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Q3 2015 | Austin Industrial | Market Report

Austin’s industrial market continues to progress as rental rates rise yet again in the third quarter. The citywide average quoted rental rate increased by 4.2% between quarters from $8.59 to $8.95 per SF NNN, and increased 19.8% on a year over year basis from $7.47 per SF NNN.

Vacancy dropped 70 basis points over the quarter from 9.2% to 8.5%, and has dropped 270 basis points on a year over year basis. The current overall vacancy rate of 8.5% is the lowest ever recorded.

Three buildings totaling 399,205 SF delivered in the third quarter, all of which were in the Southeast submarket, including Expo Center 10 & 11. Although positive net absorption decreased over the quarter for a total of 695,013 SF, this is still the second highest positive net absorption ever recorded.

According to the Texas Workforce Commission, Texas’ unemployment rate of 4.4% is among the lowest that the state has ever seen. In the state’s capital city, unemployment was at a mere 2.8% at the end of the third quarter 2015, 100 basis points lower than it was last year.

Austin is ranked No. 1 for real estate development across all 75 markets surveyed in Emerging Trends in Real Estate, an annual report published by the Urban Land Institute and PwC LLP. Austin ranked second in the nation for overall real estate prospects.

  

Vacancy & Availability

Austin’s citywide vacancy rate dropped 70 basis points over the quarter from 9.2% to 8.5%. The lowest recorded vacancy in Q3 was in the Northwest submarket, where vacancy dropped to 2.2% from 7.3% in Q2. The North submarket also saw a large decrease in vacancy over the quarter with a drop from 8.3% to 6.1%.

Among the major industrial submarkets, the Far Northeast submarket saw the largest increase in vacancy, rising from 8.5% to 9.8% over the quarter. The Far Northwest, Central, East and Southeast also saw a rise in vacancy over the quarter.

Austin’s industrial pipeline had 281,100 SF of projects underway at the end of the third quarter including Harris Ridge Business Center in the Far Northeast submarket. Three buildings delivered over the quarter in the Southeast submarket totaling 399,205 SF.

Rental Rate & Vacancy Percentage

Absorption & Demand

Austin’s industrial market posted 695,013 SF of positive net absorption in the second quarter, which is the second largest amount of absorption ever recorded in the Austin metro area behind last quarter, according to CoStar.

The North submarket posted the largest amount of positive net absorption with 298,476 SF. The Southeast submarket also saw an increase in positive net absorption with 171,938 SF posted in the third quarter. The submarket that posted the greatest negative absorption over the quarter was the Far Northeast submarket with 29,850 SF.

Rental Rates

According to CoStar, our data service provider, the citywide average rental rate increased again in Q3 to an average rate of $8.95 per SF NNN, continuing a steady rise in rental rates since Q2 2009.

The highest average rental rate at the end of the third quarter was in the Southwest submarket at $14.03 per SF NNN. The second highest rental rates were in the Far Northwest submarket at $11.00 per SF NNN, which has remained unchanged in 2015.

In the Northwest submarket where vacancy dropped drastically in Q3, rents rose from $6.61 per SF NNN in Q2 to $9.12 per SF NNN in Q3. The second largest increase in average rental rate occured in the Hays County submarket, where rents increased from $5.84 per SF NNN to $7.65 per SF NNN over the quarter.

Average rental rates for flex/R&D space dropped slightly over the quarter from $11.52 per SF NNN to $11.23 per SF NNN. Average rental rates for warehouse/distribution space rose again for the 7th consecutive quarter, to $7.06 per SF NNN.

Leasing

Austin’s industrial leasing activity recorded 405,602 square feet in Q3 2015. Expo Business Park in the Southeast submarket accounts for 152,805 SF of leased space for Education Testing Services.

Q3 2015 Top Industrial Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
Expo 10 - 6301 E. Stassney Ln.
Southeast
152,805 Education Testing Services
Jul-15
2400 Grand Parkway - Vista Park
North
57,750 Kodiak Assembly Solutions, LLC
Jul-15
401C Parker Dr.
North
57,600 Capitol Beverage
Sep-15
2130 Woodward St
Southeast
36,000 Thermo Fisher Scientific Inc.1
Jul-15
12317 Technology Blvd Northwest
24,519 U-Haul
Jul-15
9330 United Dr. 
North
23,060 Pump It Up1
Sep-15
2105 Denton - Rutland Business Park
North
22,206
Carisi Inc.
Jul-15
9801 Metric Blvd
North
21,600 
Trane1
Sep-15
4807 Commercial Park Dr.
East
10,062
UpRev
Jul-15

Q3 2015 Sales Activity


3501 Ed Bluestein Blvd. 

RBA: 935,255 SF
Built: 1974
Buyer: IDM Capital
Seller: JLM Financial Investments
Tenant: Freescale Semiconductor
Price: Unknown
Cap:
Unknown



Tuscany Center at Walnut Creek

RBA: 244,161 SF
Built:  Unknown
Buyer: Industrial Property Trust
Seller: Crow Holdings
Tenant: Multi
Price: $30.7M or $92.00/SF
Cap: Unknown

Q3 2015 Industrial Under Construction - 20,000 SF or Greater

SUBMARKET BUILDING ADDRESS RBA % PRE-
LEASED
DEVELOPER EST.
DELIVERY
Far Northeast
Harris Ridge Business Center - Bldg 5
153,000
0.0%
HPI Development
Mar-16
Round Rock
Mustang Creek Industrial Park
50,000 0.0% Taylor EDC
Oct-15
Southeast 6301 E. Stassney Ln. - Expo 12
57,600  66.0%  Trammel Crow
Sep-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 8/14 8/15
Austin 3.9% 2.8%
Texas 5.3% 4.4%
U.S. 6.3% 5.2%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 3.4% 31.1K
Texas 1.8% 212.4K
U.S. 2.1% 3.1M

Q3 2015 Highlights



Texas