Expect the office sector’s struggles to continue for the next five years … at least. That’s the sobering news from a new study from Clarify Capital.

According to Clarify Capital’s student, 16% of surveyed business owners who currently rent an office space plan to decrease or eliminate that space within the next year.

Clarify Capital found that an additional 24% of surveyed owners who currently rent an office space plan to do the same, ditching that space or downsizing it, within the next five years.

In its survey of 663 business owners, Clarify Capital found that one in five of those owners preparing to downsize or eliminate their office space are doing so because their employees prefer remote or hybrid work.

Owners in certain businesses are more likely to make this shift. Clarify Capital found that 44% of business owners in the marketing space plan to downsize or eliminate office space while 25% in the healthcare space and 24% in technology plan to do the same.

A total of 43% of buisness owners who told Clarify Capital that they want to reduce or eliminate their office space said they are making this move to reduce their costs. A total of 20% said that they are doing this because their employees prefer remote or hybrid work, while 14% are making this move because they need less office space because of efficiency improvements or changes to their business models.

There is some good news for office owners and brokers, though, in Clarify Capital’s report. Its survey found that 57% of surveyed business owners say they will keep the same amount of office space during the next year while 26% said that they will increase the amount of space they need.

And in the next five years? A total of 34% of surveyed business owners said that they would keep the same amount of office space during this period while 41% said that they would rent additional space.

In partnership with the Housing Authority of the City of Austin, The NRP Group celebrated the grand-opening of The Markson, a 330-unit mixed-income housing development in Austin, Texas’, Barton Springs community.

As a part of both organizations’ commitment to creating affordable housing options for Austin residents, more than half of the units will be reserved for residents earning 80% of the Area Median Income. 

The Markson meets the neighborhood’s demand for quality, accessible workforce housing, and embodies the vision that Dan Markson carried throughout his 30-year career. Through his tireless efforts, bold leadership, and brilliant partnership development, Dan Markson changed the affordable housing landscape, leading to the creation of over 29,000 multifamily units in Texas, with more to come. 

The Markson is one of the eight developments created in partnership with HACA, comprising over 2,300 units throughout the city. The organization serves over 25,000 Austin residents through 21 Project-Based Rental Assistance Properties, Voucher Programs, and the Austin Affordable Housing Corporation.

The Markson offers affordable rents for people who provide critical services, including teachers and first responders, close to their places of work. To assist local school teachers in finding affordable housing, NRP Group is also extending one month of free rent to all employees of nearby St. Andrew’s Episcopal School. The community’s location offers easy access to downtown Austin and nearby employment centers, like Yeti and NXP, catering to essential workers and local employees alike.

The Markson residents will enjoy an array of outdoor amenities, including a landscaped pool courtyard with private cabanas, an outdoor kitchen with grills, bocce ball, volleyball courts, and a dog park. The property’s sky lounge offers indoor and outdoor gathering spaces complemented by sweeping views of downtown Austin, providing a serene retreat for residents, families, and their guests.

Residents will also have access to a pet spa, bike storage, conference rooms, co-working lounge space, coffee bar, fitness center, game room, and package concierge. The community features a central parking garage with electric vehicle charging stations for added convenience. The Markson comprises one- to three-bedroom units with monthly rents ranging from $1,487 to $3,182. Residences are available in two different in-unit finishes—toffee flat panel or cream shaker style—and offer stainless steel appliances, pure white quartz countertops, luxury vinyl plank flooring, and keyless entry. A selection of units feature outdoor balconies.

Situated within the lush backdrop of the Barton Creek Wilderness Park, residents of The Markson will have access to a scenic nature trail, reservoir, the nearby Barton Creek Greenbelt, and over 20 acres of preserved nature area. The entire property is landscaped with native prairie plantings.

Austin’s multifamily market is dealing with an oversupply of available units
— a “too much of a good thing” scenario. National and local apartment data collector ALN Apartment Data indicated that this trend is likely to persist through at least 2024. Its data ranks Austin eighth in the country for cities with the most new units under construction. As of September, it recorded 63,882 units under preconstruction, 41,071 units under construction and 10,124 units under lease-up or being filled. Add to that another 17,364 units under construction/lease-up, and Austin’s apartment cup runneth over.

“The Austin multifamily sector is currently grappling with an oversupply of units, largely driven by significant new construction in recent years,” said Cheryl Higley, managing director of debt & equity for Northmarq’s Austin office, which offers comprehensive services in debt, equity, investment sales and loan servicing. “This oversupply has led to vacancy rates reaching a 20 year high. However, there are indications that the market will gradually balance out in the long run.”

One key factor influencing this balance is the projected growth in the population of young adults aged 20-34 in Austin. With a forecasted increase of 1.8 percent in 2024, Austin leads major U.S. markets in the growth rate of this demographic. “Given that this age group is more inclined towards renting rather than homeownership, the continued influx of young adults into the city, in addition to the expected drop-off in new units, suggests a more balanced multifamily market in the long run,” Higley noted. A seasoned professional with more than 22 years of experience in multifamily asset financing, Higley emphasized the importance of location in driving investment decisions amidst the current market scenario. “A couple years ago, multifamily properties in Austin were trading at similar cap rates, regardless of quality and location,” she said. “We currently have a multifamily listing in North Austin that would have traded at a 3 cap a couple of years ago, but now it’s approaching a 7 cap. This significant shift in cap rates underscores the impact of market dynamics on investment strategies.”

Multifamily owners are strategizing in response to market conditions, with some focusing on new acquisitions while others reinvest in existing properties. Age of the asset plays a significant role in decision-making, with buyers showing interest in older properties in strategic locations. “Owners are taking a more strategic view as their loans are maturing, evaluating between a refinance or sell scenario. We are seeing more owners adopt a ‘wait-and-see’ approach until market conditions become more favorable,” observed Higley, who, along with a team of Northmarq professionals, delivers tailored solutions to clients’ needs, attracting diverse capital sources while providing personalized services for buying and selling
multifamily properties.
Regarding the economic outlook, Higley remains cautious. “We need to be prepared for a higher-for-even-longer reality and a dim path for interest rate markets in the near future,” she said. “It is unlikely that interest rates will return to the historically low levels experienced over the past decade, but the market will eventually accept the new norm and pick up transactional activity.” While the Austin multifamily market currently faces challenges due to oversupply and shifting dynamics, there are signs of resilience and opportunities for growth. With a strategic approach to investment and a focus on emerging market trends, stakeholders can position themselves for success in the long term.

Altus Group conducted a survey across the US to provide insights into the market sentiment, conditions, metrics, and issues affecting the commercial real estate (CRE) industry.

The survey captured the individual practitioner’s perspective, representing various functions and across the capital stack.

See key highlights and download the results: United States Survey Results

Hart Commercial has arranged a 10-year renewal of Regional Employee Assistance Program’s 39,975 square feet at 400 Hospital Drive in Corsicana, Texas. 

Hart Commercial’s Allison Johnston Frizzo and Tanya Hart Little represented the building owner, Healthcare Realty Services, LLC.

NAI Geis Realty Group, Inc.’s Deidre Hardister represented the tenant.

Tenants are making plenty of big moves in today’s challenging office market. Many are moving out of older buildings and leasing smaller spaces in newer buildings, spending more per square foot but less overall for higher-end accommodations. Others are seeking out space in less expensive suburban areas as they embrace hybrid work schedules and no longer need to worry about their employees idling in traffic five days a week.

And still others? They are making the move from tenants to owners, purchasing office space instead of leasing it as the price of office properties continues to drop.

Jll reported that in the first quarter of 2014, office users accounted for 17% of U.S. office acquisitions. That might not seem like much, but in the fourth quarter of 2021, users only accounted for 4% of U.S. office acquisitions. That figure was only at 9% as recently as the second quarter of 2023, according to JLL researchers Jacob Rowden and Elena Lanning.

Since the beginning of 2023, corporate users have purchased $4.5 billion in office assets. Higher education and state and local governments have acquired $1.9 billion and $1.5 billion.

Some big names are making the move from leasing to owning, too. JLL reported that Costar Group, Prada, Kaiser Permanente, FanDuel, Hyundai, Amazon, Fortinet and Intuitive Sugical have all acquired offices priced above $100 million for occupancy since the beginning of 2023.