San Antonio Office absorption at highest January through July aggregate total since 2017.

Market Highlights

VACANCY RATE INCREASES TO 11.1%
The overall vacancy rate in the San Antonio office market is at 11.1%, up 60 basis points from this time last year at 10.5%. The vacancy rate for Class A properties is at 14.1%, up from 13.0% in the prior period. Net absorption (move-ins minus move-outs) of positive 290,000 sq. ft. was up from negative 85,000 sq. ft. at this time in 2020. In addition, six properties with a combined total of 619,000 sq. ft. of new supply has been delivered to the market so far in 2021, with an occupancy rate of 54%. Year-to-date through July, the office market has recorded 1.2 million sq. ft. of leasing activity—which is comprised of both new leases and renewals—down 60% from one year ago.

PROPOSED MIXED-USE THAT COULD INCLUDE OFFICE SPACE
Members of the Black family, which operate Terry Black’s Barbecue in Austin and Dallas, have purchased a mostly vacant 1.4-acre site—roughly a city block of land, a few blocks north of the successful Pearl development. The property is located at 2110 Broadway and will possibly be developed into a combination of San Antonio office space, multifamily, a hotel and restaurant. It is a prime spot near downtown business, the Alamo Heights neighborhood, and proximity to the Pearl.

SAN ANTONIO LABOR MARKET
The metro’s unemployment rate dropped in June to 5.5%, the lowest since March 2020. The state’s jobless rate fell slightly to 6.5%, and the nation’s rate ticked up to 5.9%. Net payrolls grew in the second quarter, with leisure and hospitality leading growth (15.1%, or 4,190 jobs) followed by government (8.8%, or 3,650 jobs). In March and April 2020 combined, 130,511 jobs were lost due to the pandemic. As of June 2021, 83.3% of those jobs had been recovered. Click to read more at www.naipartners.com.

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.

Austin is the U.S. city with the most interest from foreign real estate investors this year, a new survey found, signifying a shift in investment toward smaller metropolitan areas as the coronavirus pandemic and rise in remote working pushes people out of large cities. Nearly one in four survey respondents ranked Austin as the top market to increase real estate exposure in this year, while a third ranked it within the top three cities, according to an annual survey by the Association of Foreign Investors in Real Estate. Austin’s top ranking is a huge jump for Texas’ rapidly-growing capital city—in last year’s survey, it was ranked just tenth by international investors. It’s the first time a tertiary city, or a smaller metropolitan area, has ever ranked in the top three in three decades of AFIRE surveys, the investment association said, and marks a significant shift in investor interest. More than 60% of survey respondents said they expect to bump up their investment in tertiary cities over the next three to five years, and 80% plan to do the same in secondary cities, or medium-sized metropolitan areas. Investors indicated they are less interested in investing in large cities, like New York and Chicago, which were each ranked as one of the top three markets to lower real estate exposure by more than half of survey respondents, along with more than a third who ranked San Francisco in the top three. Click to read more at www.forbes.com.

When the real estate investment platform CrowdStreet was weighing where to relocate its headquarters from Portland, Oregon, its leaders considered a number of factors such as cost of living, the opportunity for growth, and access to a major research university. After some exploring, the choice was clear: Austin, Texas. “We did a search to understand where a majority of the investors were based. Texas came in at No. 2,” says CrowdStreet CEO and Co-Founder Tore Steen. “When looking at all the projects in the marketplace over the past seven years, the state is number one.” Steen adds that Austin also represents a diverse and highly educated population with a quality of life that is very similar to Portland, something that was important to the CrowdStreet team. “I plan to be the first Portland-based employee to move,” Steen says. “All of our employees have been given an option to continue working with our hybrid model (either in-person or remote as it works for them) or make the move to Austin with the help of a relocation package.” Click to read more at www.rednews.com.