Wondering how COVID-19 is Impacting Austin’s Office Market?

The COVID-19 pandemic has dramatically impacted both people and businesses around the world. It has left many in the real estate industry wondering how our market will be impacted. AQUILA aims to study the effects of the pandemic on businesses in Austin in order to help answer this question.

Specifically in this study, we examine the Austin job market, including layoffs and remote work changes, Austin-area subleases, and tenant rent relief requests in order to gain a better understanding of how these forces will impact the local commercial real estate market.


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Kirk Silas | AQUILA Commercial About the Author

Kirk Silas

Kirk is the mastermind behind AQUILA's wealth of market intel. He continuously delves into data and crunches the numbers to provide our team and our clients with the latest market insights and most in-depth analysis.
Chapter 1

Austin Job Market Impact

COVID-19 has had a drastic impact on the Austin job market. In this chapter we address: 

  • Austin Unemployment Statistics
  • Changes in Job Posting Data
  • Layoffs/Work-From-Home Announcements

Unemployment in Austin

Based on Texas Workforce Commission data, the unemployment rate in Austin hit 12.2% in April 2020. For comparison, the unemployment rate was 2.3% in April 2019, and the previous high point was 7.1% in July 2009. As of June 2020, unemployment in Austin dropped to 7.5%.


Job availability in Austin began to recover in mid-April, while most other cities have either continued to trend downward or have started their recovery more recently.

Layoff / Work-From-Home Announcements

We are tracking these announcements as a way to better understand which Austin companies might put sublease space on the market in the future. Below is a list of the major announcements.

Announced Layoffs

The following companies with Austin offices or headquarters have announced layoffs. Layoffs from companies with multiple locations do not necessarily apply to Austin employees. 

Note, Bird Scooters does not have an office in Austin; however, because of the company’s notable Austin presence, we found it relevant to include them in this list.

Company Employees Laid Off Austin Office Announcement Date
uShip 65 205 E Riverside March 31, 2020
Kazoo 35% of workforce* Capitol Tower March 31, 2020
RigUp 120 One Eleven Congress March 30, 2020
Bird Scooter 406 No Office in Austin March 26, 2020
Capital Factory 42 Austin Centre March 26, 2020
Outbound Engine 52 Two Barton Skyway March 25, 2020
SXSW 60 SXSW Center March 10, 2020
ScaleFactor 100  979 Springdale June 23, 2020
GoDaddy 331 East 6 June 24, 2020
Arrive Logistics 75 Met Center II April 3, 2020
Disco 75 3700 North Capital of Texas Highway July 15, 2020
Guild 38 1209 E Cesar Chavez St July 15, 2020

*According to LinkedIn, Kazoo has 51 – 200 employees

Work From Home

Several companies with a large Austin presence have signaled an intent to shift more of the workforce to work from home in the long term.

  • Facebook – Announced intent for half of its employees to work from home within the next decade; all employees working from home until at least 2021
  • Dell – More than 50% of employees will be working from home post-COVID-19
  • Google – Work from home until July 2021
  • Amazon – Extended work from home until January 8
Chapter 2

Sublease Tracker

Subleases are an important metric for understanding the health of a real estate market. We have been diligently tracking new subleases as they become available. 

Subleases

Using CoStar and broker email blasts, we have been tracking new subleases hitting the market in Austin. It is hard to say which of these are a direct result of COVID-19, but we feel it is still helpful to understand the volume of subleases on the market and which tenants are subletting their space. 


Large Subleases Recently Announced

Tenant Building Size (SF) Date Posted Term Expiration Submarket
Samsung 3900 San Clemente 25,399 January 2020 December 2023 Southwest
Netspend Austin Centre 68,279 February 2020 May 2024 CBD
TRS Indeed Tower 100,000 February 2020 March 2031 CBD
Cognitive Scale 9500 Arboretum 35,751 March 2020 February 2025 Northwest
Parsley Energy 300 Colorado 154,532 April 2020 Negotiable CBD
ATX Energy Partners Pennybacker Commons 23,245 April 2020 August 2023 Northwest
HotSchedules Pennybacker Commons 23,000 May 2020 February 2025 Northwest
Riveter 1145 W 5th St 12,300 May 2020 December 2026 Central
Blackbaud Domain 3 45,655 June 2020 September 2023 Northwest
Wesco Aircraft Highflex Technology Center I 27,361 June 2020 June 2023 Northwest
Owens Minor 2120 Grand Avenue Pkwy 84,000 June 2020 Negotiable North
CreditShop Lavaca Plaza 15,556 June 2020 April 2023 CBD
Offers.com 7801 Capital of Texas Hwy 11,266 June 2020 April 2025 Northwest
Acxiom Corporation River Place Bldg. III 32,151 June 2020 February 2022 Northwest
PureWrx Expo 13 32,000 June 2020 March 2024 Southeast
HP Bridgepoint Square 5 17,553 July 2020 January 2023 Northwest
GoDaddy East6 115,000 July 2020 April 2034 East
HomeAway Research Park Plaza Bldg. IV 49,312 July 2020 March 2022 Northwest
Rig Up One Eleven Congress 93,210 July 2020 Flexible (2 to 8 years) CBD
ScaleFactor 979 Springdale 30,000 July 2020 October 2026 East
Austin American Statesman 305 S. Congress 12,809 July 2020 July 2021 South
VRBO Domain 2 28,606 July 2020 February 2026 Domain
Athenahealth Seaholm 15,232 July 2020 February 2030 CBD
Aereon 16310 Bratton Ln 99,200 July 2020 October 2021 North
SmileDirectClub Hays Logistics Center 158,200 July 2020 March 2027 Kyle
Restaurant365 Riata Corporate Park 7 44,923 July 2020 March 2027 Northwest
Alliance Abroad Eastside Village 14,639 July 2020 April 2028 East
Navient Tuscany 4 54,865 July 2020 September 2020 Northeast
Texas Children’s Hospital Mopac Centre 25,504 July 2020 January 2033 Central
Data Foundry Rollingwood Center I 37,883 July 2020 Negotiable Southwest
Houghton Mifflin Harcourt 2700 Frontera Blvd 33,155 July 2020 December 2028 Round Rock
Mitel Networks Corporation River Place Building IV 11,405 July 2020 February 2026 Northwest
ASM The Summit at Lantana 15,904 August 2020 Negotiable Southwest
ETS 400 W. 15th St. 12,475 August 2020 December 2023 CBD
DLA Piper Colorado Tower 24,615 August 2020 6 to 12 years CBD
ShippingEasy 3700 San Clemente 10,478 August 2020 December 2021 Southwest
Yodle.com Plaza 35 Bldg B 97,153 August 2020 August 2021 North
Marquee Event Rentals NorthTech 4 26,768 September 2020 Negotiable Northwest
Rocket Software Domain 7 7,734 September 2020 July 2023 Northwest
Coder Frost Bank Tower 5,483 September 2020 March 2025 CBD
Indeed 5th & Colorado 19,087 September 2020 November 2023 CBD
Three Rivers Uplands Corporate Center Phase I 23,956 September 2020 July 2021 Southwest

 

Chapter 3

Rent Relief Data

AQUILA is spearheading an initiative to collect and share data with four separate full-service real estate companies in Austin, Texas in order to track rent relief requests and resolutions during the COVID-19 pandemic. Participants include AQUILA Commercial, Stream Realty Partners, Lincoln Property Company, and Endeavor Real Estate, which account for 11.5 million sf of office – approximately 20% of the office market in Austin, Texas. Updates to this information will be distributed monthly.

As of May 14, 9.4% of office tenants across these portfolios have requested rent relief. Of those tenants, approximately 8.9% have been granted relief of some form.

 

9.4%

of Office Tenants Requested Relief
(65 out of 695)

8.9%

of Relief Request Granted
(68,591 out of 769,729 sf)

Given comments that the surveyed companies have received from tenants so far, the rent relief packages that have been granted will be sufficient to keep tenants afloat through the ongoing COVID-19 situation.

Sample Rent Relief Structures

So far, a typical rent relief package for an office tenant in Austin generally includes some form of rent deferral. The most common deferral term length we have seen is three months, and occasionally a 90-day tax deferral, with these designated to be paid over the final six months of 2020.

While this is what we typically see in Austin, it’s important to note that rent relief and deferrals are situational and will vary based on a number of factors.

Chapter 4

Other Resources

We are here for you and are ready to help.

At AQUILA, we have always strived to not just be your real estate service provider, but your trusted partner and advisor as well. It is in difficult times like this that we hope that we can truly show you the latter. Know that we are here as a resource for you and are ready to help however you may need. Please don’t hesitate to reach out to your contact at AQUILA should you have any questions on any of the information provided.