Austin Retail in a Time of Pandemic: Q&A with Weitzman’s Matt Epple

Weitzman’s analysis of the Austin retail market shows the COVID-19 pandemic’s impact on occupancy. Matt Epple, EVP and director of brokerage for Weitzman’s Austin office, discussed the current market and forecast for 2020.

Q. What’s the current state of the market?

A: We’re certainly not where we expected as 2020 began, when the market was reporting near-record occupancy of 96% that ranked Austin as the state’s tightest major retail market. With the pandemic, Austin’s economy, and its retailers and restaurants, are facing an unprecedented challenge, the depths and duration of which are still being determined. But the strength at the beginning of 2020 means that, unlike previous down cycles, the market entered this downturn with a strong balance of supply and demand.

Q: With the pandemic, where does occupancy stand at mid-year 2020?

A: Due largely to closures from national retailers like Pier 1, Tuesday Morning and 24 Hour Fitness, Austin reported a one-half-percent drop in occupancy at mid-year. The decline is being kept in check by assistance for retailers from various sources. As an example, restaurants have been one of the hardest hit categories, but the combination of PPP loans, lease workouts/rent deferrals from landlords and initiatives such as digital marketing, curbside, takeout, delivery and meal kits lessens the impact. Also, for the first time, the state is allowing restaurants to offer alcohol to go.

Q: Strong retail markets often lead to overbuilding. Is that the case in Austin?

A: Not at all. Austin hasn’t seen annual construction reach the one-million-square-foot threshold since 2016, which is extremely conservative for a market where retail is essentially full.

For 2020, Weitzman projects Austin is on track to add approximately 404,000 square feet of space in new and expanded retail projects. The most notable space is for a new 30,000-square-foot Whole Foods and a 26,000-square-foot small-format Target store in East Austin, and a new South Austin H-E-B grocery store with approximately 130,000 square feet. This lack of new space drives demand to existing retail, which is why we continue to see fairly steady leasing activity, given the severity of the pandemic.

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