Austin Office Absorption Heads Back into Positive Range After Pandemic Disruption

Ready for some good news? The office market in Austin is not only showing signs of life, but it’s performing quite well compared to its other Texan peers such as Dallas, Houston and San Antonio. According to a new report from NAI Partners, the Austin office market has returned to positive absorption territory after three consecutive quarters of negative absorption. Just to illustrate how quickly the situation has improved in Austin, the latest second-quarter net absorption figure is around 208,500 square feet while the first quarter was -349,000.

A closer look at the stats highlighted in the report also indicates that the average asking rent is also increasing, though only slightly from $38.08 per square foot last quarter compared to $39.85 per square foot for the second quarter. Total inventory has also increased since this time last year, going from 92.72 million square feet in Q2 2020 to just shy of 96 million square feet in Q2 2021. Total vacancies are still higher than they were a year ago, at 14.8% in Q2 2021 versus 10.4% during Q2 2020.

Graphics via NAI Partners
Austin had been experiencing exponential growth even before the pandemic, but since early 2020, the city has become the darling for a tech industry that has become tired and priced out of Silicon Valley. High-profile HQ relocation announcements include the likes of software giant Oracle, fitness brand F45 Training, cryptocurrency startup Blockcap, pre-paid bank card company Green Dot, and many others. There’s also been speculation about whether Tesla could make an announcement of a corporate HQ move to the Texas capital to be close to its $1.1 billion Gigafactory.

The NAI Partners report also offers employment data from the Federal Reserve Bank of Dallas which indicates that the city has shown strong economic performance and a steep decline in unemployment to 4.6% in May, well below the national and Texas state rates of 5.8% and 6.5% respectively. The city saw the creation or addition of 17,235 jobs between March, April and May, helping close the gap on the 133,000 jobs lost at the beginning of the pandemic. As of the end of Q2 2021, Austin’s workforce was at 92% of the total pre-pandemic employment.

While upwards of 150 people were moving to the city every day before the pandemic, Austin’s cost of living has also increased as more new residents plant roots in the Texas capital. And while the city has drawn much attention from the tech and commercial real estate industries, Austin will have to quickly address its growing pains if it hopes to sustain this ongoing economic boom.