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Office Market Insight

Austin Q2 Market Stats

$45.50
Avg. Gross Rent
18.6%
Vacancy Rate
1.4M
SF Delivered
7.3M
SF Under Construction

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Where Office is Headed

The office space has changed significantly, and the return to the office is different in each city. Many employers and employees are wondering if it will ever be the same. As the United States emerges from the pandemic, one thing is clear; not everyone wants to go back. According to a YouGov poll of those who switched to remote work because of the pandemic, at least 24% want to remain remote full time. The largest proportion of respondents (37%) said they would like to work most of the time remotely and occasionally go into an office. According to the study, over 50% of employees want to work from home, most if not all the time. Employees say that no travel time coupled with flexible hours are the most considerable benefits working from home.

Most employees’ responses directly conflict with executives who have a different vision for the office’s role. A survey performed by Deloitte shows that 64% of organizations that are still remote plan on returning to the workplace entirely or in a hybrid capacity this year. Organizations’ response to the survey is at odds with what employees answered. Including those already in the office, 89% will be back in the workplace in 2021. This attitude from organizations has not been received equally across industries and cities, the best example of this is in the tech sector. Two titans of the industry Apple, and Amazon, have seen a push back on their return to office plans. Apple’s plans were three days in the office starting in September, and in response, the employees penned a companywide memo in which they directly addressed Tim Cook and the executives. An excerpt from the memo “… However, we feel like the current policy is not sufficient in addressing many of our needs… we would like to take the opportunity to communicate a growing concern among our colleagues. That Apple’s remote/location-flexible work policy, and the communication around it, have already forced some of our colleagues to quit”. With other tech giants like Twitter and Facebook adopting fully remote options, companies like Apple and Amazon may face ongoing pressure from their employees to change their policies. These demands might slowly work their way into other sectors as well. Palo Alto is not the only place where this dichotomy is playing out; it is also happening in Manhattan among the banks. Goldman Sachs recalled its employees to its offices while a direct competitor, Citigroup, has been slower and is vowing to adopt a hybrid approach.

Chris Herd, CEO, and Founder of FirstbaseHQ, a company that helps set up remote work, has interviewed over 2000 companies to understand the gravity of this change. His interviews have concluded that those companies will cut their commercial space by 50-70% allowing for 2-4 remote days and 1-2 days in the office, and 30% of the companies will eliminate their office completely.

While larger primary markets are losing workers to remote work, tertiary markets seem more resilient and even benefiting as a popular destination for those remote workers. Cities like Austin, Nashville, and Miami see an inflow of HQ relocations and expansions nearly daily. These cities offer employees lower costs of living, fewer taxes, and more advantageous business laws. These markets continue to ink deals in a time of uncertainty. In June 2021, Kilroy Realty purchased Indeed Tower in Austin for an eyebrow-raising 580 million dollars.

The role of the office going forward is uncertain. The sentiment towards remote work and the need for an office will be monitored heavily by landlords in the coming months and years as a more discernible picture is painted on the actual effects of the pandemic on the office sector.

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

Austin In the News

Thousands of Austin's Tech Workers Will Soon be Back in the Office June 2021 Austonia Foreign Investors Bank on Austin as No. 1 Commercial Real Estate Market in U.S. May 2021 Culture Map Developers Bullish on Austin Office Market Despite Vacancies, Negative Absorption April 2021 ABJ A Look at Austin's Growth, Development and the Pains That Come With It July 2021 Statesman

 

Austin Q2 2021 Development Pipeline

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