Q3 2011 Austin Office Tenant Outlook

To quote Dickens, "It was the best of times, it was the worst of times." That infamous quote adequately describes where we are in the office market from a tenant's perspective. While there are still ample opportunities for tenants to negotiate excellent lease rates, there are certain markets that are becoming more and more difficult to find the perfect space.

The CBD is currently above 90% occupied in the Class A market with only one existing building able to handle a contiguous requirement over 50,000 sf. This pressure has allowed landlords to push rates in the CBD, drawing a much deeper line in the sand where concessions are concerned. Rates are as high as $34 NNN in some class A buildings, which are approaching historical all time high water marks. Conversely, if you were to desire space in the 620/183 quadrants of the Northwest market, vacancies are still over 20%, and landlords are very accommodating in an effort to compete for business. Excellent opportunities are expected to continue in that market for many months. Elsewhere the Southwest market would likely be considered the middle ground between these two extremes but even this market is improving. However, with Cirrus Logic and Intel vacating large blocks of space in 2012 we expect to see some competitive opportunities in that submarket in the next twelve months.