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

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REOC Releases 4Q 2016 Industrial Market Report

The Austin industrial market ended 2016 on a strong note with marked improvement in the citywide vacancy rate tightening to 5.2%. The current citywide vacancy rate is down compared to the 6.1% recorded in the third quarter and 6.9% in the previous year.

At the close the fourth quarter only 193,600 square feet of new space was delivered which included Met Center II 13 (57,600 sf) and Expo Business Park 13 located at 6301 East Stassney. Both are located on the Southeast sector.

While new projects continue to reach the planning and construction stages, it’s estimated that there is already over 1.9 million square feet of potential industrial space coming through the development pipeline. In a market with such high demand for new space, the vacancy rate is expected to stay somewhat consistent going forward leaving much of the pressure on developers to provide the supply needed.

The fourth quarter brought the year-end total to over 1.7 million square of positive net absorption with the addition of 244, 797 square feet. While the fourth quarter slowed compared to the third quarter, it still contributed to a net gain compared to the previous year. Warehouse properties consisted of about 75% of the total fourth quarter abortion total and about 55% of the year-end total.

Constrained supply and sustained demand continue to be the dominant factors impacting rental rates but average rental rates stayed stable in the fourth quarter. The cost of renting office warehouse space remained at mid-year rates, currently ranging between $0.60 – $0.85 per square foot per month on a triple net basis while the price for bulk warehouse ranges between $0.45 – $0.70 and $0.65 – $0.90 for manufacturing space. Among Service Center/Flex properties, asking rental rates range between $0.80 – $1.25 per square foot per month. Given the current landlord’s market conditions, tenants should not expect any relief in rental rates through the remainder of the year but significant increases are not expected in the fourth quarter.

Click the following link to download REOC Austin’s complete 4Q 2016 Industrial Market Report

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