Austin’s industrial rates continue their steady rise despite roller coaster of vacancy rates
Austin’s industrial market posted 294,233 square feet of negative net absorption in the first quarter of 2019. Activity levels remained high as a large number of sizeable tenants occupied significant blocks of space over the quarter including Hajoca Corporation, a plumbing, heating and industrial supplies company that moved into 75,600 square feet at 10519 Boyer Boulevard in the North submarket.
Looking forward, eighteen blocks of space over 10,000 SF will be occupied by new tenants in the second quarter of 2019. One of these tenants is TireHub, who is taking 40,467 square feet at 2300 Scarbrough Drive in the North submarket.
Austin’s citywide average rental rates increased moderately over the quarter, moving up from $10.39 per square foot in Q4 2018 to $10.61 per square foot in Q1 2019. The average citywide Flex/R&D rental rate increased significantly to $14.16 per square foot up from $13.17, while the average Warehouse/Distribution rental rate decreased slightly over the quarter from $8.73 per square foot to $8.61 per square foot.
In the first quarter, Austin’s industrial market had eight buildings deliver and fifteen new buildings began construction. Five of the new buildings under construction are a part of Phase II at Park 183. Buildings 3 through 7, totalling 696,000 square feet, are located at Highway 183 and Burleson Road in the Southeast submarket.
In all, 1,759,293 square feet of industrial supply was under construction consisting of twenty-four projects. Only one of these developments, 1481 Robert S. Light Boulevard, is a build-to-suit project. 957,992 square feet of projects in the development pipeline are scheduled to deliver in the second quarter and 67,849 square feet of that inventory is pre-leased.
Vacancy & Availability
Austin’s citywide average vacancy rate increased from 7.5% to 8.6% over the quarter, due largely to new deliveries. The most significant increase in vacancy over the quarter occurred in the Hays County submarket where the vacancy rate jumped from 9.2% to 12.1%. The East, Far Northeast, Far Northwest, Hays County, Northeast, Northwest, Round Rock, Southeast and Southwest submarkets also saw an increase in vacancy in Q1 2019.
The largest quarterly decrease in vacancy occurred in the Central submarket, where it decreased from 4.6% in Q4 2018 to 3.9% in Q1 2019. Other submarkets reporting a decrease in vacancy include the North and South submarkets.