Higher rents in store: Retail real estate development drops as Austin population soars

Austin keeps growing but the retail market doesn’t appear to be keeping pace. Less than 1 million square feet of new retail space was delivered in the Austin area in 2015 — a decline of 300,000 square feet from 2014.

The Weitzman Group released its annual retail overview report Tuesday and the market dynamics lead to one conclusion: retail space is going to keep getting more expensive.

Occupancy keeps inching upward and is now at 96 percent citywide, one of the tightest years on record.

“The 2015 construction remains notably low, especially for a market with such high occupancy,” the report states. The new deliveries are largely due to redevelopment, rather than ground-up retail projects.

The Oaks at Lakeway, a 175,000-square-foot neighborhood center on the west side anchored by an HEB Grocery Co. store, was an exception. The upscale market off RR 620 in Lakeway opened last fall with many smaller tenants currently moving as the project wraps up this year.

On the south side, Lamar Union on South Lamar Union also opened last year and continues to deliver final phases. North of the river, Lamar Central at 3800 N. Lamar Blvd. is an office and retail project, which is currently moving in new tenants — including Kendra Scott jewelry and Snooze, a breakfast eatery.

Next on tap in North Austin is Rock Rose at The Domain — about 100,000 square feet of new retail with strong local flavor. I wrote about The Dogwood opening there soon, along with many other familiar brands. A 123,000-square-foot Nordstrom department store is also under construction nearby.

Here’s a look at other highlights of the report:

Saks Fifth Avenue Off 5th will open this spring in 50,000 square feet at Gateway Shopping Center, 9607 Research Blvd.

Crystal Falls Town Center, a 94,000-square-foot Randalls grocery-anchored shopping center, is under construction in Leander. It’s scheduled to open in fall 2016.

Belterra Village, a retail project on 90 acres near U.S. 290 and Nutty Brown Road on the way to Dripping Springs, is slated to begin delivering retail this year. It could encompass nearly 300,000 square feet of commercial space.

Phase III of Round Rock Crossing at I-35 and State Highway 45 in Round Rock is scheduled to start this year, adding 90,000 square feet.

The highest lease rates currently are for tenants in new construction developments, commanding rents of between $35 and $40 per square foot.

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