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Austin’s Industrial Advancement

Posted on by in Features

By Chris Gamel, CCIM, Grubb & Ellis ‘ Austin, Texas

The Austin industrial market has grown significantly in the last few years as a result of the city’s economic expansion. The addition of retail centers across the area, new business moving to town as a result of the population and job growth, as well as the growth in high tech firms and suppliers for Dell, Samsung, Applied Materials and other major employers, have caused this growth. The new road infrastructure and tollways have provided better and quicker access across town and improved transit time to outlying areas in the north, east and south. These roads also lead to better access to available and cheaper dirt for industrial development. SH-130 serves as a valuable link between north, east and south Austin, extending beyond the older, traditional east Austin market. The SH-130 Bridge across the Colorado River has also provided relief to the traffic bottleneck on Highway 183 across the river to the airport. The 45 North and South tollways also help link Mopac, IH-35 and SH-130, providing Austin with a long-needed loop (except for a small gap southeast) around the city.

One of the latest industrial trends is the development of new projects along the new roads and tollways. The southeast sector is beginning to mature near the relatively new Bergstrom International Airport. Over 1.35 million square feet of flex and warehouse space has been delivered in the last year in this submarket alone, with two new developments currently under construction. Centerpoint at Colorado Crossing is a four building 264,219-square-foot office/warehouse project being developed by St. Croix. Burleson Business Park is a three building flex project of 324,000 square feet being developed by The General Investment & Development Companies. These projects will likely be delivered in fourth quarter 2008 or first quarter 2009. ING Clarion recently bought Southpark Commerce Center III, a fully leased 470,000-square-foot development. This submarket has been relatively steady with absorption keeping pace with new development to date.

In the north sector, Raceway Crossing is a new 250,000-square-foot industrial development under construction on Bratton Lane by Thackeray Partners and Chief Partners LP. Other new construction in this submarket includes the recently announced Northpointe Trade Center, a 448,550-square-foot warehouse project near IH-35 and SH-45 in Round Rock. This project, which is a joint venture between Koll Development and Harbert Management, is scheduled to be completed in first or second quarter 2009.

In the northeast sector, Prologis is developing 112,000 square feet of office/warehouse product across from the main post office in The Walnut Creek Business Park, with completion slated for third quarter 2008. This development is on one of the last remaining large lots in Walnut Creek. Also in Walnut Creek, McShane has commenced construction of its 51,865-square-foot office/warehouse building targeted for completion in first quarter 2009.

In a new trend for Austin, Indevelopments Corp. has just announced its new office/warehouse/ condominium project on Wells Branch Parkway in Pflugerville. Phase I includes two 30,000-square-foot buildings that will be developed and sold in 3,000-square-foot increments with each unit having its own overhead door. While office condominiums are a known quantity in Austin, this is the first known office/warehouse/condominium project in Austin.

Common trends in new developments include higher ceiling heights of 24 to 28 feet and Early Suppression Fast Response sprinkler systems. Some developers are even beginning to develop green buildings with LEED-certification from the U.S. Green Building Council, which promotes buildings that are environmentally responsible, healthy places to work. While usually a bit more expensive to develop, expect more developers to build green, not just because it is socially responsible but because it reduces operating expenses and adds value when it’s time to sell the project.

Adding up the square footage of the projects currently under construction including the two recently announced projects, Austin has approximately 1.5 million square feet of industrial space currently under construction. Including recently completed projects, Austin has added over 4 million square feet of industrial space to the market over the last few years. In a 75 million-square-foot market, this is a small percentage but the market will need some time to digest the new space. According to CoStar, industrial vacancy increased from 9.9 percent to 10.4 percent from first quarter to second quarter this year. Flex vacancy remained relatively steady at 17.6 percent and warehouse vacancy slightly increased from 7.2 percent to 7.9 percent from first quarter to second quarter. The market has done a relatively good job of absorbing the new space as it has come on line to date.

The Austin market continues to be a bright spot in the real estate industry, relative to other markets. Everyone wants to be in here, including real estate investors.

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Chris Gamel CCIM, is vice-president — Transaction Services, with the Austin office of Grubb & Ellis.

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