- Population growth continues at a formidable rate: +184 people/day are making the move to the greater Austin metropolitan area
- Abundant human capital hugely attractive for companies looking to enter the Austin Market; Tesla expected to hire 10,000 employees in order to service upcoming Gigafactory
- Driven by increasing e-commerce demand, retailers and 3PLs on the hunt for additional W/D space
Boots On The Ground
Our “Boots on the Ground” viewpoint is the voice of our experts, who have broken down the market data and compared it to what they are seeing for themselves. This is their take on what the numbers actually mean for the Austin industrial market.
The first quarter kicked off what promises to be one of the most transformative years in recent memory for Austin’s industrial real estate market. Continuing upon the trends that began in mid- to late 2020, Austin continued to benefit from rapid population growth, e-commerce demand accelerated by the pandemic, and a burgeoning automotive manufacturing market that is reshaping not only the built environment, but also the skilled labor force throughout the region.
The Market at a Glance
Austin continued to grow at an amazing clip, with more than 184 people moving to the greater Austin area every day. Census numbers show that Austin’s five-county population grew nearly 3% year over year to nearly 2.3 million people, making Austin the fastest-growing major metropolitan area in the country.
This is easily understood by anyone trying to buy a home in Central Texas, and is backed up by building materials suppliers, HVAC distributors, electrical distributors, or any other company servicing the home building industry in Austin. Many of these companies continue to strain within the confines of their existing warehouse solutions, and are competing for expansion space and short-term overflow storage throughout our market.
In lockstep with the area’s population growth, the MSA continues to add jobs, many of which will be in the new but quickly scaling automotive industry in Austin. In addition to the 10,000 jobs that Elon Musk has promised to hire at Tesla’s new facility in East Austin, an entire cadre of Tier 1 and Tier 2 suppliers are eagerly anticipating their contract awards from the company to begin their own commencement of build-outs and hiring. As of the first quarter, however, we’ve not yet seen any publicly-announced contract awards from Tesla.
All of this growth continues to attract retailers and 3PLs wanting to get their products as close as possible to consumers in the area. Rumors of additional Amazon warehouses abound, in addition to other Fortune 500 retailers looking for distribution facilities in town, much of which is centered around big blocks of space (100,000+ SF).
With demand for space far exceeding supply, we continued to see a steady drip of new spec industrial projects announced in the first quarter, pushing the geographic boundaries of the market and highlighting investors’ fervent appetite for exposure to all that Austin has to offer. This investor interest continues to explore markets such as Georgetown to the north, Hutto and Manor to the east, as well as Hays County through San Marcos to the south, often in places where land basis is more affordable despite the additional travel times inherent in servicing the overall Austin market.
With a healthy amount of the spec industrial pipeline set to deliver in late 2021 and early 2022, we expect industrial pre-leasing activity to remain extremely strong, as the market is still without an abundance of space across any size ranges, but in particular for big blocks of space.
Absorption, Supply & Demand
Austin continues to emerge as an important industrial hub, clearly evidenced by the mounting investment within the city despite the lingering presence of pandemic-related challenges. Quarterly absorption of ±207K SF (vs. Q4 2020 absorption of ±1,127K SF) coupled with tightening vacancy rates (Q1 2021 vacancy down 70 basis points vs. Q1 2020) illustrate a growing, positive trajectory that will likely continue as more e-commerce companies enter the market and/or expand their footprint. To relieve this pressure for space, projects totaling +1.6M SF are now under construction while an additional +13.5M SF of space has either been planned or proposed.