AUSTIN – (By Dale King) – With a new skyscraper anchored by Google opening in downtown amid concerns that the Austin economy might be slowing, demand for office space remained strong in the second quarter of 2017, states a report from the Avison Young commercial real estate services firm.
Austin’s overall vacancy remained low – at 8.7 percent, Avison Young reported.
Demand for office space from large technology tenants relocating to the Austin market is also solid, driving leasing activity and rental rates to new highs, the report adds.
Avison Young’s report says “vacancies appear to be stabilizing as new office product deliverers and office users broaden their footprint.”
In the meantime, “vacancy has tightened in Austin’s up-and-coming submarkets, like the east and south where office product inventory is low, while submarkets with increasing inventory have seen vacancy climb.”
Construction deliveries increased, Avison Young reported. “Those that were slow to come online during the first quarter of 2017 made a dramatic rebound during the second quarter of 2017, with more than 870,000 square feet of office product” coming on line during Q-2.
New buildings completed in the second quarter included Domain 8, Galleria Oaks II and the 29-story downtown tower at 500 W 2nd St., which is anchored by Google. Google leased 200,000 square feet in the 500,000-square-foot building, developed by Trammell Crow.
Another 1.88 million square feet was under construction in the Austin market by the close of the second quarter, of which 728,917 square feet is expected to be completed by the end of 2017. An additional 2.28 million square feet is proposed.
Rental rate growth market-wide persisted through the second quarter of 2017, posting a nearly $5 per square foot increase over Q-2 2016. “Following recent historical patterns, the Central Business District continues to boast the highest average asking rate while the lowest rates can be found in the northeast and south submarkets,” Avison Young said.