‘Forecast Is Looking Positive’: Austin’s Industrial Sector Is Signaling Growth, Opportunity For Investors

Austin’s industrial real estate sector has blossomed into one of the “hottest emerging markets” in the U.S., with demand driven by a considerable influx of new residents, major corporate relocations and the availability of good sites.  

Tesla, Amazon, Samsung and other well-known corporations have established a major presence in Austin and surrounding areas. Tesla’s Gigafactory, a $10B electric vehicle manufacturing plant that employs nearly 20,000 people, is the second-largest factory in the world, and has spurred other industrial manufacturers and suppliers to flock to the area. 

Amazon has established several fulfillment centers in the area as well as introduced plans for more locations to keep pace with demand. In late 2021, Samsung also announced plans to build a new $17B chip manufacturing plant just outside of the city.

But despite all of this market activity, Austin’s industrial sector is not immune to national market challenges. 

“The market has definitely slowed down due to economic influences like rising interest rates,” said Chris Copeland, vice president of industrial at Catamount Constructors, a 100% employee-owned general contracting and construction management firm with offices in Texas, Colorado, Florida and Georgia. “That being said, total absorption is still positive and people keep moving into the area, signaling promising growth and opportunities for the sector.”

Copeland will be speaking at Bisnow’s Austin Industrial Outlook conference on Feb. 28, alongside other market leaders and CRE professionals. Register here. 

To learn more about Austin’s industrial market, Bisnow spoke with Copeland and Rick Rodman, vice president of business development/national industrial, about what is impacting market activity and where the future of the sector lies.

Bisnow: How has today’s economy impacted the growth of the industrial market in Austin?

Copeland: High interest rates have prevented some activity, slowing everything down. But industrial is still moving to Austin more so than other parts of the country. Last year, industrial net absorption reached almost 5M SF in Austin and its surrounding areas, making it the third year in a row of positive industrial absorption. Deliveries totaled almost 10M SF last year, with more than 16M SF currently under construction. 

Rodman: We are seeing more activity in Austin than we have in other cities. Austin has slowed down over the past year or so, but it's still active comparatively. The Texas border towns, such as El Paso and Laredo, are some of the best-performing industrial markets in the state as well as the entire country. 

Bisnow: What is driving demand and which areas of the city are most popular with industrial developers?

Copeland: North Austin along Highway 130 has been a popular submarket. That whole corridor has been very active, especially around where Tesla’s manufacturing facilities are located. You’re seeing these types of large-scale industrial projects around the perimeters of the city instead of in closer, tighter areas. 

The Highway 130 corridor has been the majority of our work, including Pflugerville, Round Rock and South Austin.

Rodman: Part of what drives demand is the fact that people are moving into the city at high rates. Austin has become the 10th-largest city in the country and industrial companies want to be here. This growth naturally creates more job opportunities and more online demand, which leads to additional development demands.

A lot of our clients are outside entities coming into Austin to develop because it’s still growing and there’s an abundance of demand. They’re putting deals together here where they may not be doing so in other parts of the country.

Bisnow: How does Catamount help its industrial clients? 

Copeland: We do anything and everything. Flexibility is important to us, so we try to cater to all of our clients' needs — whatever they need to make the process easier. Whether they want to follow the traditional design-bid-build or lean into full design-build, our approach is to be flexible and client-service oriented. 

Rodman: We routinely provide constructability review and cost study, on-site analysis, programming, site design, civil design as well as the whole vertical construction component. The earlier we are asked to join the development process the better, as we are able to better influence design and cost savings. 

Bisnow: What are some of the industrial projects that Catamount is working on in Austin?

Copeland: We have 12 buildings underway on four different development sites in and around Austin, along the Highway 130 corridor predominantly. Our teams are starting on-site work at a four-building development totaling 440K SF, just south of the Austin-Bergstrom Airport. We are also well underway on a three-building industrial park in Pflugerville, with the three buildings offering 485K SF. We’re also excited to deliver a two-building spec warehouse property in Del Valle, just east of Downtown Austin, which will provide a total of 362K SF.

We also have two more developments in the pre-construction phase, totaling eight buildings. We're not seeing mega square footage projects going on in Austin, and it’s not surprising based on the slowdown of large tenant leases. Most of them are in the mid-100K SF to high-200K SF. 

Rodman: The developments we’re seeing in Austin right now are mostly multibuilding projects. Most of what we’re doing right now is initially speculative, which is signaling that this market is doing well. 

Bisnow: What does the future of the Austin industrial market look like? 

Copeland: Even though there might be some leveling off, Austin is holding its own, especially compared to other areas in Texas like Dallas and Houston. The border towns have been seeing huge demand for speculative work and we’re seeing a similar trend picking up in Austin, too, which is a great sign for the market doing well.

Rodman: The three to five-year forecast still looks positive. While 2024 may not be a showstopper, it’s set to maintain the positive trajectory we’re currently experiencing. Austin will definitely stay pretty strong compared to other parts of the country.

Catamount is all about adapting to these shifts in the market, whether it be a client in need of speculative building or a build-to-suit facility. We’re ready to tackle not only Austin’s evolving demands but national demands as well. Our industrial construction expertise allows us to be competitive all over the United States.

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].