Commercial Real Estate Projected Vacancy and Changes in Rent

The Texas A&M Real Estate Center has started providing more content for Commercial Real Estate markets in Texas that is very helpful to those of us following the Commercial Real Estate Markets.

This graphic for our Austin market shows that we are below the natural vacancy rate for all three Commercial Real Estate (CRE) types and that rents look like they will continue to rise. Retail rent growth however is projected to slow down in comparison to the last couple of years.

It’s helpful to keep in mind the definition of “Natural Vacancy Rate”. The natural vacancy rate is the average percentage of rental properties that are not occupied when there is balance in demand and supply.

Here’s a link to the Real Estate Center’s website if you are interested in more helpful content => https://www.recenter.tamu.edu/

Renters over 60 years old have increased by 43% in the last 10 years

In the last decade the average age of household renters has increased across all age groups.

• Renters aged 60+ increased by 43% in the last decade.
• Renters aged 35 to 59 grew by 17%.
• Renters aged under 35 increased by 7%.

Home ownership is on the decline among older renter households as they are growing at a 43% rate versus older owner households which are increasing at a 31% rate.

Austin, Texas has the highest percentage increase in the share of 60+ aged households, increasing by 113% in the last decade.

Renters over 60 in the top 30 largest U.S. cities

Information Source: Rent Cafe

Austin Office, Retail, and Warehouse in 2019

OFFICE – Actual vacancy has been around 9% since 2015. For 2019 its forecasted at 9.4%. With natural vacancy at 13%, rents are expected to continue to rise, with a projected 2019 increase of 2%.

RETAIL – Actual vacancy is at 4% in Q4 2018 with natural vacancy at 6%. Vacancy is forecasted at 4.3% for the year. Rent growth is expected to slow averaging an increase of 1% in 2019.

WAREHOUSE – Actual vacancy was at 6% in Q4 2018, with natural vacancy at 11%. Rent growth is projected at 1.5% for the year.

*Natural vacancy is the average percentage of rental properties that are not occupied with tenants when there is balance in demand and supply.

Information courtesy of Texas A&M REAL ESTATE CENTER.

1,633 SF Office Space For Lease on South Lamar

• Available 6/3/19
• Rare opportunity, building stays 100% leased. Don’t Wait.
• Just south of downtown.
• Vibrant South Lamar scene.
• On site management.
• On site US Postal, UPS, Fed Ex and Lonestar Overnight.
• Pristinely maintained.
• $25/SF Rent + NNN.

1,564 square feet of Office / Retail For Lease

• Available space on end cap of this Retail Center.
• Former State Farm Insurance location.
• Appropriate for Retail or Office.
• $19.50/SF/Year in Rent + NNN.
• Highly visible with 150′ of Manchaca Rd frontage.
• Drive by traffic estimated at +15,000/daily
• Metal roof with limestone and wood front elevation.
• Septic system for sewer.
• City of Austin ETJ
• 2 miles south of Slaughter Lane on east side of Manchaca Rd. 3 miles west of I-35 and 1 mile north of FM 1626.
• Back of building access for deliveries.
• SF home growth in area.

Email mark@matexas.com with interest or call 512.970.8359.

Affordable Housing Proposal receives initial approval

Austin City Council has initially approved a program that would allow an increase in affordable housing development by relaxing regulations for properties that meet certain criteria.

District 4 Council Member Greg Casar introduced the plan earlier this month. “Our city’s potential to build more affordable housing for families is currently locked up by needless restrictions, … It’s time to change our policies so that every dollar of the successful $250 million affordable housing bond goes to help as many people as possible.”

The proposal would allow at least six (6) housing units to be built on any feasible lot by waiving density, setback, height and parking regulations. All zoning categories with the exception of industrial zoning would be eligible for these affordable housing projects.

Click here for a copy of the February 21 approved resolution and details of the proposal: http://assets.austintexas.gov/austincouncilforum/4E-20190204182437.pdf

Q4 2018 Austin Industrial Market

The fourth quarter of 2018 ended on a high note for the Austin area Industrial market. Annual market absorption was 1.7 million + square feet and vacancy fell to 9.4%. Similar absorption levels have not been seen since 2012. Over 2 million square feet remains under construction with the fourth quarter delivery of new buildings totaling 222,800 SF. Net absorption exceeded 800,000 SF and the average annual asking rate is up to an average of $10.53/SF. Click here for CBRE Q4 2018 Austin Industrial Market Report.

High Income Austin Renters

Austin is number 19 in the U.S. in the category of high income earners that rent in lieu of home ownership. The news comes from RentCafe and a recent article, High Income Renters Study . High income earners are defined as $150,000 + annually.

Locally the number of high income households living in rentals multiplied by 3.2 in the past decade. This segment of the renter market is now the fastest growing in the U.S. with a 175% increase in the last ten years.

2018 Austin Office Market Update

2018 ended with a bang for the Austin Texas office market. For the fifth consecutive year, Austin absorbed more than one million square feet. 500,000 additional SF were added in the fourth quarter of 2018 bringing the total office under construction to 4,913,727 SF. The average full service asking rate for the fourth quarter of 2018 was $36.64/SF – a record high. Q4, CBRE Research, Austin Office, 2018

Email property for Buyer’s consideration to: mark@matexas.com

Email mark@matexas.com or call Mark Pustka at 512-970-8359.

Email property(ies) for my Client’s consideration to: mark@matexas.com

Email property(ies) for my Client’s consideration to: mark@matexas.com

A January 4, 2019 article posted on www.marketwatch.com indicates that an interest rate hike is likely forthcoming. Economists believe that the robust December 2018 jobs report will cause the Federal Reserve to raise interest rates in 2019.

A total of 300,000+ jobs were added in December, far exceeding economists’ forecasts of a 182,000 gain.

Prior to this jobs report economists were of the mind that rates would not change in the short term, but now many are expecting another hike in June.

During the third Quarter of 2018, the Austin Office Market performed as follows:

• 448,000 SF of office space was absorbed.  Class A absorption accounted for 336,000 of the total.  However, year to date absorption remains at negative 230,000 SF.
• Vacancy is at 11.5%, down from 12.2% in the second quarter.  The decrease in vacancy has resulted in a steady increase of rental rates.
• Transaction volume is dominated by large companies taking large blocks of space.  For example-
  • City of Austin leased 175,000 SF at 5202 E Ben White
  • HEB/Favor leased 82,000 SF on E 6th
  • PIMCO leased 47,000 SF at 401 Congress
• 2 million of 4 million new office development has been pre-leased.
• Overall average Austin office rental rate increased 2.51% to $35.45/SF.  Class A average rental rates average $50.45/SF.

Source:  Colliers International Research & Forecast Report, Austin Office, Q3 2018.

Lockhart Warehouse For Lease

Address:  10545 S US Highway 183, Lockhart, TX 78644

Building:  7,475 SF Total.  2,100 SF Office, 5,375 Warehouse.

Rent:  $6,000/month + $869 NNN

Electrical:  3 Phase, 1200 Amp service.  Overhead drops.

Executive Office Suite.

Pristine condition.

Bethany Perez with AQUILA Commercial does a very good job with this blog post of explaining Commercial Leasing and its cost.  Here’s a link => Cost to Hire a Commercial Project Leasing Broker

Highlights of the article include:

• Upfront costs for hiring a broker
• How brokerage fees are structured
• What standard brokerage fees are
• How these fees vary by lease and property type
• When commissions are typically paid
• Any additional costs a landlord may incur during the leasing process

Formed in 2013, AHV Communities develop, build and operate single family rental communities.

AHV Communities’ concept is simple – single family rental living.  In their communities you rent the home instead of purchasing.  AHV owns, manages, maintains and operates the community.

Residents live in single family homes with amenities that are typically only found in master planned communities or luxury apartments.

The financial benefits include no down payment, no long term debt, no taxes and no HOA fees.

And the commmunities’ on site management takes care of home and landscape maintenance.

In Central Texas AHV currently has communities including Rivers Edge, in Georgetown, and in San Antonio TX called Pradera.  Projects coming soon to the area include Legacy in Pflugerville TX and Creekside in New Braunfels, TX.

We are currently looking for additional sites in the Central Texas area. Sites need to be 15-20 acres in size. Please send potential sites for consideration.

Retail pad sites for sale in Hays Commerce Center, Kyle, Texas.

Kyle Texas pad sites for sale on the I-35 frontage Road north of Kyle Crossing (where Home Depot currently operates).  Traveling southbound on I-35 these pad sites are located closer to I-35 exit and before Kyle Town Center, the project Endeavor Real Estate is marketing.

The sites range in size from 1.42 acres to 1.57 acres along I-35 to a 2.9 acre site that fronts FM 967 or South Loop 4 to sites across from Home Depot that start at 1.19 acres in size.

Contact Mark Pustka, Broker Associate with McAllister & Associates for more information.  Email is mark@matexas.com and mobile phone is 512 970-8359.

Recently Jimbo Cotton and myself sold a 17.5 acre parcel at 12419 Anderson Mill Rd to Travis County.  It’s our understanding that the land will be added to the County’s land preserve.  The property is to the west of RR 620 in NW Travis County.

On the other side of the adjacent parcel is land also owned by Travis County that is part of a preserve.  $850,000 was the asking price.

South Buda Business Park Land Sold Out

Recently I sold the last parcel of land (2.5 acres) at South Buda Business Park to Aces A/C Supply.

With this purchase the seventy (70) acre commercial subdivision is sold out of land.

Current occupants at the business park include Dynamic Systems, Capital Excavation, Fat Quarter Shop, Chamberlin Roofing, and Speed Tech Lights.

The website for Aces A/C Supply describes their business as follows

Serving the HVAC Contractor for over 30 years…

ACES A/C SUPPLY, INC. provides wholesale product sales, training, marketing and logistical support for HVAC dealers and contractors in and around Houston, Beaumont, Austin, Corpus Christi, San Antonio and the Rio Grande Valley.

Since 1983, ACES A/C SUPPLY, INC. has built a rock-solid reputation for fair pricing, dependable service and total commitment to the professional HVAC contractor.

Aces has begun work on the design of their new location.  Therefore it’s likely that by the fourth quarter of 2018 the new facility should be open to the public.

Along with Greg Gaynor at Fokus Commercial, we recently helped a private investor client purchase a 4,300 SF retail center in South Austin at 11525 Manchaca Rd.  Our  client was looking for an Austin area income producing property to invest in.  Despite the difficulty in finding quality investment property in the current Austin Commercial real estate market we identified this property and were able to assist in this purchase.  The seller was represented by EDGE Realty and the property was on the market for $952,000.

Click Here => Hurricane Harvey Housing Search Help

RENTCafe and their parent company Yardi have put together the following to help with those looking for housing as a result of Hurricane Harvey.

If you or someone you know needs help finding a home in the aftermath of #HurricaneHarvey, now you have direct access to available rentals in the area on RENTCafé’s Housing Registry, a Yardi initiative for residents displaced by the hurricane. #houstonstrong #harvey

According to The Kiplinger Letter online, Federal regulators are considering increasing the commercial loan dollar amount that would trigger the need for an appraisal.

Currently the loan amount is $250,000 or more and the proposed increase is to $400,000 or more requiring an appraisal.  If approved this would be the first increase to this amount in 23 years.

Kiplinger Letter online

Austin’s Rental Market Sees a 37% Drop in Apartment Construction This Year

• Texas has the most metros in the Top 20, and we’re talking of course about the Fantastic Four: right on New York’s tail, Dallas-Fort Worth takes silver with almost 25,000 new units, Houston grabs 3rd place with approx. 18,000 apartments, while Austin and San Antonio land at No. 13 and No.14 respectively, each with over 7,400 rentals.
• The 7,435 new apartments that are expected to hit the Austin market this year mark a 37% decrease compared to 2016, when almost 11,900 new units saw the light of day.
• The high number of completions has kept rates in check so far, with rents in the metro decreasing 0.3% Y-o-Y to reach $1,270, but for how long? Although Austin now has one of the lowest occupancy rates of the Top 20 metros (94.5%), it also features a strong employment sector with a reassuring 2.8% job growth. Moreover, people are moving to Austin in droves, making it the 3rd fastest growing metro in the country, with a 2.9% population change.

According to Yardi Matrix senior analyst Doug Ressler, all this new construction may well work in the renters’ favor, at least in the near future : “With more units on the table, renters may be able to get some discounts and concessions on new leases, including one month of free rent, waived move-in fees, and free gym memberships.”

Article is being reprinted with permission from the author courtesy of RentCafe.  Original article can be found at the following link:  https://www.rentcafe.com/blog/rental-market/us-apartment-construction-at-a-20-year-high-in-2017/

Mark Pustka with McAllister & Associates recently sold an office property near Mueller.

1310 E 51st, an office building on about 1/2 acre that has long operated as the local headquarters for the Mechanical Contractors Association of Austin.  A local, private investor purchased the property.

The property’s asking price totaled $975,000.  The Buyer’s plans have not been finalized but they are excited about the location.  East 51st street across from the Mueller redevelopment is a hotbed of real estate deals.  The success of the nearby mixed use redevelopment project fuels this surge.

Mark Pustka and Joe McAllister with McAllister & Associates recently sold a 13 acre affordable housing site in Austin.  The parcel’s location is in the 7600 block of Old Manor Rd near Springdale Road in NE Austin.

Rise Residential Development purchased the property and represented themselves in the transaction.  They plan to construct a 264 unit apartment community.  The community’s design focuses on families with children.  Rise is one of the largest developers of affordable multifamily in the US.  Over the last 3 years Rise ranks 7,8 and 19^th nationally in annual value built.

The targeted market for this community is affordable housing – a significant concern for the City of Austin and its residents.  According to the Texas Tribune “The Austin area had the smallest percentage of homeowners and renters — 59 percent and 40 percent, respectively — able to afford the monthly payments of a median priced home.”

McAllister & Associates has served Austin and the Central Texas with over 30 years of quality commercial real estate services.

Austin Market Forecast 2017

The 2017 Urban Land Institutes’ Emerging Trends in Real Estate has been released.  Austin sits atop their list of Markets to Watch.  This annual report analyzes data gathered by surveys conducted by the Urban Land Institute.

Categories examined by the report include Overall Real Estate Prospects for Investment and Development opportunities (ranked #1), Homebuilding Prospects (ranked #11, Raleigh/Durham #1), Economy, Housing, Investor Demand (ranked #5, Seattle #1), Development / Redevelopment Opportunities (ranked #16, Boise #1) Availability of Debt and Equity Capital (ranked #7, Nashville #1), and Local, Public, and Private Investment (ranked #17, Dallas/Ft Worth #1).

Austin continues the three year run of Texas cities that lead the survey (Houston in 2015, Dallas/Fort Worth in 2016 and Austin in 2017).

Despite Austin’s growing popularity, it remains a comparatively small market in terms of investment opportunities. While Austin is unlikely to attract a meaningful amount of off-shore capital, it tops many domestic investors’ wish lists. This makes the market very competitive. Despite the amount of competition, local, regional, and national real estate participants operate in relative harmony in the market. This cooperation has helped keep adequate levels of debt and equity capital available for investment opportunities.

The full report can be found here Emerging Trends in Real Estate – United States and Canada.

Tech Sector focus of current Austin Office Market

According to Jones Lang Lasalle’s High Technology Outlook report the tech sector remains the top industry for real estate expansion in the U.S.

Over the past two years it is estimated that 25% of leasing activity across the country is attributable to the tech market.

Austin is the third most resilient tech market in the U.S. This means that even in the event of an economic slowdown the Austin tech market is projected to remain strong.

The following provides an idea of how big the tech sector is in the Austin market.  In 2011 seven of the tech giants occupied just under 900,000 square feet. Today that has grown to nearly 3.2 million square feet or an increase of 268%.

During the third quarter of 2016, 430,000 square feet of office space began construction. One million square feet of new office space is expected to be delivered during the first quarter of 2017.

The three largest submarkets in Austin – Northwest, Southwest and CBD represent 70% of the Austin inventory. From the 3rd quarter of 2014 to the 3rd quarter of 2015 rental rates increased almost 10% year over year. From the 3rd quarter of 2015 to date CBD rates have continued their pace of growth at an increase of 8-10% year over year. However Northwest and Southwest submarkets have slowed to a 2% year over year rate of growth.  Read more at JLL Office Insight, Austin | Q3 2016.