The office market in major cities across the country have been reeling from the impacts of the pandemic over the last year and a half, and it’s still very uncertain how, when and even if we will see a big return to downtowns across the United States in the coming months or quarters. However, as Austin continues to witness stratospheric population growth and the addition of new satellite campuses and corporate headquarters relocations, the office market has fared much better in the Texas state capital city than say in Houston, San Antonio or Dallas.
A new report from NAI Partners offers a snapshot of the latest figures in the Austin office market, illustrating some signs for optimism. While vacancy was still relatively high at 14.7% by August 2021, net absorption was significantly higher than it was just a year ago. Between January through August 2021, the Austin office market clocked in 1.2 million square feet of net absorption, 4 million square feet of leasing activity and 3.4 million square feet of new deliveries. Compared to the same period last year, where there was only 258,000 square feet of net absorption over eight months, and the city seems poised for a recovery. As for leasing and deliveries between January and August 2020, the figures stand at 3.6 million square feet and 2.15 million square feet respectively.
While the absorption level in 2021 is a far cry where things stood in 2020, overall leasing activity is still much lower than in pre-pandemic years. When comparing the period of January through August over the last five years, leasing activity topped out in 2019 where it stood between 8 and 9 million square feet, when also including sublease deals. The sublease trend has remained steady though as a large percent of office deals so far in 2021 have been sublets.
However, on a more somber note, there still remains a lot of supply left to fill in the Austin market. While leasing activity has been steady in 2021, the new deliveries combined with available sublet space means that there is a lot of availability — roughly 20% of the entire city’s office space. The city will have to witness further quarters of higher leasing activity and absorption to bring this number down but the 6.33 million square feet of office space still under construction means that there is still a substantial pipeline of new office space that will be delivered in the near future.
Of the big lease deals inked in 2021, the NAI Partners report highlights a handful of significant contracts. Tech company Cloudflare committed to 124,393 square feet at the Foundry II campus in the city’s eastern submarket in July while Amazon signed up for 114,665 square feet in The Domain mixed-use campus due north of downtown. Other tech leasing activity in 2021 includes a 96,467-square-foot deal for Skyworks at the Eastlake at Tillery office development and Tiktok’s 65,000-square-foot lease at Chase Tower.