by Ercel Brashear

Activity in the commercial market has continued on a torrid pace since my last report in mid-2005. Over the last 10 years, Georgetown has moved from an ‘inner-tube’ floating down the San Gabriel to a full-throttle cruiser out on the lake.

During the last 12 months, another 600,000 square feet of space has been added to the total non-institutional database bringing the commercial sector to just over 8 million square feet. When the institutional sector is added to the mix (schools, churches and government buildings), the entire database is now over 12.8 million square feet. That’s over 300 square feet of space for every man, woman and child living in Georgetown. That number is high, but partly it is the result of being the County seat. Every person moving into Williamson County increases the demand for services from the County which leads to a need for space inside Georgetown. The growth of County government, for example in the judicial sector, leads to increasing demands for legal space in and around the downtown courts complex.

As to the non-institutional portion of the database, Georgetown’s most active sector still remains in retail where the total square footage has grown from just over 2.2 million square feet in 2005 to over 2.6 million square feet in 2006. Additionally, in the banking category, the number of new banks entering the market seems to be accelerating. There are three new banks coming to West Georgetown Village, located at the intersection of Williams Drive and Shell Road. Those banks are Wachovia, World Savings and Hibernia (now Capitol One), while a new credit union is on the drawing boards for the Rivery. Clearly the financial institutions are bullish on the Georgetown market!

Whenever possible, Georgetown will need to aggressively promote local employment opportunities in order to generate the income needed to support the large surge of retail development that has taken place during the last five years. While the growth of new retail is always welcome, the addition of over 100,000 square feet occupied by the Tasus Corporation is extremely encouraging. Kudos to the folks involved in getting Tasus up and running.

Land prices are surging, but the buyers are generally users, not speculators. So far, the reported transactions have involved substantial amounts of buyer equity, which is reassuring in light of the rapid price increases.

Georgetown’s commercial property base keeps expanding!

At the beginning of 2005, the total square footage in this sector was just over 2.2 million square feet. 1.8 million square feet was classified as occupied (83%) with about 374,000 square feet (17%) listed as vacant. As of today, this sector contains just over 2.6 million square feet. 2.2 million square feet is classified as occupied (85%) with 381,000 square feet (15%) listed as vacant. In the last month, two large blocks of space, totaling about 86,000 square feet, have moved into the vacant classification with the closing of Albertson’s and Celebration.

The big story for this sector is the increase in occupied space during the last year. Between 2005 and mid-point of 2006, total occupied retail space increased by 410,000 square feet. Most of that increase come from the completion of tenant spaces at Wolf Ranch; namely Kohl’s, Target, Best Buy, Office Depot and numerous other Wolf Ranch tenants.

In the pipeline are several projects that will add roughly another 120,000 square feet to this sector. Those projects include the Monument Café remodeling of the old Draeger dealership and the Choi project for downtown, combined with the construction of Discount Tire and the City Lights Movie Theater in the Rivery. Finally, West Georgetown Village, under construction across from HEB on Williams Drive, will be adding new retail space. With the Choi, Draeger, and West Georgetown Village projects, the actual available retail space is not finalized. Of the total square footage being built, approximately 68,000 square feet will be classified as “occupied” the day construction is completed.

The interesting thing to me about the retail sector is the magnitude of the change in the past ten years. Since 1996, Georgetown’s population has doubled, while the total square footage of retail space increased by 200%. In 1996 Georgetown had 864,000 square feet of retail, roughly 42 square feet for every person in town at that time. Today, total retail space has swelled to just over 2.6 million square feet, roughly 53 square feet per person.

One of the areas offering a significant growth in available choices over the past ten years has been the restaurant category. In 1996, Georgetown had just over 91,000 square feet of total restaurant space. Today that number is just over 236,000 square feet, with over 193,000 square feet (89%) reported as occupied. Of the currently vacant space, only 24,700 square feet is on the ground ready for tenants, roughly 11 % of all space. Three major projects under construction comprise the balance of the square footage in the database. Those projects are the Village Inn restaurant, Panda Express, and the proposed Monument Café downtown. Compared to ten years ago, this sector has experienced nearly a 260 % increase in total square footage. Lets go eat!

Office Report

In 2005, Georgetown had just over 526,000 square feet of office space. As of the midpoint of 2006, this sector has increased to just over 661,000 square feet, an increase of 135,000 square feet. The bulk of that increase came from the completion of Jimmy Jacob’s office condominium project on Williams Drive, the addition of new units at Dawn Plaza, and the completion of the first phase of the Embree construction project on Williams. Of the total, about 590,000 square feet are occupied, with about 71,000 square feet vacant; a vacancy rate of 11%. This sector has had a net absorption of space in the last year of almost 143,000 square feet - much of that being owner-occupied - while total available square footage of office space has declined slightly.

Again, comparing the market in 1996 versus 2006, the total office square footage has increased from 351,000 to 661,000 square feet. On a per capita basis, the total office market has decreased from 16.7 square feet per person in 1996 to 15.7 in 2006. This sector still is not seeing any significant upward pressure on lease rates despite rising construction costs. The average lease rate tends to run from $12-$18/sf per year, with newer units commanding the highest prices.

Single Family Homes on the Rise

During 2005 there were 1074 single family building permits issued in the Georgetown market. The permits issued were fairly evenly split between the age-restricted category versus traditional category. The 2005 permit total is the highest number of single family permits issued in Georgetown in the last 10 years. Based upon permits issued to date for 2006, the pace of the single family market shows no signs of easing in the near term.

This year the NW sector will see the first phase of the revised Georgetown Village project coming on-line. Additionally, new subdivisions are coming on-line in the Williams Drive corridor; which when combined with Sun City’s steady performance, will result in continuing the NW corridor’s domination of the local market. The emerging market NW is SH 195 with at least 3 major residential land purchases completed in the last 12 months. Activity is now underway to develop two of the tracts. The southeast side of town should continue its steady growth pattern with arrival of the Pinnacle project on Maple Street. SW will see new activity as Reagan Blvd. is completed to SH 29 and the LCRA sewer plant comes on-line. There are even rumblings of the NE sector awaking with report of a 300+ acre tract on FM 971 being in negotiations for residential development.

All in all, the rise of rooftops around Georgetown appears to continue unabated; a very good sign for the commercial sector!