Austin office occupancies, rents rise in 2nd quarter

Jul 14, 2014
Austin American Statesman

The Austin-area office market remained on solid footing in the second quarter, with rents and occupancies for first-class space higher than in the year-ago quarter, new figures show


In its latest report, Cushman & Wakefield | Oxford Commercial,which tracks the local office market, said the occupancy rate for top-tier office space across Central Texas was 89.4 percent on average, up from 88.4 percent by the end of June 2013


Rent for that space averaged about $33 per square foot , up 4 percent from just over $31 a foot a year ago June, the firm said


White-collar job growth drives demand for office space, and the Austin area saw more than 31,000 new jobs created in the 12 months that ended in May, according to the Texas Workforce Commission


As office space has gotten more scarce in recent years, developers began construction on new office buildings both downtown and in suburban locations in Central Texas. In all, 1.6 million square feet of new office space is expected to hit the market by year’s end, with that number expected to reach 2.5 million square feet by the end of 2015, according to Cushman & Wakefield | Oxford Commercial


Downtown is one of the region’s hottest sectors. Nearly 900,000 square feet of new office space will be coming online in five downtown buildings within a year, and “surprisingly, almost 80 percent of this new supply has already been leased,” said Ryan Bohls, a vice president in Austin with JonesLang LaSalle, a global corporate real estate services firm


Much of that leasing activity is due to companies that are relatively new to Austin, Bohls said, including Athenahealth, Dropbox, Parsley Energy and Atlassian


Parsely Energy and Atlassian will both be leasing space in Colorado Tower, a 29-story tower that will have just over 370,000 square feet of space


Jonathan Tate, a vice president with Endeavor Real Estate Group, said leasing activity has been “extremely good” at IBC Bank Plaza, a 13-story building Endeavor is developing at 500 W. Fifth St., next to the new federal courthouse downtown


The situation in some suburban areas could be a bit different, where tenants can expect to find more options for space — and more moderate rents


With some of the new suburban office buildings expected to come to market with some vacancies, “landlords are going to be competing hotly for those tenants that are in the market,” Coddington said


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