In the past decade, the Industrial and Flex space has seen extreme growth bolstered by the shift to e-commerce. Companies like Amazon and Walmart have invested in building warehouses across the United States and globally. In Austin alone, Amazon has over 3.8 million square feet under construction right now. Tesla is currently building another Gigafactory over 4.5 million square feet. While rent has stagnated and decreased in Office, the Flex and Industrial leasing and sale activity have experienced sustained growth. Over the past decade in Austin, the market has seen Warehouse and Flex rents increase nearly 70%. The recent developments of COVID have made it an appealing investment as vacancies have stayed much lower, coupled with the increase in demand for online ordering due to the pandemic. “In 2020, over two billion people purchased goods or services online, and during the same year, e-retail sales surpassed 4.2 trillion U.S. dollars worldwide.” Office space is at an inflection point with an uncertain future; Industrial and Flex space is facing quite the opposite. Industrial and Flex will continue to be red hot as companies expand their supply channels and invest in warehouses.
Companies who want to stay competitive in the internet age invest heavily in warehouses and logistics to deliver their products to customers fast. Increased demand for these spaces bodes well for the Industrial sector. The increase in demand for all things shipped has moved its way to groceries as well. Demand for cold storage is rapidly outpacing the supply as things like meal kits have been wildly successful. As more and more individuals purchase their groceries online, this will be another sector where we begin to see Industrial thrive. As grocery store traffic diminishes, warehouses with cold storage will grow. Industrial growth is here to stay, and as it does grow, we will see new creative and innovative uses for it.
The current state of Industrial is still demand exceeding the supply, “However, the demand for Industrial space still outstripped supply, as net absorption was 40.2 million S.F., which fell short of new supply by 25.4 million S.F. because of the amount of space built on speculation. However, with warehouse space demand expected to grow by 1 billion square feet by 2025, this market could tighten considerably.” Look to see a large amount of Industrial construction in the coming years to help meet the booming demand.
Austin Industrial Rental Rates
*Research information is sourced from CoStar data compiled through ECR from custom reports using existing, non-owner occupied properties above 20,000 SF.
Austin Q1 2021 Industrial Development Pipeline
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