posted on January 27, 2011 23:31
Just months after a record low, Austin’s industrial market showed strong signs of recovery in the second half of 2010 — part of a larger trend seen in other end-of-year figures across commercial real estate.
The industrial vacancy rate in Austin decreased to 20 percent at the end of 2010, down by 4 percent when compared with the record-high 24 percent recorded at mid-year. The vacancy rate is also an improvement from a year ago, down 2 percent from when the rate was 22 percent, according to the year-end survey conducted by NAI REOC Austin.
Not only is the industrial market showing signs of stabilization and a slight recovery, but so are other commercial real estate sectors.
Last week, Oxford Commercial reported the overall vacancy rate for Austin’s office market shrunk slightly throughout 2010, ending the fourth quarter at 20 percent, also down 2 percent from a year ago.
“The lack of new construction coupled with an increase in leasing velocity worked together to lower vacancy rates,” said Mark Milstead, senior broker of industrial services and investments at NAI REOC Austin.
All areas in the Austin metro saw vacancy rates for the industrial market totaling more than 37.3 million square feet decline — except for the East submarket.
Also, despite the Southeast bustling with the largest leases for relocations and expansions, the massive level of inventory at 1.5 million square feet put on the market during recession has been greater than the demand. Since year-end 2008, however, NAI REOC Austin reports nearly half (45.8 percent) of the 2.4 million square feet of newly constructed first-generation space has been absorbed.
“After suffering almost 600,000 square feet of negative absorption in the first half of 2010, Austin’s industrial leasing market experienced a much stronger second half as has been the historical trend,” said David Barber, an industrial services and investments broker with NAI REOC Austin.
Leasing activity in the fourth quarter 2010 alone generated 570,113 square feet of positive net absorption. Warehouse vastly outperformed Flex/R&D properties with 557,261 square feet of net gain versus 12,852 square feet respectively.
The fourth quarter gain marked the second consecutive quarter of positive net absorption, which raised the year-end total to 693,354 square feet led by Goodwill Industries of Central Texas (124,000 square feet), Owens-Minor (84,000 square feet), Ultra Electronics Advanced Tactical Systems Inc. (76,800 square feet), U.S. Courier and Logistics (also 76,800 square feet) and Power Freight Systems (72,000 square feet).
After seeing lease rates decline 30-35 percent from the benchmark high reached in late 2007 through early 2008, landlords ended 2010 with greater confidence to support current asking rental rates based on improved vacancy and positive absorption.
“This has created cautious expectation of upward pressure on rents for 2011. However, with 20 percent vacancy, many landlords are expected to continue aggressive efforts to attract long-term qualified tenants,” the report said. “Even as the economy continues to improve, tenants will remain in the driver’s seat heading into 2011.”
Kim Gatley, senior vice president and director of research for NAI REOC Austin, said that the industrial market will see greater recovery in 2011 as long as speculative construction remains in check, local tenants continue to expand operations and new companies continue to move into the area
1/18/11, Austin Business Journal, Francisco Vara-Orta