The Office Market at a Glance

The Austin office market wrapped up the 1st quarter of 2008 with an overall vacancy of about 12.5%. Q1 saw about 358,000 sf of net absorption, and of that 71,000 sf was in Class A properties leaving the Class A market at roughly 15% vacant.

About 1,109,000 sf of office has hit the Southwest market in the last 6 months or will be completed in the near future. Less than 28% of the new product has been leased. Of that, one building (Parkway at Oakhill) has been foreclosed on. These landlords will be lowering their projected rates or offer concessions to attract tenants.

The Southwest is faring better than the Northwest, which is about to add 1,600,000 sf to the market all in a short time frame. Of these projects, only 45,000 sf is currently leased. The Northwest will see increased vacancy and probably a lowering of rates to stay competitive.

The CBD has seen good activity as of late and landed some high profile tenants like Google and Da Vinci (the Dell marketing company). Rates in the CBD have remained strong, and Class A buildings are closing lease transactions in the $21-23 NNN range. There are a few large blocks (30,000 sf +) of space left, which will push some large tenants to the suburbs.