Retail vacancy in Austin contracts to a record-breaking 3.2% due to robust leasing activity, development, and rent growth.
OCCUPANCY GROWS TO 96.8%
The first half of 2022’s strong Austin retail sector momentum has continued into the second half of 2022. Vacancy tightened further to 3.2%, leasing activity remained strong, retail development was up, and rent growth increased. Vacancies have contracted to the lowest level since Partners’ research team began tracking this statistic in 2006. Leasing for the quarter was again robust, with Austin recording 424,000 sq. ft. of activity, following Q1 2022’s 728,000 sq. ft. There is currently 1.7 million sq. ft. under construction, close to 200,000 sq. ft. delivered in 2022, and another 2 million sq. ft. proposed through 2023, reflecting the sustained demand for retail space in the Austin metro.
AUSTIN’S ECONOMY CONTINUED TO GROW IN MAY, THOUGH AT A SLOWER PACE
Austin’s unemployment rate dropped to a revised 2.9% in May – a new low since the beginning of the pandemic. This is comparable with the states’ jobless rate of 4.2% and the nation’s rate of 3.6%. Austin employment increased at a 4.5% annualized pace, or by 13,600 net jobs, for the three months ending in May. Growth was led by manufacturing (up 10.6%, or 1,700 jobs), followed by leisure and hospitality (up 8.4%, or 2,600 jobs), and professional and business services (up 7.3%, or 4,500 jobs). Construction and mining remained weak, seeing a net decline in employment (down 8.0%, or 1,500 jobs). As of May, all major sectors except leisure and hospitality, government, and other services were above pre-pandemic levels.
DEMAND CONTINUES TO OUTPACE SUPPLY IN Q2 2022
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—was at 546,000 sq. ft. in Q2 2022. This is the fifth consecutive quarter that demand has outpaced supply. Total space delivered during Q2 2022. This is the fifth consecutive quarter that demand has outpaced supply. Total space delivered during Q2 2022 was 173,000 sq. ft. Notable move-ins during the second quarter have included 49,130 sq. ft. leased by Fresh International Market at 12901 N. I-35 in Shops at Tech Ridge in the Northeast submarket; 43,000 sq. ft. leased by Brookshire Brothers at 20900 FM 1431 in Lago Vista Village; and 29,678 sq. ft. occupied by O’Reilly Automotive in Round Rock Shopping Center.
MONTHLY SALES VALUE UP 58% YEAR-OVER-YEAR
Real Capital Analytics data reports that the cumulative monthly sales value in the greater Austin area was $496.2 million as of June 30, 2022, up 58% compared to last year at $314.3 million. The primary capital composition for buyers during 2022 was made up of 55% REIT/listed investors and 41% private investors. The composition was 88% private and 8% institutional investors for sellers. A noteworthy transaction in the second quarter included the sale of La Frontera Village, a 534,566-sq. ft. shopping center at 2601 La Frontera Blvd. Built in 1980, the property was 92% leased at the time of sale. Tenants include Kohl’s, Hobby Lobby, Burlington Coat Factory, Marshalls, Barnes & Noble, and Cost Plus.
HOME SALES DECLINE AND INVENTORY TICKS UP AS HOME PRICES SET RECORDS
According to the Austin Board of Realtors, more homes were sold in the Austin-Round Rock MSA experienced a decline in residential home sales, while a slight increase in housing inventory coincided with a new all-time record for median sales price. In March, residential home sales declined 5.9% year over year to 3,302 closed sales as the median price rose 22.6% to a new all-time record of $521,100. Sales dollar volume grew by 10.3% to $2,130,213,961 as new listings dipped 1.2% to 4,150. Active listings jumped 46.1% to 1,731 listings, causing housing inventory to increase from 0.2 months to 0.5 months of inventory. Pending sales fell 11.1% to 3,597 listings, and listings spent an average of 21 days on the market, six fewer days than March 2021.
Director of Research
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