Eureka Warehouse Finds! Warehouses May Be A Tenants Gem For Properties In Austin Texas

Vacancy finds!

Vacancy finds!

How is the vacancy doing in the commercial real estate market for industrial and flex type properties in Austin?

Answer: Good for you as a tenant or a potential buyer.

Vacancy rates are still hovering in the low 20 percentile due to more space being delivered which has kept vacancy rates higher than normal. Whats the reason? Several actually, but mainly due to some shut downs of big companies along with an overbuilt market this is keeping the vacancies higher than normal.

What does that mean for you?

Heres an example: some companies closing their offices, others have consolidated the amount of warehouse space they needed adding to the additional capacity of industrial property in the market today. Take the additional capacity along with a higher unemployment rate that translates to lower lease rates and more concessions available to tenants and buyers. For some sellers of property, there is still an elevated expectation of what the property should sell for. This will be evened out as time moves on and the hits or offers on the specific property are not very high.

Where are the best deals areas wise?

The highest percentage of vacant warehouse and industrial space is currently located in the Northern section of Austin followed by the Northeast and Round Rock area. It comes as no surprise that there is more warehouse space available in the Round Rock area due to the technology laden market in Round Rock which has diminished since last year employment wise. The decline in available warehouse and industrial related properties since 2008 has not declined that significantly only around 3% or so. If you take a comparison of leased property versus vacant property for industrial in the Austin area, you will see that leasing was trumped by properties that are available.

Take advantage of lease rates that beat the average market!

Average lease rates are running at approx $0.60 cents per square foot per month for industrial properties. That being said, there are properties that are leasing for less than the $0.60 cents and some with full service rates giving the tenant an added savings. Current rates are the lowest since 2007 for Flex space and the lowest warehouse rates are coming in around the high 40 cent to low 50 cent range per square foot per month. There are a few small warehouse deals out there, small meaning less than 2500 square feet. These properties do require a longer term lease; quite a few customers are looking for shorter terms meaning less than 5 years and closer to 2-3 years. Our suggestion to our clients, is if you can take advantage of the lower lease rates of today, lock them in for at least 3 -5 years.

For the foreseeable future, at least thru 2010 it looks like it will still be a tenants and buyers market due to the slow employment recovery. Manufacturing has suffered quite a bit during the economic downturn and these types of companies tend to lease the larger square footage properties which add to the surplus of available space.

by: Steve Shire

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