Austin

Research Contact


Q2 2015 | Austin Office | Market Report

Class A rental rates in Austin’s CBD decreased by 2.5% over the quarter and vacancy increased slightly for the third consecutive quarter as office space continues to deliver. 

Six buildings totaling 730K square feet were delivered in the second quarter, and 2.2M square feet of office space is currently under construction. Among the projects delivered in Q2 include Capital Ridge, a 217K square foot office development in southwest Austin that is fully leased by Apple, Inc. San Clemente At Davenport also delivered in Q2 and remains only 38.1% leased to Spiceworks, Inc. 

The citywide average rental rate increased by 3.7% from $28.16 per SF to $29.20 per SF over the quarter. The average CBD Class A rental rate decreased from $42.64 per SF to $41.58 per SF, and the average suburban Class A rental rate increased from $31.54 per SF in Q1 to $32.87 per SF. 

According to the Texas Workforce Commission, the job growth rate has remained positive for 60 consecutive months in Texas despite a slow down in 2014. According to a recent article in Forbes magazine, Austin’s technology job base has expanded by 17.8% since 2011, benefitting from the relocation of California based companies to Central Texas. Austin’s unemployment rate fell to 3.1% from 4.1% over the year, remaining lower than both the national average and state average. 

Austin has unseated Silicon Valley as the No. 1 city in the U.S. for startups, claiming 180 startup businesses, according to the latest annual Kauffman Index report. Texas cities Houston and San Antonio also claimed spots in the top 10.


Absorption, New Supply & Vacancy Rates

  

Vacancy & Availability

Austin’s citywide vacancy rate increased 20 basis points from 10.2% to 10.4% between quarters, continuing its gradual increase since Q3 of 2014. Despite an overall increase, vacancy in the CBD decreased by 60 basis points from 8.2% to 7.6%. Overall suburban vacancy increased 30 basis points from 10.7% to 11.0% due primarily to a large increase in Class A suburban office vacancy of 100 basis points. 

The average CBD Class A vacancy rate increased slightly between quarters from 10.5% to 10.8%. The average CBD Class B vacancy rate decreased by 90 basis points over the quarter bringing it to an all time low of 2.1%. The average suburban Class A vacancy rate increased by 100 basis points from 10.6% last quarter to 11.6% and the average suburban Class B vacancy rate increased from 11.5% to 11.7%. 

The citywide Class A vacancy rate increased 70 basis points over the quarter from 10.7% to 11.4%.

Absorption & Demand

Austin’s office market posted 480,277 SF of positive net absorption in Q2 2015, majority of which occurred in the Southwest submarket with the delivery of Capital Ridge, Apple, Inc.’s new headquarters. The Southwest submarket posted the largest gain, with 214,758 SF of positive net absorption. 

The North submarket posted 74,545 SF of positive net absorption followed closely by the Far Northwest submarket which posted 72,807 SF of positive net absorption due to new leases and expansions at Aspen Lake and 7700 W. Parmer Lane, where Google, Inc. signed a new lease for 63,965 SF in Q2. 

The largest negative absorption this quarter occurred in the Northeast submarket.

Rental Rates

The citywide average rental rate increased by 3.6% from $28.16 per SF to $29.20 per SF over the quarter. The average citywide Class A rental rate increased by 2.4% from $33.94 per SF to $34.77 per SF. Class B rental rates also increased over the quarter by more than 6.0%, rising to $24.42 per SF in Q2 2015. 

In the CBD, Class A rental rates decreased over the quarter from $42.64 per SF to $41.58 per SF. Conversely, Class B rental rates in the CBD increased by 4.7% over the quarter from $33.93 per SF to $35.52 per SF. 

The average suburban Class A rental rates increased over the quarter from $31.54 per SF to $32.87 SF. 

The highest average quoted rental rate this quarter was the West Central submarket’s Class A office properties at $41.77 per SF in Q2.

Leasing Activity

Austin’s office leasing activity recorded 1.9M SF in Q2 2015. Major transactions this quarter included new leases for Apple, Inc. who will take 217,490 SF at Capital Ridge, and SolarWinds, with 117,886 SF in The Summit at Lantana.

Q2 2015 Top Office Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
Capital Ridge Southwest
217,490 Apple, Inc.  Apr-15
Aspen Lake One
Far Northwest
128,336 Q2ebanking2 Apr-15
The Summit at Lantana Southwest
117,886 SolarWinds Apr-15
7700 W Parmer Lane Far Northwest  63,965 Google May-15 
3100 Alvin Devane Blvd - Bldg A
Southeast
32,500 Younicos AG Apr-15
9500 Arboretum Blvd
Northwest
27,642 Rockwell Automation1 Apr-15
1703 W. 5th St
West Central
27,149 Snow Software3 Apr-15
9111 Research Blvd
North
24,759 Mike Chang Fitness Apr-15
Research Park Plaza
Northwest
23,379 Site Stuff, Inc. May-15
816 Congress CBD
21,610 All Clear ID, Inc. Jun-15
Seaholm Power Plant Building  CBD  20,000  Umbel Corp. May-15 
1 Renewal
2 Expansion
3 Sublease
4 Pre-lease/proposed or under construction

 

Sales Activity 

Austin’s office investment sales activity included five sales transactions (including three portfolio sales) with an average sale price of $277 per SF.

Q2 2015 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or Greater) 

BUILDING NAME SUB-
MARKET
RBA
(SF)
YEAR BUILT BUYER SELLER SALE PRICE $/SF CLOSED
Riata Corporate Park
Northwest 688,432 1998-2000 Accesso Partners Spear Street Capital Undisclosed   Undisclosed 6/2015
CityView Center & Setting Complex Southwest 282,106 1997/1985 Dividend Capital Pearlmark Real Estate Partners $68.8M $244 4/2015
Scarbrough Building & Littlefield Office Building CBD 233,463 1910 David Kahn DivcoWest $84M $360 6/2015
Arboretum Atrium & Las Cimas I Northwest/Southwest 173,870  1984/1998  Wedge Group Mohr & Associates $45.5M  $261 6/2015 
Perry Brooks Building  CBD  127,975  1954  Clarion Partners  Barton Creek Capital  Undisclosed  Undisclosed  4/2015 

Office Development Pipeline

More than 2.2 million square feet of office space was under construction during Q2 2015. Major buildings that delivered over the quarter include San Clemente At Davenport, and Capital Ridge. Capital Ridge is 100% leased to Apple, Inc.


BUILDING NAME
ADDRESS
SUBMARKET
SF PRE-LEASED DEVELOPER EST. DELIVERY
Green Water Treament Plant
500 W 2nd St
CBD
489,404 42.5% Trammel Crow Co Mar-16
Parmer 3.2
13101 McCallen Pass Dr
Northeast
192,000 0.0% Trammel Crow Co Sep-15
5th & Colorado
201 W 5th St
CBD
179,846 9.5% Lincoln Property Company Mar-16
Research Park Plaza Bldg V
12301 Research Blvd
Northwest
171,500 0.0% Cousins Properties Incorporated Nov-15
Lamar Central
3800 N Lamar Blvd
West Central
168,752 28.1% Highland Resources, Inc. Sep-15
Encino Trace 2
5707 Southwest Pky
Southwest
158,137 0.0% Koontz McCombs Jul-15
Rollingwood Center Bldg 1
2500 Bee Caves Rd
Southwest
147,900 100.0% Endeavor Real Estate Group Aug-15
Quarry Oaks III
10901 Stonelake Blvd
Northwest
140,000 100.0% Riverside Resources Dec-15
Quarry Oaks
10901 Stonelake Blvd
Northwest
137,615 100.0% Riverside Resources Dec-15
Aspen Lake Two
13785 US-183
Far Northwest
128,700 100.0% Patrinely Group Nov-15
317 Grace Ln
317 Grace Ln
Southwest
87,748 2.5% Equitable Commercial Realty Dec-16
Domain 5
2901 Esperanza Crossing
North
74,804 0.0% Endeavor Real Estate Group Dec-15
Rollingwood Center Bldg 2
2500 Bee Caves Rd
Southwest
69,150 100.0% Endeavor Real Estate Group Sep-15
1303 San Antonio St
1303 San Antonio St
CBD
54,442 48.1% Unknown Jul-15
NorthShore
110 San Antonio St
CBD
23,592 100.0% Trammel Crow Co Oct-15

Click here to download the report as a PDF.

Austin Office Market Indicators


Q1
2015
Q2
2015
CITYWIDE NET ABSORPTION (SF) 616K
480K
CITYWIDE AVERAGE VACANCY 10.2% 10.4% 
CITYWIDE AVERAGE RENTAL RATE $28.16 $29.20 
CITYWIDE DELIVERED INVENTORY (SF) 696.3K 730K
CLASS A RENTAL RATE

     CBD $42.64 $41.58 
     SUBURBAN $31.54 $32.87 
CLASS A VACANCY

     CBD 10.5% 10.8% 
     SUBURBAN 10.8% 11.6% 


Job Growth & Unemployment (Not Seasonally Adjusted)

UNEMPLOYMENT 5/14 5/15
Austin 4.1% 3.1%
Texas 5.0% 4.1%
U.S. 6.1% 5.3%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 3.5% 32.2K
Texas 2.5% 287K
U.S. 2.2% 3.1M

Q2 2015 Highlights

Texas