PS Business Parks Grabs 700,000-SF Flex Portfolio in Austin
- Apr 23, 2010
April 23, 2010
By Barbra Murray, Contributing Editor
PS Business Parks has just doubled its presence in the Austin industrial market in one fell swoop. The Glendale, Calif.-based REIT plunked down $42.9 million in cash for the acquisition of a portfolio of flex business parks totaling 704,000 square feet.
The group of properties includes three multi-structure business parks and a single building at a complex where PSB had already owned industrial space. The portfolio, which encompasses 13 single-story buildings, is 88.1 percent leased to a long list of tenants. With the average vacancy rate for R&D/Flex properties in Austin standing at 19.3 percent, according to a first-quarter 2010 report by real estate services firm Grubb & Ellis Inc., PSB’s newly acquired portfolio is ahead of the curve, which is no small accomplishment given the current state of the city’s industrial market.
“The Austin market is still trying to stabilize; it’s still in recovery mode,” Chris Gamel, Vice President with Grubb & Ellis, told CPE. “Since the market is not a big distribution center, most of the demand is coming internally through retail suppliers, and their business is off. And when the downturn hit, a lot of new product was online so basically, there’s been excess supply.”
It’s the same story being heard across the country; with an overabundance of space and the recession-induced downward spiral of industries that utilize industrial facilities, absorption is in the dumps. But that’s not to say that leasing deals aren’t being made; after all, it’s a tenants’ market, Gamel said: “Tenants are shopping around and they’re looking to beat up landlords, so there’s a lot of competition out there.”
With the closing of PSB’s flex portfolio acquisition, the REIT has increased its industrial market presence in Austin from approximately 787,000 square feet to 1.5 million square feet. The purchase dovetails with PSB’s current strategy of focusing on its core markets — markets that, as described in its annual report filed with the Securities and Exchange Commission, “with some combination of above average population growth, education levels and personal income will produce better overall economic returns.” Of the eight states in which PSB owns properties, Texas ranks third in terms of the company’s total square footage.
If PSB is looking to snap up more properties in Austin, it will have more than a little competition. “Everybody’s looking for a deal,” Gamel said. “If a property is in trouble, there’s a lot of money on the sidelines looking for a deal.”