Why AP’s Bullish on Austin & Industrial

By Will Pender, President of Adolfson & Peterson Construction Gulf States

As Central Texas’ population grows, we are seeing a correlation with the size of construction projects increasing, as well. Austin and its surrounding areas thrive with a growing influx of people and businesses requiring bigger (and more) buildings as well as additional infrastructure.

Depending on whom you ask, about 100 people move to Austin each day. It’s a flourishing region with ample job opportunities and big projects for employers ranging from automobile and semiconductor manufacturers to venture capital firms. Between 2010 and 2020, the state’s population grew by 15.9% while the Austin Metropolitan Statistical Area (MSA) saw more than double that growth at 33%, according to the Austin Chamber of Commerce.

The Austin MSA continues to experience tremendous growth in the industrial and multifamily sectors, which are prime focuses for Adolfson & Peterson Construction’s Central Texas region. With ample land and a central location, Austin continues to be an in-demand region for industrial development. Huge recent investments from companies like Tesla and Samsung have intensified this need even further.

Additionally, infrastructure is needed to support Austin’s unprecedented growth, which includes schools, higher education and healthcare along with state, city and county facilities.

With that knowledge, it’s no surprise Austin was ranked the second-fastest growing economy in the U.S. in 2022, trailing only San Francisco, according to the Kenan Institute of Private Enterprise at the University of North Carolina Kenan-Flagler Business School’s recent study, The American Growth Project. The study revealed Austin’s MSA showed a 4.3% GDP (gross domestic product) growth in 2022, behind San Francisco which has four times the population of Austin at 9.7 million versus Austin’s 2.3 million.

With information like this and a plethora of development projects slated for the greater Austin region, AP saw an opportunity to grow our presence in the area. We have made great strides and grown our presence in the market with the strategic additions of Eric Churchill as Director of Business Development for Central Texas, and Tommy Meserole as Director of Preconstruction for Central Texas.

AP has already completed St. David’s Medical Hospital in Austin along with work for the University of Texas at Austin. We are currently constructing 465,786 square feet of industrial space across five buildings for IDI Logistics in Round Rock, a northern Austin suburb. The Class A speculative Sunrise Commerce Center, on 37 acres, is less than a mile from Interstate 35, offering great ingress and egress.

Slated for construction in two phases, AP is constructing the buildings and performing tenant finishes. Phase 1 is slated for completion in Fall 2023. The first phase features three buildings with various common elements, including rear load capabilities, LED lighting, ESFR fire sprinklers and build-to-suit office space. The 175,170-square-foot Building A features 36-foot clear heights while the 59,274-square-foot Building B and 76,245-square-foot Building C both have 32-foot clear heights.

The project includes tilt-wall, shell buildings with special DUCTILCRETE® Slabs with HEIDEBED® technology, providing differentiated slab systems. This technology enables warehouses, distribution centers, manufacturing facilities, and data centers greater floor space flexibility while lowering maintenance costs. AP’s site work includes site paving, retaining walls, and landscaping.

Shallow-bay industrial properties (generally defined as warehouse distribution properties between 50,000 square feet and 200,000) represent one of Austin’s tightest segments on the market, according to data from commercial real estate firm Partners (formerly known as NAI Partners). With a sub-10% availability rate, spaces are on the market for less than one month on average before they get leased, which is the fastest lease-up time recorded over the past 10 years, according to Partners. CBRE’s Q4, 2022 industrial stats show Round Rock’s vacancy rate at just 4.7%.

That’s good news for Sunrise Commerce Center with all three building sizes right in that sweet spot. And, market indicators continue to shine on Austin-area industrial projects. CBRE data showed 2022 as a record year for Austin industrial absorption with 4.2 million square feet coupled with industrial asking rents rising 4.4% year-over-year to a market average there of $11.56 triple net. The Round Rock submarket is at a substantial $14.60 triple net per square foot.

Austin’s diversified economy and growing population are prime indicators that opportunities abound. With this, it’s safe to say we are bullish on Central Texas and the industrial market, in particular, and expect great things from the region.

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