Austin Office Market | Q4 2017

Austin Office Market | Q4 2017 | Summary Report

2017 was a strong year overall for the Austin office market , although the last quarter was met with negative occupancy (absorption). Vacancy rates were at a 16 year low for the Austin office market as well.  New development is an additional 600,000SF of space with over 2M square feet of new office space available.  During the last quarter occupancy was slower  compared to the previous 3 quarters. The majority of leases were with technology companies at over 30% of the leases done , next were financial services.  OPEX costs rose approx 86 cents per square foot which translates to an Austin average of over $9.50 per square foot. 

Offsetting operational cost increases | Austin Office Market Q4 2017

Landlords were seen lowering their base lease rates to an average of approx $24.00 down from $25 in Q3 to offset the higher operating expenses. Citywide however the full service gross rate rose approx $0.07 per sf compared with the previous quarter.  Unemployment in Austin has fallen to 2.6% which is the lowest since the 90’s. Vacancy rates are as follows for the last quarter of 2017:

  •  CBD 7.9%
  •  Northwest 8.6
  •  Far NW 6.0
  • North Central 7.7                                               Austin , TX Lease Terminology      
  • Round Rock 8.3
  •  East 7.4
  •  South 12
  • Southwest 11

Sublease activity has increased as well over the past 3 months, which can show consolidation or potential expansion into new spaces, however typically the sublease activity does not show expansion as much as it does consolidations.  We do expect the office market to somewhat flat despite some marketing forecasts of it being busy, as an example we have seen sublease listings last for 6 months with no takers.