In the world of commercial real estate, location can directly impact property value and desirability. When a major corporation like Samsung decides to establish a presence in a particular area, it can significantly impact the local commercial real estate market.
Such is the case with the Samsung semiconductor manufacturing facility in Taylor, Texas. In this article, we’ll explore how this tech giant’s presence is expected to impact the commercial real estate market in Williamson County. Read on to learn the pros and cons for commercial property owners and buyers.
Pros
- Increased Demand for Commercial Space
The Samsung semiconductor facility is a massive operation, and is expected to generate many jobs. This influx of workers, along with the need for support services and suppliers, has already driven up the demand for commercial properties in the vicinity. This includes office spaces for administrative staff, warehouses for logistics, and retail spaces as amenities serving the workforce.
The demand for commercial space creates many opportunities and challenges in our industry, as each supplier has a specific requirement for their respective facility in order to do business. Here at Don Quick & Associates, we are already working with developers and property owners who are ahead of the curve, and developing product that complements this classification of user appropriately.
- Rising Property Values
As demand for commercial real estate increases, property values in the area are rising as well. This is great news for property owners who have invested in the area before the Samsung announcement.
Their properties may appreciate significantly, allowing them to capitalize on their investments by selling at a higher price or by charging higher lease rates. However, the current interest rates have made it a challenge for non-cash buyers seeking a way into the area.
- Infrastructure Investment
To accommodate the Samsung facility, the surrounding cities in Williamson County have their work cut out for them in the way of investing in additional infrastructure improvements, such as road expansions, utility upgrades, and public transportation enhancements. - Diverse Tenant Base
Samsung’s presence is likely to attract various suppliers and service providers to the region, creating a diverse tenant base for commercial property owners. This diversity can help mitigate the risk of relying on a single industry or tenant, making the overall commercial real estate market more stable.
- Job Growth and Economic Stimulus
Samsung’s facility will not only create jobs directly related to semiconductor manufacturing but also stimulate the local Williamson County economy. This economic growth can lead to increased consumer spending, benefiting retail and hospitality sectors. This, in turn, will only further benefit commercial property owners in those categories.
Cons
- Competition for Commercial Space
While increased demand is generally a positive factor, it can also create intense competition among businesses and investors looking for suitable commercial properties.
This may drive up prices and make it challenging for some buyers to secure properties within their budgets. The current interest rates are an additional variable complicating the prospect of property sales during a time of such high demand.
- Traffic Congestion
With the influx of workers and suppliers associated with the Samsung facility, the area’s traffic congestion is likely to worsen. Businesses and property owners may face challenges in ensuring easy access to their properties, potentially affecting their desirability.
- Infrastructure Strain
While infrastructure improvements are an advantage, they can also cause short-term disruptions. Construction projects may lead to road closures or detours, affecting access to businesses.
Additionally, the strain on existing infrastructure can result in longer wait times for essential services like water and electricity.
- Increased Operating Costs
As property values rise, property taxes and operating costs follow suit. When commercial property owners pay more in taxes and maintenance expenses, this places a burden on tenants who pay operating expenses on top of their base rents.
To go further, Residential and Commercial property taxes have been immense topics of discussion over the last ten years in the Austin MSA. For some commercial property owners, property taxes have doubled in the last two years. This places a heavy burden on the owner, the tenants (when taxes are passed through as additional rent) and even the consumer when tenants have to raise prices to satisfy their overhead costs.
Additionally, the high interest rates have contributed to rents going up even more. At Don Quick & Associates, we don’t believe this is sustainable in the long run. In fact, we may see landlords starting to incentivize tenants in various ways for retention.
- Risk of Overdevelopment
Rapid growth driven by a major corporation like Samsung can sometimes lead to overdevelopment. If not managed carefully, this can saturate the market, potentially delivering an oversupply that drives down rental rates and property values.
Final Thoughts
The arrival of Samsung’s semiconductor facility in Williamson County brings both pros and cons for commercial property owners and buyers. While the increased demand for commercial space and rising property values can be enticing prospects, there are some challenges. These include factors like increased competition, traffic congestion, and higher operating costs.
Ultimately, the impact on the local commercial real estate market will depend on how well our community and local authorities manage and balance these factors.
For commercial property owners and buyers, it’s essential to conduct thorough due diligence and stay informed about local developments. At Don Quick & Associates, we can help you understand the intricacies of the local commercial real estate market.
In keeping informed, you can maximize the opportunities presented by the presence of a tech giant like Samsung in Williamson County.
