Q1 2018 | Austin Office | Research & Forecast Report
Austin’s office market starts the year slow, but steady
When you look at the numbers, the office market was relatively flat in Q1 2018. Absorption was negligible, vacancy trended up slightly and rates increased. Our team believes that this “lack of activity” was based primarily on standard cyclical activity (i.e. lack of moves and deal-push over the holidays). On the ground, however, we’ve seen an uptick of activity and are tracking a large number of medium and large companies either new to Austin or making considerable expansions. Landlords have noticed this as well and it has resulted in a slight uptick of rates even though vacancy went up and absorption went down. Operating expenses saw another increase, but thankfully the jump was relatively minor in comparison to recent quarters.
In Q1 we saw another 792,705 SF of developments kick off, which brings the current under construction total in Austin to 3,456,491 SF. The construction pipeline remains full, but we’re still seeing the majority of the “prime”, new projects being spoken for prior to delivery. We’d be very surprised if any of the CBD, East or South-Central properties deliver with any meaningful vacancy. The few Northwest/Round Rock properties that chose to go spec are having relatively good leasing success and most other shovel-ready sites continue to hold for anchor tenants. In terms of activity, we’ve seen that the slowest market (as evidenced by lack of sublease movement and/or direct absorption) is the Southwest submarket.
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