Austin Commercial Buildings

Austin Commercial Buildings

Summary of Austin’s commercial buildings and activity for 2017 (portions obtained from Co-Star )

Austin is going thru expansions for commercial buildings especially in the Downtown area.  Austin’s downtown commercial building leasing rates are up +30% compared with per-recession lows. Vacancies remain low as well with only approx 25,000SF of space avail for lease south of the Capitol building.  Pre-leasing activity remains strong for commercial buildings most of the new construction buildings deliver leased.  Over 2M square feet has been delivered to the Austin market since 2012.

Sales of Austin commercial buildings have hit highs , as high as $665 per square foot at a 5.9 cap rate. The specific Austin commercial building that sold for these numbers had new construction going for it as well as the average remaining lease terms were about 6 years and were to high credit tenants.Cap rates for commercial property

Unemployment rates in Austin stay Low

Another key factor is the robust population growth and how unemployment in the Austin area , for Q2 it hovered around 3.3% and moving into July of 2017, unemployment went below 3% . Business expansion was up to 5.7% . Key transportation issues and affordability has cropped up in the Austin area as it continues to grow. Vacancy rates have fallen to lows of not seen since the 2nd quarter of 2001.  For new construction moving into the third quarter, the sub-markets that saw the highest delivered new construction were East and Northwest Austin.

Austin Commercial Leasing

Austin Commercial Leasing

This is a summary of Austin’s commercial leasing market for office space moving into the 3rd Quarter of 2017.  Continuing occupancy has been the theme for some time now in Austin. The current vacancy rates are now at a 16  year low.  Tenant demand remained strong for the 3rd quarter with approx 1M square feet of office space being leased for 2017. Construction wise for offices is expanding with approx an extra 2M square feet under construction . Austin commercial leasing for only 2 sub-markets was low which was Round Rock and East Austin.

Sectors producing the demandAustin office market Q2 2016

Austin’s commercial leasing for offices was lead by engineering and tech firms which accounted for more than 1/3 of the leases executed. Vacancy rates are not sitting at 8.8% which is down 50 points, the lowest since the second quarter of 2001.  Current OPEX costs have risen,up $0.30 cents per sf per year while NNN lease rates moved downward by $0.90 cents per square foot per year. The market is being supported by a very low un-employment rate coming in at 2.8% . Tenants can expect more of the same in the near term with rates staying static , most landlords are looking for minimums of 3+ year term commitments. Contact Shire Commercial to help you find a suitable office space , specialists in Austin Commercial Leasing.

Austin Office Market Q2 2017

Austin Office Market Update Q 2 2017

There are always differing opinions as wide as there are people in the CRE market , brokers, agents and owners. Austin has been on a very long run approximately 8 years and some say this cannot sustain itself and some say it will continue. Truthfully, nobody really knows the answer. If we take historical into account every long up-cycle has an eventual down cycle and vice versa that is the law of the universe.

So where is the Austin office market for Q2 2017? Currently, the news for the most demand seems to be Downtown Austin and the East Side. This sub-market is expected to be the leader as far as momentum however, lease rates are expected not to change too much. There are properties to be delivered in 2017 that will hold the lease rates in check unless the spaces are pre-leased at a fast rate then the formula would change.
Nine office buildings has been completed in Q2 2017 in Downtown Austin with an 80% pre-leased occupancy. Citywide leasing averages increased approx $0.28 cents per sf per yr to $34.02 as an average for the downtown Austin office market.

Among the best tech cities to live in, Austin still came in at number 1 against cities like San Francisco, New York, Boston and Seattle. As long as the media touts Austin as a number one city, the population growth will most likely continue regardless of growing traffic congestion and higher taxes and expensive housing relative to the rest of the state.

Suburban Office Market
The suburban market vacancy rates are a bit higher approx +3% and demand remains somewhat steady, however we are seeing a lot more sublease listings coming onto the market which shows consolidations, changes to locations preferences or slow-downs in Austin office demand. Class A Office space is still leasing at a flat to slight increases.

Austin Office Space Market | Q1 2017

Austin Office Space Market for Q1 2017

The one word that can describe the Austin office space market is “new construction underway” for the first quarter of 2017, 1M SF of new space has been delivered to the Austin market. In addition to the 1M SF , approx 1.7M SF is expected and is currently under construction. Sub-markets with the most new construction activity consist of Downtown Austin, Northwest Austin and Southwest Austin.  Although there is new construction the occupancy rate has slowed somewhat. Vacancy rates ticked up to 9.7% from 9.2% in the previous quarter.  Near term forecasts for positive momentum are in place still due to new population growth and employment activity.  With the softening of occupancy and office lease rates may be more adjustable in the tenant’s favor, however they may not be at a significant discount. Shire Commercial is starting to see more sub-lease activity which is a gauge of what the overall market may be doing. 

 

Lease rates for Austin office space came down to $33.89 versus $34.89 in the last quarter which was a record high. 

Tenant improvements

 

Potential More of the Same to Slightly Downward?

 

The commercial real estate market for Austin office space has been on an up-swing for sometime and just like all things that ebb and flow , so does commercial real estate. Shire Commercial tracks Austin office space consistently and does see room for movement a bit more towards the tenant’s favor eventually.

Austin TX Office Market | Q42016

Austin office properties for leaseAustin Office Market for Q4 2016

Here is an overview of the Austin Texas office market ending for 2016.  Austin’s office market maintained itself with a consistent performance for all of 2016.  Growth and expansion continue moving into 2017. Lease rates for the Austin office market hit an all time high at almost $35.00 per square foot. New construction of perhaps the tallest building in Austin have been discussed which will cover almost 2M square feet of space  Class A office spaces hit a new high as well with a $0.55 cent increase compared to the 3rd quarter of 2016.

Increasing Expenses for the Austin Office Market

Landlords for 2016 pushed leasing rates higher along with higher expenses , which play an important stimulus on the rising lease rates. Class A lease rates moved up $0.55 cents tp $38.85 per square foot.  Occupancy continued a positive move with Downtown Austin, Northwest Austin and the Southwest Austin sub-markets along with more development in each sub-market.

Vacancy for Office Properties

Year over year vacancy moved downward in 2016. Overall vacancy came in at just under 12% down from close to 15% in 2015. The near term forecast for office space is for continued demand.  Also the sub-markets mentioned in the above paragraph are still the hottest sub-markets for demand and look like they will continue. There are currently 21 office development projects on the ground in Austin which equates to over 2M square feet , there is optimism about the future and influx of a growing population.