Vacancy rates rose in Austin’s office market in the Second Quarter of 2009.
Oxford Commercial reports that vacancy rates for Class A office averaged 23.7% in the second quarter, up from 16.6% a year ago. Rents averaged $28.49/ square foot, down 5.8% compared to the same time last year.
Endeavor Real Estate Vice President Travis Dunaway said that “vacancy rates in certain parts of town have topped 25%.” Average vacancy rates are typically in the 15% range.
According to Oxford Commercial, the Northwest Austin submarket put the largest amount of space back on the market (negative absorption) with 158,000 square feet returning to the marketplace in the Second Quarter.
The downtown market is holding its own according to Endeavor’s Dunaway and is on par with its historical vacancy rate. Oxford Commercial notes that the downtown submarket is at a 14% vacancy rate which is better than almost all other submarkets.
Overall office vacancy equals 9.1 million square feet of empty space, the highest amount ever and is a comparable amount to the entire downtown office market.
Sublease space currently totals 1.2 million square feet, the most since 2003 according to Ford Alexander with Oxford Commercial.
Interesting to note that the average per square foot rental rate remained roughly the same at $26.08 / SF compared with $26.66 / SF a year ago. However, there are parts of town according to Bart Matheney with Aquila Commercial where “rents in suburban areas have dropped 12 to 17% during the past 1.5 years”.
Rick Whitely with Oxford Commercial expects to see vacancy increase and lease rates decrease in the next quarter. Sam Houston with HPI Real Estate states that things are much better than they were at the end of 2008 and early 2009 noting that most businesses seem more confident about their business environment. Ford Alexander with Oxford thinks that the office market could start to turn up in the second half of 2010 when he expects businesses to be looking to relocate to Austin or for existing companies to expand.
Major office lease deals of note in the Second Quarter include OneWest Bank Group which leased 173,962 SF in the Domain Gateway office buidling and the Teachers Retirmenet System which leased 47,000 SF at 816 Congress Avenue.