Industrial – Landlords Perspective

As 2009 comes to a close, the Austin industrial market is facing a few harsh realities –  the first, being an excessive amount of space on the market and the second being market numbers jarringly similar to those of 2002.

The market, currently 78% occupied, has experienced nearly 1.1 million square feet of negative absorption.  From an absorption and occupancy standpoint, we’re reaching levels not seen since the aftermath of the tech bust in 2002.  That being said, the fundamentals of this market downturn are completely different than those of 2002. This time around, the weakness in the market comes from the addition of too much speculative space without tenant growth.  In 2002, the weakness came from tenant failure.

There’s no doubt about it, Austin has experienced its fair share of tenant failures and factory closures during this recession, but surprisingly, Tenants have held up well.  As we continue to monitor our tenant’s health, we are becoming optimistic for the coming year. The positive signs are already beginning to appear as we are seeing fewer “work out” requests, renewals for longer periods of time, and feedback that business is improving across all industries.