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AUSTIN, TX-Dismal statistics from Grubb & Ellis Co.’s Q2 market report showed a negative 411,794 square foot absorption, bringing the YTD total to negative 539,420 square feet. The mid-year total is Austin’s highest negative absorption rate in seven years.

The report also showed an overall vacancy of 20.7%, with 438,876 square feet under construction. But there were a handful of bright spots. For example, the CBD had a 12.9% vacancy rate, the southern submarket at 5.1% vacancy, and the west-central area stood at just under 10% vacancy.

In comparison, Marcus & Millichap Real Estate Investment Services’ quarterly figures point to a 20.4% vacancy area wide, a year-over-year increase of 420 basis points. The report notes that, year-to-date, 500,000 square feet of space is under construction, all scheduled to be completed by the end of the year. Some of the stronger areas in the Marcus & Millichap statistics included the south at 9.7% and the southeast at 13.9% vacancy. The central business district figure stood at 15.3%.

Though the two reports differ somewhat in terms of CBD figures, Brian Butterworth and Robert Bantly with Grubb & Ellis’ Austin office tell GlobeSt.com that downtown remains a popular place for leasing activity. They say the reason for this is because there is a great deal of class A, first generation space downtown, which tenants like.

Furthermore, Bantly believes the market is starting to turn. As an example, he referenced a recent 50,000-square-foot lease signed by Bazaaarvoice at 3900 San Clemente. “The interesting about that is it was an expansion, meaning more employees added,” he says. Also on the good-news side were positive quarterly earnings reported by Intel and IBM, both of which have a huge presence in Austin. As a result, “we feel like we’ll see an improvement in the jobs picture sooner rather than later,” Bantly remarks.

But don’t go celebrating a recovery just yet, he cautions. Though local companies during the remainder of the year will explore the possibilities of expansion and new hires, a significant amount of sublet space remains on the market, and that will need to be absorbed. “It’ll be a long, slow road to where we were a year or two ago,” Bantly acknowledges.

Furthermore, the wild card of non-performing loans and impact on owners remains. “That’s what we’re watching for as we work on the tenant rep side,” Butterworth comments. He and Bantly say there’s been concessions loosening up, ranging from free parking to free rent. But concessions aren’t everything, Butterworth notes.

“In addition to looking at the available space, the big component tenants need to watch for is whether the landlord is financially stable,” he points out.

Building owners, in the meantime, are looking for one thing: good credit. “If you can demonstrate you’re good credit, they’ll invite you out to lunch and say ‘do I have a deal for you,’” Bantly says.

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