Austin's Rent Backslide Slows, Possibly Stops

AUSTIN-Austin is no longer “king of the hill” for class A office rates. Rent, like the economy, kept going down, but all that seemingly has come to a halt, says a leading executive around town.

“I think we’ve seen the end of the slide,” Steve McMillon, senior vice president of Austin-based Kucera Co., tells GlobeSt.com. “For awhile, it changed every week to 10 days.” There’s a leveling off period in the asking price and it is attracting tenants’ interests. The “wait for a better deal” days are gone. “They’re (tenants) accepting the deals are as good as they’re going to get,” he says.

McMillon says CBD rates now are more in line with those being sought in the suburban markets–$24 per sf to $28 per sf. In comparison, the CBD in 2000 had a few buildings pulling in rents as high as $40 per sf, with the average falling more in the mid-$30 per sf range. “The times have changed,” he says.

The northwest and southwest submarkets, the city’s largest pockets, are collecting gross rents of $24 per sf to $28 per sf for class A space and $22 per sf to $23 per sf for class B. The killer comes with the vast blocks of sublease space, where the asking rate is falling $6 per sf to $8 per sf below the average direct space rate. McMillon should know since he is marketing sublease space in 100 Congress Ave., a top-of-the-line CBD building, for just $22.50 per sf in a bid to fill the spot for his client. That building is now quoting a rate of $28 per sf in comparison to the $36 per sf sought just nine months ago.

McMillon admits that trade is still slow around town, but it’s often slow at Christmas as business winds down for the year. Yet, he says, the positive note is that phones are still ringing.