The Austin Office Market on a macro level continues to perform well. The influx of new people to the city continues and the job market remains one of the best in the nation.
Key Takeaways
- Small space continues to move, while large transactions are continuing to decline
- Vacancy rates maintain a steady climb
- Deliveries are down and new construction is slowing
- Net absorption remains negative for Q3 2023
The Austin office market has seen a challenging year, experiencing negative net absorption for the third consecutive quarter. This has offset gains from the past two years, as lease expirations and new subleases continue to increase vacancy rates. Notably, Indeed vacated a building at Domain Gateway and listed it for sublease, consolidating its market footprint. This, along with other factors, has pushed total availability to nearly 23% of the existing supply, with the majority of 5.5 million square feet under development remaining available.
No new ground-breaking occurred during the quarter, and some projects have been delayed. Two projects were completed: 9500 Parmer in the Far Northwest and 6th and Guadalupe in the CBD, the latter being fully available for sublease by Meta. Despite these challenges, there were signs of improvement in the Austin office investment sales market, with several transactions taking place. Notably, Three Barton Skyway was sold to Riverside Resources, Intel sold its office campus to Oak Street Real Estate Capital, and Capital Metro purchased Fifth and Tillery from CIM.
Occupancy losses were significant, but there was an uptick in demand for smaller office spaces, reflecting a shift in work patterns and economic uncertainty. Office spaces ranging from 1,000 to 10,000 square feet have become popular, with higher-end creative spaces moving faster than traditional office spaces.
In short, the Austin office market has experienced negative net absorption for three straight quarters this year, eroding the advances made in the prior two years.
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