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With the lowest vacancy rate in five years, the Austin Retail market is roaring ahead. 


EXECUTIVE SUMMARY

OCCUPANCY EXPANDS TO 96.3%
Austin’s retail market is off to a strong start in 2022. Vacancy remained tight at 3.7%, leasing activity increased, retail development was up, and rent growth improved. Vacancies have contracted to levels not seen in five years (or Q2 2017), and second-lowest only to Q4 2016 at 3.6%. Leasing for the quarter was again robust, with Austin recording 619,000 sq. ft. of activity, following Q4 2021’s 533,000 sq. ft. There is currently 1.3 million sq. ft. under construction, close to 200,000 sq. ft. delivered in 2022, and another 1.6 million sq. ft. proposed through 2023, reflecting the continued demand for retail space in the Austin metro.

AUSTIN RECOVERED ALL JOBS LOST SINCE PANDEMIC BEGAN
Austin’s unemployment rate remained at 3.2% in February, the lowest level since the beginning of the pandemic. This is well below the state’s jobless rate of 4.7% and the nation’s rate of 3.8%. Growth in the metro labor force increased from an annualized 1.4% in January to 5.8% in February. Austin employment rose at a 2.1% annualized pace, or by 6,353 net jobs, in the three months ending in February. Leisure and hospitality (up 13.5%, or 4,122 jobs) led overall growth, followed closely by manufacturing (up 11.7%, or 1,833 jobs).


MARKET OVERVIEW

SUPPLY OUTPACED DEMAND IN Q1 2022
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 198,000 sq. ft. in Q1 2022. This broke the previous third consecutive quarter streak that demand has outpaced supply. Total space delivered during Q1 2022 was 198,000 sq. ft. In addition, in 2021, a total of 1 million sq. ft. was delivered to the market, with an occupancy rate of 92.4%.

MONTHLY SALES VALUE UP 157% YEAR-OVER-YEAR
Real Capital Analytics data reports that the cumulative monthly sales value in the greater Austin area was $404.2 million as of March 31, 2022, up 157% compared to last year at $157.2 million. The primary capital composition for buyers during 2022 was made up of 71% institutional investors and 29% private investors. The composition was 66% REIT/listed and 35% private investors for sellers. A noteworthy transaction in the first quarter included BH Properties acquiring Round Rock Crossing, a 245,592-sq. ft. retail strip center at the southeast corner of I-35 and SH 45 Toll Road in Round Rock. The retail center was 52% occupied at the time of sale with tenants including Best Buy, Michael’s, Dollar Tree, Vitamin Shoppe, Five Guys, and Salons by JC.

HOME SALES DECLINE AND INVENTORY TICKS UP AS HOME PRICES SET RECORDS
According to the Austin Board of Realtors, more homes were sold in the Austin-Round Rock MSA experienced a decline in residential home sales, while a slight increase in housing inventory coincided with a new all-time record for median sales price. In March, residential home sales declined 5.9% year over year to 3,302 closed sales as the median price rose 22.6% to a new all-time record of $521,100. Sales dollar volume grew by 10.3% to $2,130,213,961 as new listings dipped 1.2% to 4,150. Active listings jumped 46.1% to 1,731 listings, causing housing inventory to increase from 0.2 months to 0.5 months of inventory. Pending sales fell 11.1% to 3,597 listings, and listings spent an average of 21 days on the market, six fewer days than March 2021.


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

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