Austin's Industrial Tenants Gaining Ground

AUSTIN-The state capital’s industrial market is slower than last year, but still holding its own amid a sluggish economy on national and local levels.

“The market has definitely slowed down, but it hasn’t stopped,” Royce O. Lacey, vice president of NAI/Commercial Industrial Properties Co. in Austin, tells GlobeSt.com. “I don’t think we’ve got any unusual situations going on in the industrial market in Austin… in relation to the national economy.”

Lacey and the NAI/CIP team have just released a midyear report showing 529,576 sf of industrial space has been absorbed–and 47% or 247,353 sf has been in the northern submarket. That’s 465,235 sf less overall than the first six months of 2000 and just about one third of the prior year’s final six months tally.

For years, Austin’s industrial market has been a boon for landlords, says Lacey. That’s changing as the numbers push toward a more balanced market, he says.

Lacey isn’t predicting a swing to a tenant’s market although some 850,000 sf of sublease space is expected to hit in the third quarter. Of that predicted amount, 75% will come from the north and Round Rock, home to Dell Computer. Lacey says he’s not at liberty to say which company is going to free up the industrial space, just that it is coming. The June 30 stats show there really isn’t that much sublease space available so the added amount will still keep it far below that of the office sector. “To date, the sublease space has had very little impact on the industrial market,” he says, “while it’s had a significant impact to the office market.” For now, the industrial market is showing an overall 8% vacancy, excluding sublease space, and nearly flat rents that range from 35 cents per sf monthly in bulk warehouse to as much as $1.20 per sf for R&D.

What is significant is the change in the southeast submarket, the city’s second-largest industrial arena. Its 2001 metamorphosis has a record-breaking amount of new construction under way. It’s simply a trickledown effect from the still infant Austin-Bergstrom International Airport, which practically outgrew itself before the first plane took off.

Right now, the southeast sector has 599,886 sf of warehouse and 370,276 sf of flex and research and development product coming out of the ground. In comparison to the rest of town, it’s latched onto 42.3% of the more than 1.4 million sf of warehouse and 869,188 sf of flex and R&D projects that are gearing up to start before January 2002. The bulk of the southeast’s building boom is contained in three projects: Transwestern’s South Park Commerce Center, Hill Partners’ South Tech Business Center and MetCenter, owned by Howard Yancy’s Zydeco Development. .