According to a report on Statesman.com, high demand for office space in Austin has pushed up the cost of Austin commercial rents to record highs. Because the region has become a popular place to relocate a business or establish a corporate headquarters, demand for office space in the area is becoming stronger. In combination with workers relocating for better job opportunities, the Austin area has reached record population growth in addition to real estate growth.
In the first quarter of the year, the price per square foot for top-tier office space – also known as Class A office space – reached an average of $41.83. It’s the highest level on record and up from $39.93 per square foot the year before. The data for the report comes from real estate services firm Cushman & Wakefield.
Local commercial real estate brokers don’t expect the price to come down anytime soon. Feedback from office brokers indicates that office rental rates should remain strong due to continuing Austin job market growth.
Additionally, the occupancy rates for Austin office space was 90.3 percent occupied in the first quarter. That’s the same occupancy rate as a year before, based on the numbers from Cushman & Wakefield.
“Job growth drives demand for office space, and the Austin market continues to generate jobs, including many in the tech sector,” Cushman & Wakefield said in the Statesman article.
Another quarterly report for Austin office space from CBRE shows that the gross asking rent for Austin office space reached $37.62 per square foot for all classes of space. It’s another record high for office rents in the area. Per their report, “robust demand continues to push asking rents to record highs.”
Developers are working hard to meet demand which professionals say is growing. That can be seen in the amount of commercial real estate construction in Austin and the surrounding areas. Throughout the Austin area, there’s about 5.6 million square feet of new office space under construction.
“The amount of office product under construction this quarter is remarkable,” said Holliday Hinckley, a director with Cushman & Wakefield. “Not only is this a glimpse into the ever-changing skyline but also a solid indicator of the impressive strength of the Austin market.”
And businesses are signing leases on office space before it’s even completed construction. One example is at the Domain, where Facebook signed a lease on an entire 17-story, 320,000-square-foot building currently under construction. The lease is the largest one signed last year in the Austin market. Amazon has signed a lease for about half of Domain 10, a 15-story tower with about 300,000 square feet that is also under construction at the Domain.
Since Austin offers a great quality of life and is still reasonably affordable, it’s become a popular place for newcomers looking to get more out of their money. As a result, companies are relocating to the Austin area to take advantage of everything the area has to offer. So some of the largest companies in the world like Google, Facebook, Amazon and Indeed, are moving or expanding their operations here.
Kristi Svec Simmons, a principal with Aquila Commercial in Austin told Statesman.com that “When they think of cities that best meet the needs of their employees, Austin is at the top of the list.”
In its monthly Austin market snapshot for March, commercial real estate brokerage NAI Partners said that “large leases dominated in 2018, and all indications point to that trend continuing in 2019.”
“There has been 1.5 million square feet of leasing activity year-to-date, up 75 percent from this time in 2018,” NAI’s report said.
In 2018, Austin saw 136 tech companies relocate or expand in the area with plans to create close to 18,300 jobs, NAI said, citing research by CoStar, a commercial real estate information company.
Read more about Austin commercial real estate.