Retail Occupancy, Sales Tax Shortfall Create Austin Dichotomy

The mid-year figures from NAI/Commercial Industrial Properties Co. showed occupancy was 95%, up slightly from 94.47% at the end of 2001 and rents were flat. Rents dropped one cent to $1.38 per sf at centers with 50,000 sf to 100,000 sf while rents rose between a penny and $1.63 per sf at centers with more than 100,000 sf.

Austin-area governments have cut back on services and projects in their 2002-03 budgets because of shortfalls in sales tax revenue. The proposed City of Austin budget has $177.9 million in sales tax revenue, about $10 million less than the current budget.

John Hockenyos, managing director of Austin-based economic analysis and consulting firm Texas Perspectives, says sales tax revenues clearly are down. "There is an economic softness," he says. But that doesn't mean retail is hurting. There are several factors that can reconcile the stable retail rates and the falling revenues.

For one thing, he says, the retail economy is essentially flat. Retailers may not be doing as well as they were in recent years, but they're still open and still leasing space, Hockenyos says. "They had three years of terrific prosperity," he tells GlobeSt.com. "Hopefully now, they've got a few nuts stored up for the winter."

Another factor is that more retail centers, following residential growth, have been built outside municipal jurisdictions. The ability of city governments to capture some of the tax revenue generated by those centers hasn't caught up.