Q2 2012 Austin, Texas Industrial Market Trends

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Q2 2012 Austin, Texas Industrial Market Trends

The 33.6-million-square-foot Austin MSA warehouse/ distribution market improved in the second quarter, as 186,000 square feet of net absorption dropped the vacancy rate 60 basis points to 12.6%, down 160 from a year earlier. The rate reached 12.5% in July, and is forecast at 12.2% at year-end. The average asking rent rose 0.2% to $6.47 psf during the quarter, with the average effective rent up 0.4% to $5.70 psf. The asking average was down 0.9% from a year earlier, but the effective average was unchanged. The effective average was up a cent in July.

“The only industrial space under construction is the 172,800-square-foot Met Center II in Southeast Austin,” according to the Austin Business Journal. Reis predicts warehouse/distribution net absorption will total 262,000 square feet in 2012, rising to nearly 650,000 square feet in 2015. Although new supply is forecast to nearly keep pace, keeping the vacancy rate close to 12.0% through 2016, rent gains are forecast to accelerate from about 1.0% in 2012 to more than 4.2% in 2014 and more than 5.0% thereafter.

The 15.1-million-square-foot Austin Flex/R&D market is relatively large and relatively strong, with a second quarter vacancy rate of 14.0% that is down 50 basis points for the quarter, down 290 from a year earlier, and below the U.S. average of 14.7%. The rate fell another 20 basis points in July. The average asking rent increased 0.3% during the quarter to $8.75 psf, with the average effective rent up 0.8% to $7.72 psf, with rents up the same percentages from a year earlier. Rents edged up a penny by both measures in July. New Flex/R&D supply is forecast to resume next year as solid demand keeps the vacancy rate falling. Rents are forecast to rise by 5.0% per year or more starting in 2014.

“At the close of the second quarter, the citywide vacancy rate registered 15.9%— the lowest since 2008 and notably improved compared to 17.6% last quarter,” NAI REOC reported. “Rental rates, having stabilized, are now starting to creep upwards.”