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AUSTIN-The working out of excess office space in Austin’s suburban office market will take about 24 months, according to an analysis by Holliday Fowler Fenoglio LP. Overall occupancy throughout the city will remain soft for the rest of 2002 and start pushing upward in 2003, according to Holliday’s research director Ed Frieze.

The Austin market’s most solid areas should be the CBD submarket and the southern submarkets, according to Frieze’s report. Those submarkets historically have stronger average occupancy rates than other submarkets, a relatively small base of high-tech tenants and a deep pool of Austin-based tenants. “Look for rents to remain flat or even decline in some submarkets over the next few quarters as sublease space competes with existing vacant inventory, as well as first generation space coming online,” the report states.

The report said a substantial amount of space–562,471 sf–was directly absorbed in the first half of 2002. But add sublease space to the equation and absorption switches to a negative 291,976 sf for the period.

New buildings added 1.3 million sf to the Austin inventory during the first half of the year. The buildings, which included Mira Vista, 1005 Congress, 300 West Sixth, River Pointe V and Travis Oaks, were about 40% leased.

The Holliday report pegs the Round Rock submarket as the area’s weakest with a 45.5% occupancy rate while the northeast Austin submarket was the tightest with a 92.2% occupancy rate.

Rents for multi-tenants buildings decreased 11.6% in the first half of the year to an average of $21.64 per sf. Class A properties rent for an average of $24.83 per sf; class B, $19.74 per sf; and class C, $16.73 per sf.

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