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Office Market Insight

Austin Q2 Market Stats

$48.74
Avg. Gross Rent
13.6%
Vacancy Rate
613K
SF Delivered
11.8M
SF Under Construction

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Could a Spec Suite be Right for You?

It seems like every day we look out our windows on 7th St. and see the city change all around us. This quarter we saw 613,029 square feet of new office construction hit the market and a Direct Vacancy Rate of 11.8%. As more of Austin is currently being developed we are still faced with a looming question, who is going to build all of this? In July, the construction industry saw a decline in employment of 8%, which equates to 1,500 jobs. This has a ripple effect that causes an increase in construction times. The current timeline for a tenant to remodel an office suite can take upwards of 12 months, or longer in many instances. Many companies find this timeline to be simply too long to consider a traditional remodel.

Many tenants are opting to look for speculative office suites (commonly known as Spec Suites) instead of proceeding with a build-out project. These office suites are built to meet market trends, prior to a tenant signing a lease.  This saves time and allows a company to begin operations sooner.  Additionally, this solution for tenants removes the risks around expenses associated with a construction project.

The typical build out for a shell space takes 3-4 months for the design and permitting, 1 month for construction bidding, and finally 3-4 for physical construction. This is all assuming there are no supply chain issues or other delays commonly incurred in construction projects. Most businesses would need to plan a year in advance to make this type of build-out possible. We are finding this long of planning is not feasible for most companies. These companies will opt to look for a space that is already pre-built and spec suites offer a convenient solution for companies looking for an office.

Currently, in Austin, there is nearly a half million square feet of spec suites. Landlords historically would use spec suites to draw attention to small hard-to-lease offices. However, today the average size of a spec suite is much larger than its predecessors and it is not unusual in the current market to see spec suites over 10,000 SF. Landlords may find that having a spec suite sets them apart from the competition and drives more companies to look at their offices. However, for some landlords, the cost of preparing a spec suite may be too much of a gamble and, they may feel that this expense will limit any further investment ability. Ultimately, creating a concern that they won’t design the space to meet the needs of a future tenant. However, in ECR’s experience, the design of office space is becoming less tenant-specific and with the help of a skilled interior architect, you can design a space to meet the needs of many of today’s tenants.

Austin Sublease Activity

Quarter Class A Office Class B Office Class C Office Total
2016 Q2

864533

480796 60113 1405442
2016 Q3 899632 467834 38118 1405584
2016 Q4 856643 439641 34746 1331030
2017 Q1 909176 561556 25547 1496279
2017 Q2 952435 456450 28108 1436993
2017 Q3 850486 444043 45576 1340105
2017 Q4 1005713 480616 24850 1511179
2018 Q1 1114427 465834 22831 1603092
2018 Q2 1135173 703671 27356 1866200
2018 Q3 1158644 596011 62841 1817496
2018 Q4 1025760 685090 51813 1762663
2019 Q1 959386 616030 32816 1608232
2019 Q2 907874 659263 19732 1586869
2019 Q3 641646 632070 27772 1301488
2019 Q4 943674 657355 20145 1621174
2020 Q1 1293038 699123 20254 2012415
2020 Q2 1912374 808228 35809 2756411
2020 Q3 2295295 946767 44659 3286721
2020 Q4 3024439 1070789 48013 4143241
2021 Q1 2905258 1016242 59778 3985265
2021 Q2 2067050 823289 51786 2942421
2021 Q3 1760065 731252 38713 2530284
2021 Q4 1889479 845798 45870 2781147
2022 Q1 1468352 909732 51755 2429840
2022 Q2 1905530 888513 30219 2824263

Austin In the News

Austin is Now the Gen Z Capital of America June 2022 Fortune Downtown Austin Making Strong Recovery Following Pandemic June 2022 ABJ Austin Metro Sees One of the Highest Employment Increases in U.S. Over the Past Year May2022 Austonia Gen Z is Choosing Austin Over Other Tech Hubs Like Denver and NYC July 2022 Austonia

 

Austin Q2 2022 Development Pipeline

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VIEW THE FULL Q2 2022 PIPELINE HERE

 

Austin Submarket Map

 

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