Austin

Research Contact


Q4 2015 | Austin Office | Market Report

According to Wallethub’s list of “2016’s Best & Worst Cities to Find a Job”, Austin ranks 3rd in the nation behind Plano, Texas and Overland Park, Kansas. The strong numbers in this report prove that despite low oil prices that are taking a toll on other Texas markets, Austin continues to thrive.

Once again, overall positive net absorption in the Austin market has reached the highest ever recorded. Tenants moving into new office space during Q4 2015 amount to a positive net absorption of 902,046 square feet.


  

Five buildings totaling 676,904 square feet delivered in the fourth quarter and 1,579,496 square feet of office space is currently under construction. Projects that delivered in Q4 include Lamar Central, a 168,752 SF mixed-use development in the West Central submarket. In the Northwest submarket, Quarry Oaks III delivered and is 100% leased.

The citywide average rental rate increased by only 0.6% from $30.52 to $30.71 over the quarter. Class A rental rates in Austin’s CBD increased by 1.4% over the quarter to $44.36, a small increase in comparison to the 7% increase that occurred in Q3. Suburban submarkets also saw an increase in rental rates as the average Class A suburban rental rate increased from $32.73 per square foot to $33.16 per square foot over the quarter. Austin’s unemployment rate of 3.3% is now well below the state average of 4.5% and the national average of 4.8%. Job Growth in the city is also remarkably higher than the state and national average with a 3.9% annual increase in job growth.

Vacancy & Availability

Austin’s citywide vacancy rate fell 40 basis points from 11.7% to 11.3% between quarters, continuing its gradual decrease since Q2 of 2009. Vacancy in the CBD remains lower than the average at 6.8%, a decrease of 160 basis points since the end of the third quarter. This drop in vacancy is the most significant drop in the fourth quarter.

Overall suburban vacancy also continues to decrease although it remains higher than the CBD at 12.4% vacancy in Q4. Major submarkets that saw a significant decrease in vacancy over the quarter include Central, North/Domain, Southwest, and Northwest.

Submarkets that experienced increases in vacancy in Q4 include Cedar Park, Far Northwest, and the South submarket. The increase in vacancy in the Cedar Park submarket is due primarily to the delivery of Paloma Ridge Buildings A & B which created 212,400 SF of available office space in the Cedar Park submarket. Both buildings were completely vacant upon delivery in December.

Absorption & Demand

Austin’s office market posted 902,046 SF of positive net absorption in Q4 2015, the highest positive net absorption ever recorded according to our data service provider, CoStar. Approximately 327,720 square feet of that absorption occurred in Class A office space in the Southwest submarket where Apple, Inc. moved into 217,490 square feet at Capital Ridge. Class A space in the Northwest submarket posted the second highest positive net absorption of 204,809 square feet in the fourth quarter. The CBD posted the third highest gain of 148,599 square feet of Class A positive net absorption. Only the South submarket saw negative net absorption over the quarter of 10,965 square feet. Total positive net absorption for 2015 reached 2,874,695 square feet, well over double the amount of positive net absorption in 2014.

Absorption, New Supply & Vacancy Rates

  

Rental Rates

The citywide average rental rate increased slightly over the quarter from $30.52 per square foot to $30.71 per square foot. The highest rates across the Austin market are in the CBD where Class A rental rates reached $44.36 per square foot in Q4, a 1.4% increase over last quarter. Rates were also high in the South and West Central submarkets, where Class A rates reached $39.37 per square foot and $38.74 per square foot, respectively.

Citywide Class B rental rates rose slightly in the fourth quarter to $25.19 per square foot from $24.92 per square foot.

Over the year, citywide rental rates rose 3.6%, a significant increase in comparison to years past. In 2014, the citywide average rental rate rose only 0.8% over the year.

Leasing Activity

Austin’s office leasing activity recorded 898,758 SF in Q4 2015. Major transactions this quarter included a new lease for Natera Genetics, a renewal for LDR Spine, USA, and an expansion for Q2 Holdings, Inc.

Q4 2015 Top Office Leases

BUILDING NAME/ADDRESS
SUBMARKET SF TENANT LEASE DATE
Parmer 3.2
Northeast
93,000 Natera Genetics
Oct-15
Aspen Lake One
Far Northwest
88,000 LDR Spine USA, Inc.2
Oct-15
4516 Seton Center Pky
Northwest 62,193 BancVue, Ltd. Nov-15
Research Park V Northwest 51,624 Planview Oct-15
One Congress Plaza
CBD
46,960 Main Street Hub
Oct-15
3800 Quick Hill Rd.
North/Domain 46,247 Protect America1
Oct-15
San Jacinto Center
CBD 40,207 Outbound Engine
Dec-15
823 Congress Ave.
CBD 33,000 AllClear ID
Dec-15
The Terrace 7
Southwest 25,082 BPL Plasma
Dec-15
5th+Colorado
CBD 19,087 Industrious Office4 Oct-15
Ben White 6
Southeast 18,990 Tokyo Electron1
Dec-15
1300 Guadalupe St.
CBD 18,446 Projekt202 Oct-15
Frost Bank Tower
CBD 14,000
Pilsbury Winthrop Shaw Pittman LLP
Oct-15
5th+Colorado
CBD 12,434
Sheri Hill4
Oct-15
1 Renewal
2 Expansion
3 Sublease
4 Pre-lease/proposed or under construction

 

Sales Activity 

Austin’s office investment sales activity included three sales transactions (including one portfolio sale) with an average sale price of $369 per SF.

Q4 2015 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or Greater) 

BUILDING NAME SUB-
MARKET
RBA
(SF)
YEAR BUILT BUYER SELLER SALE PRICE $/SF CLOSED
7700 W Parmer Ln (4 Properties)* Far Northwest 911,579 1999 Accesso Partners, LLC
Spear Street Capital
$272M $299 12/15
Amber Oaks Corporate Center (10 Properties)*
Far Northwest 667,999 1999-2007 Menlo Equities
CBRE Global Investors Ltd.
$116M $173 12/15
301 Congress
CBD 418,338 1985 Prudential Investment Management, Inc.
Commonwealth Partners Management Services LP
N/A N/A 12/15
6800 Burleson Rd. Southeast 204,346 1986 Unknown DivcoWest
N/A N/A 12/15
*Part of a portfolio

Office Development Pipeline

Almost two million square feet of office space was under construction during Q3 2015.  Only four buildings delivered this quarter including Rollingwood Center Buildings I & II. Almost half of the buildings currently under construction plan to deliver in Q4 2015.


BUILDING NAME
ADDRESS
SUBMARKET
SF PRE-LEASED DEVELOPER EST. DELIVERY
Green Water Treament Plant
500 W 2nd St
CBD
500,512 41.2% Trammel Crow Co Jan-17
5th & Colorado
201 W 5th St
CBD
179,854 26.8% Lincoln Property Company Mar-16
Research Park Plaza Bldg V
12301 Research Blvd
Northwest
179,846 29.9% Cousins Properties Incorporated Feb-16
Domain 1 - 11801 Domain Blvd - North
124,578 0.0% Endeavor Real Estate Group
Mar-16
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 Feb-16
411 W Main St
Round Rock
26,563 0.0% 411 Partners, LLC
Jan-16
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


Q3
2015
Q4
2015
CITYWIDE NET ABSORPTION (SF) 899K
902K
CITYWIDE AVERAGE VACANCY 11.7% 11.3% 
CITYWIDE AVERAGE RENTAL RATE $30.52 $30.71 
CITYWIDE DELIVERED INVENTORY (SF) 625K 805K
CLASS A RENTAL RATE

     CBD $43.75 $44.36 
     SUBURBAN $32.73 $33.16 
CLASS A VACANCY

     CBD 9.8% 7.6% 
     SUBURBAN 13.8% 13.4% 


Job Growth & Unemployment (Not Seasonally Adjusted)

UNEMPLOYMENT 11/14 11/15
Austin 3.7% 3.3%
Texas 4.5% 4.5%
U.S. 5.5% 4.8%
JOB
GROWTH
ANNUAL CHANGE # OF JOBS ADDED
Austin 3.9% 36.1K
Texas 1.7% 204.8K
U.S. 1.9% 2.6M

Texas