Austin Warehouse Market Update – May 2016
The Austin warehouse market continues to drive vacancies lower and demand remains strong. Moving into the 2nd quarter of 2016, the warehouse market in Austin to move lower by another 1%. Currently the warehouse vacancy rate is at 7% , this is level that has not been seen since the tech explosion in the late 90’s. Of all the sub-markets in Austin three of them have vacancy rates below 1% thus almost having 100% occupancy. If construction does not take off with more product the rental rates for warehouse space will be at a premium with very little leverage unless a tenant is willing to provide a 5 yr term for some concessions.
What is Under Construction?
At the close of the first quarter of 2016, there were no new warehouse spaces in Austin delivered to the market. Currently, there is about 400,000SF of new developments for warehouse property. With oil prices tanking manufacturers are battling with higher lease rates than have been seen in the past 5 years within the Austin Market. Austin typically is a destination location for warehouse properties as opposed to a hub for big companies, therefore there is not a huge incentive for developers to add on warehouse property like other cities in the USA. Instead of building more warehouse properties, office buildings are being constructed to cater to the white collar employment demographic of Austin.
To say the least the new development market for industrial properties in Austin is subdued compared to the activity.