Q4 2021 | Austin Office Report

HOUSTON - Feb. 15, 2022 - PRLog -- Key Takeaways

• Vacancy increased slightly, but this is primarily due to new deliveries.
• Leasing activity was very strong in Q4 21, with multiple large transactions resulting in another quarter of positive absorption.
• Construction pricing has continued to increase due to heavy activity, lack of subs, and pricing and availability of materials

Boots On The Ground

It's a weird market. The majority of office buildings throughout the city still feel relatively under occupied (sub 40% in the suburbs and sub 25% in the CBD), yet leasing activity is robust. No doubt this is primarily due to an incredible amount of inbound interest and demand from out of state companies; our office receives at least 2-3 calls per month for 40K-100K SF requirements who have short-listed Austin for expansion. Local tenants remain very active as well, with many considering upgrading to newer or Class A product. The competition for new space, especially in prime submarkets (CBD, East, South Central and North/ Domain) is amazing. It's likely that multiple buildings in the CBD that have delivered recently, but have significant vacancy, will be fully leased up within the next few months; at record rates and for an average lease term of 9 years. Construction pricing remains the biggest problem for every transaction. Cost per square foot guidelines for improvements that have been valid for years have been thrown out the window. While construction pricing trended down for a short period of time during Covid-19 due to general contractors cutting profits to keep their people busy, pricing has increased drastically in the past 10 months due to increased work, lack of subs, and materials pricing. We are regularly seeing construction pricing 20% higher than it was before the pandemic. Construction timing also remains a hurdle as designers are at capacity and the City of Austin is still very spotty on permit process and timing.

The Market, at a Glance

Austin continues to outperform competing markets nationwide. Leasing velocity is strong and rental rates continue to set records. Most medium and large companies, both tech and professional services, have thus far held their space throughout the city. When this is combined with a continued influx of inbound companies, primarily tech related, it makes for... To read the full report, click here: https://www.colliers.com/en/research/austin/2021-q4-offic...