Q2 2012 Austin, Texas Retail Market Trends

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Q2 2012 Austin, Texas Retail Market Trends

Austin’s 20.4-million-square-foot community-neighborhood shopping center market had a weak second quarter. Net absorption slowed to just 9,000 square feet, leaving the vacancy rate essentially unchanged at 7.4%, still down 40 basis points from a year earlier. Both the average asking rent and the average effective rent slipped 0.1% during the quarter, to $20.17 psf and $18.23 psf, respectively. The year-over-year loss was 0.4% asking and 0.2% effective. The asking average gained back a penny in July, when the vacancy rate slipped 10 basis points. For all of 2012, rents are expected to rise by about 1.0%.

No new space has been added thus far this year, and little new supply is expected. There is, however, 312,700 square feet under construction including the 240,000-square-foot Lakeline Market in Austin, which broke ground in May. Reis predicts about 400,000 square feet of new supply per year from 2013 to 2016, slightly more than the amount of expected net absorption most years. The vacancy rate is expected to rise from 7.2% at year-end 2012 to 8.0% at year-end 2015. Rent gains, however, are forecast to increase from 1.9% asking and 2.5% effective in 2013 to 5.0% and 5.8%, respectively in 2016.

For power centers, Reis reports a second quarter vacancy rate of 8.7%, up 10 basis points from a year earlier, and an asking rent of $24.13 psf, down 1.3%. The 600,000-square-foot second phase of the Southpark Meadows power center is expected to complete construction in Austin in February; two other power center projects are under construction further out. A 39,500-square-foot free standing Whole Foods completed construction in Bee Cave in May; another is under construction in Austin (see Special Real Estate Factors.)

“This year, retail vacancy will fall to 8.4%, an annual decrease of 50 basis points,” Marcus & Millichap predicted in its second quarter report. “Owners will regain some leverage during lease negotiations this year, facilitating a 1.1% rise in asking rents to $19.69 psf.”