Austin has seen an influx of California transplants in recent years. Individuals, families and companies alike are increasingly opting to leave behind their West Coast home in favor of Austin’s favorable living conditions and business environment. One question that we frequently receive from our clients considering this move is “how do office rental rates compare in California vs. Austin?”
In this article, we answer that question by looking at office rental rates on a cost-per-square-foot and cost-per-employee basis.
California vs. Austin 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 San Francisco and Silicon Valley and is competitively priced when compared to Los Angeles and San Diego.
As of 4Q 2020, the average full service rental rate in Austin was $39.39 per sf.1 Compare that to average rental rates in San Francisco ($80.88 per sf) and Silicon Valley ($66.36 per sf) and it makes sense that information, finance and professional services jobs saw a 5.8% YOY growth in December 2020, while San Francisco saw a decline of 2.6%. Companies simply cannot justify paying 200% more for their office space.
Austin’s average rate also remains competitive to the average rental rates of $43.92 per sf that tenants in Los Angeles pay, and the $38.16 per sf seen in San Diego.2 In contrast, tenants in Sacramento pay significantly less, currently averaging only $25.20 per sf.3
California vs. Austin Office Rental Rates
|City / Region||4Q 2020 Full Service Rental Rate (SF / Year)|
California vs. Austin Office Rental Rates
As you are doing your own research to compare these rates, it’s important to note that most rental rates in Austin will be quoted on a per-square-foot per-year basis, whereas most rates in California will be quoted on a per-square-foot per-month basis. California rates might look cheap on paper, but don’t forget to multiply by 12!
California vs. Austin Cost per Employee
When it comes to a company’s bottom line, a more useful comparison to make is expense per employee. Some industries, like tech, are able to fit more employees in a smaller space, while other industries, like law firms, require more space per employee. By analyzing the cost of real estate on a per-employee basis, a company can gain an accurate picture of the true potential cost savings of moving from California to Austin.
Read Next: How Much Office Space Do I Need?
For these comparisons, we’ve assumed an average of 250 sf per employee and the average rental rates outlined above. To understand these numbers as they relate to your company, use the calculator below.
In Austin, the average real estate cost per employee comes out to $9,848 per year. This means a 10,000-sf tenant could likely fit 40 employees in its space and pay roughly $393,900 per year. A similarly sized company in San Francisco would pay double that, averaging $20,220 in real estate expenses per employee and paying a total of $808,800 per year for a 10,000 sf space.
Even Sacramento, which is roughly 35% cheaper on a cost-per-sf basis compared to Austin, only constitutes a $3,547 savings per employee over Austin. When you account for the relative salaries required based on the cost of living in each city, it’s clear that Austin is still the more affordable city.4
Not sure how many square feet you might need? Use our Square Footage Calculator to find out!
Although we didn’t dive into Austin’s cost of living, experienced workforce and favorable tax structure compared to California in this article, this rental rate comparison should shed light on one of the many reasons that making the move from California to Austin can positively impact a company’s bottom line.
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1CBRE 4Q 2020 Austin Office Market Report
2CBRE 4Q 2020 Los Angeles and San Diego Office Market Reports
3CBRE 4Q 2020 Sacramento Office Market Report
4According to the NerdWallet Cost of Living Calculator, a $50,000 annual salary in Austin is equivalent to a $59,496 annual salary in Sacramento. If a company can be expected to pay $9,496 more in salary per employee, the $3,547 per employee cost savings for real estate is negligible.