Texas’ major commercial real estate markets are reporting their strongest performance in years. That’s according to a recent article by R. Marshall Mills, president and CEO of The Weitzman Group and Cencor Realty Services. Commercial real estate in Dallas-Fort Worth, Houston, San Antonio, and Austin are expected to report a very strong 2016.
In North Texas, occupancy is at 92 percent, the highest it’s been since 1984. Thanks to existing-center leasing and a conservative development cycle, 2016 is expected to end with strong commercial real estate numbers. For instance, in the third quarter of 2016, Austin market’s 47.9-million-square-foot retail inventory is 96 percent occupied. “That’s a high point, even for a market that has long reported healthy occupancy in the low-to-mid-90-percent range,” wrote Mills.
The strong commercial real estate numbers are being seen across all of Texas’ major metros. The three market drivers Mills says are influencing commercial real estate are:
During the 12 months ended September 2016, Texas gained 207,500 net new jobs, an annual growth rate of 1.7 percent. Many of those jobs were added in our four major metros. In Austin, 22,234 new jobs were added. Austin unemployment is at 3.5 percent.
Our Texas markets are national leaders in single-and multi-family residential growth, per MetroStudy. Austin’s annual starts are at the highest level in three years, with around 13,400 new single-family units.
Four metros, more than 18 million residents. Austin has seen the highest percentage of population growth. Now with a population of 2 million people, the Austin population has grown 60 percent since 2000.
Breaking Down Supply and Demand
The combination of job, residential, and population growth results in retail expansions throughout our four major metros. Many of these tenants are leasing increasingly scarce space in existing centers, since new space is largely for anchors, particularly grocer anchors, and speculative space is extremely limited.
Austin is seeing the most limited retail space, with only around 700,000 square feet on track for 2016. New development is largely for grocery-anchored retail, as well as an open-air mall expansion with a Nordstrom.
“These low construction totals will help ensure the Texas retail markets remain tight,” writes Mills. These construction totals are conservative. Austin’s incredibly high retail occupancy and continued economic growth causes new development to occupy immediately. “And with new space dominated by anchor stores, new construction adds to occupancy—not vacancy.”
Read more about commercial real estate in Austin.