The biggest indication of Austin's office market strength is the 4.6 million square feet of user demand in the market, says Gump.

AUSTIN—Office vacancy rose slightly to 11.8% at the end of the second quarter, but the market still saw its fourteenth quarter of positive net absorption. According to the latest CBRE report, Austin saw 153,061 square feet of positive net absorption. Adding to this, the area has more than 2 million square feet of office space under construction, something the market hasn’t seen since 2008.   

GlobeSt.com spoke with John Gump, first vice president of CBRE, to get his take on the report’s findings and the state of the market.

GlobeSt.com: What was the most surprising finding of the report? 

John Gump: The negative absorption in the Southwest Austin submarket is surprising, but the story behind it makes it much less surprising. We knew the AMD space would hit the market for quite some time, but SolarWinds taking 230,000 square feet at the campus—more than double their previous space—softened the impact on the market. SolarWinds’ sublease accounts for the other big piece of the negative absorption—approximately 118,000 square feet. We are tracking approximately 4.6 million square feet of demand in the entire market, so the negative absorption in the Southwest Austin submarket is likely an anomaly and we’ll see positive absorption continue throughout the remainder of the year.

GlobeSt.com: Do you foresee these favorable conditions continuing for some time? 

Gump: We will continue to see positive activity for at least the next 12-18 months. More than 2.5 million square feet of office product is under construction and other new projects are close to starting. As projects are completed, we will likely see a softening in the market, but that is about 12 months away.

GlobeSt.com: Where do you expect to see the market in a year’s time? 

Gump: We will see higher rates and similar vacancy as today, and then due to increased supply, rental rates will begin softening.

 GlobeSt.com: What do you think is the most telling statistic at the moment to indicate the current state of the market? 

Gump: The biggest indication of Austin’s office market strength is the 4.6 million square feet of user demand in the market.