Austin Office Landlord Outlook

There have been some positive signs in the Austin office market as of late.  National companies are genuinely looking and making the decision to have a presence in Austin.  Hanger Orthopedic is relocating their corporate headquarters from Baltimore to the Domain development. LegalZoom and Facebook, both West Coast companies, are opening offices here in Austin, and the medical device company, Pioneer Surgical Technology, is hiring 30 people to staff their first office outside Michigan. 

Not only are companies looking to move to Austin, but several local technology companies have recently attracted large acquisitions from the likes of IBM (Lombardi Software), Computer Associates (NetQos), Hewlett Packard (3Com), and Logitech (Lifesize Communications). Not all of these acquisitions, however, are resulting in positive growth in the market due to existing facilities by IBM and HP.

Overall, the vacancy sits around 23% with a majority of that concentrated in the Northwest and Far Northwest submarkets.  The CBD continues to hold strong with the lowest vacancy rate in town at 16.5%, followed by the Southwest at 20%.  Activity has picked up a bit, primarily in the SW and CBD submarkets, while the NW and FNW submarkets continue to see negative absorption. Over the next 8–10 months, expect to see several buildings go back to the banks, as landlords struggle to carry vacant or slightly occupied buildings. 

Base rates are still slightly declining everywhere, while most landlords are playing the free rent game to attract tenants.  A significant number of leases expire in 2010, so activity will be up, and we expect occupancy to increase by the end of the year.