At the close of Q2 2018, industrial developers continued their expansion of the industrial market in Austin by delivering an additional 124,476 sq. ft. of new product. Compared to the completion of more than 800,000 sq. ft. in Q1 2018, the recent midyear quarter was relatively soft for new additions. However, the under-construction pipeline expanded substantially to over 1.6 million sq. ft., an increase of more than 600,000 sq. ft. This roaring activity - mainly for warehouse-distribution product - clearly demonstrates robust demand for quality Austin industrial space and the growing functionality of Central Texas logistics.
This past quarter's construction activity was predominately located in the northern submarkets of Austin; the Round Rock submarket alone accounted for 28% of new construction activity among nine area projects.
As mentioned, the local construction pipeline is heavily skewed in favor of warehouse product, with approximately 67% of new building promoted as warehouse/distribution product.
Market fundamentals improved during Q2 2018 as vacancy again dipped below 10%, the "sweet spot" for Austin developers. The citywide average annual asking rent increased over Q1 2018 to $9.89 per sq. ft., an increase of $0.02 per sq. ft., largely driven by flex/R&D product. Absorption activity was strong the past quarter with positive net absorption exceeding 82,000 sq. ft. mainly in warehouse/distribution, registering past 107,000 sq. ft. Flex/R&D product acted as a drag accounting for close to 25,000 sq. ft. of negative absorption, bringing total demand to just more than 558,000 sq. ft. for the first half of 2018.
More Info: https://www.cbre.com/research-and-reports/Austin-Industrial-MarketView-Q2-2018
