Rent Growth Likely to Slow as Uncertainty from COVID-19 Looms Over the Market

Prior to the March onset of the COVID-19 pandemic, and related virus control measures bringing business across the state to a halt, the Austin office market witnessed some softening in availability as asking rents continued to push higher. At the end of the first quarter, the overall average asking rent stood at $39.28 per square foot (psf), reflecting annual (9.2%) and quarterly (2.4%) increases. Class A asking rents increased by 5.8% over the year to $42.93 psf. Central Business District and suburban asking rents increased by 6.7% and 7.7% year over year through the first quarter, respectively. As the market adjusts itself to the shifts that COVID-19 has created, rental rate growth is expected to slow. Downward pressure is likely to come from an influx of sublease space on the market as venture-capitalfunded technology companies implement cost-saving measures. Availability rates see year over year softening and are expected to continue to rise as COVID-19 reality sets in Austin’s overall availability rate increased by 10 basis points over the quarter, and 280 basis points year over year, to 13.8% in the first quarter of 2020. In comparison, the average Class A availability rate declined 20 basis points over the quarter, but is still up 430 basis points on an annual basis (14.9%). Market fundamentals differ some in the core and surrounding markets, the Central Business District availability rate rose by 200 basis points to 11.1%, while the average suburban availability rate declined by 30 basis points, to 14.5%. Click to read more at