Austin absorption drops significantly in Q2

For the first time since 2012, Austin’s office market is experiencing negative absorption, dropping from 505,303 SF of positive absorption in Q1 2016 to 24,603 SF of negative absorption in Q2 2016. The absorption is falling, the construction is slowing, yet the rental rates are still on the rise in the Austin market. 

Three buildings totaling 196,463 square feet delivered in the second quarter, and together the three buildings were 91.9% leased upon delivery. Projects that delivered in Q2 include the fully leased 74,804 SF Domian 5 building, located in the North/Domain submarket. The Round Rock submarket delivered 97,941 SF at 2700 La Frontera, and has three more buildings, totaling 79,634 SF, set to deliver next quarter.

The citywide average rental rate increased by 0.9% from $34.39 per square foot to $34.65 per square foot over the quarter. Class A rental rates in Austin’s CBD increased by 2.7% over the quarter to $49.52 per square foot from $47.31 per square foot in Q1. Overall suburban Class A rental rates increased marginally from $35.71 per square foot to $35.74 over the quarter. 

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