"I see subleases come across my desk every week," says Kristi Svec, who compiled the figures for Staubach Co. "But I think there's enough activity in the market to keep those leveled to where we have, for this quarter, a steady quarter. A quarter ago it wasn't like that."
The average citywide vacancy rate increased to 24.65% in the third quarter from 24.13% in the second quarter and the rental rate dropped to $22.40 per sf in the third quarter from $23.11 per sf in the second. A comparison to 2001 year-end figures, however, shows how unkind 2002 has been to the Austin office market. The vacancy rate was 16.61% at the end of 2001 and the average rent was $24.84 per sf.
In the third quarter, the amount of vacant sublease space fell to 3.2 million sf from 3.4 million sf in the second. Some of the moves that closed off sublease space included Pervasive and Evoke taking about 30,000 sf from the market; the Akin Gump law firm subleasing about 11,000 of the office space it vacated at Frost Bank; Dell subleasing about 40,000 sf at Las Cimas; 84,000 sf formerly occupied by the Vinson & Elkins law firm that reverted the building owner of One American Center; and i2 subleasing about 22,000 sf at Lakewood on the Park.
Vacant direct lease space, however, more than made up for that, growing to nearly 6 million sf from 5.4 million sf. Part of that, but certainly not all, is attributable to Staubach adding the 68,000-sf River Place Pointe V in the far northwest submarket and 80,000-sf Braker Pointe II in the northwest submarket to the inventory. The buildings received certificates of occupancy during the third quarter, Svec says. Staubach says 37.3 million sf of Austin inventory is contained in designs of 10,000-sf, multi-tenant buildings.
The far northwest submarket continued to pile up vacant sublease space. It increased to 1.5 million sf in the third quarter from 1.4 million sf in the second. The submarket's overall vacancy rate rose to 43.11% from 41.22% and the average rent dropped to $21.14 per sf from $21.68 per sf. Class A space continued to account for more than half of the submarket's vacancies.
Is it time for tenants, who have been looking for the best space at the best price, to make a decision? "There are some pretty good rates out there right now with furniture and free rent and free parking," Svec says. "Deals are coming pretty close to your best deal. I can't see it getting a lot better (for tenants) than it is right now.
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