Demand in Austin's industrial space remains high, although supply is causing some issues with key fundamentals. Net absorption in the second quarter totaled 1.8 million square feet, marking the 20th straight quarter in which demand has stayed in the positive territory, according to a report from JLL.
"Six occupiers each claimed spaces exceeding 200,000 s.f. this quarter, continuing the momentum from 2024's strong leasing activity," JLL said, while adding "last year saw an unprecedented nine leases signed and one purchase for spaces 200,000 s.f. and larger, the most such transactions completed in a single year in Austin's industrial history."
No leases were larger in the second quarter for industrial in the city than Tesla's 296,960 square feet deal at the Austin Hills Building 1. So far, that holds as the largest lease in Austin's industrial sector in 2025, according to JLL. However, leasing overall is down in the market from the three-year quarterly median.
Additionally, despite the high demand, there were other unfavorable trends.
Vacancy spiked by 15.1 percent from the previous three months and 12.2 percent year-over-year to 16 percent. That comes as development exceeds absorption, with 11.15 million square feet underway in the second quarter. That trend also put "pressure" on asking rents, which averaged $11.75 per square foot in the second quarter, according to JLL. However, rents remain up 48.7 percent since 2020. Deliveries in the first half totaled 4.8 million square feet, with 28.7 percent getting pre-leased. Also, since 2020, Austin's industrial sector has seen 29.6 million square feet of speculative space come online.
Because of that trend, JLL is warning that further "pressure" is expected on asking rents, with the anticipation that vacancy will spike in turn. Plus, broader economic concerns remain on trade policy.
"Though tariff concerns have sparked multi-city searches across Texas, these discussions haven't yet translated into known actions in the Austin market," JLL said.
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