Q3 2011 Austin Office Landlord Outlook

Through the 3rd Quarter of 2011, the office market has seen considerable absorption.  This trend started in late 2010 and has remained strong; however, signs of a pullback are surfacing.  With the erratic stock market and the continued shaky European markets, the national economy is showing signs of things turning downward.   Austin has been somewhat isolated from the rest of national downturn with its growth in 2011; however, recent activity has slowed and as a result, a 100,000 sf deal with a national solar company withdrew its commitment to expand in Austin in the 3rd Quarter.

Currently, citywide vacancy sits at 17% with the Southwest submarket being the tightest at 12% and the CBD at 13.9%.  The Far Northwest has witnessed the greatest absorption percentage since Q1, dropping 6% on the year.  The average lease rate across all property types and submarkets has increased by roughly $.50/sf from Q1 of this year. With deals closing at $47/SFG, the CBD continues to attract the highest paying tenants in town.

Some notable transactions that witnessed occupancy in Q3 include:

  • Fulbright & Jaworski's move from One American Center to San Jacinto Center (net 13,000 sf absorption)
  • Samsung's new office in the NW for 28,000 sf at Ladera Bend 1
  • Chase Source Real Estate took 60,000 sf at Northview Business Center in the NE submarket
  • Travesia, in the North submarket, has leased a total of 88,000 sf to Protect America and Pearson

As we approach Q4, we do so with cautious optimism.  While local tenants continue to maintain and grow, we expect the larger, national companies to pull back potentially slowing new movement into Austin.   That being said, we're fortunate to be in Texas, and most especially Austin.