Austin Industrial in the Spotlight
Looking closer at commercial real estate in Austin, there are many different assessments for each sector. The industry is still quantifying the effects on the office. One sector that boomed through COVID in Austin was industrial real estate. There are many reasons it has performed so well. A combination of industry growth, population growth, and overall positive sentiment towards Texas for business is turning Austin into a powder keg for development.
When looking at Austin’s industrial market, only Charleston, South Carolina, performed better pound for pound, according to CoStar. When not including Amazon leasing and construction activities, over a million SF leased in Austin in the past 18 months.
Amazon is not the only large company that has given Austin the nod. Tesla has been building a 4.5M SF Gigafactory in East Austin. Tesla is not the only Elon Musk company that has been looking at Austin for expansion. One of Elon Musk’s more ambitious companies re-imagining the future of transit & infrastructure, the Boring Co., recently acquired land in East Austin. Another large company eying a similar area is Samsung as the mull over where to put their next 17-billion-dollar chip fab. These large industrial deals are drawing in smaller companies looking to take part in the Austin boom. It is not just local companies anymore. According to an AFIRE survey, Austin has passed New York in foreign investment interest. According to the CEO of AFIRE, “That’s odd for a couple of reasons,” … “Number one, it’s small. Institutional investors are really looking for large investments, say $50 million and more. And it’s not that deep a market — there’s not that much there. However, Austin is a high-growth market. It has a lot of tech firms, a lot of biotech, and a lot of young people that are moving into that market.”
One of the newer drivers of demand has been cold storage. With the increase in appetite for food delivery services, the need for this type of storage has been fast outpacing the supply as it is costly and highly technical. The demand for cold storage is expected to increase by 100 million square feet in the next five years.
Austin’s commercial real estate is diversifying and no longer becoming about one sector, and instead industrial leads the charge as foreign investors look for opportunities outside office. As Austin grows, it will need to expand on industrial and flex space as more and more commerce comes through the Austin-San Antonio corridor.
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 Q2 2021 Industrial Development Pipeline
Zoom/Click for More Details