Q1 2023: Austin Office Market Report
Austin’s office market is experiencing a slowdown in demand, with a wave of new building deliveries expected to further disrupt the market fundamentals in the near term. Economic headwinds and changing tenant needs could continue to affect the leasing outlook. Austin’s vacancy rate of 15.7 percent has exceeded its 10-year average of 9.6 percent, and the considerable construction pipeline could push it even higher. Sitting at ~5.5M square feet of sublease space, most properties transacting are lower quality with a focus on the CBD and West Central areas. Long term outlooks are positive given Austin’s high-growth reputation and with an increasing supply of high-quality sublease space in high-profile submarkets. Landlords and tenants are offering more favorable terms at a discount to direct deals which could make for an enticing entry point for office-using tenants in the market. Texas is still ahead of other states in post-pandemic returns to office as Kastle Systems reported office usage of over 60 percent in Austin as of February 2023. Looking forward, employers play a critical role in the future of office leasing and vacancies.