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Q2 2015 Austin Office Market Research & Forecast Report

07/13/2015
Published By: Hannah Tysor

 

Austin’s office market sees a slight increase in vacancy as additional space delivers in 2015

Class A rental rates in Austin’s CBD decreased by 2.5% over the quarter and vacancy increased slightly for the third consecutive quarter as office space continues to deliver. 

Six buildings totaling 730K square feet were delivered in the second quarter, and 2.2M square feet of office space is currently under construction.  Among the projects delivered in Q2 include Capital Ridge, a 217K square foot office development in southwest Austin that is fully leased by Apple, Inc.  San Clemente At Davenport also delivered in Q2 and remains only 38.1% leased to Spiceworks, Inc. 

The citywide average rental rate increased by 3.7% from $28.16 per SF to $29.20 per SF over the quarter.  The average CBD Class A rental rate decreased from $42.64 per SF to $41.58 per SF, and the average suburban Class A rental rate increased from $31.54 per SF in Q1 to $32.87 per SF.

According to the Texas Workforce Commission, the job growth rate has remained positive for 60 consecutive months in Texas despite a slow down in 2014.  According to a recent article in Forbes magazine, Austin’s technology job base has expanded by 17.8% since 2011, benefitting from the relocation of California based companies to Central Texas.  Austin’s unemployment rate fell to 3.1% from 4.1% over the year, remaining lower than both the national average and state average.

Austin has unseated Silicon Valley as the No. 1 city in the U.S. for startups, claiming 180 startup businesses, according to the latest annual Kauffman Index report.  Texas cities Houston and San Antonio also claimed spots in the top 10.

 

Vacancy & Availability

Austin’s citywide vacancy rate increased 20 basis points from 10.2% to 10.4% between quarters, continuing its gradual increase since Q3 of 2014.  Despite an overall increase, vacancy in the CBD decreased by 60 basis points from 8.2% to 7.6%.  Overall suburban vacancy increased 30 basis points from 10.7% to 11.0% due primarily to a large increase in Class A suburban office vacancy of 100 basis points.

The average CBD Class A vacancy rate increased slightly between quarters from 10.5% to 10.8%.  The average CBD Class B vacancy rate decreased by 90 basis points over the quarter bringing it to an all time low of 2.1%.  The average suburban Class A vacancy rate increased by 100 basis points from 10.6% last quarter to 11.6% and the average suburban Class B vacancy rate increased from 11.5% to 11.7%. 

The citywide Class A vacancy rate increased 70 basis points over the quarter from 10.7% to 11.4%. 

Absorption, New Supply & Vacancy Rates

Absorption & Demand
Austin’s office market posted 480,277 SF of positive net absorption in Q2 2015, majority of which occurred in the Southwest submarket with the delivery of Capital Ridge, Apple, Inc.’s new headquarters.  The Southwest submarket posted the largest gain, with 214,758 SF of positive net absorption. 

The North submarket posted 74,545 SF of positive net absorption followed closely by the Far Northwest submarket which posted 72,807 SF of positive net absorption due to new leases and expansions at Aspen Lake and 7700 W. Parmer Lane, where Google, Inc. signed a new lease for 63,965 SF in Q2.

The largest negative absorption this quarter occurred in the Northeast submarket.

Rental Rates

The citywide average rental rate increased by 3.6% from $28.16 per SF to $29.20 per SF over the quarter.  The average citywide Class A rental rate increased by 2.4% from $33.94 per SF to $34.77 per SF.  Class B rental rates also increased over the quarter by more than 6.0%, rising to $24.42 per SF in Q2 2015.

In the CBD, Class A rental rates decreased over the quarter from $42.64 per SF to $41.58 per SF.  Conversely, Class B rental rates in the CBD increased by 4.7% over the quarter from $33.93 per SF to $35.52 per SF.
The average suburban Class A rental rates increased over the quarter from $31.54 per SF to $32.87 SF. 

The  highest average quoted rental rate this quarter was the West Central submarket’s Class A office properties at $41.77 per SF in Q2. 

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Release Date07/13/2015 - 18:15

Source

Colliers International

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