Q2 2022 Industrial Real Estate Report: Austin, TX
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
The capital of Texas, Austin has been one of the nation’s fastest-growing cities since 2010. Part of the Texas Innovation Corridor, Austin recently made headlines when Elon Musk announced plans to move Tesla’s headquarters from California to Austin.
Opportunities for all types of commercial real estate, especially industrial space and office space, continue to grow in and around Austin, making it a popular destination for investors and businesses.
The second quarter of 2022 saw Austin, TX industrial real estate turn in some record-breaking figures. Let’s take a closer look.
Summary of Austin Industrial Real Estate Performance in Q2 2022
Over 4 million sq. ft. of new construction product broke ground in Q2, including Austin’s largest speculative industrial project in history.
Kyle/35 Logistics Park is set to deliver over 1.3 million sq. ft. of industrial real estate across five buildings.
The vacancy rate has loosened to 3.8% in the Austin metro industrial market, as Q2 2022 broke the seven-quarter streak of demand for industrial space outpacing supply.
Around 2 million sq. ft. was delivered to the market during Q2 2022, bringing the year-to-date total to 7.8 million sq. ft., with 93% of that space spoken for.
Wondering if the increase in vacancy rates has affected average pricing for industrial real estate? Here’s an update.
How much is the average Austin industrial area real estate?
The shift towards e-commerce, combined with the quality of its industrial property, has encouraged rent growth in the Austin-Round Rock metropolitan area.
Monthly rental rates for the Austin industrial metro averaged $1.02 per
square foot (PSF) during Q2 2022, a year-over-year increase from $0.97.
- The monthly average rate for flex space* is currently $1.45 PSF.
- Manufacturing rates are at $1.17 PSF.
- Warehouse/distribution space sits at $0.88 PSF.
Austin’s Southeast ($1.44 PSF) and Northwest ($1.41 PSF) submarkets
currently have the highest monthly overall average rates.
Next, we’ll look at who’s buying and leasing industrial real estate in the Lone Star State’s capital city.
*Industrial-office flex space is a single-story, industrial building that is at least 25% office space with a parking space ratio of four-to-one. “Flex” describes the possibility of the property being converted to 100% office space.
Purchase & Leasing Activity
While active, purchasing activity within Austin during the most recent quarter was overshadowed by the previous quarter’s sales.
- Q1 industrial quarterly sales volume was $350.7 million, while Q2 sales totaled $93.3 million, a 75% drop from Q1.
- Investors led the field in purchasing industrial real estate, with 69% of buyers identified as institutional investors and the remaining 29% private investors.
- Sellers of Austin-area industrial real estate were a combination of REIT/listed investors and 47% private investors.
Over 1.8 million sq. ft. of leasing activity, comprised of new leases and renewals, took place during Q2. These brought the year-to-date total to 3.8 million sq. ft.
The largest leases signed in the second quarter include:
- Wesco, a leader in electrical, communications and utility distribution and supply chain services, executed a sublease for 126,500 sq. ft. at 301 W. Howard Lane in the Northeast submarket in June.
- Bosworth Papers leased 109,203 sq. ft. at 6301 E. Stassney Lane in Expo Business Park in the Southeast submarket in June.
- 108,160 sq. ft. was leased at 1980 Kohlers Crossing in Kyle in April.
While Q2 didn’t see as many high-dollar industrial real estate deals as the previous quarter, there was still plenty to pique investors’ and sellers’ interest, such as the following deals.
Notable Industrial Real Estate Deals in Austin in Q2 2022
Not all big sales happen in the city of Austin. Perhaps the biggest sale during Q2 happened in the northern suburb of Hutto.
Local press reported the sale of Titan Innovation Business Park, a 361,467 sq. ft. Industrial development.
Notable Industrial Real Estate Leases in Austin in Q2 2022
Tenants continue to lease the new large blocks as they became available, with several 100,000 sq. ft. deals made during Q2 2022.
- Trucking and logistics provider JIT Transportation took 108,160 sq. ft. at Kyle Crossing in the Far South, absorbing HBO’s recently vacated real estate that had been leased as a short-term production space.
- Distribution company Graybar signed a deal for 102,060 sq. ft. at the recently 130 Crossing, a Class A, multi-phase industrial park located north of Austin in the town of Pflugerville, near SH 130.
As the Austin-Round Rock metro area continues to attract new tenants, more industrial real estate went into development or began construction during 2Q 2022.
New Industrial Real Estate Development Activity in Austin in Q2 2022
Warehouse and distribution space comprise the majority of industrial real estate currently in development or construction.
- As of Q2 2022, 10.8 million sq. ft. of industrial real estate is under construction, with 55% available for lease.
- Q2 projects under construction rose to 91, a big jump from the 54 projects under construction during Q2 2021.
- Warehouse/distribution space currently makes up 90% of the total space under construction.
- Flex space is responsible for 9% while manufacturing represents 1%.
Two of the largest projects underway are:
- The Applied Materials Logistics Center Building 37, which will provide 725,000 square feet of industrial space.
- The Georgetown Logistics Park, Building 1, located at the corner of Aviation Drive and South IH 35. This is scheduled for completion in Q1 2023.
While no real estate expert has a reliable crystal ball, many local commercial brokers share a positive outlook for Austin’s industrial real estate for the remainder of 2022.
Market Forecast for Austin’s Industrial Real Estate Market
Austin’s industrial real estate market is expected to see continued demand.
This is based on the area’s sustained population growth and continued expansion by e-commerce, manufacturing, third-party logistics producers, and construction industries.
This demand includes industrial real estate requirements from Tesla and Samsung suppliers, as many of those contracts have yet to land, and as both companies ramp up output.
Takeaways for Austin Industrial Real Estate Investors
Local industrial real estate brokers are optimistic, as demand for industrial space in the Austin-Round Rock metro area is expected to remain active for several reasons:
- Same-day delivery options are rapidly replacing retail.
- Projects like Samsung’s semiconductor plant in Taylor, 25 miles outside Austin, and Tesla’s Giga Texas have been attracting more industrial development.
However, one industrial site is in peril.
- In June 2022, Amazon informed Austin planning officials in the Austin suburb of Round Rock, TX that the company has decided to postpone plans for a $250 million fulfillment center.
- Amazon had been planning to build this center on a 193-acre site purchased for development during 4Q of 2021.
Austin has more than its share of industrial real estate opportunities but still isn’t totally immune from the occasional disappointment.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
List & Browse Commercial Real Estate in Texas for Free on MyEListing.com!
You can list and browse commercial real estate in Texas for free right here on MyEListing.com.
Simply sign up for a free account and get unlimited access to accurate local market intelligence, customized property type alerts, comp software, and more.
Other recent articles
Article Search
Share
All Article Categories
