Q3 2023 Austin Industrial Market Report
Austin’s robust expansions and tight industrial market conditions exhibited a slight softening in the third quarter compared to the previous year. However, the market’s strong demand is expected to persist with more large industrial developments nearing completion.
While new leases signed in the first half of the year exceeded historical averages at 5.5 million square feet, there was a deceleration from the 6.2 million square feet signed in the same period in 2022. Long-term optimism has prompted developers to increase development, with a current construction pipeline of 20.3 million square feet, marking a 35 percent increase from a year prior. However, spec development is more than 12.6 million square feet and is 14.3 percent pre-leased with most deals in Georgetown, Roundrock and Northeast Austin, indicating a risk of rising vacancies and weakening rent growth in other submarkets.
Market-wide rent growth remains robust at 5.6 percent year-over-year but is showing signs of cooling from all-time highs. The investment volume has declined, with 3 million square feet of sales volume in 2023. Observations indicate price contractions, especially in lesser-quality products, exemplified by a recent sale at $135 per square foot, reflecting a 10 percent decline over the past year in suburban areas.
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