Austin’s industrial rates finally start to decrease amid negative absorption
Austin’s industrial market took another hit to it’s net absorption in Q3 2017, posting 261,906 SF of negative net absorption. There were a few sizeable tenants that moved out of large blocks of space in the third quarter of 2017, including Pearson Inc moving out of 135,442 SF at Tech Ridge Five (905 Howard Lane) in the Northeast Submarket.
Vacancy & AvailabilityAustin’s citywide average vacancy rate increased from 9.0% to 9.9% over the quarter. The largest quarterly spike in vacancy occurred in the Southwest submarket, where it increased from 6.7% in Q2 2017 to 11.2% in Q3 2017. Other submarkets with an increase in vacancy include the Central, East, Far Northeast, Far Northwest, Hays County, North, Northeast, Northwest and South submarkets.
Rental Rate & Vacancy Percentage
Absorption & DemandAustin’s industrial market saw a fourth consecutive quarter of negative net absorption, which is the first time Austin witnessed three consectutive quarters of negative net absorption since late 2008 and early 2009. Year to date, absorption for 2017 is currently at 1,150,630 SF negative. Though it has been a tough year so far, our research indicates at least 12 tenants that will be moving into 252,940 SF of industrial space in the Austin market in Q4 2017.
The submarkets that posted positive net absorption were Round Rock and Southeast. The Round Rock submarket had the highest positive absorption with 51,079 square feet of positive net absorption.
Rental RatesAccording to CoStar, our data service provider, the citywide average rental rate decreased over the quarter to an average rate of $10.66 per SF NNN from $11.09 per SF NNN in Q2 2017. Annually, citywide average rental rate has decreased 0.8%, since Q3 2016.
Austin’s industrial leasing activity was 437,313 square feet in Q3 2017. The bulk of the leases signed in the third quarter were in the North submarket, totaling 303,520 square feet. The two largest new leases signed were 93,425 and 49,500 square feet, at 11000 North Interstate 35 by FEMA.
Q3 2017 Top Industrial Lease Transactions
|11000 N I-35||North||93,425||FEMA||Sep-17|
|11000 N I-35
|10200-10212 Metropolitan Dr||North||11,295||Unknown3||Jul-17|
|9324 Neils Thompson Dr||North||10,500||Unknown||Aug-17|
|8024 Exchange Dr||Northeast||48,498||Brothers Produce||Jul-17|
|8329 Cross Park Dr||Northeast||20,511||Unknown||Jul-17|
|9011 Tuscany Way||Northeast||19,572||Glazers||Jul-17|
|6101 Baldwin Dr||East||40,000||Unknown3||Aug-17|
|4401 Freidrich Ln||Southeast||75,051||Hd Supply Facilities Maintenance, Ltd1||Aug-17|
|3701 Drossett Dr||Southeast||14,534||Unknown||Sep-17|
|3801 Helios Way||Far Northeast||54,427||Unknown||Sep-17|
Q3 2017 Industrial Under Construction - 20,000 SF or greater
|BUILDING ADDRESS||SUBMARKET||RBA||% PRE-
|4100 Smith School Rd||Southeast||195,000||100.0%
|4500 S Pleasant Valley Rd - Building 1
|4500 S Pleasant Valley Rd - Building 2
|4500 S Pleasant Valley Rd - Building 3||Southeast||162,232||0.0%||Ridge Development
|The Collective @ South Congress -
7601 S Congress St
|0 Warehouse Dr||Hays County||25,200||0.0%||Unknown||Apr-18|
|2301 E Saint Elmo Rd - Building 3||Southeast||162,232||53.8%||Ridge Development||Nov-17|
Q3 2017 Austin Industrial Highlights