Austin’s Industrial Market’s Vacancy Continues to Rise

EXECUTIVE SUMMARY

Q2 In Review

Austin’s industrial market remained stable in Q2 2026, with positive net absorption and lower leasing. The market recorded 2,137,077 sq. ft. of net absorption during the quarter, up 137.5% from the prior quarter. The vacancy rate dropped 70 basis points to 15.7%. Leasing activity decreased 34.7% quarter-over-quarter and fell 5.1% annually. The construction pipeline stands at 14.7 million sq. ft., up 6.3% over the quarter. Rental rates decreased 5.6% quarterly to $13.02 per sq. ft.

Austin Economic Update

Austin posted the strongest relative job growth among the Texas majors, adding 14,900 jobs (+1.1%) for total nonfarm employment of 1.42 million in May 2026. Professional and business services (+3,000), financial activities (+2,700, +3.0%), and health care (+2,200) led gains, while information (−1,600, −3.2%) continued to contract. Office-using employment of 428,400 grew 4,100 jobs (+1.0%) — the fastest office-using growth rate of the five metros. Unemployment remained the lowest of the Texas majors at 3.4% (April), up 30 basis points from a year earlier.

Austin’s $207.5 billion real GDP (2023) grew 4.5% year over year and has compounded at 6.8% annually over five years, the fastest of the Texas metros. Population stands at 2.55 million with the highest median household income of the group at $99,897. Home prices declined 0.8% year over year (Q1 2026) — the only Texas major in negative territory — and residential permitting fell sharply, down 29.1% year-to-date to 8,240 units.

Supply and Demand

Key Market Indicators

MARKET OVERVIEW

Net Absorption Up in Q2 2026

Net absorption—move-ins minus move-outs—totaled 2,137,077 sq. ft. in Q2 2026, up 137.5% from 899,888 sq. ft. in Q1 2026. By subtype: Distribution 1,150,243 sq. ft., Data Center 469,000 sq. ft., Light Distribution 224,696 sq. ft., R&D 59,183 sq. ft., Warehouse 50,227 sq. ft., Showroom 38,183 sq. ft., Manufacturing 37,289 sq. ft., Light Manufacturing 18,122 sq. ft., Food Processing 0 sq. ft., Refrigeration/Cold Storage 0 sq. ft., Service 0 sq. ft., Telecom Facility 0 sq. ft., Truck Terminal 0 sq. ft.. At the submarket level, the Round Rock Ind submarket recorded the strongest gain at 1,082,199 sq. ft., while Southeast Ind posted -536,633 sq. ft.

Leasing Activity Down Quarterly

Quarterly leasing velocity—new leases and renewals—fell 34.7% over the quarter to 1.7 million sq. ft., but fell 5.1% annually. By subtype: Warehouse 876,121 sq. ft., Distribution 414,328 sq. ft., Light Distribution 218,714 sq. ft., Light Manufacturing 35,763 sq. ft., R&D 15,777 sq. ft., Manufacturing 13,350 sq. ft., Showroom 4,280 sq. ft., Data Center 0 sq. ft., Food Processing 0 sq. ft., Refrigeration/Cold Storage 0 sq. ft., Service 0 sq. ft., Telecom Facility 0 sq. ft., Truck Terminal 0 sq. ft.. Notable leases signed in Q2 2026 include Tesla’s 681,259 sq. ft. lease in Austin Hills Commerce Center – Building 6 scheduled to deliver in January 2027 and The American Housing Corporation’s 157,251 sq. ft. lease in Southeast Crossing.

Vacancy Rate Drops 70 Basis Points

The overall vacancy rate fell to 15.7% in Q2 2026, down 70 basis points from 16.4% in Q1 2026, and up 150 basis points year-over-year. The direct vacancy rate is 14.8%, and the total availability rate is 16.8%. Georgetown Ind posted the highest vacancy rate at 27.2%, while Bastrop County Ind remained tight at 3.8%.

Construction Pipeline Up and Deliveries Down

The construction pipeline rose to 14.7 million sq. ft., up 6.3% from 13.8 million sq. ft. in the previous quarter and up 30.4% from a year ago. Significant construction remains concentrated in Round Rock Ind (4.3 million sq. ft.) and Southeast Ind (2.5 million sq. ft.). Deliveries decreased 39.7% quarterly to 1.5 million sq. ft.

Investment Sales Trends

Over the past year, 63 industrial and flex transactions totaling 7.2 million square feet closed in Austin, with flex at 21% of volume. Notable trades include BKM Capital Partners and Kayne Anderson Real Estate’s acquisition of 22 buildings across seven business parks from Link Logistics, allocated at $206.3 million ($151/SF) within a national portfolio, and Longpoint Realty Partners’ purchase of the three-building, 394,216-sq.-ft. Interchange East from Link Logistics for $72.6 million ($184/SF) at 89% leased. Portfolio sales represented 54% of square footage.

Occupier trades added further volume, including Pegatron’s purchase of a 168,784-sq.-ft. Georgetown facility and the City of Austin’s $8.0 million acquisition of three vacant Tracor Lane buildings.

Rental Rates Down

Austin’s average asking rent (NNN) dropped to $13.02 per sq. ft., down 5.6% from $13.79 in Q1 2026. By subtype: R&D $19.41 per sq. ft., Showroom $18.81 per sq. ft., Light Distribution $18.61 per sq. ft., Light Manufacturing $12.04 per sq. ft., Warehouse $11.94 per sq. ft., Distribution $11.17 per sq. ft., Manufacturing $10.12 per sq. ft.. Submarket leaders included South Ind at $19.57 per sq. ft., while Bastrop County Ind trailed at $6.00.