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Q4 2015 | Austin Industrial | Market Report

Austin’s industrial market closed out 2015 on an extremely strong note with year-end positive net absorption reaching 2,245,821 square feet as vacancy continued to drop over the year. Citywide average vacancy rate dropped to 7.8% at year end, falling 270 basis points over the year and 80 basis points over the quarter. 

Austin’s citywide average rental rates decreased slightly to $9.32 per SF NNN. Since the first quarter of 2015, rental rates have increased by 3.8%. Citywide warehouse/distribution rental rates also decreased very slightly over the quarter to $7.11 per SF NNN. Flex/R&D rates increased over the quarter from $11.23 per SF NNN to $11.26 per SF NNN.

Only one building totaling 50,000 SF delivered in Q4 in the Round Rock submarket. 1,222,100 SF of industrial supply was under contruction in Q4, including the new 855,000 SF Amazon distribution center in the Hays County submarket. 

According to Wallethub’s list of “2016’s Best & Worst Cities to Find a Job”, Austin ranks 3rd in the nation behind Plano, Texas and Overland Park, Kansas. Austin’s unemployment rate of 3.3% is now well below the state average of 4.5% and the national average of 4.8%. Job Growth in the city is also remarkably higher than the state and national average with a 3.9% annual increase in job growth.

  

Vacancy & Availability

Austin’s citywide average vacancy dropped 80 basis points over the quarter from 8.6% to 7.8%. The lowest recorded vacancy in Q4 was in the Northwest submarket at 2.7%. The second lowest vacancy at the end of Q4 was in the South submarket at 3.6%. The largest drops in vacancy over the quarter occurred in the Hays County submarket where vacancy dropped from 11.0% to 9.2%, and in the Southeast submarket where vacancy dropped from 10.1% in Q3 to 7.5% in Q4. 

Among the major industrial submarkets, only the Northeast and Northwest saw an increase in vacancy, both by only 50 basis points.

Rental Rate & Vacancy Percentage

Absorption & Demand

Austin’s industrial market posted 433,947 SF of positive net absorption in the fourth quarter, bringing year end absorption to 2,245,821 square feet. The submarket that posted the highest positive net absorption in 2015 was the Far Northeast with 542,581 SF of positive net absorption. The east submarket posted the largest loss with 23,727 SF of negative net absorption in 2015. 

Only two of the major industrial submarkets saw posted negative net absorption in Q4, the northeast and northwest submarkets. 

The southeast submarket posted the largest amount of positive net absorption with 278,955 SF. Tenants that moved into to the southeast submarket during Q4 2015 include Kendra Scott Design, who now occupies 64,800 square feet at Expo 11.

Rental Rates

According to CoStar, our data service provider, the citywide average rental rate decreased slightly over the quarter to an average rate of $9.32 per SF NNN from $9.37 per SF NNN in Q3. Despite this slight decrease, rates have been consistently rising over the year and since Q1 2015 have risen 5.9%. 

The highest average rental rate at the end of Q4 was in the Southwest submarket at $14.03 per SF NNN. Rental rates were also high in the Far Northwest and East submarkets at $11.00 and $11.39 per SF NNN respectively. 

Average rental rates for flex/R&D space increased slightly over the quarter from $11.23 per SF NNN to $11.26 per SF NNN. Average rental rates for warehouse/distribution space decreased slightly over the quarter from $7.15 to $7.11 per SF NNN.

Leasing

Austin’s industrial leasing activity recorded 514,892 square feet in Q4 2015. Majority of the deals done in Q4 were renewals for tenants including Applied Materials, The Liquidation Channel, and Biomat USA, Inc. The North and Southeast submarkets saw the majority of leasing activity in Q4 2015.

Q4 2015 Top Industrial Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
Tech Ridge - 810 W. Howard Ln.
North
180,000 Applied Materials1
Dec-15
100 Michael Angelo Way
North
55,949 The Liquidation Channel1
Oct-15
Tech Ridge - 710 W. Howard Ln.
North
54,000 Applied Materials1
Oct-15
10420 Metric Blvd.
North
51,500 Oskar Blues Brewery Oct-15
4401 Freidrich Ln. Southeast
51,029 Biomat USA, Inc.1
Oct-15
2222 West Runberg Ln.
North
43,200 Stone Solutions1 Nov-15
4104 Smith School Rd.
Southeast
38,400
Move Solutions
Nov-15
1905 E. 6th St.
East
30,000
Aplheus Communications1 Dec-15
Met Center I
Southeast
28,385
Fluor Nov-15
1106 Smith Rd.  East 23,520 Intertech Commercial Flooring1 Nov-15
Expo 11  Southeast 19,200 Dependable Express Oct-15
4401 Freidrich Ln.  Southeast 20,309 Onnit Fit LLC1 Oct-15

Q4 2015 Sales Activity


Round Rock Distribution Center

RBA: 200,411 SF
Built: 1974
Buyer: Gramercy Property Trust
Seller: Sysco Corporation
Tenant: ProPortion Food
Price: $28.8M or $143.70/SF
Cap:
7.5%



14500 Single Trace

RBA: 185,757 SF
Built:  2006
Buyer: Lone Star Data Centers LLC
Seller: Hewlett-Packard
Tenant: Hewlett Packard
Price: Unknown
Cap: Unknown

Q4 2015 Industrial Under Construction - 20,000 SF or Greater

SUBMARKET BUILDING ADDRESS RBA % PRE-
LEASED
DEVELOPER EST.
DELIVERY
Hays County  E. McCarthy Lane 855,000 100.0% Seefried Properties, Inc Oct-16
Far Northeast
Harris Ridge Business Center - Bldg 5
153,000
0.0%
HPI Development
Mar-16
Southeast 6301 E. Stassney Ln. - Expo 13
136,000 0.0% Trammel Crow
Sep-16
Southeast 6301 E. Stassney Ln. - Expo 12
57,600  66.0%  Trammel Crow
Sep-16 
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 11/14 11/15
Austin 3.7% 3.3%
Texas 4.5% 4.5%
U.S. 5.5% 4.8%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 3.9% 36.1K
Texas 1.7% 204.8K
U.S. 1.9% 2.6M

Texas