The Austin market wrapped up 2017 much like it began – with job growth continuing to outpace national averages and an unemployment rate that remains one of the lowest in the country, coming in at a record low of 2.8% versus the national average of 4.1%. Fortune 500 companies including Facebook, Google, Indeed, Expedia and others proved they were bullish on the future of Austin by signing massive office leases in 2017. Furthermore, Austin’s housing market continues to sizzle at a record pace. According to the Austin Board of Realtors, home sales in Austin jumped 2.2% from 2016, while the median home price increased 4.3% within the same time period.
The Austin office market recorded approximately 90,000 square feet (SF) of negative absorption during Q4 2017. Although absorption was down for the quarter, the 2017 year-to-date total of overall absorption was on the positive side at just over +627,000 SF. Vacancy rates throughout the city remain relativity low. The overall vacancy rate in Austin fell slightly to 10.4%, while in the CBD, overall vacancy fell even further to 9.1%. The
overall asking rate for the entire Austin market retreated slightly off its torrid pace, coming in at $36.13 per square foot (PSF) to end 2017. This still represents a year-over-year (YoY) increase of 5.7%. Class A product demand remains strong and continues to command the highest prices, particularly in the suburban markets, where Class A rates were up to $36.10 PSF to close out Q4 2017, a YoY increase of 6.4%. Class A rates in the CBD have followed suit and are up 2.7% YoY to $54.48 PSF.
Major lease transactions were the theme of 2017 as blue-chip tenants took down large blocks of space throughout Austin. With several additional large transactions in the works for 2018, including Parsley Energy’s commitment to
pre-lease 302,000 SF downtown, the outlook for Austin seems bright. A steady stream of corporate migration & expansion in addition to a healthy pipeline of younger start-up companies looking to call Austin home seems to be the norm. With leasing activity on the upswing and multiple new office developments on the horizon, we can expect to see Austin’s office market continue to strengthen.