posted on June 13, 2011 01:11
Austin will see a million square feet of new retail space by the end of 2011 — representing the largest percent increase in the U.S. — according to a report by Marcus & Millichap Real Estate Investment Services Inc.
That compares to the less than 100,000 square feet of retail space added in 2010. The million new square feet adds up to about 2 percent more retail stock last year.
Add to that, another 3.1 million square feet is under development in suburbs such as Pflugerville and Kyle. The company said only six metro areas nationally are forecast to see more than 1 million square feet of new retail space. Houston, Dallas-Fort Worth, Chicago, Denver and Washington, D.C., are the others.
Acknowledging that construction financing is still hard to obtain, the researchers say developers are confident about prospects in high growth markets that aren’t “reeling from the housing bubble. “
One big new project? The 600,000-square-foot, third phase of the Southpark Meadows outdoor mall in South Austin, slated for completion in 2011. That final phase of the 1.6 million-square-foot development will include a Sam’s Club.
For the most part in Central Texas, the report said vacancy trended lower in the first quarter of 2011, dropping to 9 percent from 9.9 percent a year ago.
California-based Marcus & Millichap said Austin’s economy has already made an “impressive march out of the recession,” citing 28,300 projected new Austin-area jobs, in part the result of billions of dollars invested by companies such as Samsung Austin Semiconductor LLC and eBay Inc.
Evidence of a recovery in retail has even begun showing up in tax collection data.
For example, researchers at Marcus & Millichap said Travis County collected 3.3 percent more sales tax revenue than the same time last year. Suburban areas such as Williamson and Hays counties reported a 13 percent and 9.4 percent jump in sales tax revenue, respectively.
Notable submarkets vacancies stand at 6.9 percent in the Central Business District, 7.1 percent in South Austin, while out in Round Rock the numbers rose to 14.4 percent.
Still, Marcus & Millichap said tightening conditions will embolden operators across Central Texas to raise asking rents, on average, 1.5 percent to $19.87 per square foot and effective rents will rise 1.9 percent to $17.85.
Noting the obvious, the report said many of the newly created jobs would command higher than average salaries for a city Austin’s size.
That means an already sizable local discretionary income will grow even bigger, which they say will further benefit retailers and property owners.
Worth noting, the report cites $2.8 million in state incentives and $1.2 million from the city of Austin to eBay. In return, the company will create 1,050 new jobs in Austin over the next 10 years. The average annual salary is to be $120,000.
Looking into the investor’s crystal ball, Marcus & Millichap said money will stay focused on single-tenant properties through yearend, though low cap rates will encourage more buyers to explore opportunities with second-tier tenants.
They add that local buyers will likely explore first suburban properties that are mostly vacant.
6/3/11, Austin Business Journal, Cody Lyon