Tenant demand has remained robust in Austin’s industrial market, as recent expansions helped lift total leased space above pre-pandemic averages. However, leasing volume remains nine percent below last year’s historic levels as the risk of a recession cast uncertainty on the horizon.
In response to long-term growth trends, the market remains in a period of supply expansion. A total of 18.8 million square feet is under construction, accounting for 12.7 percent of the existing inventory. When considering the market’s size, Austin’s industrial sector stands out as the fastest growing in the U.S.
Austin’s vacancy rate of nine percent is among the highest of any major U.S. market, and its recent increase is primarily attributable to new deliveries. Developers are focused on large projects. Consequently, available space is concentrated among properties between 100,000 and 250,000 square feet, creating a mismatch between the strong demand from smaller, regional tenants and the growing surpluses of large warehouses.
The market is on pace for another year of record deliveries. However, the surge in borrowing costs and stricter lending standards has led to a 50 percent year-over-year decline in construction starts. As a result, the market will witness a notable reduction in the number of speculative projects, which is expected to contribute to the stabilization of Austin’s vacancy rate.
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