Report: Austin’s retail sector remains hottest in Texas


Highlights

As 2016 came to an end, retail occupancy in the Austin area sat at 96.2 percent.

No other Texas market has been able to maintain occupancy above 90 percent as consistently as Austin.

Finding space for all the retailers and restaurants itching to set up shop in Central Texas isn’t easy these days.

The region continues to lead the state – and most of the nation – when it comes to retail occupancy, according to new figures from Weitzman, a commercial real estate firm with offices across Texas.

As 2016 came to an end, retail occupancy in the Austin area was at 96.2 percent. No other Texas market has been able to maintain occupancy above 90 percent as consistently as Austin, Weitzman said – even during the recession that hit in the mid 2000s.

Those numbers have prompted developers to start work on a handful of new shopping centers throughout the region, including projects in Cedar Park and Dripping Springs, but overbuilding shouldn’t be a concern, according to Weitzman’s Britt Morrison, senior vice president in the firm’s Austin office.

“With occupancy at basically full, we’re seeing retail construction ramp up once again,” he said. “However, a combination of developer restraint and retailer contraction is keeping any possible overbuilding in check.”

The few remaining vacancies in existing centers throughout the region have, for the most part, been snapped up. Target is taking a 22,000-square-foot chunk of the former Dobie Mall near the University of Texas campus, for example. H&M grabbed 20,000 square feet at the Hill Country Galleria in Bee Cave, Saks Fifth Avenue Off 5th backfilled a 50,000-square-foot spot once occupied by Star Furniture in the Arboretum area, 99 Ranch Market will help boost occupancy at a once-struggling center on Airport Boulevard in North Austin and Asian grocer HMart will take over nearly 70,000 square feet of space near Lakeline Mall vacated by Bed Bath & Beyond and Sports Authority.

With high demand comes higher rents. For Class A spaces – the best on the market – small shops and restaurants can expect to pay as much as $40 per square foot or more, Weitzman’s research found. Class B spots are going for as much as $33 per square foot and Class C storefronts typically range from $20 to $24 per square foot, although a few properties are reportedly advertising rates in the high teens.

Rates in all three classes of retail space can vary for a number of reasons, such as location.

“There is some churn due to the combination of increased competition and higher rents, which require more traffic and business,” Morrison said. “We’re also seeing new anchor store growth on a level we haven’t seen recently. These include everything from Restoration Hardware’s upscale gallery concept at Domain Northside to HMart. Based on everything we’re seeing, we expect to see 2017 as a year with continuing strong occupancy and an uptick in development.”

Restaurants, in particular, are on track for a strong year, Morrison said.

“As we’ve seen for the past several years, the restaurant market is staying dynamic, specifically with the rapid expansion of Austin’s better-known restaurants and concepts,” Morrison said.

Local concepts Juiceland, Jack Allen’s Kitchen, Mama Fu’s and Flyrite are all adding locations this year, according to Weitzman.

This follows an active 2016 that saw Via 313, P. Terry’s, Grand Lux Café, Chi’lantro, Pollo Tropical, Modern Market, Boiler Nine, MAD Greens and Second Bar + Kitchen either enter the Austin market or grow their presence here.



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