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Austin retail

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The overall occupancy rate was unchanged quarter-over-quarter at 95.3%, though this figure represented a 60-basis-point decrease year-over-year. Net absorption in the Austin retail market ended Q1 2021 at 294,000 sq. ft.—down from 755,000 sq. ft. year-over-year.


EXECUTIVE SUMMARY

OCCUPANCY REMAINS AT 95.3% The overall occupancy rate was unchanged quarter-over-quarter at 95.3%, though this figure represented a 60-basis-point decrease year-over-year. Net absorption in the Austin retail market ended Q1 2021 at 294,000 sq. ft.—down from 755,000 sq. ft. year-over-year. Leasing activity—which is comprised of both new leases and renewals—included 448,000 sq. ft. of signed deals during the first quarter, an increase quarter-over-quarter, although down from this time last year. The retail market saw overall average asking rates decrease by $0.26 per sq. ft. quarter-over-quarter to finish at $21.02 on a triple-net basis. A year ago, average rates were at $21.50, representing a 2.2% decrease.

AUSTIN ECONOMIC INDICATORS The Federal Reserve Bank of Dallas reported that the Austin economy continued to expand in February, albeit at a slower pace. While jobs were added, Austin’s unemployment rate ticked up to 5.3% in February from 5.1% in January. This is well below the state’s jobless rate of 6.9% and the nation’s 6.2%. Austin payrolls grew by 12,915 net jobs in the three months ending in February. The “other services” sector led the job expansion (1,945 jobs), followed by professional and business services (8,390 jobs) and construction and mining (2,180 jobs). Two sectors declined—government (5,585 jobs) and manufacturing (800 jobs). As of February, 76.3% of the 135,520 jobs lost at the onset of the pandemic in March and April of last year have been recovered.


MARKET OVERVIEW

SUPPLY AND DEMAND The Austin retail market realized net absorption—the measure of total square feet occupied in existing buildings, (indicated as a move-in) less the total space vacated (indicated as a move-out) over a given period—of 294,000 sq. ft. in Q1 2021. So far in 2021, a total of 343,000 sq. ft. was delivered to the market with 58% of that space occupied. Of the 809,000 sq. ft. still in the pipeline, less than one-fourth of that space is available.

INVESTMENT SALES TRENDS Real Capital Analytics data reports quarterly retail sales volume for Q1 2021 in the Greater Austin area at $70 million involving 11 properties, down compared to this time last year at $170.4 million including 11 properties. The capital composition for buyers in 2021 was made up almost entirely of private investors at 98.1%, and for sellers, the majority was 70.4% private investors and 22.2% institutional.

AVERAGE ASKING RENTS The retail market in the Austin area saw triple net average asking rents at $21.02 per sq. ft. to end Q1 2021, down 2.2% from this time last year. Rent growth has varied across Austin submarkets, and with additional space likely coming available in Austin, tenants may have more leverage than at any time in the last decade with regards to negotiating rental rates, terms, tenant improvements and concessions. The CBD ($27.52 per sq. ft.) and Hay County ($24.63 per sq. ft.) submarkets currently have the highest annual overall average rate, followed by the Northwest ($23.87 per sq. ft.).

AUSTIN-ROUND ROCK MSA CONTINUES TO SET HOUSING RECORDS According to the Austin Board of REALTORS®, sales volume lost due to the February storms was recovered in March and the median price for a home in the MSA rose by 28.8% compared to last year, hitting an all-time high of $425,000. Across the five-county MSA in March, home sales increased 13.1% year over year to 3,603—a record for the month of March. At the same time, active listings fell 78.3% to 1,202 listings, keeping housing inventory at a record-low 0.4 months of inventory, or 1.4 fewer months than in March 2020.


Leta Wauson
Director of Research
leta.wauson@naipartners.com
tel 713 275 9618

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