It’s springtime in Austin (yes, we’re surprised as well) but the commercial real estate markets are warming things up. There is a flurry of leasing activity in the metro area as well as some seriously big looks from powerhouses like Amazon and Google for new or increased presences.
Any decisions made from a group of that size would cause an uproar in the CRE development world with interested builders and investors scrambling to capitalize on needs for residential and commercial to support such a major influx of hiring or transplants to our fair city. The city as a whole has experience major changes from the likes of Facebook, Oracle and more...all who have made significant splashes in both the real estate world and the employment of local professionals.
Tech-centric companies continue to lead the way and Austin’s moniker as the south’s Silicon Valley is still well earned, if not improving. For more information on Amazon’s process and that potential impact we recommend checking out this article.
In the meantime, let’s take a look at the local real estate markets and what they mean for Tenants in today’s environment.
Office markets are still quite strongly in favor of the Landlord, with rising rental rates (now averaging $35+ PSF/YR Gross citywide and over $50.00 in the CBD) and tight availabilities pinching the Tenant community, especially in the downtown areas. Overall vacancy sits right at +/-11% but is extremely tight for larger users (15,000 S.F+) as there are very few big blocks of space downtown available at favorable rates. Brand new availabilities are seeing deals done in the high $50’s PSF/YR Gross for larger Tenants and in the 5,000 S.F. range we’ve seen deals in new buildings at over $65/PSF/YR.
The market is opening up for small users however, as some of these larger occupiers vacate the area in favor of lower economics in the suburban markets. Bottom line? Sentiment from Tenants is pushing big users of space out of the downtown area in search of a better lease deal. Increases to not only rental rates but parking costs and traffic issues has pressured Tenants in a major way. Flights to areas like the Northwest and South markets have been havens for favorable leasing transactions. Looking for a parking deal? Try the east side. Although rental rates are increasing there are many lots shuffling people who work downtown back and forth for significant savings from standard rates. The Domain continues to lead the charge in development and leasing, staking it’s claim as one of the hottest Office markets in the country.
Retailers...our thoughts are with you. Austin is experiencing one of the staunchest Landlord markets in recent US history. With vacancies city-wide at sub 5%, it’s no surprise that rental rates have continued to rise. NET rent’s have risen almost 75% since the lows of 2015, with the average base rent PSF/YR now over $23 PSF/YR, pushing $35/PSF/YR with expenses. Want to lease downtown? It will cost you $60/PSF/YR plus, and vacancy is sub 3%. Bottomline for Tenants? The best deals remain on the horizon, just not in the short term. There are a ton of deliverables, especially in the North market, which should push vacancy rates up a bit and provide some much needed rental relief. We recommend being incredibly smart about your leasing decisions this year, using options and timing negotiation to limit your square footage needed to account for these increases in rates...on a renewal basis? We feel for ya, push Landlord’s for shorter term leases and options to renew at “Fair Market Value” down the road (2-3 years) to try and limit your exposure to these massive increases in rate. If you need to move? Flight to the Far North and Far East markets are the best bets, with lots of new development on the horizon and historically reduced suburban expenses. Check out our leasing guides for more tips.
The industrial markets continue to be a pretty even battle between Tenants and Landlords for rates. With the recent skirmishes won by Landlords. Vacancy rates dropped from almost 9.5% to sub 9% in the past quarter, due to increased leasing activity in the south market. Have no fear Tenants, there is over 500K S.F. coming on line in this quarter alone, and rates continue to be fairly stable at +/-$10.75 NET, expenses have seen an uptick (thanks taxman) to $5.00 PSF/YR+ on average. If you’re looking for flex space, expect to be in at +/-$17-18.00 PSF/YR Gross. Best deals to be had are south of the city, as continued developments are spurred on by that never-ending road construction we all love so much. For more information on industrial availability visit us.
After collecting feedback from over 1,700 Tenants (150+ joining us per week now) that have joined us here in Austin since our recent launch we can say the reviews are in (seriously). We now have over 1,600 properties to search, match with, review and more...Tenant sentiment is average in the city, with most of our business community focused on the following:
- Responsiveness. This is a running theme and frankly Landlords and reps have no excuse to not call people back. From calling signs for inquiries to management issues the time to respond is critical. This is a big needs improvement item Houston.
- Parking. Not a whole lot most owners can do here but it’s a major complaint and the number one reason Tenants are considering a move. Work is hard enough, getting to/from shouldn’t be a soul suck. Creative Landlords are offering valet, uber-like services and having police manage traffic to help soothe these issues.
- Biggest positive? Renovations. Tenants were extremely complimentary of Landlords who spent moolah making their places stand out. In a market of more than 100K Tenants and 25K+ making a lease decision annually don’t you want to look great?
We’ll be keeping you all up to date on the newest developments, market research and more in our “Business Happens” brief...so keep your inboxes ready. We’re all about empowering Tenants with knowledge so get the skinny on how to make your next lease a great experience today.
Landlords, Reps? We will show you how to lease your space and keep it leased (hint, keeping Tenants happy is HUGE). Show our business community you care about your building and your Tenants today by claiming your building at Tenavox.
Learn how to leverage critical Tenant feedback, ratings and enhanced media to make your building standout to the only community of Tenants in commercial real estate with Tenavox.
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