No room on store shelves. Occupancy highest in Texas; causes slower leasing activity

Transcription

1 Austin Retail, Q4 217 No room on store shelves. Occupancy highest in Texas; causes slower leasing activity Occupancy 96.3% Under Construction 883,232 SF Avg. Asking Rate $22.25 PSF Net Absorption 246,856 SF *Arrows indicate trend from previous quarter. Figure 1: Net Absorption and Class A Occupancy Net Absorption (SF,s) 4, 3,5 3, 2,5 2, 1,5 1, 5 Occupancy (%) (5) Q1 Q2 Q3 Q4 Total Annual Net Absorption Class A Occupancy Rate Source: CBRE Research, Q AUSTIN S CLASS A OCCUPANCY NEARS 98% Limited availability continues to constrict market activity. Class A occupancy only registered down slightly during the final 9 days of 217. Retailers aren t just on the search for prime, Class A space, overall occupancy is high as well at 96.3% the highest measured in Texas. LARGEST BLOCKS OF SPACE TAKEN UP BY FITNESS AND INLINE STORES Net absorption continued to fall off peak levels registered in, while new construction captured a large portion of demand over 15, sq. ft. of the 247, sq. ft. absorbed. Large blocks were occupied this quarter by fitness tenants including Crunch Fitness and Orangetheory Fitness. 218 RETAIL SALES GAINS EXPECTED CBRE Econometric Advisors forecasts Austin retail sales volumes to reach $29.7 billion in 218, a 6% increase from 217. Similar sales growth is projected to continue over the next five years at an annual rate of 5.6%, higher than the U.S. average. NEW NEIGHBORS: TEXAS ADDS 4, OF THEM SAYS U.S. CENSUS Once again Texas population gains grew faster than any other state between July 216 and July 217. This reflects 19, net migrations from elsewhere into Texas, according to recent data from the U.S. Census Bureau. Growth in the technology industry has contributed to population gains in Austin which are concentrated in suburban submarkets like Williamson County. Q4 217 CBRE Research 218 CBRE, Inc. 1

2 Figure 2: Market Snapshot Market Number of Centers Net Rentable Area Vacancy (%) Asking Rate, NNN Avg. Annual ($/SF) Under Construction Delivered Construction Q4 217 Net Absorption 217 Net Absorption Bastrop County 73 2,291, (12,1) (16,461) Caldwell County , (1,) (1,525) CBD 63 1,826, (1,738) 9,8 Cedar Park 159 7,251, , ,795 Central 186 6,281, (12,752) (35,491) East 84 2,964, , (22,39) (28,767) Far Northeast 83 2,658, ,722 47,561 71,182 Far Northwest 82 3,437, (15,878) (4,542) Georgetown 146 5,3, ,475 3,668 69,161 Hays County 2 7,655, ,45 21,1 68,49 North 157 6,41, ,65 18,66 (36,779) Northeast 62 2,542, ,8 11, 17,973 19,66 Northwest 122 4,597, ,6 56, ,71 Round Rock 166 6,87, ,4 142,294 56,62 91,81 South 225 9,361, (14,21) (1,524) Southeast 54 2,99, ,7 9,464 14,147 Southwest 187 7,887, ,757 1,169 15,238 7,149 West Central , , (3,84) (3,63) Austin Total 2,99 8,292, , , , ,942 Source: CBRE Research, Q Q4 217 CBRE Research 218 CBRE, Inc. 2

3 Figure 3: Asking Annual Rents, NNN Avg. ($) Figure 4: Construction SF (s) Q1 217 Q2 217 Q3 217 Q Community Neighborhood Strip Power Source: CBRE Research, Q Figure 6: Population Growth and Purchasing Power HH Income ($) Population (s) 72,5 2,2 7, 2,1 67,5 2, 65, 1,9 62,5 1,8 6, 1,7 57,5 1,6 55, 1, Median HH Income Population (s) Source Moody s Analytics, Q Figure 7: Austin MSA Retail Sales Retail Sales ($,Millions) 3, 26, 22, 18, 14, Annual Sales Growth (%) , (2.) Under Construction Delivered Construction Source: CBRE Research, Q Figure 5: Retail Investment Sales Volume ($, Millions) 1,4 1,2 1, Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 216 Q2 216 Q3 216 Q4 216 Q1 217 Q2 217 Q3 217 Q4 217 Source: Real Capital Analytics, Q Gross Retail Sales Retail Sales Growth Source: CBRE Econometric Advisors, Q Q4 217 CBRE Research 218 CBRE, Inc. 3

4 CONTACTS Robert C. Kramp Director, Research & Analysis E. Michelle Miller Research Operations Manager Analee Bivins Micheletti Senior Research Analyst Robert Basiliere Senior Research Analyst CBRE OFFICES CBRE Austin 1 Congress Ave., Suite 5 Austin, TX 7871 To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

5 Austin Retail, Q3 217 Retailers flock to new product amidst tight Class A occupancy Occupancy 96.2% Under Construction 935,354 SF Avg. Asking Rate $22.49 PSF Net Absorption 116,119 SF *Arrows indicate trend from previous quarter. Figure 1: Net Absorption and Class A Occupancy Net Absorption (SF,s) 4, 3,5 3, 2,5 2, 1,5 1, 5 Occupancy (%) (5) Q1 Q2 Q3 Q4 Total Annual Net Absorption Class A Occupancy Rate Source: CBRE Research, Q BALANCING ACT: BIG BOX CLOSURES AND NEW PRODUCT SPLIT NET ABSORPTION Like the rest of the nation, Austin retail has had to face a shift in retailers with several big box occupiers closing this year. As a result, absorption levels are lower than last year despite stable demand and high occupancy rates with a handful of big box closures including Bealls, Hastings, Gander Mountain, and Office Max were a drag on net absorption in Q3 217 for a total of 88, sq. ft. of negative absorption. However, high demand for new space led to 64, sq. ft. of activity in new product alone offsetting the closures and bringing the total net absorption to 116, sq. ft. Class A occupancy has been extremely tight for over two years and currently sits at 98.1%. The limited availability has forced tenants into new retail developments. Retailers aren t just on the search for Class A space, overall occupancy is high as well at 96.2% the highest retail occupancy in Texas. CONSTRUCTION ACTIVITY CONTINUES TO INCREASE The Austin retail development pipeline continues to deepen reaching construction activity on par with levels. While the majority of development is smaller strip centers, 64% of sq. ft. underway is in four main projects. The largest developments are both mixed-use projects including Plaza Saltillo in East Downtown and Belterra Village in West Austin/Dripping Springs. Both developments follow national trends of focusing heavily on entertainment and restaurant to create an experience for consumers. Q3 217 CBRE Research 217 CBRE, Inc. 1

6 Figure 2: Market Snapshot Market Source: CBRE Research, Q Number of Centers Net Rentable Area Vacancy (%) Asking Rate, NNN Avg. Annual ($/SF) Under Construction Delivered Construction Q3 217 Net Absorption Bastrop County 73 2,293, ,749 Caldwell County , CBD 63 1,82, ,59 Cedar Park 158 7,177, ,2 14,263 Central 184 6,257, (22,32) East 85 2,975, , 13, 18,577 Far Northeast 8 2,618, , (29,2) Far Northwest 83 3,43, (9,749) Georgetown 143 4,855, ,5 27,967 Hays County 195 7,547, ,8 14,175 North 157 6,41, ,65 3,791 Northeast 6 2,513, ,8 17,23 Northwest 121 4,584, ,6 19, 27,68 Round Rock 163 6,734, ,9 16, 1,312 South 225 9,369, , 4,858 Southeast 54 2,99, ,7 11,5 5,553 Southwest 186 7,879, ,854 14,2 19,379 West Central , ,948 Austin Total 2,8 79,667, ,354 96,45 116,119 Q3 217 CBRE Research 217 CBRE, Inc. 2

7 Figure 3: Asking Annual Rents, NNN Avg. ($) Figure 4: Construction SF (s) Q4 216 Q1 217 Q2 217 Q3 217 Community Neighborhood Strip Power 211 Under Construction 216 Delivered Construction 217 YTD Source: CBRE Research, Q Source: CBRE Research, Q Figure 6: Population Growth and Purchasing Power HH Income ($) Population (s) 72,5 2,2 7, 2,1 67,5 2, 65, 1,9 62,5 1,8 6, 1,7 57,5 1,6 55, 1, Median HH Income Population (s) Source Moody s Analytics, Q Figure 7: Austin MSA Retail Sales Retail Sales ($,Millions) 13, 11, 9, 7, 5, 3, Annual Sales Growth (%) (.5) (3.) 1, (5.5) Figure 5: Retail Investment Sales Volume ($, Millions) 1,4 1,2 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 216 Q2 216 Q3 216 Q4 216 Q1 217 Q2 217 Q3 217 Source: Real Capital Analytics, Q Gross Retail Sales Retail Sales Growth Source: Texas Comptroller of Public Accounts, Federal Reserve Bank of Dallas, Q Q3 217 CBRE Research 217 CBRE, Inc. 3

8 CONTACTS Robert C. Kramp Director, Research & Analysis E. Michelle Miller Research Operations Manager Analee Bivins Micheletti Senior Research Analyst Robert Basiliere Senior Research Analyst CBRE OFFICES CBRE Austin 1 Congress Ave., Suite 5 Austin, TX 7871 To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

9 Austin Retail, Q2 217 Strong fundamentals fuel growing development pipeline Occupancy 96.3% Under Construction 896,4 SF Avg. Asking Rate $21.94 PSF Net Absorption 132,36 SF *Arrows indicate trend from previous quarter. Figure 1: Net Absorption and Market Occupancy Net Absorption (SF,s) 4, 3,5 3, 2,5 2, 1,5 1, 5 Occupancy (%) (5) Q1 Q2 Q3 Q4 Total Annual Net Absorption Occupancy Rate Source: CBRE Research, Q STEADY DEMAND CONTINUES FROM BIG BOX EXPANSIONS Austin retail demand remained strong throughout the first half of 217, absorbing 372, sq. ft. Big box retailers including Austin Couch Potato, Petco, and Rooms to Go all occupied large blocks in Q2 217 contributing to positive net absorption in the Central, Northwest, and Far Northeast submarkets. As a result, occupancy increased 1 basis points quarter-over-quarter and sits well above the 1-year average of 94.4%. These healthy fundamentals have spurred more construction activity, which hasn t been this elevated since. The majority of recent development activity is strip centers and second phases of larger projects. The largest concentration of construction is in Round Rock with eight projects totaling 217, sq. ft. The largest projects are both mixed-use developments including Plaza Saltillo in East Downtown and Belterra Village in West Austin/Dripping Springs. Both developments are focusing heavily on entertainment and restaurant tenants. POPULATION GAINS TRANSLATE INTO GROWING RETAIL SALES Austin saw some of the fastest population gains in the nation from to 216 which has helped boost spending. Austin gross retail sales have steadily increased since 21, and, 216 sales growth increased by 5.6%, according to data released from the Texas Comptroller. Continued healthy consumer spending will further sustain Austin s stable retail demand. Q2 217 CBRE Research 217 CBRE, Inc. 1

10 Figure 2: Market Snapshot Market Number of Centers Net Rentable Area Vacancy (%) Asking Rate, NNN Avg. Annual ($/SF) Under Construction Delivered Construction Q2 217 Net Absorption Bastrop County 75 2,795, ,623 Caldwell County , CBD 64 1,846, (6,487) Cedar Park 153 7,145, ,2 (871) Central 186 6,672, ,812 East 9 3,237, , (6,684) Far Northeast 77 3,46, , 6,15 62,965 Far Northwest 83 3,199, ,494 Georgetown 146 5,182, ,5 45, 12,418 Hays County 195 6,964, ,8 37,785 North 157 5,77, (28,878) Northeast 61 2,244, , 19,415 Northwest 12 5,612, , 46,387 Round Rock 159 5,651, ,327 24,244 9,935 South 226 8,167, , 11,643 Southeast 54 1,953, ,75 (3,37) Southwest 184 7,974, ,877 1,21 (59,166) West Central 34 86, (2,994) Austin Total 2,81 79,314, ,4 139, ,36 Source: CBRE Research, Q Q2 217 CBRE Research 217 CBRE, Inc. 2

11 Figure 3: Asking Annual Rents, NNN Avg. ($) 25 Figure 4: Construction SF (s) Q4 Q2 216 Q4 216 Q2 217 Community Neighborhood Strip Power 211 Under Construction 216 Delivered Construction 217 YTD Source: CBRE Research, Q Source: CBRE Research, Q Figure 5: Retail Investment Sales Volume Figure 6: Population Growth and Purchasing Power ($, Millions) 1,4 HH Income ($) 7, Population (s) 2,2 1,2 1, ,5 65, 62,5 6, 57,5 2,1 2, 1,9 1,8 1,7 1,6 Median HH Income Source Moody s Analytics, Q Figure 7: Austin MSA Retail Sales Retail Sales ($,Millions) Annual Sales Growth (%) 13, , 9.5 9, 7. 7, 5, (.5) 3, (3.) 1, (5.5) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 216 Q2 216 Q3 216 Q4 216 Q1 217 Q , ,5 Source: Real Capital Analytics, Q Population (s) Gross Retail Sales Retail Sales Growth Source: Texas Comptroller of Public Accounts, Federal Reserve Bank of Dallas, Q Q2 217 CBRE Research 217 CBRE, Inc. 3

12 CONTACTS Robert C. Kramp Director, Research & Analysis E. Michelle Miller Research Operations Manager Robert Basiliere Senior Research Analyst Analee Bivins Micheletti Senior Research Analyst CBRE OFFICES CBRE Austin 1 Congress Ave., Suite 5 Austin, TX 7871 To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.