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Kim_Gatley
Kim Gatley
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enior Vice President & Director of Research at REOC Austin

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REOC Releases 3Q 2015 Industrial Market Report

Demand for industrial space led to a strong third quarter performance among Austin industrial properties.  Leasing activity generated 532,064 square feet of positive net absorption in the third quarter pushing the year-to-date net change in occupied space to 1,126,000 square feet, according to the survey of more than 37.9 million square feet of industrial lease space conducted by the research department of REOC Austin, a locally-based commercial real estate company, and confirmed by the Xceligent Industrial Advisory Board – a group of top industrial brokers who meet quarterly to review and certify the analytic information.  “The net gain through the end of the third quarter is already double that experienced last year and exceeds the gain recorded in 2013,” says Mark Milstead, Vice President, Industrial Services, REOC Austin and a member of the Xceligent Industrial Advisory Board.  As a result, the Austin industrial market closed the third quarter with a tight citywide vacancy rate of 7.5% – down from 8.9% last quarter and 11.0% recorded in the same quarter a year ago.

Warehouse properties led the market with 479,002 square feet of the total positive net gain for the quarter.  The North sector saw the greatest gain with more than 352,000 square feet of absorption supported by Wisenbaker and BPI combining to occupy 91,648 square feet at Heritage Crossing 2.  The Round Rock submarket followed with more than 124,000 square feet of net gain including Capitol Beverage (57,600 sf) and Atlas Relocations (38,400 sf) at Prologis Corridor Park.  Overall, warehouse properties closed the third quarter with a citywide vacancy rate of 7.1% – improved from 7.3% last quarter and 8.2% recorded last year at this time.

Flex/R&D properties, particularly in the Northeast and Southeast submarkets, experienced positive net absorption totalling 53,062 square feet in the third quarter.  Area Flex/R&D properties closed the quarter with a vacancy rate of 8.4% – down from 12.1% last quarter and 16.0% recorded a year ago.

“There was no noticeable change in quoted rents compared to last quarter but, as vacancy rates continue to tighten, pressure on rates will mount,” says Kim Gatley, Senior Vice President and Director of Research at REOC Austin.  The cost of renting office warehouse space currently ranges between $0.50 – $0.65 per square foot per month on a triple net basis while the price for bulk warehouse ranges between $0.45 – $0.60.  Asking rental rates for area Flex properties range between $0.80 – $1.10 per square foot per month.

“Investors remain bullish on Austin-area industrial assets,” says Jerry Heare, SIOR, Senior Vice President, REOC Austin.  The largest transaction in the third quarter was IDM’s acquisition of the former Freescale Semiconductor campus on Ed Bluestein spanning nine buildings totaling more than 935,000 square feet.  IDM plans to convert the facility to a data center and value office and rename the project MOS 8 with the first phase to be delivered in 2017.

Looking ahead, “demand for space will continue to drive industrial development in Central Texas,” adds Heare pointing to a new 855,000-square-foot Amazon Fulfillment Center in the works for San Marcos and a 50,000-square-foot spec building recently started in Taylor to kick off the Mustang Creek Industrial Park.

Click to download REOC Austin’s complete 3Q 2015 Industrial Market Report

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