AUSTIN-The story for the area’s Q2 office sector can be summed up as follows: Lower vacancies; higher rents. Specifically, according to NAI REOC’s research, area-wide vacancy came in at 12.3% out of an inventory of 41 million square feet (versus the 14.7% reported during the same time a year ago) and average asking rents increasing $.50 to $24.80 per square foot.
The experts at NAI REOC note that the cause for these statistics is due to new jobs being added (28,700 during the past 12 months) and population growth (more than 25,000 new residents came to the area within the past year).
“A decidedly strong 8.2% growth rate within the Professional & Business Services sector is of particular significance to the local office market due to the close correlation between job growth and demand for office space,” comments Bob Rein, NAI REOC’s associate vice president. The job growth translated into 384,727 square feet of positive net absorption in the local office market.
This demand, needless to say, has lead to the increase in asking rates; Class A asking rents average $30.42 per square foot but prices vary by submarket. For example, tenants looking at top-tier office space downtown, for example, can expect to pay an average north of $40.
NAI REOC anticipates more of the same for the rest of the year. Though construction is underway on certain projects (notably, the 374,348-square-foot Colorado Tower; the 195,279-square-foot IBC Bank Plaza and the 148,000-square-foot Seaholm redevelopment), that space will not come online for at least another year. Additional projects slated for suburban areas are expected to break ground in coming quarters.
“As the market continues to heat up moving into the second half of the year, tenants will continue to face a crowded marketplace with fewer space options and higher rental rates,” predicts Kim Gatley, senior vice president and director of research for NAI REOC.