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Estimated 1.3-Mil SF Sublease Office Space Now Talk of the Town

AUSTIN-It's a possible short-term phenomenon that has caught Austin by surprise, say commercial real estate professionals. But, it's one to be watched. In recent weeks, an estimated 1.3 million sf in sublease office space has hit the market, giving rise to talk and back-room huddles.

By Connie Gore | Updated on February 06, 2001

AUSTIN-Commercial real estate professionals are huddling this week over the state of Austin’s office market, which had an estimated 1.3 million sf come available in sublease space in recent weeks.

It’s the talk of the town and the phenomenon is such that Charles Heimsath of Austin’s Capital Market Research is starting to tabulate the bottom line. He expects to have a market assessment ready in 10 days. “It’s got everyone watching with a guardedly optimistic eye,” he told GlobeSt.com.

The blame primarily is being laid at the feet of struggling dot-coms, which last year had kept Austin ahead of the state in rents and vacancy levels. Year-end calculations had appeared healthy, but few, if any, had taken sublease space into account, explains Steve McMillon, senior vice president for the Kucera Co. in Austin. “It has got a lot of people concerned,” he says. “Until the past three or four weeks, we were lucky to have 100,000 to 200,000 at any given time.” He estimates that the once-hailed 3% to 4% vacancy rate is now realistically 8% to 9%, thanks to the sublease space that’s being put on the market by companies that are pulling out or pulling back their Austin operations. “It’s all changed in a blink,” he told GlobeSt.com.

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