Austin Office Market
4Q22
| Average Asking Rent (Price/SF) | $40.49 |
| Vacancy Rate (%) | 19.5% |
| Net Absorption (SF) | -503,829 |
The Austin office market reported a decline in demand in the fourth quarter of 2022, the only quarter of the year that reflected negative net absorption. The occupancy decline was largely driven by occupiers remaining cautious due to growing economic headwinds. Despite net absorption ending the fourth quarter of 2022 at negative 503,829 square feet, the positive activity earlier in the year resulted in overall net absorption to end 2022 on a positive note at 119,901 square feet. Occupancy declines led overall vacancy rates in the market to increase by 80 basis points quarter over quarter and 220 basis points year over year to 19.5%. Supply remained robust, with 2.3 million square feet delivered in 2022, accounting for 2.9% of the market’s office inventory. The under-construction pipeline remained at peak historical levels, with 6.3 million square feet still under construction. Overall rental rates continued to trend upward as landlords attempted to keep pace with inflation. Face rates will likely remain elevated, despite softening economic conditions, and will be coupled with attractive concessions packages to help alleviate the impact of increasing prices. In 2023, the market may see similar investments levels as in 2022, due to high inflation and rising capital costs. Overall, the Austin office market’s long-term outlook remains positive, given the market’s strong economic and labor market fundamentals that will help the market tackle the near-term softening macroeconomic landscape.
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Austin Industrial Market
4Q22
| Average Asking Rent (Price/SF) | $12.09 |
| Vacancy Rate (%) | 4.9% |
| Net Absorption (SF) | 900,392 |
The Austin industrial market had a stellar year, breaking yearly historical records in deliveries under construction and net absorption. A previously constrained supply, likely impacted by demand slowing at the end of fourth quarter of 2022, resulted in 900,392 square feet of quarterly net absorption. The last time the market had quarterly net absorption under 1 million square feet was in 2020 during the pandemic. Yearly net absorption ended at 12.2 million square feet, a record high, bolstered by strong activity earlier in the year. The year ended with an all-time high of 14.2 million square feet of deliveries, outpacing yearly demand by 2.1 million square feet. As a result, overall vacancy rates rose by 130 basis points year over year to 4.9%. Overall asking rents remained relatively unchanged at $12.09/SF, reflecting a 0.7% decrease year over year. Under-construction activity ended the year at 15.3 million square feet, a new milestone. Assets under construction accounted for 12.9% of the market’s current inventory. Deliveries will likely remain high in 2023 due to a robust pipeline of under construction projects. Supply is projected to continue to outpace demand, leading overall vacancy rates to rise as an influx of deliveries hit the market. Overall, the Austin industrial market’s outlook remains positive as it continues to be bolstered by synergies resulting from the impact of Samsung’s and Tesla’s expansions over the coming
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