AUSTIN – (Realty News Report) – Austin’s shopping center and retail leasing activity declined 63 percent in the fourth quarter, as the retail sector was pounded by the coronavirus pandemic.
Leasing activity—which is comprised of both new leases and renewals—included 304,000 SF of signed deals, down 63 percent from the fourth quarter of 2019, according to the NAI Partners real estate firm.
The retail occupancy was down in Austin, NAI Partners reported, and rents were softer.
In its annual report on Austin retail space, the Weitzman real estate organization, said Austin’s overall retail fundamentals remained strong despite the dip at year-end.
In Austin, said the Weitzman report, the retail market ended 2020 with an occupancy rate of 95 percent, “a healthy percentage even though the year-end number represents the market’s lowest occupancy rate since 2013.”
Despite the increase in overall vacancy caused largely by the COVID-19 pandemic’s effect on retail traffic, Austin remains the strongest major-metro retail market in Texas in terms of occupancy, Weitzman said.
“For nearly 20 years, the market has maintained enviable occupancy above 90 percent, with the low point being a rate of 90.5 percent in 2006. The year-end 2020 rate represents a decline from the 96 percent occupancy rate posted at year-end 2019.”
The decline resulted from increased small-concept vacancies and closings from national concepts such as Stein Mart, 24 Hour Fitness, Pier 1 and Tuesday Morning. The limited number of store closings combined with continued economic stability at a time of limited new space deliveries meant that Austin ended 2020 in far better shape occupancy-wise than predicted during the onset of the pandemic in March.
In addition, even as some restaurants closed, many were being backfilled with new tenancy by concepts with programs to generate business through take-out, delivery and limited-capacity, in-person dining.
Demand exists for larger vacancies as well. For example, Skechers backfilled a former Pier 1 near Lakeline Mall and a Cowboys Fit fitness facility opened in 57,000 SF in Pflugerville.
New restaurants also leased in a number of second-generation spaces include Easy Tiger Bake Shop and Beer Garden, which backfilled the former Old Red’s Porch on South Lamar; Another Broken Egg in the former Mangia Pizza at 8012 Mesa Drive; Qi Austin, which opened downtown in street-level retail on W. 6th Street; Buddy’s Burger , a new fast-casual concept that opened at 9001 Cameron Road and which already is seeking a second location, and Bishop Cidercade, which opened in the former Joe’s Crab Shack space on East Riverside.
The Weitzman report said Austin “benefits from key corporate moves. Tesla is now underway with a gigafactory just outside Austin in southeastern Travis County that is expected to open its first phase by mid-2021. Additionally, Oracle announced in late 2020 it would relocate its headquarters from California to Austin, and Apple is underway on its new $1 billion, 3-million-square-foot campus, which is expected to open in 2022.
“If the vaccines currently being distributed dramatically reduces infections and create a sense of safety for shopping, dining and entertainment, we expect to see a year of recovery in 2021 and a return to the pre-pandemic retail occupancy rates and overall economic health by 2022,” Weitzman said.
Feb 15, 2021 Realty News Report Copyright 2021
Photo: State capitol in Austin. Photo credit: Ralph Bivins, Realty News Report Copyright 2021
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