Austin Office November Review: Upticks in Major Leases and Sales Activity Shine Hope Even as Vacancy Rates Climb
Opening Bell ??: Office Sector sees strongest quarter in five years nationally despite vacancy rates being at their highest in 45 years like Law Firm Pillsbury Winthop Shaw Pittman’s latest full floor lease at The Republic. Sales activity heats up with the City of Austin purchasing Barton Skyway One and Two for $108 million.
Market Snapshot ??: Austin comes in at #13 of major metros with 17.7 million SF of vacant office space, thanks in large part to recently delivered projects like Springdale Green (800,000 SF delivered in Q3 24 sitting vacant) facing occupancy challenges.
Dive Deeper ??: Continued RTO rates and solid overall economic growth are combating rising vacancy rates. Here in Austin, we saw a 3.6% job growth and stable unemployment rate below the national average. The Austin-Business Cycle Index grew an annualized 10.3% in September pointing to a strong continued recovery in the office sector.
It’s true that more office product is available than previous quarters (with more coming in the construction pipeline) but that’s not necessarily bad news. Office vacancy rates and available SF indicates plenty of opportunity for businesses and investors alike to work together for creative solutions. This is supported by the continued rise in market asking rent/SF coming in at $47.07 in November, a 1.6% increase from the previous month.
Companies continue to commit to the Austin market, supported most heavily by PayPal’s 91,000 SF expansion in The Domain. Look for this trend to continue in to 2025 as key economic indicators stabilize and businesses get a better grasp on how much space they need to efficiency operate in today’s world.
Pro Insight ???? : We have more best-in-class office space available than ever before, creating a very tenant friendly market which should drive continued growth to the overall Austin economy. A HQ relocation from Silicon Valley to Austin typically saving companies 15-20% in wages alone, it’s not surprising Austin continues to lead the nation as the top HQ relocation destination. That coupled with the fact that 55 of the Fortune 500 companies are HQ’ed in Texas, look to see more companies setting up shop to cut costs while strategically positioning themselves closer to investors. Bloom Nutrition’s HQ move to be closer to it’s lead investor Nutrabolt while taking advantage of their already established distribution network is a great example of strategic relocation.
Final Buzzer ??: November’s activity strongly supports the continued recovery of a sector struggling compared to other CRE asset types. Interestingly suburban markets are outperforming CBDs across the nation, reflecting a shift in workplace priorities in a post-pandemic world as employers entice their workers back into the office.