AUSTIN–The local industrial market saw the highest level of year-to-date negative net absorption since 2009, but at the same time the city saw the largest rental rate increase since 2011, according to the latest MarketView report from CBRE.
“Two straight quarters of negative absorption might lead you to believe the Austin industrial market is headed in the wrong direction,” Ace Schlameus, first vice president for CBRE, tells GlobeSt.com. “However, the numerous positive trends are overshadowed by a few large departures. For example, Dell, one of the largest employers in the private sector, vacated its largest Austin-based manufacturing facility of approximately 300,000 square feet on Howard Lane, which I consider net zero absorption for the market year-to-date.”
During Q2, Austin reported 109,469 square feet of negative net absorption, making it the second quarter in a row that the city has seen negative net absorption numbers. The year total is now a negative 293,813 square feet, while the vacancy rate is 11.6%.
At the same time roughly 570,000 square feet of new construction has delivered in 2014. Schlameus says that is proof of Austin’s “healthy and expanding market.”
During the second quarter, average citywide asking rates increased $0.04 per square foot quarter-over-quarter. Flex rates saw the most significant growth, reaching $0.87 per square foot per month, up from $0.79. This figure is the highest level recorded since 2008. Schlameus sees this as a trend that will continue in the months ahead.
“As more institutional buyers look to invest in Austin’s market at historic values, tenants should expect rental rates to gradually increase on class A projects, regardless of the vacancy factor, while concessions will stay tied to market availability,” Schlameus says.