However, the flex/R&D market managed a slim positive absorption toward the end of the year, the first in 18 months, said the Grubb & Ellis research team.
David Sheldon, who started Atlantis Properties in September 2002, tells GlobeSt.com that he saw increased activity in the 1,000-sf to 10,000-sf category for the flex/R&D market in the last quarter. "It's been robust," he says. "We're seeing that it's a very active market."
Sheldon says Atlantis recorded 13 deals, the smallest totaling about 1,000 sf and the largest almost 7,500 sf in the north, south and southeast submarkets. Although rental rates weren't as high as they might have been one or two years ago, they "weren't where you need to go to get the larger deals done," he says.
The tenant mix has been an across-the-board gamut of large and small new companies and those with operations in Austin and those new to the city. A new company was Prairie Ridge, KS-based Sizewise Rentals, which took 2,700 sf at Southpoint Service Center at 3709 Promontory Point. Derek Lewis of Hill Partners represented Sizewise.
"The nice thing that we're seeing is that there are established companies that are, albeit in a modest way, strengthening their presence in the Austin market or they're coming into the Austin market," Sheldon says.
Grubb & Ellis said that despite the positive absorption at year end, flex/R&D space still accounted for half the year's negative absorption although it's 29% of the total industrial market. Total negative absorption was 1.2 million sf.
Industrial rents dropped 18.3% to $6.69 per sf. The gap between flex/R&D and warehouse/distribution space pretty much closed, according to Grubb & Ellis.
Speculative construction dwindled to 292,090 sf in 2002 as it came pretty much to a halt, the report said. Developers should concentrate on build-to-suit orders in 2003, the researchers concluded.
Tenants can find good deals in 2003 with building owners offering generous improvement allowances, which drop the effective rents, the report said.
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