Stage set for 2016 Austin industrial expansion

​​​​​​AUSTIN – Demand for industrial space led to a strong third quarter performance among local industrial properties, REOC Austin says in its latest market report.

Leasing activity generated 532,064 sf of positive net absorption, pushing the net change in occupied space for the first three quarters of the year combined to 1.1 million sf, according to the firm’s survey of more than 37.9 million sf of industrial lease space.

The net gain through the end of the third quarter is already double what the market had last year and exceeds the gain recorded in 2013. As a result, the Austin industrial market closed the third quarter with a tight citywide vacancy rate of 7.5 percent, down from 8.9 percent last quarter and 11 percent recorded in the same quarter a year ago.

Three new warehouse projects were delivered in the third quarter totalling more than 392,000 sf: Expo 10 (109,203 sf) & 11 (130,002 sf) in the Southeast sector and Harris Ridge 5 (153,000 sf) in the Northeast.

REOC Austin said the tightening trend continues to give developers reason to move forward with additional speculative development. There are currently three major buildings under construction totalling 362,000 sf: two service center/flex buildings at Met Center 2 – Building 3 (160,000 sf) and Building 12 (72,000 sf) along with another warehouse building at Expo 12 (130,000 sf). All are in the Southeast sector.

Warehouse properties led the market with 479,002 sf of the total positive net gain for the quarter. The North sector saw the greatest gain with more than 352,000 sf of absorption. Overall, warehouse properties closed the third quarter with a citywide vacancy rate of 7.1 percent — improved from 7.3 percent last quarter and 8.2 percent a year ago.

Flex/R&D properties, particularly in the Northeast and Southeast submarkets, had positive net absorption totalling 53,062 sf. Area flex/R&D properties closed the quarter with a vacancy rate of 8.4 percent — down from 12.1 percent last quarter and 16 percent a year ago.

There was no significant change in quoted rents compared with last quarter, but REOC Austin said that as vacancy rates continue to tighten, pressure on rates will mount.