Austin: A Recession Proof City

Austin is a great place to do business, and has been for years. A young and highly educated workforce, reasonably low cost of living, outstanding quality of life, and recognition as a technology hub are just a few reasons why this State Capital is a “bargain” for company headquarters. Given the current economic climate, Austin is a top prospect compared to other mid-sized and large cities across the country.

The worldwide credit crisis has caused unprecedented uncertainty for businesses across the country. This uncertainty has resulted in companies putting investment and hiring decisions on hold, even if their fundamental business conditions are solid. The lack of office demand and the corresponding supply of new office buildings has caused a temporary imbalance in the office sector. Overall vacancy rates have escalated from 11% to 17%. Some submarkets have forced office building owners to become more aggressive to attract tenants. As a result, Austin businesses will now be able to take advantage of this temporary imbalance and strike office leases at very attractive prices and terms.

Austin is a “high beta” commercial real estate market meaning it can swing up and down rapidly. Many economists have projected Austin to swing back to strong office absorption in the second half of 2009 with robust demand in 2010. As the national economy improves, experts predict Austin will again be the beneficiary of several large corporate relocations. Austin businesses should “buy low” and take advantage of this temporary down-market before rents shoot back up to 2007 levels.

Written by:
Jeff Pace
Simmons Vedder Partner