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'Robust' economy sparking Austin retail interest'Robust' economy sparking Austin retail interesthttps://www.recenter.tamu.edu/news/newstalk-texas/?Item=107312015-10-06T05:00:00Z

​AUSTIN – A robust economy stemming from strong job growth and net migration is attracting investors to Austin and sparking demand for retail assets.

Marcus & Millichap's third-quarter 2015 market report shows that the majority of properties have stabilized, and investors will find that upside potential will be gained by bringing rents up to market or by placing additional capital into property improvements.

Though few opportunities exist, competition for value-add assets is intense, and properties will sell at premium cap rates, sometimes below 7 percen​t.

The market is also appealing to a wider buyer pool as some single-tenant and apartment investors begin to target multitenant retail properties in search of higher yields. Cap rates for high-quality, stabilized properties average in the low-to-mid 7 percent range, while Class-B and C assets trade in the high 7 percent area.

Other projections from Marcus & Millichap's report:

  • Developers will complete 500,000 sf of retail space this year, increasing inventory 0.6 percent. In 2014, retail stock expanded 0.9 percent with the addition of 778,000 sf.
  • Retail construction will remain limited this year. Combined with heightened retailer demand, vacancy will drop 50 basis points during 2015 to 4.6 percent. The vacancy rate fell just 10 basis points in 2014.
  • Rents will continue to surge as space demand strengthens. The average asking rent will advance to $18.98 per sf in 2015, an increase of 3.5 percent from last year. In 2014, the average asking rent grew 3.1 percent.
Marcus & Millichap Real Estate Investment Services
Austin-Round Rock
Retail
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