The Austin office market is facing challenges due to upcoming office completions coinciding with declining demand, leading to higher vacancies and decreasing average rents. Despite being one of the fastest-developing office markets in the U.S., demand has not kept pace with supply. Occupancy losses surpass moveins, with downsizing prevalent across both urban and suburban areas.
Approximately 6.7 million square feet of office space is in the pipeline, contributing to the market’s oversupply issue. This construction activity, coupled with declining demand, poses a significant challenge to near-term market stabilization. However, a decline in construction starts suggests a potential slowdown in new supply starting in 2025.
Despite these challenges, landlords have maintained relatively flat asking rents, but with vacancies accumulating, average rents are expected to decline in 2024. Currently, the market’s average rent stands at $44.00 per square foot, making it the fifth most expensive in the country. We forecast a dip to $43.20 per square foot by the end of 2024, indicating a 0.7 percent decline from the previous year, one of the lowest rates of change nationwide. Here’s to 2024!
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