Prologis Inc. is planning to add 629,000 square feet of premier logistics offerings to the suburban Austin, Texas, market. As reported in the Austin Business Journal, Prologis has set its sights on developing a five-building industrial complex on 75 acres in Cedar Park, Texas.
The new development will take shape along Brushy Creek Road, roughly 20 miles south of downtown Austin. The site consists of a 68-acre parcel and a 7-acre piece of land that Prologis acquired from National Instruments Corp. in July 2022, according to Williamson County records. Construction is expected to begin in spring or early summer, with an expected delivery in 2024.
Prologis knows how to pinpoint gaps in supply in industrial markets. In the fourth quarter of 2022, Cedar Park, which has an inventory of just over 1 million square feet, recorded a total vacancy rate of only 2.1 percent, according to a report by Avison Young. Additionally, there was a mere 70,000 square feet of product under development at the close of 2022. Overall, metropolitan Austin’s industrial market continues to thrive, with vacancy near record lows and asking rents having skyrocketed 26.9 percent over the last five years.
There appears to be no end in sight to the robust demand for product in the Greater Austin area. “Leasing activity is expected to remain above historic averages bolstered by Austin’s sustained population growth and its ongoing transformation into a national semiconductor manufacturing hub,” according to the Avison Young report. Prologis has had a decades-long presence in the Austin market, and as noted on the company’s website, its portfolio in the area totaled more than 2.6 million square feet in 2021.
The calming of the industrial sector
According to a 2023 forecast by Prologis, the U.S. industrial market is in for a few changes after several years of high-level activity. The real estate company predicts that, due to the rapidly increasing cost of capital, warehouse development starts will go on a major downswing this year, dropping an estimated 60 percent despite ongoing demand and rising rents. Prologis, which holds the distinction of being a global leader in logistics real estate, continues to expand its portfolio; however, it is not turning a blind eye to change in the industrial sector.
“We lease a million square feet on a daily basis. Let’s get our heads around that, a million square feet on a daily basis,” Hamid Moghadam, chairman & CEO of Prologis Inc., said during the company’s fourth quarter 2022 earnings conference call on January 18. “I mean, that is 10 times the amount of space anybody else leases in any sector in real estate. So, by watching these customers and their behavior, obviously, we’ll figure out if some bad stuff is about to happen and won’t be waiting for the quarterly report to analyze that.”