The first quarter of 2018 marked yet another quarter that the Austin unemployment rate ranked as one of the lowest among the 50 largest metropolitan areas, coming in at 2.7%. The local Austin unemployment rate also remained ahead of both the Texas rate of 4% and the national rate of 4.1%. Additionally, the rate of job growth in the Austin MSA continued to impress. According to the U.S. Bureau of Labor Statistics, Austin has added more than 35,000 new jobs in the past 12 months. Many of these new jobs can be attributed to more and more companies relocating or expanding to Austin from other areas, including many Silicon Valley tech companies that are finding the Austin market rich in talent.
The Austin office market recorded approximately 20,000 square feet (sf) of positive absorption during Q1 2018. Class A product, particularly in the Central Business District (CBD) where there was nearly 125,000 sf of positive absorption, helped bolster overall absorption numbers, as lower class office product weighed down overall absorption figures. Vacancy rates throughout the city remained relatively steady compared to Q4 2017, as the overall vacancy rate in Austin rose only slightly to 10.5%, while in the CBD, overall vacancy fell to 9%. The overall asking rate for the entire Austin market continued to climb, coming in at $36.39 per square foot (psf). This represents a year-over-year (YoY) increase of 2.7%. As absorption numbers confirm, Class A product demand remained strong and continued to command the highest prices. Class A rates citywide were up to a record high of $39.93 PSF, while Class A rates in the CBD also hit a record high, coming in at $56.43 psf.
New construction activity continues to be a dominant force in the Austin office market, with nearly 3 Million SF of new office product underway. However, despite this activity and other recent additions to the office inventory, robust pre-leasing has held vacancy levels in check. Large corporate users, including Google, Indeed, WeWork and others continue to demand and commit to top-tier office space. With no immediate surge in vacancy rates on the horizon and an active office market, we can expect to see the ongoing confidence in the Austin market continue.