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Austin Retail market already outpacing prior year’s net absorption total with three months to go.


EXECUTIVE SUMMARY

OCCUPANCY AT 95.9%
Austin’s retail market has been largely insulated from the uncertainty that many expected at the onset of the pandemic. Occupancies remain north of 95% and net absorption has remained positive for all but one quarter (Q3 2020). Leasing activity is already showing some positive momentum, with Austin recording 610,000 sq. ft. of activity, just below the five-year quarterly average of 637,000 sq. ft. With 283,000 sq. ft. delivered since the beginning of the year, 703,000 sq. ft. under construction, and another 640,000 sq. ft. planned through 2022, the demand for retail real estate may continue to overtake supply.

AUSTIN RECOVERED ALL JOBS LOST DURING PANDEMIC
The Austin economy continued to expand, led by declines in the unemployment rate. Austin’s unemployment rate once again fell in August, to 3.8%—the lowest level since March 2020. This is well below the state’s jobless rate of 5.9% and the nation’s rate of 5.2%. Austin payrolls expanded an annualized 7.5%, or by 20,700 net jobs, in the three months ending in August. Health and private education services led job growth at 16.4%, followed by leisure and hospitality at 13.5%. Strength in consumer spending in Austin has continued, reaching a record high during Labor Day weekend. In Travis, the metro’s most-populous county, credit and debit card spending has consistently surpassed January 2020 levels since last July, except for a dip in late November 2020.

Austin Retail Data Graphs


MARKET OVERVIEW

DEMAND OUTPACED SUPPLY
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 619,000 sq. ft. in Q3 2021. This is the second consecutive quarter since Q1 2020 that demand has outpaced supply. Total net absorption year-to-date is 1.2 million sq. ft. So far in 2021, a total of 828,000 sq. ft. was delivered to the market, with 67% of that space spoken for. Of the 703,000 sq. ft. still in the pipeline, about 34% of the space is available.

INVESTMENT SALES TRENDS
Real Capital Analytics data reports that the cumulative monthly sales volume in the greater Austin area is at $565.7 million as of September 30, 2021, up 80% compared to this time last year at $312.8 million. The primary capital composition for buyers so far in 2021 was made up of 72.3% private and 15.6% institutional investors. For sellers, the majority was 51.3% private and 28.2% institutional investors. Among recent noteworthy transactions include Springdale Shopping Center at 7112 Ed Bluestein Blvd. in Austin sold to Edens Inc. by Forge Capital Partners LLC. The fully leased 163,145-sq.-ft. retail center is anchored by an H-E-B grocery store near the intersection of U.S. Highways 183 and 290, which also has Dollar Tree, KFC, O’Reilly Auto Parts, Ross Dress for Less, Subway and Wingstop as tenants. The sale price was not disclosed.

AUSTIN HOUSING MARKET REMAINS STRONG AND COMPETITIVE
According to the Austin Board of Realtors’ September 2021 Central Texas Housing Report, the Austin-Round Rock MSA is continuing its calming trend. Home sales decreased 5.1% compared to September 2020 as the median sales price of $450,000 set a record for the month of September. The increased demand in the Austin housing market, not just over the past 16 months, but over the past two decades, have been contributed primarily to job growth and a flourishing and diverse economy. Although addressing housing affordability and increasing available inventory should continue to be a top priority for the region.


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

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