Austin and San Francisco had the highest office vacancy rates nationally at 27.7%, according to a new Commercial Edge study. This means the supply for empty offices in downtown Austin is high, but the demand is low, making it harder for companies to sell the space they have.
There are three new towers in Austin’s skyline that sit dark, the Austin Business Journal reported in October. Google has yet to move into its 35-story sail-shaped building overlooking Lady Bird Lake, and Facebook’s parent company, Meta, abandoned plans to move into its nearly 66-story skyscraper on Sixth and Guadalupe its been seeking to sublease since 2021.
The city’s ongoing construction for offices that may or may not be filled, has led to significant spikes in Austin’s vacancy rate. Austin’s current rate, “represents a 710-basis point increase year-over-year, the highest jump among major U.S. office markets,” according to the report. The Central Texas city also had the second-highest asking rents in the region at $46.75 per square foot, surpassed only by Miami’s $52.84 per square foot.
The average U.S. office listing rate stood at $32.79 per square foot, up 3.3% year-over-year. While the report says southern markets continue to be the most sough-after for office investments, Austin remains a unique case.
Austin, which led the nation in sale prices in September, saw a sharp decline from $379 per square foot to $287 per square foot, now ranking sixth among leading U.S. office markets, the report says. The drop shows there was an increase in properties being sold at discounted prices, with the most recent transaction being the sale of two office assets for $64.5 million by Equity Commonwealth (EQC).
One was Bridgepoint Square, a 440,00-square-foot office campus acquired in 1997 for $78 million and the other was a 176,000-square-foot building purchased in 2012 for $49 million. Despite the discounts, the report explained that Austin maintained its position as a leader in office development, ranking first regionally and third nationally in square footage under construction.
“The market’s 3.5 million-square-foot pipeline accounted for 3.7% of its existing stock, placing it second among top U.S. markets on a percentage-of-stock basis,” the report says. “Looking ahead, Austin’s office footprint is projected to grow by 12.1%, including current and planned projects.”
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