CBRE Research: Austin development shifts into higher gear as product comes online

Like a finely tuned speeding engine, the Austin
industrial development cycle shifted into high gear
to kick off 2018. Developers have delivered 28%
more product within the past five quarters than
during the entirety of 2010-2016, showing there are
still a few more laps to go in the cycle before the
checker flag waves.

Once again, roaring development activity brought
an additional 470,000 sq. ft. of new product to the
Southeast submarket. To the north, the first phase
of the planned 800,000 sq. ft. Innovation Business
Park broke ground in the suburb of Hutto, located
in the Georgetown submarket.

During Q1 2018, approximately 850,000 sq. ft. of
new construction delivered to the market, with an
additional 1.19 million sq. ft. in the pipeline,
showing that developers remain optimistic on the
Austin market.

For the first time since 2014, vacancy crested to
10.8% this quarter. Meanwhile, the average annual
asking rent declined by $0.28 since Q4 2017 to
$9.87 per sq. ft.

From 2010 to 2016, developers brought
approximately 2.0 million sq. ft. of new product to
the Austin industrial market. Since 2017,
development activity has ramped up drastically:
approximately 2.6 million sq. ft. has been delivered
since the beginning of 2017, a 28% increase from
prior years. The current status of the development
cycle has put pressure on basic leasing market
fundamentals: vacancy has increased, while the
average asking rent decreased. Despite this, CBRE
Research is currently tracking more than 1.5
million sq. ft. of user demand in the market for
both Flex/R&D and Warehouse/Distribution
product.

More Info: https://www.cbre.com/research-and-reports/Austin-Industrial-MarketView-Q1-2018