AUSTIN – (By Dale King) – Despite concerns about a possible slowdown in the Austin economy, demand for office space remained robust during the second quarter of 2017, according to a report from commercial real estate firm Avison Young. The report finds that strong leasing activity, particularly from large technology companies relocating to the market, helped sustain rental growth and keep vacancy low.
Avison Young reported Austin’s overall office vacancy at a relatively low 8.7 percent. The firm noted that vacancies appear to be stabilizing as new office development comes online and a broader range of office users expands their footprints in the market.
Submarket dynamics vary across the region. Emerging areas such as the east and south sides of Austin have tightened vacancy rates because they have limited existing office inventory. Conversely, some submarkets that have absorbed a greater volume of new space are seeing vacancy tick upward as that supply is delivered.
Construction deliveries accelerated in the second quarter after a slower first quarter. Avison Young reported more than 870,000 square feet of new office product delivered during Q2 2017. Notable completions included Domain 8, Galleria Oaks II, and the 29-story downtown tower at 500 W. 2nd Street, where Google signed on as an anchor tenant. Google leased roughly 200,000 square feet in the 500,000-square-foot building developed by Trammell Crow.
At the end of Q2, approximately 1.88 million square feet of office space was under construction in Austin, with about 728,917 square feet scheduled for completion by the end of 2017. In addition, developers had proposed another 2.28 million square feet of office space.
Market-wide asking rents continued to rise through the second quarter, showing nearly a $5-per-square-foot increase compared with Q2 2016. As has been the recent pattern, the Central Business District held the highest average asking rates, while the lowest rents were found in the northeast and south submarkets, the report said.