Industrial Landlord Market Update

Over the last 18 months, local and national developers alike have added nearly 3.4 million square feet to the Austin industrial market.  This represents a 10% growth in the overall gross inventory. The increase of inventory, coupled with Dell’s closure of the Topfer Manufacturing Center, has not been kind to the market. The above factors, along with the general slow down in the overall economy; have increased the overall vacancy to 22%, up 4% from 2008 year end.   

There are currently six new projects, ranging in size from 170,000 – 440,000 square feet, sitting completely empty.  All of these respective projects are offering sizeable free rent along with additional concessions for credit worthy tenants.  Tenants in today’s market unquestionably hold nearly all of the good cards.  The landlords on the other hand, are simply attempting to keep the odds in the house’s favor. 

From a lease transaction standpoint, there have been a number of deals in the marketplace landing and closing them however, is quite a different story.  At HPI, we have been fortunate enough to land most of the significant lease deals in the market thus far.  These leases include:

• ALC – 122,000sf
• Marquee Rents/Tents – 71,000sf
• HD Supply – 70,000sf
• Rigaku – 20,000sf

Despite landing a few of the more noteworthy deals, investment sales have come to a screeching halt.  To date, the Austin investment market has not experienced any “distressed” industrial real estate. Thus far, there has been one institutional grade transaction in Austin. However, the Weingarten portfolio, which is currently on the market, should trade by the end of the 3rd quarter. In spite of the current market, we all remain enthusiastic that conditions will begin to turn around sooner rather than later.