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Q4 2020 Austin Office Report

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Boots On The Ground 

Commentary by David Bremer | Managing Director; | Austin

Our “Boots on the Ground” viewpoint is the voice of our experts, who have broken down the market data and compared it to what they are seeing for themselves. This is their take on what the numbers actually mean for the Austin office market.

The office market has been incredibly slow. Subleases have flooded the market resulting in an increase of approximately 2.1M SF since the start of the pandemic (from 1.0M SF to approximately 3.1M SF). This is a 210% increase over 9 months. Many of these subleases are the result of medium and large-sized tech users gobbling up space to accommodate speculative growth when the market was hot, only to realize that in-office head count growth in 2021 or 2022 is unlikely. Other subleases are driven by changing energy markets (Parsley Energy alone placed 448K SF of sublease space on the market in the CBD). Lastly, many companies are placing their space on the market just to test the waters. If a company’s lease is rolling in 2022 and they aren’t confident the space will be utilized in 2021, why not give it a try? Finding a sublessee would allow them to cut cost until their expiration, at which time their needs (size, budget, configuration, etc.) will likely be different than today. Furthermore, if the company’s need for a physical presence changed beforehand, there are ample opportunities to re-enter the market under favorable terms. Regardless of the reasoning (though all point back to COVID-19), sublease opportunities are abundant city-wide and many sublessors are willing to get extremely aggressive to beat the competition.

Thus far, direct Landlords have held firm on marketed rates, however, this doesn’t tell the whole story. Landlords who 12 months ago were demanding 7-10 year terms with low concessions are now showing tremendous flexibility on 2-3 year lease terms with 10-15% rate reductions (some are asking for NDA’s to maintain the perception of a strong market). The pandemic coinciding with a large amount of speculative office development hitting the market has created some panic with these once-stern Landlords. Austin currently has 5.9M SF under construction with only around 45% of that space pre-leased. In the next 12 months, we’ll see sizable deliveries in the CBD, East and North / Domain area. These Landlords are aggressively battling for tenants and we’re seeing many offering huge concession packages to compete.

Future Forecast

We firmly believe concession packages will remain aggressive, direct rates will drop by close to 10% (some have already, but others will follow over the next 12 months), and subleases and new deliveries will continue to battle it out over the next few quarters. That being said, Austin is resilient and is already showing signs that it will recover from this mess at a rate that will outpace most markets. We are experiencing a huge increase in demand from companies relocating from the West Coast and Northeastern markets (tech, financial, venture capital, etc.) with a staggering number of small and medium companies relocating to service expanding companies like Tesla, Apple, Amazon, Facebook and BAE. California’s “wealth tax” is spurring many company owners to seriously consider relocating operations to a more tax-friendly state. An interesting trend we have been monitoring is the sheer number of transplants purchasing homes in Austin over the past 4 months. Some of these home buyers are high-level decision makers at companies headquartered outside of Texas, while many others are engineering and sales reps relocating due to their ability to work remotely. We believe both trends will drive new office demand as employees follow decision makers and as employees eventually prefer some form of a return to the physical office, even if only part-time. 

We estimate Austin will stabilize in Q2 2021 and a slow rebound will begin in Q3 or Q4 2021.

By The Numbers - Austin's Office Market

Q4 2020  Office By The Numbers

Austin Economy Statistics

Q4 2020  Office Austin Economy

Direct Lease Rates

Austin’s citywide vacancy rate increased from 13.6% in the second quarter of 2020 to 15.2% in the third quarter. The West Central submarket’s Class A vacancy rate had the largest jump in vacancy moving from 5.0% in Q2 2020 to 23.1% in Q3. Since the West Central submarket is so small, a 9,382 SF being vacated at JLL Plaza (1703 West 5th Street) was a factor in the jump in vacancy.

The largest decline in vacancy was recorded in the Class A Cedar Park submarket, where the rate decreased from 26.9% to 15.4%.

Q4 2020  Office Direcrt Rates

Supply and Absorption 

Citywide absorption levels came in at negative 555,000 SF, further illustrating Austin’s stagnant leasing environment. Large chunks of sublease space, coupled with incoming construction deliveries, will likely continue to push the city’s overall vacancy rate even higher.

Q4 2020  Office Absorption and Supply 

Capital Markets

Commentary by Doug Rauls | Executive Vice President | Austin

Q4 2020 saw an increase in office sales compared to Q2 - Q3 of 2020. The overall sales activity is still down approximately 60% in Austin compared to 2019. This mirrors the national trend, where total November 2019 - November 2020 sales were down 57% compared to the same period in the prior year. In general, there are very few commercial properties over 20,000 SF available for sale in Austin. Many sellers are waiting until market conditions improve before listing their properties. Assuming a smooth rollout of the COVID-19 vaccine, we are expecting activity to increase in Q3 - Q4 2021 and into 2022 with a backlog of willing sellers waiting to list their properties under better market conditions.

Construction Pipeline

Q4 2020  Office Construction Pipeline


Q4 2020 Austin Office Report

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Related Experts

David Bremer

Managing Director - Austin


David Bremer has focused on tenant representation since 2000, completing over 350 transactions and establishing himself as one of the most knowledgeable and experienced brokers in the Austin market.  David is recognized by past clients and landlords as one of the most service focused brokers in the industry and he takes great pride in the number of clients he now considers friends.    His experience includes complex and high-value office leases, expansions and contractions, subleases, purchases and everything in between.   He’s even been known to help a client move a desk when necessary.

In 2017 and 2018, he was a Colliers' Everest Award recipient. This award is bestowed upon the top 10% of all Colliers professionals in brokerage, valuation and corporate solutions across the U.S. business based on revenue production.

Prior to joining Colliers, David co-owned and operated a successful boutique tenant representation firm in Austin.   David graduated from the McCombs School of Business at the University of Texas with a degree in finance and is happily married with two young children.

David is active in the community, acting as the charity chair for the Austin Commercial Brokers Association.   He represents a handful of local charities pro-bono and donates his time whenever possible.   David is also learning patience by coaching his kids’ sports teams.  

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Doug Rauls

Executive Vice President


I bring more than 20 years of experience in all aspects of commercial real estate including landlord representation, tenant representation, investment sales, financial analysis, acquisitions, development and operations. I started my brokerage career in Dallas, Texas then moved to Austin in 2000, working for Trammell Crow Company, Aspen Properties and The Kucera Companies. I joined Colliers as Executive Vice President in March 2015.  In addition to a focus on office landlord representation, I have deep experience in investment sales, with a track record of closing multiple transactions per year.  In 2016, 2018 and 2019, I was a Colliers' Everest Award recipient. This award is given to the top 10% of all Colliers professionals in brokerage, valuation and corporate solutions across the U.S. business based on revenue production.

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Will Nelson

Vice President


Will has over twelve years of experience in commercial real estate, specializing primarily in project leasing.  Will represents a wide range of local and institutional investors and developers.  He is currently responsible for the leasing of an office portfolio in excess of one million square feet.  In addition to office leasing – Will also focuses on office investment sales and new business sourcing.

Will began his brokerage career with Transwestern in Dallas before moving to Austin in 2016.  Will established a strong foundation leasing over 1.5 million square feet of office space for mostly institutional clients.  While at Transwestern – Will executed over 100 lease transactions .

Will holds a BA from the University of Texas at Austin and a Certified Commercial Investment Member (CCIM) designation.  

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