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Austin Commercial Real Estate - Commercial Real Estate Market Conditions in Austin

expected projected vacancy austin’s

Austin is a bit of an outlier market in Texas. With an economy dominated by education, government and technology it, in many ways, has more in common with a northwestern market, than with its Texan neighbors.

As with the rest of the country, office vacancy in Austin is projected to climb in Austin throughout the year, even though completions of new space will be the lowest since 2006. Due to the already high, and climbing, vacancy, average rents, both on an asking and on an effective basis, are projected to fall again this year, as well. Luckily, though, the return of job growth will gradually whittle down the overhang of vacant space on the market.

Austin’s retail market is a different story than its office market. Completions of new retail properties will be significantly higher than in any year since 2007. Although higher quality grocery-anchored centers will fare well, even in the light of the heavy construction in the market, lower quality and non-anchored centers are expected to feel a significant pinch this year. Vacancy is expected to slightly exceed last year’s 40 basis point gain, and effective rents are projected to fall 4.1% this year.

On the whole, Austin’s performance will track that of the rest of the country. Values and transactional velocities are expected to pick up in the latter half of the year, although neither are expected to reach the highs of the mid-naughties (i.e., 2005, 2006, 2007). A number of factors indicate that an economic recovery is in place, but it will take time for existing stock to be absorbed and for both occupancies and rents to increase for Austin’s commercial investment properties.

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