October 18, 2019
While four real estate brokerage companies analyzing the Austin office market offered varying metrics in their Q3 2019 analysis, a single trend emerged. Namely, the quarter was marked by high demand, and robust development. “Continued demand, steady rental rates and a full construction pipeline could be the first signs of a balanced market,” opined NKF researchers, who added that absorption fell into negative territory for the first time since Q2 2018. Avison Young also pointed to negative absorption in the quarter.
CBRE explained the reason for the drop-in absorption, pointing out that 3M vacated its old campus in Northwest Austin, officially creating a drop of 1.1 million square feet. However, “demand to be in Austin” is continuing to drive an upward movement in leasing rates and rental rates. CBRE added that, at present, office space delivery is light. However, according to all four brokerage houses, a lot of space is in the pipeline.
As for the outlook, JLL analysts point out that rental rate growth “is expected to continue, as the availability of space concentrates in high-quality new construction product.” JLL also indicated that, while the technology sector remains dominant, Austin is experiencing a diversification of companies. Avison Young’s analysis agreed, pointing out that “the capital city remains to be one of the most sought-after markets in the United States,” with 2019 likely going down as one of Austin’s strongest years to date.
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