Q4 2023: Austin Office Market Report
Facing pressures from new construction with uncommitted space along with a leasing volume that continues to trail the historical average, Austin’s office market is on the way to seeing a continued expansion of vacancies, which will weigh on average rents across the market. Austin’s overall vacancy rate stands at 16.5 percent and is expected to expand to 21.2 percent by the third quarter of 2023, which would move its ranking from fourth to second among major U.S. office markets, trailing only San Francisco.
Approximately half of new construction is still available for lease, and 54 percent of the 6.6 million square feet under construction remain uncommitted. Further adding to availabilities are sublease spaces, which remain at all-time highs. The sharp rise in the vacancy rate over the past year is attributable to a combination of tenants subletting, downsizing to a hybrid model, or moving out of older, lower-quality office buildings, as well as the unleased space in newly constructed buildings.
Because of the widening gap between supply and demand, average rents are expected to revert to early 2019 levels by the end of 2024. This would still make Austin the fifth most expensive office market among the top 50 in the U.S.
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