The Austin Office Space Market Navigating the Waves
Key Takeaways
- New Supply: Close to 500,000 square feet, compared to 154,000 square feet in the previous quarter
- Net Absorption: 287,900 square feet, marking a decrease from Q4’s 321.8 thousand square feet, but an improvement from early 2023’s negative absorption
- Overall Vacancy: 22.5%, a slight increase from 22.4% in Q4 2023, reflecting continued challenges in the market
- Asking Rents: $41.52/SF, slightly down from $43.12/SF in Q4 2023
The first quarter of 2024 saw the Austin office space market face continued challenges amidst fluctuating leasing activity and a growing supply of office space. Austin’s commercial real estate sector is navigating a delicate balance between supply and demand, with overall inventory rising. While the vacancy rate indicates ongoing challenges, positive net absorption suggests continued leasing activity. Despite some downward pressure on rents, Austin’s robust economy and evolving market dynamics will continue to shape the commercial real estate landscape in 2024.
Austin’s economic outlook remains strong, with positive indicators offering resilience. The city is seeing a trend toward smaller leases, particularly between 1,000 to 5,000 square feet, driving leasing activity. Moving forward, continued growth in Austin’s economy may stabilize the office market, despite ongoing challenges and anticipated further completions.
In Q1 2024, Austin’s office market experienced moderate fluctuations. Inventory has slightly increased to 89.5 million square feet. Net absorption decreased to 287.9 thousand square feet, improving from earlier negative trends. The vacancy rate rose to 22.5%, indicating market challenges, while new completions were modest at 10.5 thousand square feet. Under-construction inventory reached 5.4 million square feet, signaling ongoing development. Asking rents fell to $41.52/SF. The market is maintaining a delicate balance between supply and demand, with stable absorption, increasing supply, and moderate pricing challenges early in 2024.
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