AUSTIN – The story of industrial real estate today, at least in terms of national media coverage, centers around compressing cap rates and the steady stream of capital flowing into the sector.
But in Austin—the kid brother of two major industrial markets, Dallas and Houston—the story over the past 12 months has been the large increase in the volume of industrial construction.
The past 12 months have brought a large increase in the volume of industrial construction in Austin.
Austin delivered 3.1 million sf of industrial product in 2017, a 55 percent increase over the total space delivered during the previous year.
Austin’s recent industrial performance reflects the changing mindset of the tenants and developers that are shaping the trends of a secondary market’s industrial landscape.
On average, between 2012 and 2017, the market experienced a year-over-year asking rate change of 6.4 percent and a rental rate of $9.14 per sf.
The average asking rent for industrial properties in Austin currently sits at $10.86 per sf.
One can easily conclude from the data that the plan to combat this explosive rent growth was simple: build more.
Another emerging trend—shrinking footprints in larger bulk warehouses—represents an easy way for industrial users to reduce occupancy costs.
Larger industrial users seeking their own facilities can also take control of their real estate costs by consolidating under one roof.
SOURCE: John Taylor, managing director, HFF, and Dom Espinosa, analyst, HFF.