Austin Office Space Tight, Pre-Leasing Robust
Jul 31, 2014
The citywide vacancy rate has tightened to 9.7% in the Austin-area office market. “Things are really heating up,” says Doug McGregor, senior office consultant at REOC Austin
The local office market has seen new leases and expansions generating 306,517 square feet of positive net absorption in the second quarter which raised the year-to-date total gain to nearly 636,000 square feet, according to the survey of more than 41.7 million square feet of Austin-area office lease space
Last quarter, the vacancy rate stood at 10.5% and it was 12.3% in the same quarter a year ago. At the end of June, the citywide average quoted rental rate climbed to $26.32 per square foot per year—up $0.14 over the previous quarter and $1.52 compared to a year ago for an annual increase of more than 6%
A number of new projects have broken ground recently and are responsible for the growth:
Capital Ridge (217,490 square feet)—a seven-story office building located near the intersection of Loop 360 and Bee Caves Road
The first of two buildings at Encino Trace (159,000 square feet)—a four-story office building located at 5707 Southwest Pkwy.
In the Northwest sector, work has begun on two four-story office buildings at Champion Office Park. The project, located at 6500 N. Capital of Texas Highway, spans 230,000 square feet
Also, pre-leasing is robust, with the ARM lease at Encino Trace being one of several on a growing list of such activity within area buildings currently under construction. Others include:
Parsley Energy (73,843 square feet) and Atlassian Inc. (24,411 square feet) at Colorado Tower
Dropbox (56,000 square feet) at 501 Congress Ave.
Whole Foods (40,000 square feet) at The Bowie and
MapMyFitness (27,244 square feet) at the Seaholm Power Plant project
Office properties in the Central Business District maintained the highest rental rates in the city. At the close of the second quarter, the cost to rent office space downtown increased to an average $36.15—up more than $4.00 compared to the previous year. Rents in the CBD are nearly $8.00 higher than the next-highest area, which is the Southwest sector where the average rental rate stands at $28.63