Office leasing activity in Austin, Texas has taken a dip in the second quarter while posting gains through the first half of 2024.
Quarter-over-quarter, the category slipped from about one million square feet to 900,000 square feet, according to a report from Savills. While it was a slight decrease, the first half of the year experienced a 32 percent boost year-over-year.
Most of the leases signed in the second quarter were smaller deals under 100,000 square feet. The one exception was Visa, which renewed its 176,883 square-foot space at 12301 Research Boulevard. The Northwest market controlled the largest share of leasing activity at 38 percent in the second quarter.
“Despite demand being up in the first half of 2024, leasing activity continues to lag pre-pandemic figures,” Savills said.
“The slowdown in leasing from the technology sector continues to place downward pressure on overall office space demand.”
A high amount of unused space has become a problem in Austin’s office market. The availability rate has stayed steady for most of the year and was pegged at 28.1 percent in the second quarter. In comparison, several other markets in the country had lower rates than Austin including, Central, Southwest, West Central, Southeast, Round Rock, North, and Southeast. The East region posted the highest vacancy rate (35.2 percent).
Meanwhile, average asking rates in Austin inched up by 1.4 percent year-over-year to $46.47 in the three months through June. However, because vacancy rates are high, Savills expects “downward pressure” on prices. Plus, 5.3 million square feet of office space is under construction – meaning in the short-term availability rates could grow higher, according to Savills.
But Savills did offer a positive spin on leasing activity. This area will likely continue to increase in the short term thanks to a boost in touring. However, it did warn that long-term performance will depend on office demand in the technology segment and the category returning to what it once was.