Industrial Space Noose Tightening Despite New Projects

AUSTIN-Despite plans for several million sf of new space, the city’s industrial market remains tight, with a lack of space for tenants hungry for expansion, say experts in the sector.

“Austin’s industrial market has a tough time keeping up with demand,” explains Jerry Heare, an industrial specialist at NAI/Commercial Industrial Properties Co. here. “Vacancy ranges at 5% to 6% even though the increase in product construction continues at a brisk rate.”

The continued expansion of Dell Computers and Applied Materials, combined with the growing number of software companies and services to the expanding population is driving the market, he adds. According to Heare, most buildings being constructed are bulk warehouses, which are dock high and have 24-foot clear height. About one-third to one-half are being used for flex office space with dropped ceilings, air conditioning and windows in place of overhead doors. “Flex space is in demand in response to the high cost of office space,” he says.

According to statistics provided by NAI/CIP, Austin has absorbed nearly 1 million sf in the first six months of this year, bringing the market total to more than 26 million sf of industrial space. Nearly half of the absorbed sf is located in the city’s northern corridor, where a 1% vacancy rate prevails.

Currently, some 2.2 million sf of warehouse space is under construction or scheduled to be started before the end of the year. Of that amount, about one third is already pre-leased. The city also has 1.3 million sf of flex/R&D space under construction, according to NAI/CIP researchers.

Royce Lacey, a NAI vice president and industrial specialist, says overall economic growth in the Austin area is driving continued demand for industrial space. “It is based on user demand,” says Lacey. “Currently, bulk warehouse has the most demand with respect to the supply available.”

Casey Borgers, an industrial specialist at NAI, says “demand is grossly outweighing the supply. We are having the most difficulty finding small-to-medium bulk warehouse space for young companies.