Austin, Texas, is punching above its weight class when it comes to retail construction as developers race to capitalize on the growing consumer demand in the area.
The Texas capital ranks 37th in the U.S. for square feet of retail inventory but ranks fourth in most space under construction and in square feet built over the past 12 months.
Some of the largest occupancies over the past year included warehouse clubs and grocery stores. Completions in recent months include a 160,000-square-foot Costco in Georgetown and a 106,000-square-foot H-E-B grocery store in southwest Austin.
Retailers have been motivated to construct new spaces to meet the high demand that has been fueled by steady in-migration and positive consumer sentiment. The trend of residents relocating to Austin’s suburbs plays a pivotal role, driven by growing job opportunities in manufacturing, healthcare and education, coupled with favorable cost-of-living considerations.
Retailers are moving in tandem, seizing the opportunity to provide the goods and services its local population needs. Manor, Georgetown and Kyle collectively account for over 1 million square feet under construction, representing 44% of the development pipeline.
Austin leads the country in the amount of retail space completed as a share of inventory over the past 12 months, at 1.8%. The next closest market, Miami, is at 1.2%. With 2.4 million square feet underway, the pipeline is 65% higher than its average between 2013 and 2022.
Although the current construction pipeline is booming, the pace of retail groundbreakings continues to decline. This quarter saw 125,000 square feet of construction starts, an 80% decline from the 657,000 square feet recorded in the fourth quarter of 2022. Restrictive lending standards, higher interest rates and increased construction costs continue to slow new project launches.
As the retail sector adapts to changing demographic and economic trends, sales remain robust, showcasing resilience amid heightened inflation and altered purchasing power.
This article originally appeared on CoStar Insight. It has been republished here with permission.