Many companies have been relocating to Austin from San Francisco, New York, Miami and more in the past few years. But what’s driving them to relocate from these states to Austin? 

Read Next: How Expensive Is Office Space in California vs. Austin? (Average Rental Rates, Calculator)

In this article, we help answer that question by comparing Austin and New York in terms of:

  • Rental rates
  • Cost per employee
  • Quality of living
  • Culture

 

Austin vs. New York: Rental Rate Comparison

Although Austin is definitely not the least expensive city in Texas when it comes to office space, it is still significantly cheaper than New York. According to CBRE’s 3Q 2021 Austin office market report, the average full-service office rental rate in Austin is $42.87/sf. This comes in at less than half of New York’s average full-service rate at $82.17/sf according to CBRE’s 3Q 2021 Midtown Manhattan office market report. 

For reference, these rates mean a 10,000-sf tenant in Austin would pay $428,700 per year, while the same tenant in New York would pay $821,700 per year in rent. 

Below is a breakdown of the rates in each city based on the primary submarkets:

City/Submarket 3Q 2021 Full Service Rental Rate (SF/Year)
Austin $42.87
ATX Central Business District $56.83
ATX Northwest $38.48
ATX Southwest $40.98

 

City/Submarket 3Q 2021 Full Service Rental Rate (SF/Year)
New York $82.17
5th/Madison $104.82
Park Avenue $101.11
Plaza $98.28

Austin vs. New York Rental Rate Comparison by Submarket

Rental rates in New York get even higher when you are looking at the main submarkets of the city. Full-service rental rates in 5th/Madison, Park Avenue, and Plaza all have an average full-service rate near or above $100/sf. By comparison, the most expensive submarket in Austin is the CBD with an average full-service rate just above $53/sf.     

 

Austin vs. New York: Cost Per Employee

Comparing cities based on the cost of real estate alone is helpful; but, a more useful comparison is to look at your potential costs on a per-employee basis. With the average full-service rental rate being more than double in New York compared to Austin, you are going to pay a much higher annual cost per employee.

Annual Real Estate Cost = Cost per SF x Size of Space

Annual Cost per Employee = Annual Real Estate Cost / Number of Employees

For example, if you have 10,000 sf of office space with a density of 250 sf per employee, you will have 40 employees in your space. If we use the average full-service rates in Austin, this means your real estate cost per employee will be approximately $10,717 per year. Under the same circumstances in New York, your real estate cost per employee would be approximately $20,542 per year. 

From a salary standpoint, for your employees to maintain the same standard of living in New York as they would in Austin, you would have to pay employees 152% more. This means an employee making $125,000 a year in New York would only need to be paid $50,000 in Austin in order to achieve a similar standard of living. 

Using our previous example of 40 employees, this means locating in Austin would save you $3 million per year in salary alone.

As an employer, it’s important to factor this into potential cost savings when considering relocating to Austin from New York.

 

Austin vs. New York: Quality of Living

Austin continuously ranks at the top of “best places to live” lists and most recently ranked in the top 5 for best places to live in 2021. 

There are many perks of moving to Texas that your employees will enjoy, especially not having to pay state income tax. New York’s state income tax varies from 4% all the way up to 8.82%, which is one of the top tax rates in the entire country. This may be a contributing factor as to why New York’s population is decreasing, while the city of Austin is growing at a rapid pace.

Income tax is not the only quality-of-living difference between these two cities. According to Esri, the New York MSA’s median household income was $80,424 in 2020, compared to the Austin MSA’s median of $78,659. Although median income is roughly equivalent, the cost of living index for housing in New York is 84.4% higher than in Austin. 

When looking at the cost of living index, the extra price you pay to live in New York City is not slim. The cost of buying a home, food, utilities and transportation are all significantly more expensive in New York. 

Having a lower cost of living will allow an employee’s money to go much further in Austin. 

Cost of Living Indexes Austin, TX New York, NY Difference
Overall Index: Homeowner, No Child care, Taxes Not Considered 119.3 187.2 56.9% more
Food & Groceries 96.7 116.6 20.6% more
Housing (Homeowner) 159.6 294.3 84.4% more
Median Home Cost $369,000 $680,500 $311,500 (84.4% more)
Utilities 99.1 150.5 51.9% more
Transportation 109.9 181.1 64.8% more
Health 94.4 112.6 19.3% more
Miscellaneous 100.4 121.2 20.7% more

Chart courtesy of Best Places.

 

Conclusion

I hope this article gives you a useful overview of the potential differences between locating your business in Austin vs. New York. If you think Austin sounds like the place for you, schedule a consultation with one of our Austin experts today.   

Want to learn more? Download our Why Austin book to see what makes Austin so great.

Why Austin - download the free book
  
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Zeke Sheffield

Zeke Sheffield was a commercial real estate intern at AQUILA in 2021.


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