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

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REOC Austin releases 4Q 2013 industrial market report

The Austin industrial market closed out 2013 with a citywide vacancy rate of 10.6%, according to the fourth quarter survey of more than 37.4 million square feet of industrial lease space conducted by REOC Austin.  “With few new developments constructed over the past several years, an expanding economy and steady tenant demand for space has tightened vacancy to its lowest point in twelve years,” says Mark Milstead, Vice President Industrial Services, REOC Austin, locally-based commercial real estate company.

Tenant move-ins recorded between the first of October and the end of December generated 340,541 square feet of positive net absorption within Austin-area industrial properties.  The fourth quarter gain raised the year-end absorption total to nearly 1.1 million square feet.  “The 2013 performance marks the fourth-consecutive year of positive annual net absorption and the third-consecutive year topping the one-million mark,” adds Milstead.

“Rental rates are finally starting to respond to improved occupancies,” says Jerry Heare, SIOR, Senior Vice President, REOC Austin.  Although asking rental rates for area Flex properties remained stable ranging between $0.65 – $0.95 per square foot per month, quoted rental rates for Warehouse product moved up slightly now ranging between $0.40 – $0.55.  “Improved occupancy has given landlords more confidence and leverage in lease negotiations.  As a result, rental concessions are on the decline and landlords are starting to test higher rents,” adds Heare.

Looking ahead, tenants may be challenged with higher lease costs as the market continues its steady march forward but the addition of new projects will create more options for expansion and tenant relocation.  “The North and Northwest submarkets are poised for more speculative development and Cedar Park is expected to see significant growth but there is potential activity slated in several areas throughout the city,” says Perry Horton, Commercial Property Specialist, REOC Austin.

Click to download REOC Austin’s 4Q 2013 Industrial Source Report.

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