The Industrial Wave of Change

As of mid-year, the industrial market has held its own despite the surge of rapid development and unfavorable news from local manufacturers. Unlike the previous slowdown of 2001, most of our tenants are doing quite well. In fact, several projects have tenants currently in expansion mode. HPI has been fortunate enough to secure and complete several new deals this year, and we would like to thank those brokers and tenants who helped us post a solid first half of the year.

Dell’s decision to move PC and laptop manufacturing to North Carolina has most certainly made an impact on the industrial market. Within days of the announcement, news began to trickle in regarding operation shut downs for many Dell vendors. Eagle Logistics and MagRabbitt are just two of the notable tenants who plan to give back space in the coming months.

The Dell news was not particularly timely, considering the 1,600,000 square feet of new bulk development that is currently under construction. Some of the notable developments include Southpark Phase IV, Burleson Road Business Park, Vista Business Park and Springbrook Corporate Center. When reflecting on Austin’s historical absorption trends, we certainly have our work cut out for us from a vacancy standpoint.

The flex market has been the shining star within the industrial sector as many tenants are beginning to realize the significant cost savings between Class A office and flex space. We estimate an $8.00 to $10.00 per square foot delta between the two product types. Currently, HPI has approximately 710,000 square feet of flex space in three projects under construction. We are pleased to report that we are ahead of pro-forma on all projects.

As always, tenant retention is HPI's main focus heading into the second half of the year. Now, more than ever, we need to, and especially plan to, focus on our customer service.