AUSTIN-The shock of the sudden falling out of the Austin office real estate market may have worn off and owners are adjusting their prices to where the market is, and that’s lower. The citywide average rental rate dropped a full $1 per sf to $25.15 per sf at the end of the third quarter, according to a market status report from Colliers Oxford Commercial Inc. in Austin.

The overall vacancy rate rose to 16.1%, the highest level in nine years, according to the report released Thursday. That’s an increase from 14.7% at the end of the second quarter, Vacancy rates rose in each submarket except the southeast market. Vacant sublease space accounted for 2.1 million sf of the total 4.5 million sf awaiting tenants. That’s up from 1.9 million sf in the second quarter. The direct vacancy rate citywide is 8.5%.

The market fell so fast that building owners had a hard time catching up to it, Charles Heimsath, of Capitol Research, tells “It was just hard for your mind to grasp that it took 10 years to go from 75% occupancy to 95% occupancy,” he says, “and six months to go from 95 to 85%. If you’re in the market, it’s hard to get your mind around that concept.”

Now, the Austin market, he says, “has moved from the denial phase” to what he calls the “let’s-make-a-deal phase.” “For the first six months of the years, we just didn’t have any activity to speak of because the difference between the ask price and bid price was so large,” Heimsath says. “That seems to be narrowing now and we’re getting some leasing activity.”

The CBD is a prime example of how rents are dropping. Colliers reports the average downtown rental rate is $28.48 per sf, down from $29.64 in the second quarter. The area’s vacancy rate jumped to 13% from 11%. Average rates for class A space dropped to $32.44 per sf from $34.62 per sf at the end of the second quarter.

The far northwest submarket, which has the second largest amount of office space behind the CBD, has been hardest hit by the abundance of vacant sublease space. The area, which has had one of the highest concentrations of high-tech companies, has a 30% overall vacancy rate. Here are the raw numbers: It has 756,791 sf of direct space available and 1.3 million sf in available sublease space. The average rental rate is $26.70 per sf, off from $28.18 per sf.

There was 975,717 sf more space on the market at the end of the third quarter than at the end of the second, according to the Colliers report. Most of that, nearly 680,000 sf, was in the far northwest submarket.

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