Texas Industrial Is On The Rise: How To Meet Evolving Client Demands

While industrial demand has softened somewhat in the last few years in certain U.S. markets, in Austin, Texas, industrial real estate is booming.

Austin’s industrial market ended 2022 with its highest net absorption rate on record. Coupled with low vacancy rates and consistent demand, Austin’s industrial market headed into this year with nearly 14.5M SF of construction scheduled for delivery. 

“We’ve seen significant growth along the I-35 corridor, and even towards the I-10 corridor headed to Houston,” Catamount Constructors Vice President of Industrial Brad James said. “In the near future, we’re going to see growth among the major cities in Texas because of distribution needs.”

James will be speaking at Bisnow’s Austin Industrial Update Conference on March 1. Register here.

Bisnow spoke with leadership from Catamount Constructors — James and fellow Vice President of Industrial Stephanie Martinez — to see how the employee-owned, nationwide general contracting and construction management firm is seizing opportunities in this fast-growing and evolving market as well as how they are meeting clients' needs.

Bisnow: How has Catamount Constructors been able to capitalize on the growing Austin and San Antonio industrial sector?

James: We're a nationwide company, but when it comes to San Antonio and Austin, there’s a small town feel as far as general contractors go, so it's difficult to break into that market. With that being said, we're based in San Antonio. We have valuable members of our team that have extensive experience in this area. With our nationwide experience and strong relationships with the local subcontractor base, we're intentional about serving the needs of our clients throughout the area.

Martinez: Catamount has constructed over 3.5M SF of industrial space in the Austin and San Antonio market in the last few years. We currently have 1M SF of ongoing or upcoming projects as well. Long-term partnerships with developers and end users, coupled with successful projects nationwide, have given us the opportunity to be a part of the growth we are experiencing in Austin and San Antonio. 

Bisnow: How have current economic conditions and market challenges impacted client relations? 

James: Through market challenges, there are two things that hold true: Builders still need to build and developers still need to develop. The need for working together is as important now as ever. We’re having to be as transparent as possible when it comes to cost and material availability. We haven't seen drastic declines in pricing just yet. However, if interest rates stay high, inflation and material cost will drop. This process is slower in our industry. Luckily, we maintain strong client relationships and open communication, so we’re still seeing steady growth.

Martinez: Our clients rely on us to communicate, manage risk and quickly produce solutions. Responsiveness and thinking creatively has been key to growing existing and new client relationships when dealing with prior and current economic conditions. We actively support our clients in resolving market challenges by budgeting projects in multiple phases or as needed to ensure we are providing the client the best value they need to secure an opportunity they may be pursuing.

Bisnow: How has Catamount Constructors pivoted its strategy to adjust to clients’ evolving needs?

Martinez: At Catamount, we have always been solution- and partner-oriented. This means staying in constant communication with developers and owners, listening to their needs and being responsive. Going above and beyond for clients has always been a part of how we do business and our culture. We listen to their needs and pivot our strategy accordingly. 

A recent example of a strategy pivot was for an online retailer we have partnered with for many years. In a matter of four to six weeks, we created a special operations group in San Antonio that was dedicated to the national online retailer’s pipeline when it shifted its focus to electric vehicle build-outs, renovations and retrofits of their existing facilities. Not only has this pivot allowed us to better serve an existing client and their needs, it has also created opportunities with other end users who have similar project types in their pipeline. Adjusting to a client's needs is something that we have always done swiftly and seamlessly.

James: Our strategy is listening to client needs and asking the right questions. I'm working next door to a project that we are not the general contractor of, but it's a developer that I'm working with in another state. If they run into any issues, I'll reach out to them and ask what I can do to help them out even though it's not my project. That's the same question I ask every developer: ‘How can we help?’

Bisnow: What trends do you see shaping the industrial sector, not only in Austin and San Antonio but nationally as well?

Martinez: Growth and expansion of seaports along the East Coast and land ports along the U.S. border are trends I see shaping the industry. The expansion of these ports allows for an increase in imports and exports, which in turn creates a high demand for industrial space to package, sort or distribute. It’s likely these markets will have a high tenant demand but low vacancy rates, which will increase the growth of our sector.

James: Industrial lease space availability is extremely low. Usually, when you see a slowdown in the economy, lease bases are abundant and buildings sit empty. Right now, there's very few empty buildings between Laredo and El Paso to San Antonio and Austin. There is a need for additional industrial warehouse space storage. This is a major trend I see moving forward in the next three to five years.

Bisnow: What predictions do you have for the industrial sector in 2023?

James: I predict continued, steady growth and, hopefully, a decline in material cost coupled with increased material availability. Cold storage, light manufacturing and distribution facilities will continue to be a focus. 

Martinez: In general, I’m predicting the cost of construction will come down some and, hopefully, stabilize based on recent trends and pricing. I am also forecasting continued growth in specific markets, less exposure to material escalation and improvements to long lead materials, including roofing and steel.

This article was produced in collaboration between Catamount Constructors and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].