Austin’s industrial market closes 2018 with new buildings and high absorption Research & Forecast Report AUSTIN | INDUSTRIAL Q4 2018 Kaitlin Holm Research and Marketing Coordinator | Austin Austin’s industrial market posted 539,820 square feet of positive net absorption in the fourth quarter of 2018, bringing 2018’s annual absorption to 1,222,219 square feet. Activity levels remained high as a large number of sizeable tenants occupied significant blocks of space over the quarter, including Tri-Supply, a home products company, moving into 78,238 square feet at 5811 Trade Center Drive in the Southeast submarket. Looking forward, ten blocks of space over 10,000 SF will be occupied by new tenants in the first quarter of 2019. One of these tenants is Moore Supply Company, who is taking approximately 75,600 square feet at 10519 Boyer Boulevard in the North submarket. Austin’s citywide average rental rates increased significantly over the quarter, moving up from $10.57 per square foot in Q3 to $10.98 per square foot in Q4. The average citywide Flex/R&D rental rates increased to $13.56 per square foot up from $13.55 and the average Warehouse/Distribution rental rate also rose slightly to $8.68 per square foot from $8.63 per square foot. In the fourth quarter, Austin’s industrial market had eleven buildings deliver, and fourteen new buildings began construction. Two of the new buildings under construction are part of the Settlers Crossing Phase II. Buildings 3 and 4, totalling 175,850 square feet, are located at 900 East Old Settlers Boulevard in the Round Rock submarket. In all, 1,651,290 square feet of industrial supply was under construction, consisting of twenty-two projects. Two build-to-suit projects at 1481 Robert S Light Boulevard, totalling 20,000 square feet, are a part of the 199,884 square feet of construction that was pre-leased in Q4. The inventory set to deliver in the first quarter of 2019 includes sixteen buildings totalling 1,353,866 square feet. Summary Statistics Austin Industrial Market Q4 2017 Q3 2018 Q4 2018 Vacancy Rate 7.8% 6.9% 7.1% Net Absorption (SF) 391,068 151,362 539,820 New Construction (SF) 660,351 449,450 861,274 Under Construction (SF) 1,165,477 1,663,549 1,651,290 Asking Rents Per Square Foot Per Year Average $10.39 $10.57 $10.98 Warehouse/Distribution $8.57 $8.63 $8.68 Flex/R&D $12.67 $13.55 $13.56 Market Indicators Relative to prior period Annual Change Quarterly Change Quarterly Forecast* VACANCY NET ABSORPTION NEW CONSTRUCTION UNDER CONSTRUCTION *Projected
Transcript
Austin’s industrial market closes 2018 with new buildings and high absorption
Research & Forecast Report
AUSTIN | INDUSTRIALQ4 2018
Kaitlin Holm Research and Marketing Coordinator | Austin
Austin’s industrial market posted 539,820 square feet of positive net absorption in the fourth quarter of 2018, bringing 2018’s annual absorption to 1,222,219 square feet. Activity levels remained high as a large number of sizeable tenants occupied significant blocks of space over the quarter, including Tri-Supply, a home products company, moving into 78,238 square feet at 5811 Trade Center Drive in the Southeast submarket.
Looking forward, ten blocks of space over 10,000 SF will be occupied by new tenants in the first quarter of 2019. One of these tenants is Moore Supply Company, who is taking approximately 75,600 square feet at 10519 Boyer Boulevard in the North submarket.
Austin’s citywide average rental rates increased significantly over the quarter, moving up from $10.57 per square foot in Q3 to $10.98 per square foot in Q4. The average citywide Flex/R&D rental rates increased to $13.56 per square foot up from $13.55 and the average Warehouse/Distribution rental rate also rose slightly to $8.68 per square foot from $8.63 per square foot.
In the fourth quarter, Austin’s industrial market had eleven buildings deliver, and fourteen new buildings began construction. Two of the new buildings under construction are part of the Settlers Crossing Phase II. Buildings 3 and 4, totalling 175,850 square feet, are located at 900 East Old Settlers Boulevard in the Round Rock submarket.
In all, 1,651,290 square feet of industrial supply was under construction, consisting of twenty-two projects. Two build-to-suit projects at 1481 Robert S Light Boulevard, totalling 20,000 square feet, are a part of the 199,884 square feet of construction that was pre-leased in Q4. The inventory set to deliver in the first quarter of 2019 includes sixteen buildings totalling 1,353,866 square feet.
Under Construction (SF) 1,165,477 1,663,549 1,651,290
Asking Rents Per Square Foot Per Year
Average $10.39 $10.57 $10.98
Warehouse/Distribution $8.57 $8.63 $8.68
Flex/R&D $12.67 $13.55 $13.56
Market IndicatorsRelative to prior period
AnnualChange
Quarterly Change
Quarterly Forecast*
VACANCY
NET ABSORPTION
NEW CONSTRUCTION
UNDER CONSTRUCTION
*Projected
In December Durango Doors purchased the 31,380 SF industrial warehouse building from Twin Oaks Associates. The building is currently 100% leased by Spec Building Materials. The building sold for $3,635,000 ($115.84/SF).
The 10,920 SF industrial warehouse building was purchased in October by University Realty, for $1,604,200 ($146.90/SF), from Twin Oaks Associates.
2 Austin Research & Forecast Report | Q4 2018 | Industrial | Colliers International
Sales ActivitySources: Real Capital Analytics and CoStar
Q4 2018
No. of Properties: 32
Total SF: 1,970,200 SF
Average $/SF: $165.89
Average Cap Rate: 6.7%
650 Canion St
Vacancy & Availability
Austin’s citywide average vacancy rate increased from 6.9% to 7.2% over the quarter. The most significant increase in vacancy over the quarter occurred in the Far Northeast submarket where the vacancy rate jumped from 4.4% to 8.6%. The Central, Far Northwest, Hays County, North, Northwest, Southeast and Round Rock submarkets also saw an increase in vacancy in Q4.
The largest quarterly decrease in vacancy occurred in the East submarket, where it decreased from 6.5% in Q3 2018 to 0.4% in Q4 2018. Other submarkets reporting a decrease in vacancy include the Northeast, South, Southeast and Southwest submarkets.
4.0%5.0%6.0%7.0%8.0%9.0%10.0%11.0%12.0%
$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00
$10.00$11.00$12.00
Industrial Rental Rate and Vacancy Percentage Austin, TX
Avg Quoted Rent Avg Vacancy
*Vacancy percentage includes direct and sublease space.
Absorption & Demand
Austin’s industrial market posted positive net absorption of 539,808 square feet in Q4 2018. One of the tenants that moved into space in Q4 included TS Distributors moving into 42,560 square feet at 3306 Longhorn Boulevard in the North submarket. Ten tenants will move into almost 330,000 SF of industrial space during the first quarter of 2019. One of those tenants, MSI Stone, is moving into a 67,640 square foot space at 2300 Scarbrough Drive.
The Southeast submarket posted the largest amount of positive net absorption with 156,977 square feet. The Round Rock submarket had the second largest amount with 128,447 square feet of positive net absorption. Other submarkets that also had positive absorption include East, Far Northeast, Northeast, Northwest and South.
The submarkets that posted negative net absorption were Central, Far Northwest, Hays County and Northwest. The Hays County submarket had the highest negative absorption with 105,105 square feet of negative net absorption in the fourth quarter.
Rental Rates
According to CoStar, our data service provider, the citywide average rental rate increased over the quarter from $10.57 per square foot in Q3 2018 to $10.98 per square foot in Q4 2018. Annually, the citywide average rental rate has increased 5.7% from $10.39 in Q4 2017.
The highest average rental rate at the end of Q4, most likely due to the higher number of flex buildings in the area, was in the Northwest submarket at $15.87 per square foot. The submarket with the lowest average rental rate in Q4 2018 was the Hays County submarket at $6.86 per square foot.
10200-10212 Metropolitan Dr North 16,943 Unknown Oct-18
9220-9232 Research Blvd Central 16,694 Unknown Dec-18
4509 Freidrich Ln Southeast 16,382 Travis Association for the Blind Oct-18
2209A Rutland Dr North 14,927 Unknown Dec-18
7303 Burleson Rd Southeast 14,200 Unknown Nov-18
Leasing ActivityAustin’s industrial leasing activity included 723,555 square feet of space in Q4 2018. The bulk of the leases signed in the fourth quarter were in the North submarket, totaling 367,836 square feet. The largest new lease was signed by Build A Sign, a printing company, for 96,000 square feet at 9800 Burnet Road, located in the North Industrial submarket.
4 Austin Research & Forecast Report | Q2 2015 | Office | Colliers International4 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International
3161 Eagles Nest St - Chandler Creek Business Park - Bldg K3 Round Rock 63,960 14.3% Unknown Jan-19 Industrial Warehouse
Eagles Nest St - Chandler Creek Business Park - Bldg K4 Round Rock 63,960 0.0% Unknown Jan-19 Industrial Warehouse
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