.21 to $8.34 per SF NNN, and increased 18.5% on a year-to-year basis from $7.04 per SF NNN.

Vacancy dropped 140 basis points over the quarter from 10.2% to 8.8%, continuing to gradually decrease after a small increase last quarter.

Three buildings totaling 207,008 SF delivered in the second quarter, two of which are in Hays County, a growing submarket south of Austin.

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. Hays County alone was the fifth fastest growing county in the nation over the past year.

  

Vacancy & Availability

Austin’s citywide vacancy rate dropped 140 basis points over the quarter from 10.2% to 8.8%. In the Far Northeast submarket, vacancy dropped to 8.5% from 15.6% last quarter and from 23.4% in Q2 2014. The Northeast submarket also saw a large decrease in vacancy over the quarter with a drop from 15.2% to 10.8%.

Among the major industrial submarkets, the South submarket had the lowest vacancy rate at 3.9%. Although the South submarket has the lowest vacancy, it has been slowly rising since Q1 2013. The East submarket has the second lowest vacancy rate at 5.2%.

Austin’s industrial pipeline had 572,705 SF of projects underway at the end of the second quarter, the majority of which are in the Southeast submarket and are scheduled to deliver in Q3 2015. Projects in the Southeast submarket include Met Center Phase II and Expo Industrial Park buildings 10 and 11.

Rental Rate & Vacancy Percentage

Absorption & Demand

Austin’s industrial market posted 933,552 SF of positive net absorption in the second quarter which is the largest amount of absorption ever recorded in the Austin metro area, according to CoStar. The Northeast submarket posted the largest amount of positive net absorption with 369,357 SF. The submarket that saw the largest increase in absorption over the quarter was the Southeast submarket that jumped from 319,327 SF of negative net absorption to 113,421 SF of positive net absorption in Q2.

The Southwest submarket was the only submarket in the Austin metro that saw negative net absorption in Q2, posting 2,500 SF.

Rental Rates

According to CoStar, our data service provider, the citywide average rental rate increased in Q2, continuing a steady rise in rental rates since Q4 2012.

The largest increase in rental rates occurred in the Southeast submarket. Average rental rates in the Southeast submarket were quoted at $8.28 per SF NNN at the end of the second quarter and have increased by 14.6% since Q1, and by 26% from $6.57 since the second quarter of last year.

The highest average rental rate at the end of the second quarter was in the Southwest submarket at $14.00 per SF NNN. This is a slight decrease since last quarter when rental rates were quoted at $14.13 per SF NNN in the Southwest submarket.

The submarket with the lowest rental rates was Hays County which quoted an average rental rate of $5.84 per SF NNN in the second quarter.

Leasing

Austin’s industrial leasing activity recorded 558,051 square feet in Q2 2015. Novitex and Kendra Scott Design both signed leases in Expo Business Park, totalling 187,200 SF. Maintenance Supply LLC signed a lease for 72,800 SF in the Hays County submarket.

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

Q2 2015 Top Industrial Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
Expo Business Park - 6301 E. Stassney Ln.
Southeast
122,400 Novitex
Jun-15
1600 Clovis Barker Rd.
Hays County
72,800 Maintenance Supply LLC
Jun-15
Expo Business Park - 6301 E. Stassney Ln.
Southeast
64,800 Kendra Scott Design
May-15
100 Michael Angelo Way
North
61,766 Flight Director Inc.1
Jun-15
3800 Drossett Dr.
Southeast
41,894 Tires to You, LLC
May-15
1300 E Anderson Ln. - Bldg A
Northeast
35,000 Unknown
Apr-15
3100 Alvin Devane Blvd.
Southeast
32,500
Younicos Inc.
Apr-15
15877 Long Vista Dr.
North
31,084
Daltile
May-15
Northpointe Trade Center
Far Northeast
29,781
Levantina USA, Inc. 
May-15
8701 Wall St.
Northeast
22,400
Unknown
Jun-15
8619 Wall St. 
Northeast
21,813
Westco3
Apr-15
8619 Wall St. 
Northeast
21,813
His Company Inc.1
Apr-15
Q2 2015 Sales Activity


KFG Investment Co. Portfolio

RBA: 271,060 SF
Built: N/A
Buyer: KFG Investment Co.
Seller: TA Associates/Clarion Partners
Tenant: Multi
Price: Unknown
Cap:
Unknown



Stonehollow Industrial Park

RBA: 384,174 SF
Built:  1997
Buyer: Cornerstone RE Advisors
Seller: Forester Properties, Inc.
Tenant: Multi
Price: Unknown
Cap: Unknown

Q2 2015 Industrial Under Construction - 20,000 SF or Greater

SUBMARKET BUILDING ADDRESS RBA % PRE-
LEASED
DEVELOPER EST.
DELIVERY
Southeast
Met Center Ph II
160,000 0.0% Zydeco Development
Sep-15
Far Northeast
Harris Ridge Business Center - Bldg 5
153,000
0.0%
Unknown
Mar-16
Southeast
Expo Business Park - Bldg 11
130,002 49.9% Trammel Crow
Jul-15
Southeast Expo Business Park - Bldg 10
109,203  0.0%  Trammel Crow
Jul-15 
Northeast 9503 Brown Ln. - Bldg 4
20,500 100.0%  Dalton Mar-16


Click here to download the report as a PDF.


Job Growth & Unemployment (Not Seasonally Adjusted)

UNEMPLOYMENT 5/14 5/15
Austin 4.6% 3.4%
Texas 5.7% 4.3%
U.S. 7.0% 5.8%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 2.5% 32.2K
Texas 2.5% 287K
U.S. 2.2% 3.1M

Q2 2015 Highlights


Texas