Austin

Research Contact


Q1 2016 | Austin Industrial | Market Report

Austin’s industrial market continues to grow despite a slight rise in vacancy and a decrease in positive net absorption over the quarter. Citywide average vacancy rose to 7.7% over the quarter and positive net absorption reached only 13,890 square feet, but industrial space under construction rose again in the first quarter to 1.8M square feet. 

Austin’s citywide average rental rates also increased over the quarter from $9.30 per SF NNN to $9.54 per SF NNN. Citywide warehouse/distribution rental rates increased over the quarter to $7.32 per SF NNN and Flex/R&D rental rates increased to $11.32 per SF NNN.

Buildings that delivered in Q1 2016 include Harris Ridge Business Center Building 5, a 153,000 square foot building in the Far Northeast submarket. 1,839,297 square feet of industrial supply was under construction in Q1, including the new 855,000 SF Amazon distribution center and the 500,000 SF Capitol Wright distribution center. 

Texas added 2,100 nonfarm jobs in February, expanding the state’s employment for the 11th consecutive month. Austin’s unemployment rate remains the second lowest in the state behind Amarillo. Since Q1 2015, Austin’s unemployment rate has dropped from 3.5% to 3.1%. 

Texas has seen an upward trend in the education and health services industry for 37 consecutive months. Seven out of eleven major industries saw growth in the first quarter across the state.

  

Vacancy & Availability

Austin’s citywide average vacancy increased 30 basis points over the quarter from 7.4% to 7.7%. The largest drops in vacancy over the quarter occurred in the Round Rock and Southwest submarkets. 

The largest increases in vacancy over the quarter occurred in the Hays County submarket where vacancy rose from 8.5% to 15.6%, and in the Far Northeast submarket where vacancy rose from 5.9% to 16.7%. 

Despite a rise in vacancy over the quarter, new construction and rising rental rates prove that Austin’s industrial market continues to grow.

Rental Rate & Vacancy Percentage

Absorption & Demand

Austin’s industrial market posted 13,890 SF of positive net absorption in the first quarter, down from 470,082 SF of positive net absorption in Q4. The primary reason for the small number in Q1 is due to the 241,637 SF of negative net absorption in overall sublet space. The Hays County submarket posted 127,574 SF of negative net absorption in sublet space as Serta moved out of their space at 150 Precision Dr. 

The Southeast submarket posted the largest positive net absorption of 210,997 SF due largely to a tenant moving into 109,203 SF at Expo 10. The Round Rock submarket posted the second highest positive net absorption of 200,411 SF as ProPortion Food moved into their space at Round Rock Distribution Center in March 2016.

Rental Rates

According to CoStar, our data service provider, the citywide average rental rate increased over the quarter to an average rate of $9.54 per SF NNN from $9.30 per SF NNN in Q4. Since the first quarter of 2015, citywide average rental rates have risen by 6.7%. 

The highest average rental rate at the end of Q1 was in the Southwest submarket at $14.03 per SF NNN. The largest increased in rental rates over the quarter was in the Far Northwest submarket where rates rose from $11.00 per SF NNN to $13.00 per SF NNN.

Leasing

Austin’s industrial leasing activity recorded 703,398 square feet in Q1 2016. The majority of leases signed in the first quarter were on the north side of the city. The largest lease signed was Javelin Logistics who will occupy 177,940 square feet at TechRidge in the Northeast submarket.

Q1 2016 Top Industrial Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
Tech Ridge - 810 W. Howard Ln.
Northeast
177,940 Javelin Logistics Jan-16
Northtech - 4616 W. Howard Lane
Northwest
116,000 Undisclosed Jan-16
Heritage Crossing - 2500 Scarbrough Dr.
North
95,672 Goodwill Industries Jan-16
800 Interchange Blvd. East
64,000 Amplifier1 Mar-16
Harris Ridge Business Center - 1100 E. Howard Ln. Far Northeast
54,460 Sheri Hill Feb-16
Prologis Walnut Creek - 9101 Wall St.
Northeast
25,125 Unknown Mar-16
6006 Ben White Blvd.
Southeast
21,850
Grainger
Mar-16
4616 Howard Ln.
Northwest
20,922
Salient Systems Mar-16
113 Industrial Blvd.
South
20,573
Unknown Feb-16
4129 S. Commercial Dr. Southeast 20,000 Build by LED Jan-16
7307 Burleson Rd. Southeast 20,000 Action Gypsum Supply Mar-16

Q1 2016 Sales Activity


Wall St & Burleson Portfolio

RBA: 163,750 SF
Built: N/A
Buyer: Saber Realty Partners
Seller: Industry Capital
Tenant: Multi
Price: $13.4M
Cap:
7.9%



14500 Single Trace

RBA: 185,757 SF
Built:  2006
Buyer: HP Enterprise Services
Seller: Hewlett-Packard
Tenant: Hewlett Packard
Price: Unknown
Cap: Unknown

Q1 2016 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% Seefried Properties, Inc Mar-16
East  Capitol Wright Distribution Center - Hwy 290 East 500,000 100% Capitol Wright Distributing Dec-16
Southeast
6301 E Stassney Ln - Expo 13
136,000
20.0%
Trammel Crow
Sep16
North 2301 Scarbrough Dr. - Bldg 4
80,340 63.2% Clarion
Sep-16
Southeast  Met Center II - Building 12 72,000 33.0% Zydeco Development May-16
Southeast 6301 E. Stassney Ln. - Expo 12
57,600  33.3% Trammel Crow
Jun-16 
Far Northeast  Harris Ridge Business Center - Bldg 1 51,200 0.0% HPI Real Estate Jan-17
Far Northeast Harris Ridge Business Center - Bldg 2
44,800 0.0% HPI Real Estate Aug-16


Click here to download the report as a PDF.

Job Growth & Unemployment (Not Seasonally Adjusted)

UNEMPLOYMENT 1/15 1/16
Austin 3.5% 3.1%
Texas 4.4% 4.3%
U.S. 5.8% 5.2%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 4.2% 39.8K
Texas 1.5% 172.7K
U.S. 2.0% 2.9M

Texas