Austin Retail Occupancy Slips for First Time in Nine Years

AUSTIN-Retail lost a bit of ground in the first half of 2001 as merchants gave up 52,942 sf during that time, lowering the occupancy rate to 95.06% from 95.77% in December, according to Austin-based NAI/Commercial Industrial Property’s mid-year retail market review.

That’s the first time the NAI/CIP review has captured negative absorption since it began tracking the retail market in 1992, says Eric DeJernett, the NAI/CIP retail specialist who compiled the report. Retail occupancy has been marching ever higher since the early 1990s.

The report takes into account big openings such as an HEB center in Round Rock and the conversion of a vacant anchor space at Round Rock West Shopping Center to a Gatti Town.

Even with a drop, the rate remains above 95%. “That’s kind of hard to argue with,” DeJernett tells GlobeSt.com. “I don’t believe the retail market is going to see what the office market is seeing with all the sublease space. It’s just not the way retail is set up.”

Retail and its real estate market have been playing catch-up to Austin’s growth. “It’s a lot harder to build retail centers and once they’re built, they’re usually highly occupied,” DeJernett says. “We don’t have a lot of excess inventory. That’s why we’re at 95% occupancy.”

What he expects to see is a softening in rents and more flexible, more attentive property owners. “I do think you’re going to see more turnover,” he says. “It’s a little harder to lease space. There aren’t as many people out there right now looking for space. Some of the national folks are pulling back.”

Some of the turnover will come from retailers and restaurateurs who don’t have the business acumen to manage in a slower economy. “A blip in the market will cause those people problems,” he says.

The area’s job growth will have an impact on what the retail real estate market is a year from now, he says. “Retail tends to lag a little bit. First it’s the jobs, then the housing and then retail starts to show signs of change. Depending on what happens with job growth will say a lot about what happens with retail a year from now.” In the long term, DeJernett looks for some retailers to be ready to pounce on cheaper space when they see the economy has stabilized.