Texans by nature have often portrayed a “go big or go home” attitude that we apply to essentially everything we do – and that approach certainly applies in the world of commercial real estate. As it turns out everything is in fact bigger in Texas and as major companies turn their eyes towards growing markets within the state, Austin has garnered a lot of attention – and rightly so.
The Austin market remains resilient and continues to grow against ongoing supply chain difficulties and soaring land prices. new best practices are being implemented to help offset current challenges as the market continues to change.
As you plan your next industrial development in Austin, here are some key insights and best practice to keep you informed.
Written By: Paul Wagner, Vice President in ARCO/Murray’s Austin Office
Insight #1: Timing Is Everything
Within Austin specifically, the general entitlement process and getting through site plan approval can take significantly longer than other Texas markets. Although Austin has been working to make things more efficient, a real delay exists in moving through the site plan approval and permitting process which on average is taking 8 to 12 months. The truth is every project site offers a unique set of requirements some adding additional steps to the overall approval timeline. We’ve seen more complex projects with heavy off-site infrastructure improvements take upwards of 18-24 months. That’s an extremely broad timeline range with a lot of variables at play. While there isn’t an easy button when it comes to obtaining a permit, you can increase efficiency via a more streamlined design and construction process.
Insight #2: The Further Out You Go, The More You Need To Know
As the Austin market continues to expand, growth is happening in some areas more than others. The 35 corridor between Austin and San Antonio is seeing a lot of development, particularly around Buda, Kyle, and San Marcos. To the North East, the 130 connection has opened up areas such as Taylor, Hutto, Georgetown, and Pflugerville.
If you end up purchasing land in one of these surrounding areas and you’ve ensured the zoning is suitable for your project (or you understand your path to re-zoning approval), do you know what are you getting into in terms of site restrictions? Georgetown for example has a strict development code with façade requirements that are very difficult to implement on industrial product. San Marcos has some unique parking location requirements & nuanced setback requirements in a few of their more industrial zoning classifications.
As the Austin industrial market moves further out, many of these regions don’t have the road and/or utility infrastructure in place. Getting water and sewer to these areas can be difficult and expensive. Understanding the critical path schedule due diligence items – i.e. Traffic Impact Analysis (TIA) scoping and Service Extension Request (SER) – is important early on to understand the potential road and utility infrastructure components to your development in Austin or the Austin ETJ. The more information you have up front, the better you can plan for your project successfully.
Insight #3: Industrial Development Is Diverse in Central Texas
Austin is an extremely competitive market for land. It’s not just Industrial that’s battling for dirt, but all aspects of development from single family homes to class A office buildings and mixed-use developments. However, the Austin market continues to grow, and it’s anticipated that in 10 years’ time it’ll be closer to the population density of cities like Dallas and Houston.
As mentioned previously, Austin is an exceedingly attractive market for multiple reasons. Texas’ pro-business attitude coupled with Austin’s high lifestyle quality have been a major source of Attraction for major tech companies in the west such as Meta, Google, Tesla, and Amazon.
So, what type of Industrial is moving in? What we’re seeing is an increase in technical and/or manufacturing facilities (think Samsung’s new $17M Semiconductor facility in Taylor), and of course, distribution facilities to meet increased population demand. We are also seeing many smaller industrial buildings suited for smaller tenant spaces – both grade level and dock high product.
Austin is also extremely underserved from a rail connectivity standpoint but that’s beginning to change. As a more viable and often cost-efficient solution to materials distribution, an increase in rail serve facilities helps increase access to source materials and reduces the number of trucks on Texas roads.
Insight #4: Supply Chain Issues May Continue, But They Can Be Mitigated
It seems that just about everything has been impacted by the supply chain challenges in the past year and construction materials are certainly not exempt. From roofing materials, joists/decking, and rebar to fixtures and finishes, it’s helpful to partner with someone who can lock in pricing earlier in the process and ensure delivery dates. Despite supply chain restrictions and slowdowns, partnering with the right team helps you prepare in advance and develop your proforma accordingly.
When pursuing the traditional method of construction procurement – ie. waiting for a full set of drawings before obtaining final contractor pricing – you’re delaying material procurement. Therefore, exposing the project to an additional 2 to 4 months of commodity inflation & schedule risk. Creating a scope of work and schematic design set with sufficient detail allows for full material procurement and pricing risk transfer from the owner to the design-builder. This eliminates the need to wait for full construction drawings to start the shop drawings required to deliver the key building components to the site. Streamlining the design, pricing, & construction process is more critical than ever in today’s environment.
Where Do We Go From Here?
As national design-builders, ARCO-Murray has made it a point to learn the markets that we perform services in extremely well. We’ve completed projects within Austin and San Antonio for 25+ years and recently opened an Austin office. Currently, we have active projects in many of the major sub-markets within the Central Texas region.
Our overall advice? Find partners who can perform the proper upfront due diligence and have in-house resources to execute on everything from site selection and design to construction and occupancy. You’ll want a single point of contact who can streamline the entire process and rally around the mantra ‘go big or go home.’
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If you have a question on the Austin Industrial Market or would like to discuss an upcoming opportunity, contact us today:
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