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Category: Industrial, Net Lease Retail Tags: Austin, E-commerce, NNN, Rent Growth, texas

Why Invest in Austin, TX?

Over the past year, Austin has remained a booming commercial real estate investment activity center and continues to be a top city for people to work and live in. Austin is home to booming tech industries, and with its affordable cost of living combined with many employment opportunities, the market is attracting many young professionals who are planting down roots in the state’s capital. Plus, it’s a leading innovator of green construction, making it popular among environmentally aware builders and buyers.


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With an increasing tech presence, Austin’s economy continues to experience a multiplier effect, each new high-tech job in the U.S. creates five additional jobs in the service economy.


Retail Performance Post-Pandemic

Pandemic uncertainties had little impact on Austin’s retail market. Overall positive trends in leasing activity have driven average retail asking rents higher. The Austin metro’s NNN average asking rent is at an all-time high of $22.69 per square foot, up 7.9 percent from $21.02 last year. Despite the pandemic, Austin’s retail market has remained resilient.


Most of the issues facing the retail market are tied to rising energy costs and inflation, which reached 9.1 percent as of June 2022. This has become an impediment to consumer spending. But Austin’s robust population growth and minimal job losses relative to pre-pandemic levels have proven to be a tailwind, decreasing vacancies to three percent, well below their historic average of 4.1 percent.


Industrial Trends in Austin

Austin’s industrial market has arguably had one of the best years ever in its history. With nearly 11 million square feet underway in construction or about nine percent of current inventory, Austin has one of the largest construction pipelines in the country, relative to the market’s size, according to data from Costar. Much of the demand over the past few years has been driven by locally oriented firms like Elliott Electrical Supply and Tri Supply, though national companies like Lowes and Amazon have leased a considerable amount of space in recent months.


Given the continued shift towards e-commerce that has already occurred during the pandemic, demand and rent growth could see a strong bounce back during the recovery. Strong rent growth has certainly given developers confidence, and rents are up by more than 40 percent since 2015. As Austin’s economy has recovered at one of the fastest rates nationally, more companies and people continue to move to Texas’ capital city.

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