Market Overview
www.hcpadvisors.com
2017
Austin
www.hcpadvisors.com
Introduction
Last year was a record year for the HCP team with our involvement in several significant assignments. Our work included hundreds of projects that all point to the fact that Austin remains a dynamic market and that transaction volume has been robust. We are hearing more frequently, from those who have been in Austin for a while, how the city continues to change. Our team moved into a larger creative office space formerly occupied by Habitat for Humanity. This project, called Canopy, was designed by renowned local architect Michael Hsu and represents some of the revitalization that is happening in Austin. The economic reality of the ‘New Austin’… is here. For commercial real estate, this means higher land values, higher rents, higher construction costs, new zoning codes, more density, more traffic, more construction, and a downtown skyline that continues to evolve. More people are coming, and although we are continuing to build apartments, affordable housing remains elusive for many. Uncertainty remains about what the future will bring us in 2017; however, all economic signs indicate that the upcoming year will be strong for commercial real estate. With the possibility of reduced banking regulations, strong real estate fundamentals, supply/demand factors remaining in balance, and a desirable place to live, Austin remains a great place to be.
We look forward to working with you in 2017! The HCP Team
12
16
42Billion inProject Value
CelebratingYears inBusiness
Canopy916 Springdale RoadBuilding 4, Suite 102Austin, Texas 78702
Projects in
States
REGIONALMARKETREPORT
Commercial Real Estate Advisors
2017
AUSTIN REGIONAL OVERVIEW
For 2016, the list of accolades for Austin continued. CNBC voted Austin as America’s Best Place to Start a Business. CityLab voted Austin one of the top 3 metros ‘Where Good Jobs are Being Created’. The Kauffman Foundation ranked Austin No. 1 on the Kauffman Index of Startup Activity. Austin is 6th on Glassdoor’s Best Cities for Jobs ranking. Austin was voted the Best Place for Small Business in the U.S. American Business Journals. Nesta ranked Austin as having the 4th largest share of creative economy jobs among U.S. metros. Avalanche Consulting ranked Austin No. 5 as one of the Most Talented U.S. Metros. Austin is America’s Fastest-Growing City according to Forbes magazine. Austin is No. 2 on U.S. News’ and World Report Best Places to Live ranking. Austin also tops Forbes “America’s Cities of the Future” in their ranking of cities most likely to prosper over the next decade.
EXPERIENCE INSIGHT RESULTS
REGIONAL MARKET REPORT
AUSTIN REGIONAL OVERVIEW
Economy Office Industrial Retail Multifamily
11 111TH
num
ber
num
ber
Largest City inthe US
Best Placesto Live in US
Best Cityfor Startups
Best Cityfor Job Growth
Based on Population
POPULATIONSince 2000, the Austin MSA has grown by 60%, compared to Texas by 29.3% and the U.S. by 13.3%.
Current metro area population is estimated at 2 mil-lion. The projected population is expected to increase to 2.3 million by 2020, resulting in a 34% increase over the 2010 to 2020 time period. This compares to a statewide projected increase of 21%. The Austin MSA population is considered young, with 68% of the current population be-tween 18 and 44 years old; 32% of which are between 25 and 44 years old.
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
1,000,000
1,500,000
2,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
POPULATION SIZE CHANGE IN YEARLY GROWTH
2017
num
ber
REGIONAL MARKET REPORT
EDUCATION
EMPLOYMENT PERFORMANCE
The unemployment rate within the MSA has remained below the state and national averages over the
past decade with current Austin MSA unemployment rate being 3.2%, compared to Texas and the U.S.
rates of 4.6% and 4.5%, respectively. The velocity of relocations and expansions have increased overall
employment according to the Bureau for Labor Statistics. Job growth continues to rise, with more than
18,800 jobs added annually within the area, resulting in a 1.9% annual job growth in 2016; higher when
compared to Texas and U.S. annual job growth rates of 1.8% and 1.4%.
The Austin MSA outperforms both the state and the U.S. based
on educational attainment with 42.6% having a bachelor’s de-
gree or higher. This compares to Texas with 28.4% having a
bachelor’s degree, and the U.S. with 30.6% college graduates.
According to the Texas Higher Education Board, there are 28
colleges and universities within the Austin MSA. The Univer-
sity continues to have the highest enrollment with more than
50,000 students.
HISTORICAL UNEMPLOYMENT RATECompiled by
Source
Source Compiled by
Texas Higher Education Coordinating Board
U.S. Census Bureau and The Texas Higher Education Board
Bureau of Labor Statistics and Texas Workforce Commission HCP
Educational Attainment
Economy Office Industrial Retail Multifamily
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Austin MSA Texas U.S.
High School Graduates College Graduates
0.00%
3.00%
6.00%
9.00%
12.00%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Austin MSA Texas US
2017
REGIONAL MARKET REPORT
MAJOR EMPLOYERS
EMPLOYER SECTOR EMPLOYEES
TRANSPORTATION &INFRASTRUCTURE
Both established and emerging business exist within the Austin MSA employ-
ing more than 1,000,000 employees with more than 570,000 employed within
Travis County. The trade, transportation, & utilities industry encompasses 18%
of the total employment, while the government industry and professional &
business services industry follow with approximately 17%. Austin has a diverse
mix of industries within the area and many large companies have their head-
quarters located within the fast growing MSA.
Located in the heart of central Texas, the vast transportation available within
the area ranges from major highways, artery roadways, railways, and an
international airport. Interstate 35, U.S. Highway 183, U.S. Highway 290, State
Highway 130, and State Highway 45 are the main highways used by thousands
of passengers traveling across the area. The traffic exhibited in the city has
been reported as the 4th worst in the U.S. by the INRIX Mobility Data Report.
Source Texas A&M University Real Estate Center, Austin Business Journal, andAustin Chamber of Commerce
Compiled by HCP
Economy Office Industrial Retail Multifamily
70,074
24,183
13,000
12,198
10,672
10,270
8,598
6,074
6,000
5,561
5,500
4,000
Government
Education
Technology
Retail
School District
Healthcare
Healthcare
Technology
Technology
Government
Technology
Technology
State of Texas
University of Texas
Dell Technologies
H-E-B
Austin ISD
Seton Healthcare
St. David’s Healthcare
Samsung
IBM
US IRS
Freescale Semi Conductor
Apple
2017
REGIONAL MARKET REPORT
HISTORICAL METRICS - 2011 to 2016
INDICATORS
AUSTIN-ROUND ROCK-SAN MARCOS MSA
2011 2012 2013 2014 2015 2016
Population
% Change
Total Employment
Unemployment rate
Gross Retail Sales
Sales Per Capita
1,782,089
3.8%
912,660
6.9%
$25,531,752,357
$14,326
1,836,149
3.0%
952,005
5.8%
$27,768,525,114
$15,123
1,885,893
2.7%
988,473
5.2%
$31,076,301,601
$16,478
1,943,299
2.9%
1,016,673
4.4%
$33,417,027,138
$17,196
2,000,860
3.0%
1,019,062
3.5%
$34,253,589,712
$17,119
2,096,443
4.8%
1,003,400
3.2%
$35,281,197,403
$16,829
Source U.S Census Bureau, Bureau of Labor Statistics, and Texas Comptrollers Office Compiled by HCP
The table above highlights market indicators for Austin – Round Rock – San Marcos MSA, data is presented annually from 2011 through 2016.
Overview
The Austin MSA continues to outperform both the state and national employment growth rates and population growth rates. With job
growth and population increases projected for Austin in the near future, the metro area is positioned to perform well economically
across various real estate sectors. Given the strong talent base for employers and the record low unemployment rate, Austin’s expand-
ing tech industry continues to prosper. The Austin technology sector has rapidly expanded and is transforming the Austin area into a
major tech hub. The Austin MSA is projected to see high growth rates and outperform other metro areas across Texas, as well as the
U.S. throughout 2017.
Economy Office Industrial Retail Multifamily
2017
OFFICEMARKETREPORT
Commercial Real Estate Advisors
AUSTIN OFFICE MARKET HIGHLIGHTS
The Austin office market experienced record low vacancy rates and record high rental rates during 2016. The low unemployment rate and high employment growth rate exhibited throughout the MSA gave way to continued high office demand in 2016. Many office brokers say that Austin remains a Landlord’s market. Much of the new supply is preleased, therefore the supply of new office is limited. Given the amount of growth exhibited over the previous year and the expansions and relocations currently anticipated in the technology industry, office rents will likely continue to trend upward in 2017.
EXPERIENCE INSIGHT RESULTS
2017
2017OFFICE MARKET REPORT
AUSTIN MARKET OVERVIEW
MARKET OVERVIEW fromMajor Cities of TEXAS
Total Vacancy Rate
Net Absorption (SF)
Rental Rates (PSF)
Total New Construction (SF)
Austin San Antonio Houston Dallas
4Q2015
4Q2016
4Q2016
4Q2016
4Q2016
%change
8.20%
909,621
$30.66
879,922
8.30%
215,707
$32.28
328,227
1.22%
-76.29%
5.28%
-62.70%
9.10%
685,939
$20.37
116,206
15.10%
-240,794
$27.52
100,714
14.30%
705,773
$24.20
831,938
The Austin office occupancy
has increased over the
previous quarters. The
vacancy rate has remained
stable, keeping between
8.2% and 8.4% since 3Q
2015. Year to date net
absorption totaled a
positive 1,065,713 square
feet. Rental rates ended the
year at $32.28 per square
foot up $1.62 per square
foot from last year.
A total of 47 buildings were
delivered in 2016, totaling
1,326,271 square feet.
Approximately 3.1 million
square feet are still under
construction at the end of
2016.Property Class
Class A
Class B
Class C
$36.77
$27.66
$24.75
8.9%
9.4%
3.9%
686,483
639,788
0
263,050
-54,096
6,753
1,181,889
-19,056
-97,120
Rental Rate (PSF) Vacancy Rate YTD NewConstruction (SF)
Net Absorption(Square Feet)
YTD NetAbsorption (SF)4Q 2016
Source CoStar Property® Compiled by HCP
Economy Office Industrial Retail Multifamily
OFFICE MARKET REPORT
TOTAL OFFICE MARKET STATISTICS
TOTAL OFFICEMARKET STATISTICS
4Q2016
PeriodQuoted Rates
PSF
Existing Inventory
# of Bldgs Total RBA Direct SF Total SF Vac%
Vacancy
4Q 2016
3Q 2016
2Q 2016
1Q 2016
4Q 2015
3Q 2015
2q 2015
1q 2015
2014
2013
2012
2011
2010
2009
2008
2007
4,600
4,567
4,554
4,547
4,537
4,525
4,512
4,498
4,482
4,444
4,418
4,389
4,370
4,333
4,281
4,158
96,421,120
95,664,921
95,286,293
95,048,672
94,689,477
93,826,659
92,639,876
91,622,571
90,733,568
89,169,516
88,764,531
88,331,852
88,096,393
87,588,679
85,410,198
81,453,068
8,024,207
7,863,017
7,722,792
7,785,467
7,711,905
7,791,438
8,299,793
8,052,846
8,075,798
8,409,915
9,274,911
11,001,334
12,207,364
12,793,165
11,313,651
9,570,838
$32.28
$32.77
$31.39
$31.21
$30.65
$30.22
$29.80
$29.30
$28.13
$27.00
$25.47
$24.55
$24.87
$24.75
$25.15
$25.07
7,356,754
7,231,569
7,055,599
7,216,775
7,055,434
7,195,970
7,692,912
7,393,298
7,313,181
8,001,087
9,119,418
10,624,697
11,723,685
12,132,487
10,848,941
9,015,274
8.3%
8.2%
8.1%
8.2%
8.1%
8.3%
9.0%
8.8%
8.9%
9.4%
10.4%
12.5%
13.9%
14.6%
13.2%
11.8%
Source CoStar Property® Compiled by HCP
Economy Office Industrial Retail Multifamily
2017
OFFICE MARKET REPORT
TOTAL OFFICE MARKET STATISTICS - II
TOTAL OFFICEMARKET STATISTICS - II
4Q2016
PeriodNet Absorption
SF
2016 4Q
2016 3Q
2016 2Q
2016 1Q
2015 4Q
2015 3Q
2015 2Q
2015 1Q
2014
2013
2012
2011
2010
2009
2008
2007
Deliveries
# of Bldgs Total RBA
15
13
7
10
12
13
14
16
43
28
30
19
37
52
124
99
215,707
238,403
300,296
285,633
942,351
1,695,138
770,358
911,955
1,898,169
1,269,981
2,159,102
1,441,489
1,093,515
698,967
2,214,317
1,343,825
328,227
378,628
237,621
359,195
862,818
1,186,783
1,017,305
889,003
1,596,040
431,584
570,056
235,459
507,714
2,178,481
3,965,130
2,583,933
UC Inventory
# of Bldgs Total RBA
51
42
45
39
39
46
36
40
47
46
31
25
18
30
60
115
3,143,158
2,218,471
2,406,235
2,322,768
2,175,803
2,372,654
3,215,683
4,047,997
3,747,893
2,541,918
1,015,231
736,424
220,349
560,358
2,331,759
4,395,004
Source CoStar Property® Compiled by HCP
Economy Office Industrial Retail Multifamily
2017
OFFICE MARKET REPORT
VACANCY RATES VS. RENTAL RATES
VACANCY RATES
VS.
RENTAL RATES
The Austin office market ended 2016 with a vacancy rate of 8.3%. Over the previous year the vacancy rate increased just 1.22% when compared to 4Q 2015’s vacancy rate of 8.2%. Year to date absorption for the total office market is 1,065,713 square feet.
The rental rates for Austin area have seen a positive upward trend year to year. The rental rate reached an all time high of $32.68 per square foot during 3Q 2016. The current year end rental rate of $32.28 per square foot is 5.2% higher than the previous year’s rate of $30.66 per square foot.
Economy Office Industrial Retail Multifamily
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
$20.00
$25.00
$30.00
$35.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q
2015 2Q
2015 3Q
2015 4Q
2016 1Q
2016 2Q
2016 3Q
2016 4Q
VACA
NCY
RAT
E
REN
TAL
RATE
PSF
RENTAL RATE VACANCY RATE
2017
new constructionDuring the year of 2016, 47 buildings totaling 1,326,271 square feet were completed in the market area. This compares to 56 buildings totaling 4,020,358 square feet that were completed in the year of 2015. There was 3,143,158 SF of office space under construction at the end of 2016. The largest projects underway at the end of the year were 500 W 2nd Street, a 500,512 SF building with 67% of its space pre-leased, and University of Texas Systems, a 342,000 SF facility that is 100% pre-leased.
OFFICE MARKET REPORT
ANNUAL NEW CONSTRUCTION DELIVERIES
Economy Office Industrial Retail Multifamily
0
1
2
3
4
5
2016 2015 2014 2013 2012 2011
MIL
LIO
NS
SQU
ARE
FEET
DELIVERIES UNDER CONSTRUCTION
2017
OFFICE MARKET REPORT
TOTAL OFFICE MARKET STATISTICS 2016 4Q
MarketExisting Inventory Vacancy
Quoted RatesPSF
Net AbsorptionYTD
DeliveriesYTD
UnderConstruction SF
# of Bldgs Direct SF Total SFTotal RBA Vac %
Bastrop County
Caldwell County
CBD
Cedar Park
Central
East
Far Northeast
Far Northwest
Georgetown
Hays County
North
Northeast
Northwest
Round Rock
South
Southeast
Southwest
West Central
96
25
456
185
395
256
70
190
274
272
196
114
456
390
421
78
517
209
466,140
93,393
15,000,898
1,829,748
5,963,183
3,929,212
602,280
4,603,208
1,912,906
2,014,622
7,687,880
4,412,077
17,574,057
5,497,429
4,996,526
3,320,712
14,329,556
2,187,293
25,506
-
787,919
317,479
293,158
653,880
33,943
503,777
101,877
188,472
597,240
478,588
1,160,830
285,367
271,080
237,414
1,329,434
90,790
25,506
-
840,453
319,437
303,135
658,140
35,943
577,060
105,774
188,472
635,054
492,755
1,344,170
291,452
292,488
242,988
1,576,798
94,582
5.5%
-
5.6%
17.5%
5.1%
16.7%
6.0%
12.5%
5.5%
9.4%
8.3%
11.2%
7.6%
5.3%
5.9%
7.3%
11.0%
4.3%
$16.04
-
$46.53
$27.02
$26.92
$31.08
$23.59
$29.84
$22.83
$24.80
$32.14
$21.88
$30.78
$28.23
$28.08
$23.80
$33.61
$35.55
972
7,900
60,858
87,340
121,631
72,548
3,247
(29,134)
44,706
102,442
27,926
90,710
(24,038)
230,623
(132,091)
228,378
40,498
131,197
8,210
-
203,438
55,737
46,000
10,000
4,400
-
5,200
113,077
199,382
238,810
172,854
181,720
24,852
11,535
51,056
-
-
-
1,060,692
153,070
-
57,761
-
1,700
16,000
13,050
304,258
-
-
96,748
207,972
654,205
577,702
-
Totals 4,600 96,421,120 7,356,754 8,024,207 8.3% $32.28 1,065,713 1,326,271 3,143,158
Source CoStar Property® Compiled by HCP
Economy Office Industrial Retail Multifamily
2017
OFFICE MARKET REPORT
HISTORICAL COMPARISON
Period # of BldgsExisting Inventory
Total RBA Direct SF Net Absorption SF Vac% Quoted Rates
4Q 2016
3Q 2016
2Q 2016
1Q 2016
4Q 2015
3Q 2015
2Q 2015
1q 2015
2014
2013
2012
2011
2010
2009
4,600
4,567
4,554
4,547
4,537
4,525
4,512
4,498
4,482
4,444
4,418
4,389
4,370
4,333
96,421,120
95,664,921
95,286,293
95,048,672
94,689,477
93,826,659
92,639,876
91,622,571
90,733,568
89,169,516
88,764,531
88,331,852
88,096,393
87,588,679
7,356,754
7,231,569
7,055,599
7,216,775
7,055,434
7,195,970
7,692,912
7,393,298
7,313,181
8,001,087
9,119,418
10,624,697
11,723,685
12,132,487
215,707
238,403
300,296
285,633
942,351
1,695,138
770,358
911,955
1,898,169
1,269,981
2,159,102
1,441,489
1,093,515
698,967
8.3%
8.2%
8.1%
8.2%
8.1%
8.3%
9.0%
8.8%
8.9%
9.4%
10.4%
12.5%
13.9%
14.6%
$32.28
$32.77
$31.39
$31.21
$30.65
$30.22
$29.80
$29.30
$28.13
$27.00
$25.47
$24.55
$24.87
$24.75
OverviewOverall the Austin office market continues to experience a positive net absorption for the fourth consecutive year. Office vacancy rates remain stable and rental rates are at record high levels. Many large developments under construction were delivered during 2016, resulting in more than 3.8 million square feet of office space. Given the demand for office space in Austin from expansions and relocations, the majority of the new office space has already been leased or preleased. As demand continues, additional developments will continue to break ground for the year to come.
Economy Office Industrial Retail Multifamily
2017
INDUSTRIALMARKETREPORT
Commercial Real Estate Advisors
AUSTIN INDUSTRIAL MARKET HIGHLIGHTS
The Austin MSA industrial market again continued to see growth throughout 2016. Rental rates rose throughout the year as the overall market tightened. Austin is expected to experience continued new development in the industrial sector, with more than 2 milion square feet of space under construction. Austin’s industrial market is expected to continue to see growth in demand for Flex/R&D space. Continued expansions and relocations, coupled with the continued strength of the Austin MSA economy, will continue to support the industrial market throughout 2017.
EXPERIENCE INSIGHT RESULTS
2017
INDUSTRIAL MARKET REPORT
AUSTIN MARKET OVERVIEW
MARKET OVERVIEW fromMajor Cities of TEXAS
Total Vacancy Rate
Net Absorption (SF)
Rental Rates (PSF)
Total New Constructions (SF)
Austin San Antonio Houston Dallas
4Q2015
4Q2016
4Q2016
4Q2016
4Q2016
%change
4.80%
722,019
$8.83
432,513
4.80%
-209,472
$9.27
1,213,436
5.90%
423,342
$6.19
417,275
5.60%
1,851,815
$6.72
2,953,204
6.10%
4,090,300
$5.61
4,459,247
-
-129.01%
4.98%
180.55%-
The Austin industrial market
reported a vacancy rate of 4.8%
for 4Q 2016; on par with the 2015
4Q vacancy rate of 4.8%. The
vacancy rate over the previous
year saw an increase from
5.9% to 8.1% for flex projects.
Whereas, the warehouse sector
reported a vacancy rate of 3.8%
for 4Q 2016; decreasing from the
fourth quarter 2015 vacancy rate
of 4.5%.
The recorded year to date
absorption for the flex building
market is negative 131,380
square feet and positive
1,984,289 square feet for the
warehouse building market.
YTD, the overall net absorption
for the Austin Industrial market
is 1,852,909 square feet.Property Type
Flex
Warehouse
$12.91
$7.79
8.1%
3.8%
(131,380)
1,984,289
813,931
1,213,030
Vacancy Rate YTD Net
Absorption (SF)Under
Construction (SF)Rental Rate (PSF)
4Q 2016
By Property Type
AustinIndustrial Statistics
Office IndustrialEconomy Retail Multifamily
2017
The rental rates for the Austin industrial building mar-kets have seen an upward trend since 2011, and are currently at $9.27 per square foot. Over the previous year, the rental rate for the flex market increased from $11.69 in 4Q 2015 to the current average rental rate of $12.91 per square foot. The 4Q 2016 vacancy rate is 8.1%, jumping up from 5.9% in 4Q 2015.
FLEX MARKETVACANCY RATES VS. RENTAL RATES
INDUSTRIAL MARKET REPORT
VACANCY RATES VS. RENTAL RATES
Office IndustrialEconomy Retail Multifamily
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
$6.00
$8.00
$10.00
$12.00
$14.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q
2015 2Q
2015 3Q
2015 4Q
2016 1Q
2016 2Q
2016 3Q
2016 4Q
VACA
NCY
RAT
E
REN
TAL
RATE
PSF
RENTAL RATES VACANCY RATES
2017
The current warehouse rental rate is $7.79 per square foot as of 4Q 2016. Over the previous year, the rental rate trended upward, increasing from $7.57 per square foot, or up 3.8% from 4Q 2015. The vacancy rate decreased from 4Q 2015 of 4.5% down to the 4Q 2016 rate of 3.8%
WAREHOUSE MARKETVACANCY RATES VS. RENTAL RATES
INDUSTRIAL MARKET REPORT
VACANCY RATES VS. RENTAL RATES
Office IndustrialEconomy Retail Multifamily
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
$5.00
$6.00
$7.00
$8.00
$9.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q
2015 2Q
2015 3Q
2015 4Q
2016 1Q
2016 2Q
2016 3Q
2016 4Q
VACA
NCY
RAT
E
REN
TAL
RATE
PSF
RENTAL RATES VACANCY RATES
2017
new constructionDuring the fourth quarter 2016, 12 buildings totaling 192,665 square feet were completed in the Austin market area. There was 2,026,961 square feet of Industrial space under construction at the end of the fourth quarter 2016. Completed projects for the year totaled 1,969,533 square feet for 2016. Some of the notable 2016 deliveries include: Amazon, an 855,000-square-foot facility that delivered in third quarter 2016 and is now 100% occupied, and Met Center Bldg. 3, a 160,000-square-foot building that delivered in first quarter 2016. The largest projects underway at the end of fourth quarter 2016 were Capitol Wright Distribution Center, a 500,000-square-foot building with 100% of its space pre-leased, and Brushy Creek Corporate Center – Phase 1 Bldg, a 124,780-square-foot facility.
INDUSTRIAL MARKET REPORT
ANNUAL NEW CONSTRUCTION DELIVERIES
Office IndustrialEconomy Retail Multifamily
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2016 2015 2014 2013 2012 2011 2010
FLEX NEW CONSTRUCTION FLEX UNDER CONSTRUCTION
WAREHOUSE NEW CONSTRUCTION WAREHOUSE UNDER CONSTRUCTION
2017
INDUSTRIAL MARKET REPORT
HISTORICAL METRICS – 2006 TO CURRENT
Period Quoted RatesPSF
4q 2016
3q 2016
2q 2016
1q 2016
4q 2015
3q 2015
2q 2015
1q 2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
Existing Inventory Vacancy
# of Bldgs Total SFTotal RBA Vac%
97,948,697
97,700,297
96,491,661
96,397,542
96,011,310
95,902,047
95,469,534
95,597,112
95,278,380
94,514,665
94,022,234
93,685,948
93,057,675
92,734,207
91,395,417
88,727,353
84,037,455
4,003
3,965
3,950
3,946
3,938
3,936
3,922
3,916
3,913
3,887
3,872
3,855
3,842
3,817
3,781
3,716
3,634
4,708,604
4,462,019
5,065,996
5,080,704
4,710,890
5,324,746
5,677,319
6,982,025
7,081,878
6,546,692
8,389,010
9,893,655
10,939,843
11,595,752
9,500,939
8,384,095
8,148,117
$9.27
$9.31
$9.02
$8.87
$8.83
$9.01
$8.69
$8.46
$8.25
$7.38
$6.67
$6.77
$6.88
$6.96
$7.65
$7.51
$6.73
4.8%
4.6%
5.3%
5.3%
4.9%
5.6%
5.9%
7.3%
7.4%
6.9%
8.9%
10.6%
11.8%
12.5%
10.4%
9.4%
9.7%
overviewThe overall industrial market has seen steady vacancy rates and an increase in average rental rates over the previous year. There are many developments under construction with the majority of new rentable area within the warehouse building market. Total Industrial inventory in the Austin market area amounted to 97,948,697 square feet in 4,003 buildings as of the end of the fourth quarter 2016. The flex market has seen an increase in rental rates. The total Austin industrial market is expected to show optimal conditions for the year to come. Absorption remained positive overall, while demand for flex properties continued to stay strong as tenants in Class A & B office space consider moves to less expensive flex space. This trend is expected to continue and contribute to the evolving industrial real estate market throughout the Austin MSA.
The table illustrates the existing industrial inventory for Austin going back to 2006 through the current quarter. The data is presented on a quarterly basis from 2015 to the current quarter.
Source CoStar Property® Compiled by HCP
Office IndustrialEconomy Retail Multifamily
2017
RETAILMARKETREPORT
Commercial Real Estate Advisors
AUSTIN RETAIL MARKET HIGHLIGHTS
Demand continues to outstrip supply and it forcing many tenants to expand in existing centers. Given the rate of job growth, outstanding growth in population, and the increases in residential development, the Austin retail market again is well positioned for continued growth in 2017. New developments including new Phases at The Domain in north Austin continue to drive national tenants to the Austin area along with expansion of existing businesses. The Austin retail market continues to have some of the lowest vacancy rates in the country and retail sales continue to increase which are all factors which should contribute to a favorable retail market in 2017. Many new projects have been preleased.
EXPERIENCE INSIGHT RESULTS
2017
RETAIL MARKET REPORT
AUSTIN MARKET OVERVIEW
MARKET OVERVIEW fromMajor Cities of TEXAS
Total Vacancy Rate
Net Absorption (SF)
Rental Rates (PSF)
Total New Constructions (SF)
Austin San Antonio Houston Dallas
4Q2015
4Q2016
4Q2016
4Q2016
4Q2016
%change
3.7%
725,278
$19.14
479,101
3.5%
406,013
$21.18
356,916
-5.4%
-44%
10.66%
-26%
4.0%
49,254
$14.70
272,666
4.9%
1,172,614
$16.19
1,474,467
4.8%
974,281
$15.77
625,738
The retail vacancy rate has experienced a downward trend since 2009, with the current rate for 4Q 2016 being 3.5%, the lowest rate within the past 10 years. The retail vacancy rate dropped by 5.4% between 4Q 2015 and 4Q 2016, decreasing from 3.7% last year. The net absorption for the total market in 4Q 2016 was 406,013 square feet, while the 2016 YTD absorption amounts to 921,869 square feet.
RetailOfficeEconomy MultifamilyIndustrial
2017
RETAIL MARKET REPORT
RENTAL RATES VS. VACANCY RATES
RENTAL RATES
VS.
VACANCY RATES
The rental rates for the Austin area saw a downward trend from 2008 to 2012 and have trended upward since 2013. The current rental rate is $21.18 per square foot for 2016 4Q, an all-time high, up $2.04 per square foot from the $19.14 per square foot reported in 4Q 2015. Over the past year, the total Austin retail market saw a 10.66% increase in rental rates when compared to the 4Q 2015 rate.
RetailOfficeEconomy MultifamilyIndustrial
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
$16.00
$17.00
$18.00
$19.00
$20.00
$21.00
$22.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q
2015 2Q
2015 3Q
2015 4Q
2016 1Q
2016 2Q
2016 3Q
2016 4Q
VACA
NCY
RAT
E
REN
TAL
RATE
PSF
RENTAL RATES VACANCY RATES
2017
RETAIL MARKET REPORT
ANNUAL NEW CONSTRUCTION DELIVERIES
NEW CONSTRUCTIONS During 4Q 2016, sixteen buildings totaling 356,916 square feet were completed
in the Austin retail market. With new construction underway in multiple
submarkets, more than 1,241,958 square feet of retail space was under
construction as of 4Q 2016. Over the past four quarters, a total of 1,093,110
square feet of retail space has been built in Austin. Some of the notable 2016
deliveries include: H-E-B, a 126,000-square-foot facility that delivered in 4Q
2016 and is now 100% occupied, and 11501 Rock Rose Ave, a 63,290-square-
foot building that delivered in 1Q 2016 and is now 100% occupied.
Austin Retail StatisticsBy Property Type
Property Type Rental Rate (PSF)4Q 2016
Vacancy Rate YTD NetAbsorption (SF)
RetailOfficeEconomy MultifamilyIndustrial
2.3%
1.2%
4.0%
5.7%
0.0%
3.5%
191,251
702
16,210
197,850
0
406,013
General Retail
Mall Market
Power Center
Shopping Center
Specialty Center
Total Market
$22.17
$24.71
$25.08
$20.19
$32.48
$21.18
0
1,000,000
2,000,000
2016 2015 2014 2013 2012 2011
NEW CONSTRUCTION UNDER CONSTRUCTION
2017
RETAIL MARKET REPORT
HISTORICAL METRICS – 2007 TO CURRENT
Period Quoted RatesPSF
4Q 2016
3q 2016
2q 2016
1q 2016
4q 2015
3q 2015
2q 2015
1q 2015
2014
2013
2012
2011
2010
2009
2008
2007
Existing Inventory Vacancy
# of Bldgs Total SFTotal RBA Vac%
106,594,537
105,800,628
105,677,167
105,699,718
105,355,625
105,028,644
104,828,690
104,592,254
104,328,610
103,220,053
102,359,441
101,285,268
100,756,406
100,054,840
98,171,851
94,522,063
9,220
9,204
9,178
9,164
9,146
9,128
9,110
9,099
9,084
9,017
8,943
8,872
8,816
8,747
8,625
8,464
3,756,628
3,790,883
3,911,159
4,255,705
3,861,736
4,143,399
4,554,176
4,995,552
5,065,212
5,210,745
5,678,338
6,100,773
6,273,722
6,640,612
6,126,860
6,416,113
$21.18
$20.67
$19.72
$19.18
$19.14
$18.79
$18.49
$18.26
$17.81
$17.50
$17.83
$17.56
$17.84
$18.21
$19.80
$19.51
3.5%
3.6%
3.7%
4.0%
3.7%
3.9%
4.3%
4.8%
4.9%
5.0%
5.5%
6.0%
6.2%
6.6%
6.2%
6.8%
overviewThe Austin retail market experienced positive change in market conditions in the fourth quarter 2016. The vacancy rate remained low at 3.5%. Net absorption was positive 406,013 square feet. Quoted rental rates jumped from the third quarter 2016 record levels, to a new high of $21.18 per square foot. A total of sixteen retail buildings with 356,916 square feet of retail space were delivered to the market in the quarter, with 1,241,958 square feet still under constructions at the end of the quarter. Large retail developments are under construction in both downtown Austin and the surrounding suburban areas with projected delivery in the near future. As the retail market continues to see growth, many areas are trending toward redeveloped spaces in older properties, even utilizing mixed use properties with retail characteristics. High occupancy rates and increased rental rates show positive signs for expansion within the next year.
The following table illustrates the existing retail inventory for Austin going back to 2007 through the current quarter. The data is presented on a quarterly basis from 2015 to the current quarter.
Source CoStar Property® Compiled by HCP
RetailOfficeEconomy MultifamilyIndustrial
2017
MULTIFAMILY
MARKETREPORT
Commercial Real Estate Advisors
AUSTIN MULTIFAMILY MARKET HIGHLIGHTS
The Austin Multifamily market stayed strong throughout 2016, with the market continuing to show signs of growth and expansion. The preferable economic conditions exhibited by the Austin MSA continue to spur growth within the multifamily market. The growth in population and the above average job growth rate continue to drive demand for units throughout the MSA. With job growth on the rise and hiring anticipated to continue in 2017, expect continued strong demand for apartments across the Austin MSA.
EXPERIENCE INSIGHT RESULTS
2017
MULTIFAMILY MARKET REPORT
AUSTIN MARKET OVERVIEW
Economy Office Industrial Retail Multifamily
MARKET OVERVIEW fromMajor Cities of TEXAS
Occupancy Rate
Units Added
Units Absorbed
Average Effective Rent per Unit
Average Size (SF)
Effective Rent PSF
Austin San Antonio Houston Dallas
4Q2015
4Q2016
4Q2016
4Q2016
4Q2016
%change
92.1%
4,506
7,204
854
$1,169
$1.36
91.4%
4,387
6,086
857
$1,209
$1.41
-0.8%
-2.6%
-15.5%
0.4%
3.4%
3.7%
89.50%
3,497
5,665
842
$922
$1.06
88.00%
13,832
4,081
880
$1,004
$1.14
92.20%
11,360
14,925
964
$1,053
$1.22
The Austin Multifamily market ended 2016 with an occupancy rate of 91.4%. Year to date net absorption totaled 6,086 units. Rental rates ended the year at $1.41 per square foot. A total of 4,387 units were delivered to the market in the fourth quarter in 2016. More than 7,600 units were under construction at end of year 2016. The average rent is expected to continue to rise faster than the national average.
2017
MULTIFAMILY MARKET REPORT
RENTAL RATES VS. OCCUPANCY RATES
The multifamily occupancy rate has remained relatively consistent since 4Q 2015, with the lowest rate being 4Q 2016 at 91.4%.
The multifamily occupancy rate reached 93.9% for stabilized properties, but stands at 91.4% in general. The 2016 absorption for the total Austin apartment market is 6,086 units.
The rental rates for the Austin area have steadily risen over the previous decade.
The current rental rate is $1.39 per square foot as of the end of 2016, a 3.7% increase compared to the 4Q 2015 rental rate of $1.36 per square foot.
RENTAL RATES VS. OCCUPANCY RATES
Economy Office Industrial Retail Multifamily
80.00%
82.00%
84.00%
86.00%
88.00%
90.00%
92.00%
94.00%
96.00%
98.00%
100.00%
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q
2015 2Q
2015 3Q
2015 4Q
2016 1Q
2016 2Q
2016 3Q
2016 4Q
OCC
UPA
NCY
RAT
E
REN
TAL
RATE
RENTAL RATES PSF OCCUPANCY RATES
2017
MULTIFAMILY MARKET REPORT
AUSTIN MULTIFAMILY STATISTICS
TOTAL MULTIFAMILY MARKET STATISTICS
Property Type
Eff
1 Bdrm
2 Bdrm
3 Bdrm
>4 Bdrm
Average Market Rent
PSF
Average Effective
Rent% of the Market 4Q 2016
3.4%
49.9%
37.3%
7.0%
2.4%
458
698
1,024
1,271
1,498
$939
$1,066
$1,317
$1,513
$2,256
YEAR end2016
BY PROPERTY TYPE
Source Apartment Market Data Research Compiled by HCP
Economy Office Industrial Retail Multifamily
2017
new constructionCompleted projects for the year ending 2016 totaled 12,525 units. With new construction underway in multiple submarkets, projects under construction are estimated to be 16,500 units, with delivery dates scheduled through mid 2018. Several submarkets will receive significant stock during this time, with more than 1,500 units slated for completion in Cedar Park, East Austin, Round Rock, Georgetown and Pflugerville/Wells Branch.
MULTIFAMILY MARKET REPORT
ANNUAL NEW CONSTRUCTION
Economy Office Industrial Retail Multifamily
0
5,000
10,000
15,000
20,000
25,000
2016 2015 2014 2013 2012
NEW CONSTRUCTION UNDER CONSTRUCTION
2017
MULTIFAMILY MARKET REPORT
AUSTIN MULTIFAMILY STATISTICS
The below tables illustrate the multifamily inventory for Austin properties built before 1970 and after 2010. The data is presented on a 10 year basis.
AUSTINMULTIFAMILY MARKET STATISTICS
Period Units Occupancy Rental Rate Avg Size SF
2010’s
2000’s
1990’s
1980’s
1970’s
<1970
17,911
48,407
23,822
40,840
17,398
5,002
82.8%
95.0%
95.5%
95.8%
95.9%
96.6%
$1.54
$1.21
$1.23
$1.17
$1.23
$1.26
913
965
917
730
761
776
Source Apartment Market Data Research Compiled by HCP
SAN MARCOSMULTIFAMILY MARKET STATISTICS
Period Units Occupancy Rental Rate Avg Size SF
2010’s
2000’s
1990’s
1980’s
1970’s
<1970
724
1,801
1,100
2,665
526
509
95.2%
95.4%
94.8%
95.3%
85.7%
94.5%
$1.07
$1.01
$1.10
$1.01
$0.97
$1.09
959
960
910
771
782
746
Source Apartment Market Data Research Compiled by HCP
Economy Office Industrial Retail Multifamily
2017
MULTIFAMILY MARKET REPORT
TOTAL MULTIFAMILY MARKET STATISTICS
Market Units Occupancy Class A Rent PSF
Class BRent PSF
Class CRent PSF
Average Rent PSF
Central
CBD
Cedar Park/Leander (CP/L)
East Central (E)
Hays
North (N)
North Central (NE)
Northeast (NW)
Northwest (NW)
Round Rock (RR)
South (S)
Southeast Central (SEC)
San Marcos (SM)
Southwest (SW)
Travis County
Williamson County (WMS)
5,360
4,243
7,693
3,341
2,298
20,700
6,911
11,693
2,725
10,267
12,969
11,627
5,629
7,088
133,340
3,366
94.8%
83.2%
94.6%
88.9%
95.9%
94.9%
91.1%
93.4%
94.8%
96.0%
94.0%
93.2%
97.6%
92.2%
93.2%
95.1%
$1.82
$2.55
$1.39
$1.89
$1.30
$1.38
$1.79
$1.28
$1.38
$1.27
$1.40
$1.90
$1.32
$1.38
$1.70
$1.30
$1.89
$1.98
$1.17
-
-
$1.29
$1.55
$1.24
$1.29
$1.21
$1.31
$1.41
$1.27
$1.37
$1.35
$1.23
$1.62
$1.68
$1.07
$1.71
-
$1.26
$1.34
$1.21
$1.26
$1.21
$1.39
$1.35
$1.15
$1.30
$1.35
$1.30
$1.76
$2.49
$1.30
$1.86
$1.30
$1.30
$1.62
$1.25
$1.30
$1.23
$1.36
$1.45
$1.22
$1.37
$1.46
$1.28
Total Austin MSA 173,104 93.7% $1.59 $1.32 $1.32 $1.41
Source Transwestern Compiled by HCP
Economy Office Industrial Retail Multifamily
2017
MULTIFAMILY MARKET REPORT
AUSTIN MULTIFAMILY MARKET STATISTICS
PeriodUnits
Absorbed(Annual)
Occupancy Units Added Avg Rent PSF
4Q 2016
3Q 2016
2Q 2016
1Q 2016
4Q 2015
3Q 2015
2Q 2015
1Q 2015
4Q 2014
3Q 2014
2Q 2014
1Q 2014
2013
2012
2011
2010
2009
6,086
7,306
7,676
7,875
7,204
2,547
1,424
3,947
2,639
2,963
3,480
2,140
1,364
3,175
2,170
1,445
4,965
91.4%
91.9%
91.8%
91.9%
92.1%
95.0%
94.0%
93.8%
94.0%
95.0%
94.0%
94.0%
95.0%
95.0%
95.0%
92.0%
88.0%
3,577
1,648
4,502
2,798
4,506
2,022
2,618
2,175
2,507
2,066
2,134
2,081
1,794
1,338
1,645
1,101
961
$1.41
$1.36
$1.44
$1.36
$1.36
$1.34
$1.31
$1.28
$1.25
$1.26
$1.24
$1.20
$1.16
$1.09
$1.03
$0.96
$0.93
Source Apartment Market Data Research Compiled by HCP
overview
The Austin apartment market has continued to prosper; there are many large developments under construction with projected delivery over the next year. Rental rates have increased substantially in the recent past due to high demand exceeding the pace of the new supply being added to the market. Given the demand for multifamily space in Austin from the significant job growth and expansions, the addition of new supply will likely not negatively affect overall vacancy levels. Rents continue to rise, after they rose 3.7% from 2015. Bastrop County is the only submarket in the Austin MSA reporting rents averaging lower than $1.00 per square foot. On the other hand, the Downtown, University, and South Central submarkets are reporting rents averaging above $2.00 per square foot, including $2.55 per square foot Downtown. While all of the MSA is active with new construction, the South Austin submarkets are currently reporting seventeen multifamily projects underway, with expected delivery dates in 2017.
Economy Office Industrial Retail Multifamily
2017
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