Austin Office Report – Spring 2019, Part 2

With healthy office fundamentals and a friendly business environment, major companies—including Google, Facebook and WeWork—are in constant search of new and high-end space in the metro’s core submarkets.
Office-using employment in Austin, click to enlarge
Office-using employment in Austin, click to enlarge

Austin’s ongoing economic expansion continues to draw investor interest and fuel population growth. With healthy office fundamentals and a friendly business environment, major companies are in constant search of new and high-end space in the metro’s core submarkets. Year-to-date, tech giants Google, Facebook and WeWork closed several new expansion deals, further bolstering their Austin presence. As of December, the metro had 282,000 office-using jobs, with professional and business services leading growth in the office sector (6,100 added jobs, up 3.3 percent).

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Strong demand and positive absorption are driving Austin’s robust development pipeline. Some 5.1 million square feet was under construction as of February, representing 7.9 percent of total stock, and more than half of that (2.9 million square feet) is expected to come online by year-end. Downtown continues to lead the metro in construction activity (2.1 million square feet underway), as developers aim to match demand from existing tenants planning to expand as well as new-to-market companies like Stonepeak Infrastructure Partners, relocating from New York City.

Employment growth by sector in Austin, click to enlarge
Employment growth by sector in Austin, click to enlarge

On par with national trends for quarterly volume levels, investment activity was sluggish in the first months of 2019. Four assets changed hands for a combined $33 million through February. Transactions amounted to $938.9 million in 2018, with acquisition yields for top-tier assets in the 5.5 percent to 6 percent range. Austin continues to draw on its status as a technological, educational and governmental hub.

Read the full Yardi Matrix report.