As 2018 came to a close, the performance of Austin’s economy remained rock solid. The area’s unemployment rate of 2.9% is one of the lowest of the top 50 large metro areas in the United States. Additionally, the Austin market continues to generate jobs. According to a recent workforce report by LinkedIn, hiring was up 14.3% between July 2017-July 2018 and the U.S. Bureau of Labor Statistics reports the city added just under 36,000 jobs over that same time period. These strong economic indicators coupled with Austin’s high-quality of living continue to make the Texas capital a popular destination for both corporate relocations and individuals alike.
The Austin office market recorded just over 368,000 square feet (sf) of overall absorption during Q4 2018. The strongest absorption levels occurred in the highly desirable Far Northwest (FNW) submarket where construction and leasing activity continued to thrive. In the Central Business District (CBD), positive absorption was seen once again with approximately 81,000 sf of overall absorption recorded. The overall vacancy rate in Austin fell to 10.6%, down 80 basis points from the 11.4% posted in Q3 2018. The CBD saw even lower vacancy, with an overall rate of 7.7% for all classes and 5.9% for Class A properties. The overall asking rate for the entire Austin market increased to $36.26 per square foot (psf), while the CBD average rental rate of $52.91 psf maintained its position as the highest across all submarkets. Additionally, the average Class A rate in the CBD climbed significantly to an all-time high of $58.16 psf, a year-over-year increase of 6.8%.
Apple’s recent announcement to build a $1 billion campus in North Austin reflects the ongoing confidence in the local Austin economy. Even with construction levels at an all-time high, vacancy rates remain low as large block users continue to snap up high-end office space seemingly as fast as these new projects are announced to fulfill immediate and future needs. While the economy at the national level is worth monitoring due to a slumping stock market and concerns over foreign trade, Austin appears suited to weather most economic storms due to its importance as a technological, governmental, and educational hub.