Tesla, Samsung, Google, Apple, Amazon.
These are some of the big-name tech companies that have moved to the Austin area over the past few years. In fact, over 230 corporate headquarters from all sectors have relocated since 2020. Notwithstanding recent layoff announcements from prominent high-tech employers, Austin has rightly earned the nickname Boomtown.
Rapid levels of population growth puts strains on supply chains, distribution channels and infrastructure like health care. It’s not surprising, therefore, that the Austin area has witnessed a rapid response.
Austin today may represent a smaller commercial space market than Houston or Dallas-Fort Worth, but its growth prospects going forward are a big attraction for Titan Development, based in New Mexico.
Titan has initiated projects totalling $2.5 billion across the southwest U.S. since 1999, everything from senior living, multifamily projects and self-storage facilities. However, it is in Texas, and Austin in particular, where Titan has centred the majority of its commercial and industrial space development.
Titan partner Joe Iannacone told the Daily Commercial News Austin has a compelling workforce story for high-tech manufacturers considering a move to Texas.
“You have the high-tech manufacturing, an educated workforce and a lot of tech companies, along with everyone who gives Austin that vibe that attracts talent.”
Iannacone oversees Titan’s commercial development in Texas from his office in Austin. He speaks of the new 200-acre Hutto Mega TechCenter, located near Samsung’s new $17 billion plant north of the city, as an example of the commercial support systems that are growing alongside the latest manufacturing facilities.
“We’re getting lots of inquiries from vendors related to Samsung.”
Fifty miles away, south of Austin, Titan announced last month the groundbreaking of Building 1 at Lockhart 130 Industrial Park.
Located within 25 minutes of the Tesla Gigfactory and ABIA Airport, it’s the first of four buildings that will total nearly 650,000 square feet of industrial space spread over 45 acres. The state’s largest appliance distributor, Factory Builder Stores, will lease Building 1, illustrating the growing demand for logistical and supply chain support for the region’s surging population.
“The city of Lockhart, located in the burgeoning Austin-San Antonio corridor, has demonstrated particularly strong demand for warehouse and manufacturing space within Texas,” Iannacone said.
Increased commercial and industrial space is not the only reflection of fast growth in the Austin area. Health care infrastructure is expanding as well.
According to local media, one million square feet of additional purpose-built health care facilities are being planned, adding to the nine million square feet currently being used or leased by the sector. For-profit and non-profit clinics in the Austin area saw patient visits rise to 6.4 million, an increase of over 40 per cent from 2017 to 2022.
“What we’re seeing in Austin (medical space) is essentially following rooftops,” said Hunter Jones, senior vice-president at commercial real estate company Transwestern. “They realized that they need to kind of be closer and more convenient for the patients.”
Major retailers are expanding into Austin as well, notably Costco. The company had announced a five year timeline back in 2019 for opening a new store in Georgetown, just north of the city, but pushed that forward to June this year.
Concerns over higher interest rates and talk of economic recession are not holding Titan back from its development plans for Texas, says Iannacone.
“We are pressing forward. The demand out there from a tenant perspective is still very high,” he said. “Yes, the higher interest rates have made it a little bit more difficult to find financing as far as debt. Underwriting has to be a little bit sharper than it needed to be in the past because the banks are going to be very selective about what they are going to fund. From our perspective we are carrying on. We haven’t put anything on hold and we haven’t had any tenant back out.”
Industrial development growth in Texas appears to be largely at California’s expense, according to a 2023 Savills report. Volume at the Port of Houston, for example, grew by 15.1 per cent from 2021 to 2022, to become the fifth busiest container port in the U.S. by TEU (Twenty Foot Equivalent Volume). It remains number one for waterborne tonnage volume. This puts pressure for more inland distribution centers, driving increased development by Titan and other developers.
It may be the newer and smaller of the distribution hubs compared to Houston and DFW, but
Austin seems to be where tomorrow’s excitement lies.