Q1 2015 Austin Industrial Market Research Report
Austin’s industrial market rental rates rise after nearly a decade of stagnant rates.
Since the first quarter of 2014, citywide rates have been on the rise after years of stagnation. The citywide average quoted industrial rate increased by 4.5% between quarters from $7.99 to $8.35 per SF NNN, and increased 21% on a year-to-year basis from $6.90 per SF NNN.
Though vacancy increased slightly over the quarter from 8.4% to 8.8%, likely due to the high amount of industrial product delivered last year, Austin’s citywide vacancy rate has been steadily decreasing since Q1 2010.
Only one building, totaling 199,865 square feet, delivered in the first quarter and 692,895 square feet are currently under construction. All but one of these buildings is scheduled to deliver in the second quarter of 2015.
According to the Texas Workforce Commission, the Texas economy and employment across all major industry sectors continue to grow. Austin’s unemployment rate fell to 3.4% from 4.6% over the year, lower than both the state and national average.
Austin was the third fastest growing metro area in the nation during the past year with the population expanding by 3% between July 2013 and July 2014, according to the U.S. Census Bureau’s recent data.
Vacancy & Availability
Austin’s average industrial vacancy rate rose by 40 basis points over the quarter from 8.4% to 8.8%. However, since the first quarter of 2014, vacancy has decreased from 9.6%.
At the end of the first quarter, Austin had 5.9M SF of vacant industrial space.
Among the major industrial submarkets, the Southwest submarket has the lowest vacancy rate at 1.7%, followed by the South submarket at 2.7% and then the East submarket at 4.2% vacancy. The largest concentration of vacancy was located in the Round Rock submarket, with a 17.6% vacancy rate.
Austin’s industrial construction pipeline had 692,895 SF of projects underway at the end of the first quarter, the majority of them being spec development. The Southeast submarket saw the largest volume of buildings under construction with 399,205 SF underway at Met Center Building 3 and Expo Park buildings 10 and 11.
A list of buildings currently under construction can be found on page 3 of this report.
According to CoStar, our data service provider, the citywide average quoted industrial rental rate increased by 4.5% between quarters from $7.99 to $8.35 per SF NNN, and increased 21% on a year-to-year basis from $6.90 per SF NNN.
Average rental rates in the Southwest submarket were quoted at $14.13 per SF NNN at the end of the first quarter and have increased by 1.7% since Q4, and by 6.9% from $13.21 per SF NNN since the first quarter of last year.
After the Southwest submarket, the highest rental rates at the end of the first quarter were in the East submarket at $13.39 per SF NNN. Rental rates in the East submarket have increased by 30% quarter-over-quarter and 145% over the year from $5.46. Vacancy rates in the East submarket were at 4.1% at the end of the first quarter and have been steadily decreasing since 2011.
The submarket with the lowest rental rates was Hays County who quoted an average rate of $5.69 per SF NNN at the end of the first quarter. This was most likely due to the high volume of available sublet space.
Absorption & Demand
Austin’s industrial market posted 19,898 SF of negative net absorption in the first quarter. The Southeast submarket contributed the largest amount with 387,327 SF of negative net absorption.
The Far Northeast submarket saw the highest level of positive net absorption, contributing 327,702 SF.
Austin’s industrial leasing activity, which includes renewals, reached 228K SF in the first quarter. The largest lease occurred in the Northwest submarket where Marquee Event Group signed a lease for 101,190 SF of warehouse space at Northtech Business Center 4.
A list of select first quarter industrial lease transactions are included in the table below.
Click here to visit our website and view the full report.