New home starts in the first quarter of 2009 declined by 47% compared to 2008 according to Residential Strategies, Inc. 1,215 homes were started in January through March 2009 compared to 2,297 starts during the same time period in 2008.
Part of the explanation for the low starts is that 2008 ended with a lot of finished inventory that builders needed to sell. The good news acccording to Mark Sprague with Residential Strategies Austin is that
“builders have cut back on starts and focused on selling this inventory in the 1st quarter”.
Quarter 1 closings fell to 2,145 units, a 31% decline from the first quarter of 2008. The Central Texas housing market remains healthy compared to other parts of the country with a 5.3 month inventory of new homes compared to a six (6) month supply which is considered balanced.
The first quarter median price for a new home in Austin was $220,876, up 7% from 2008.
Because starts are down, homebuilders have reduced the number of new lots they are developing. As a result the market runs the risk of a shortage of lots as the economy begins to rebound. Terry Mitchell, a local developer believes that this could occur in one year to 18 months from now.
PMI Mortgage Insurance Co.’s first quarter 2009 economic and real estate trends report lists the Austin metropolitan area as the 17th most stable housing market among the nation’s 50 largest cities. As a result the Austin housing market is at “low risk” for a home price correction. All four of Texas’ other major cities are in the top ten of the list.
AUSTIN OFFICE MARKET
After three (3) consecutive quarters of positive net absorption, the Austin office leasing market went in the red for quarter 1 of 2009 giving back 158,281 square feet. Rental rates declined and vacancy rates went up. Overall vacancy rose to 20% for the first quarter, up from 19% in the fourth quarter of 2008.
Average annual rental rates per square foot went down from $27.65 in the fourth quarter of 2008 to $26.53 in the first quarter of 2009. Sublease vacancy is up by 100,000 square feet from the 4th quarter of 2008.
Absorption is expected to remain flat throughout 2009 and when considering that 300,000 square feet has been added to the market over the past year and absorption this quarter compared to quarter 1 of 2008 is down 4%, this equates to a stable office market especially compared to the rest of the country.
|Office Vacancy Rate||Full Service $/SF||Net Absorption SF||Sublease Inventory SF||New Office SF|
AUSTIN RETAIL MARKET
• 2009 NRI Rank: 10, Up 1 Place. Forecast household growth and only modest job cuts will support retail demand in Austin this year, allowing the market to move up one spot in the ranking.
• Employment Forecast: Employers are expected to cut 2,100 jobs this year, a 0.3 percent decrease. In 2008, 9,500 positions were added.
• Construction Forecast: Approximately 1 million square feet of retail space is forecast to be completed in 2009, following the delivery of 1.1 million square feet last year.
• Vacancy Forecast: Easing tenant demand and continued construction are expected to push vacancy up 140 basis points to 10.5 percent this year, after a 60 basis point rise in 2008.
• Rent Forecast: As vacancy creeps higher, asking rents are projected to dip 2.6 percent to $20.01 per square foot in 2009 while effective rents retreat 2.8 percent to $17.93 per square foot..
RECENT RETAIL LEASES
Austin American Statesman, Thursday, May 14, 2009
• Third Base sports bar/restaurant leased 6,236 square feet at the Grove in Southpark Meadows, 9600 S. Interstate 35. This will be the third location for Third Base, which began on West Sixth Street and expanded last year to Round Rock.
Austin American Statesman, Thursday, May 7, 2009
• Austin Regional Clinic leased 15,500 square feet at the Market at Slaughter, 1807 Slaughter Lane.
• Antonio’s Mexican Restaurant leased 5,159 square feet at 12602 Research Blvd. It formerly was a Kerbey Lane restaurant.
Sprouts’ budding local presence grows with lease of 4th area site; Chain has stores planned in Rollingwood, Round Rock, Sunset Valley, Northwest Austin; negotiating fifth lease
By Shonda Novak, AMERICAN-STATESMAN STAFF, Friday, April 24, 2009
Sprouts Farmers Market, a natural foods chain that is moving into Central Texas, signed a lease for its fourth area store and is negotiating for a fifth site in Northwest Austin, local retail brokers said. Read more…
AUSTIN INDUSTRIAL MARKET
The Austin Industrial market gave back 592,379 square feet of Industrial lease space in the first quarter of 2009, marking consecutive quarters in the red and the sixth consecutive quarter with an increase in vacancy.
Large spaces were vacated across a range of industries as businesses looked to consolidate or vacate their places of business.
The overall asking rate for industrial space fell $.07 or 1% in the first quarter. $7.44, the current average per square foot is at the lowest level since first quarter of 2007.
Austin Business Journal
April 17, 2009
Austin fighting back; jobless rate drops for 2nd month
For the second consecutive month, Austin’s unemployment rate has decreased as the region tries to regain the losses it’s sustained in the recession.
Austin added 5,100 jobs in March reducing unemployment from 6.3% in February to 6.2%. In the past year, the area has added 3,300 jobs for .4% growth. Although this number is slight, growth of any kind is seen as very positive with job losses mounting elsewhere across the country.
NewGeography.com lists Austin as the #1 big city for employment potential. Despite job growth rates of 1% in 2008 this modest number combined with Austin’s long term potential for creating new jobs, were the reasons noted by the website.
A look at recent U.S. Economic news suggests that the Nation’s Economy is headed in that direction primarily due to the recent monetary liquidity inserted by the Fed. Does this mean the recession is over? No, but we may be close to bottoming out and the recovery may be achieved more quickly than previously projected and in more of a “V” shaped bottoming out and uptick. Read on …
US Economy Could Recover Much Sooner than Expected
CNBC, Albert Bozzo, 4/9/09
A growing group of economists believe that the recession will not drag on as long as expected. These economists see a “V” shaped recovery similar to the 70’s and 80’s recoveries. The reasons for the optimism:
1. Easing of the credit crunch
2. Improvement in consumer spending
3. Better Auto Sales
4. Close to bottom out in housing market
5. Less grim job picture
Bottom line is that the recession isn’t over but the end is closer than many think. Some economists are projecting a flat or slight drop in the second quarter followed by sustained growth in the 3rd quarter.
“The velocity of downturn is lessening,”
says John J Castellani, chief economist and president of the Business Roundtable.
The Recovery Begins
Forbes.com, Brian Wesbury, Robert Stein, 4/7/09.
As of Friday, April 3 the Dow Jones is up 22.5% in less than a month, the NASDAQ is up 27.8% and the S&P 500 is up 24.5%. What does this mean? According to Brian Wesbury and Robert Stein, economists at First Trust Advisors in Wheaton, Illinois, it means that the Economic Recovery has begun. Specifically, the economists state that,
“This sea of money is impossible for the economy to ignore”
referring to the vast liquidity that the Federal Reserve is providing. They also note that rising – 1. Home Sales. 2. Retail Sales. 3. Auto Sales. 4. Oil and other Commodity Prices. 5. CPI. 6. PPI. and 7. the Baltic Freight Index numbers all support the notion that the money is working its magic.
Housing Analysts Predict the Bottom is Near
Realtor Magazine, Daily Real Estate News, April 28, 2009
“The bottom of the housing decline is near,”
predicted analysts and home builders attending the National Association of Home Builders’ semiannual Construction Forecast Conference last week. Observers generally agree that the feds efforts to shore up the housing market should take effect by the end of 2009 or early 2010.
Top Economists Say Recovery Has Begun
Realtor Magazine, Daily Real Estate News, April 7, 2009
Mark Zandi, chief economist of Moody’s Economy.com says that economic recovery is about making people feel more confident.
“Zandi evidenced increasing home sales and gains in the stock market are some promising signs that the worst is over and people will start spending again.”
He also notes that we are starting to see some pent up demand for goods. However he warns that confidence is very fickle and can go from pessimism to a more balanced world view quickly. Robert Brusca of FAO Economics predicts strong growth in the labor market in the last half of the year and a quick recovery for the labor market. Joseph Carson, chief economist at AllianceBernstein, describes improving home sales, a rising stock market, and better than expected February and March retail sales as
good signs of a turnaround.