Q2 2025 Austin Industrial Market Report
Key Findings
- Austin’s industrial vacancy rate reached 13.4% in Q2 2025, the highest level in over 10 years, driven by records levels of big-box distribution center development. This oversupply is putting upward pressure on vacancies despite strong long-term demand.
- Less than 20% of non-owner-occupied buildings under construction are preleased, indicating that a wave of speculative development is likely to add more vacant space later in 2025, especially as leasing activity begins to cool.
- Despite being one of the fastest-growing industrial markets in the U.S. over the past five years, Austin recorded negative rent growth for the first time since 2010 in Q2 2025, largely due to the influx of speculative bulk warehouse supply.
By the Numbers
- Sales Volume: $60.4M
- Average Sale Price Per SF: $161
- Cap Rate: 7.5%
- Vacancy Rate: 13.4%
- Rent Growth: (1.5%)
- Average Market Asking Rent Per SF: $13.60
- SF Under Construction: 15.7M
- SF Delivered: 2.8M
- SF Absorbed: 437K | Q2 2025 | Source: CoStar Group, Inc.
Austin Demographics
- Unemployment Rate: 3.4%
- Current Population: 2,592,834
- Households: 1,089,059
- Median Household Income: $102,604
Austin’s demographic momentum remains strong, driven by steady job creation and a highly educated, youthful workforce. While the labor market has cooled to a 1.4% growth rate, the slowest since early 2021, non-cyclical sectors like education, health services, and government continue to underpin employment, accounting for 40% of the 17,300 jobs added since August 2023. The University of Texas at Austin plays a pivotal role, both as a top-tier source of STEM talent and the metro’s second-largest employer. With approximately 25% of the population aged 20–34, thanks in part to UT graduates choosing to stay, Austin offers a deep talent pool that continues to attract employers. Despite tech sector contractions, long-term prospects remain bright with major expansions from Samsung and Tesla, reinforcing Austin’s reputation as the fastest-growing metro in the U.S., with a population increase of 35% since 2010.
Market Performance
In Q2 2025, Austin’s industrial market showed clear signs of recalibration as supply-side pressures weighed heavily on fundamentals. The vacancy rate rose to 13.4%, a decade high, largely driven by a flood of speculative big-box deliveries with less than 20% preleased, signaling continued upward pressure through year-end. While 12-month net absorption totaled 4.2 million SF over the past 12 months, demand was focused on smaller and mid-sized properties, creating a mismatch with new supply—half of which falls in the 100,000 to 500,000 SF range. This imbalance led to the market’s first negative rent growth since 2010, at -1.5%, as landlords increased concessions and lease terms became more tenant-friendly.
Construction activity remained high, with 15.7 million SF underway, although a 40% year-over-year drop in starts points to more cautious developer behavior. On the investment front, capital continued flowing into institutional-grade warehouses, but transaction volumes declined as buyers and sellers adjusted to evolving pricing expectations and elevated vacancy risks.
Performance by Industrial Type
Source: CoStar Group, Inc.
| Vacancy Rate | SF Under Construction | Asking Rent Per SF | |
| Logistics | 17.0% | 6,805,870 | $12.81 |
| Specialized | 3.3% | 8,252,593 | $16.36 |
| Flex | 13.7% | 577,504 | $18.04 |
Austin Industrial Supply & Demand Dynamics
Source: CoStar Group, Inc.
Construction
Austin Properties Under Construction
Austin’s industrial construction pipeline remained robust with 15.7 million SF underway, much of it speculative and over 10 million SF still uncommitted. Development was heavily concentrated in suburban submarkets like Round Rock and East Austin, with Samsung’s 2.8 million-SF semiconductor plant leading owner-occupied projects. However, a mismatch between supply and tenant demand is emerging, as the majority of new builds fall in the 100,000–600,000 SF range, while recent leasing activity has favored smaller spaces under 100,000 SF—a dynamic that is contributing to rising availabilities and sustained vacancy risk.
Construction Starts (SF)
Source: CoStar Group, Inc.
Under Construction (SF)
Source: CoStar Group, Inc.
Sales Activity
Sales activity in Austin’s industrial market remained selective but focused, with investor interest centered on larger, modern warehouses in the 100,000–500,000 SF range. Despite lower overall deal volume, these bulk assets traded between $170 and $180/SF, reflecting adjusted buyer expectations amid rising vacancies, higher capital costs, and negative rent growth. The market continued to shift toward institutional-grade properties, with larger transactions dominating and average deal sizes increasing. However, the disconnect between buyer and seller pricing kept many potential trades on hold, contributing to a slower pace of activity compared to historical norms.
Sales Volume & Price Per SF
Source: CoStar Group, Inc.
