Austin's Retail Stays Strong as Occupancy, Rent Rise

AUSTIN-After several years of playing catch up to population growth in the Austin area, retail might be reaching a period of stability, according to a midyear report from the Weitzman Group, based in Dallas. The stability applies to occupancy, rents, construction and leasing.

The overall retail occupancy rate bumped up to 96% at midyear from 95% at the end of 2000. Austin newcomers such as Kohl’s, Costco and others will join existing retailers such as Target, Wal-Mart and Home Depot to add more space than the 1.5 million sf built in 2000, the report says.

“The overall market for retail space remains tight, as almost all the new construction in the past several years has been demand-based,” according to the report. “Due to some scheduled closings in the second half of the year, more space will be coming onto the market; however, the current level of demand should ensure that the space is quickly re-leased.”

The report notes that a Sam’s Wholesale Club is taking the former Builder’s HQ building in the South Town Centre in Sunset Valley; Fiesta grocery has taken space formerly occupied by City Market at Oltorf Street and South Congress Avenue; and Nordstrom’s will take the abandoned Montgomery Ward’s space at Barton Creek Square Mall in 2003.

Other midyear reports have said retail space is the one island of stability in commercial real estate in Austin. Office occupancy rates have fallen through 2001, hit hard by the technology slowdown, and apartment occupancy rates are down about 4% points to 94%.

The high retail occupancy rates should keep rental rates high, but stable, the Weitzman report says. Small retailers seeking space in class A projects should expect to pay and average of $26 per sf to $32 per sf per year. For class B space, rates were in the $18 per sf to $20 per sf range and older class C rents, the $14 per sf to $15 per sf range.