The market ended 2001 with a 94.7% occupancy rate. While off from the 10-year high of 95.7% in 2000, it shows the resiliency of the retail market in the face of more than 23,000 layoffs from Jan., 1, 2001 through Jan. 31, 2002.
"We're still showing a market that's nearly 95% leased," Eric DeJernett, a retail specialist at NAI/CIP, tells GlobeSt.com. "There may be a little bit of transitioning of some weaker tenants that hung around through Christmas, but there seem to be people there to take the space." He points out that even with the layoffs, the Austin area still had positive job growth of 2.2% in 2001. That, however, was down from a three-year average of 5.9%.
The report shows higher rents than at the end of 2000. The average monthly base rent for centers 50,000 sf to 100,000 sf was $1.39 per sf at the end of 2001, up from $1.36 per sf the year before. For centers bigger than 100,000 sf, the average rent was $1.62 per sf, five cents higher.
However, DeJernett says, tenants are looking for negotiable rents and building owners are somewhat accommodating to get deals done. "But when you're 94 to 95% leased, it's sure not negotiable like in the office market," he says.
Big box retailers and grocery stores continue to follow residential development in the area, DeJernett says. Those retailers, in turn, create additional space and traffic for smaller retailers. "If H-E-B's going to do well, there's going to be enough spin off business for other retailers and that's true of Home Depot or Lowe's or Wal-Mart," he says.
Retailers are running to find good places to develop. "It's not like you can build one on every corner like Dallas or Houston on a big grid system," DeJernett says.
That may be why the hot retail corridor is Interstate 35. The NAI/CIP report lists projects completed last year or under way from H-E-B, Home Depot, Lowe's, Wal-Mart and Target along I-35.
"Five years ago I would not have thought this would have happened," DeJernett says of the I-35 activity. Like putting restaurants and bars in an area that's zoned for them, I-35 serves that function for big retailers. "You can just do it," he says. "I-35 is a commercial corridor, it's got the traffic the retailers are looking for. You've got to get a good cross street like Parmer or 1325 or that new loop at State Road 45.
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