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Q2 2016 | Austin Industrial | Market Report

Austin’s industrial market construction slipped a little, but the asking rates aren’t falling. The vacancy rate saw a slight drop and the net absorption saw a large positive increase over the quarter. Citywide average vacancy fell to 7.1% over the quarter and positive net absorption reached 141,773 square feet, and industrial space under construction decreased only by 9,500 square feet in the second quarter. Some of the asking rates for the Austin market are at an all time high;

The only major building that delivered in Q2 2016 was Met Center 12, a 72,000 square foot building in the Southeast submarket. In Q2, 1,787,440 square feet of industrial supply was under construction, including two new projects totaling 110,715 square feet. One of the projects is a 62,500 square foot building at 7307 Burleson in the Southeast submarket. 

As the population continues to increase, Austin’s unemployment rate has dropped from 3.5% to 2.9% over the past year, and also added 3.7K jobs out of the 169.4K jobs created within Texas. Over the last quarter, Austin’s unemployment rate has decreased from 3.3% to 2.9% over the last quarter. 

Vacancy & Availability

Austin’s citywide average vacancy rate dropped slightly from 7.3% to 7.1% over the quarter from 7.4% to 7.7%. The largest spike in vacancy over the quarter occurred in the Southwest submarket, where it increased from 3.6% in Q1 to 8.3% in Q2 due to 10,000 sqaure feet of sublease space becoming available at Oak Hill 1. 

The largest decreases in vacancy over the quarter occurred in the Far Northwest submarket where vacancy fell from 7.9% to 0.8%, and in the Northeast submarket where vacancy dropped from 6.2% to 4.9%. 

Despite a decline in new construction, rising rental rates and a slight decrease in the vacancy rate prove that Austin’s industrial market continues to grow.

Rental Rate & Vacancy Percentage

Absorption & Demand

Even after delivering only one building that was just 33% pre-leased, the absorption for the Austin industrial market still jumped significantly in the second quarter. 

Austin’s industrial market posted 141,773 sqaure feet of positive net absorption in the second quarter, up from 42,578 square feet of negative net absorption in Q1. The Round Rock submarket posted the largest amount of negative absorption, 83,269 square feet.

The Northeast submarket posted the largest positive net absorption of 100,530 square feet due in part to a tenant moving into 25,125 square feet at 9101 Wall Street. The Hays County submarket posted the second highest positive net absorption of 75,263 sqaure feet as Heaven Hill Distilleries moved into their space at 5 Brent Boulevard in June 2016.

Rental Rates

According to CoStar, our data service provider, the citywide average rental rate increased over the quarter to an average rate of $9.81 per SF NNN from $9.56 per SF NNN in Q1. In one year, citywide average rental rates have risen by 9.24%. 

The highest average rental rate at the end of Q2 was in the Northwest submarket at $15.90 per SF NNN. The Northwest submarket also had the largest increase in rental rates over the quarter with rates rising from $9.38 per SF NNN to $15.90 per SF NNN.

Leasing

Austin’s industrial leasing activity reached 902,447 square feet in Q2 2016. The bulk of the major leases signed in the second quarter were in the Southeast submarket, totaling 294,172 square feet. The largest lease signed was a 122,012 square foot sublease signed by UPS. Global Resale, who will occupy 80,000 square feet at 2214 Braker Lane in the North submarket, also signed this quarter.

Q2 2016 Top Industrial Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
116 E Old Settlers Blvd.
Round Rock 
122,012 UPS3 Apr-16
2214 Braker Ln.
North
80,000 Global Resale Apr-16
6800 Burleson Rd. 
Southeast
78,294 AMC3 Jun-16
12112 Boardwalk Dr.  Far Northwest
48,037 Logistics Company1 Jun-16
8606 Wall St.  Northeast 43,200 Living Direct3 Jun-16
4401 Freidrich Ln. Southeast
32,317 Wonderwall Studios LLC May-16
8701 Wall St. 
Northeast 
32,000
Mattress Firm1
Apr-16
6301 E Stassney Ln. Southeast
32,000
Ketra Apr-16
6406 Burleson Rd. Southeast 30,600 Getagadget1 May-16
6800 Burleson Rd.  Southeast 30,000 Genesis Today3 Jun-16
1 Renewal 
2 Expansion
3 Sublease

Q2 2016 Sales Activity


5925 Dillard Circle

RBA: 30,000 SF
Built: N/A
Buyer: Mothers Milk Bank of Austin
Seller: Reid Buildings of Austin, Inc.
Tenant: N/A
Price: $3.9M
Cap:
N/A



8301 Springdale Road

RBA: 90,000 SF
Built:  N/A
Buyer: East Group Properties
Seller: N/A
Tenant: N/A
Price: N/A
Cap: N/A

Q2 2016 Industrial Under Construction - 20,000 SF or Greater

500,000
BUILDING ADDRESS SUBMARKET RBA % PRE-
LEASED
DEVELOPER EST.
DELIVERY
Amazon- 1401 E. McCarty Ln. Hays County  855,000 100.0% Seefried Properties, Inc Jul-16
Capitol Wright Distribution Center Highway 290 East
East 500,000 100.0% Capitol Wright Distributing Dec-16
6301 E Stassney Ln.- Expo 13
Southeast
136,000
41.2%
Trammel Crow
Sep-16
2121 Scarbrough Dr.- Bldg 4 North 80,340 63.2% Clarion
Sep-16
7307 Burleson Rd. Southeast 62,500 0.0% Industrial Group Southwest, LLC. Dec-16
6301 E Stassney Ln.- Expo 12 Southeast
57,600 55.6% Trammel Crow
Jul-16 
Harris Ridge Business Center- Bldg 1- 1100 E Howard Ln.   Far Northeast 51,200 0.0%  HPI Real Estate  Jan-17
955 County Road 118 Georgetown 48,215 0.0% Unknown Jul-17
Harris Ridge Business Center- Bldg 2- 1100 E Howard Ln.  Far Northeast  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 5/15 5/16
Austin 3.3% 2.9%
Texas 4.3% 4.2%
U.S. 5.3% 4.5%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 3.9% 37.3K
Texas 1.4% 169.4K
U.S. 1.7% 2.4M

Texas