Market Information: Austin

 

Economy
Office

 

Economy:  Year-End 2008

Resilient

Austin’s economy was robust throughout 2007, but began to lose momentum in 2008. Job growth for the 12 months ending October 2008 totaled 14,700 in Greater Austin.  This growth rate of 1.9% compares favorably to the national rate of -0.9%. Austin's long-term average annual job growth is 19,000 new jobs.

The Greater Austin unemployment rate increased to 4.8% in October 2008, from 3.5% 12 months earlier. By comparison, the national rate was 6.5% in October 2008. The unemployment rate in Greater Austin remains among the lowest in the nation, behind Washington and Boston.

 

Office Market:  Year-End 2008

Demand: Softening

The Greater Austin office market began to soften in 2008, as developers filled the pipeline with an abundance of projects.  Although absorption was stronger than the previous year, vacancy rose due to lighter leasing activity.  Concern over rising construction costs, relocation costs and tenant build-out expenses may continue to encourage companies to remain in existing space or to lease space in older buildings. 

  • Net absorption of office space totaled 1.6 million SF in Greater Austin in 2008, up from 634,000 SF in 2007. 
  • Available sublease space declined by 75,000 SF in Greater Austin during 2008. Remaining sublet space now represents 0.9% of standing inventory.
  • The overall vacancy rate in Greater Austin was 13.2% at year-end 2008, up from 11.4% at mid-year and 11.9% at year-end 2007.
  • There was 2.0 million SF of office space under construction in Greater Austin at year-end 2008 at 36% pre-leased. This compares to 4.0 million SF under construction a year ago at 29% pre-leased.
  • Class A rents increased 0.5% in Greater Austin in 2008, with rent declines in the second half of the year.
  • Investment sales activity in Greater Austin has slowed from $1.4 billion recorded in the second half of 2007 to $581 million in the second half of 2008. Office sale prices averaged $191/SF in 2008 in Greater Austin, compared to $302/SF in 2007. Last year the Thomas purchase of the Blackstone portfolio buoyed the average sale price.  However, investors remain interested in Austin assets because of the city’s growing economy, even in a post-credit crunch environment.  

 

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