Austin Office Report – Spring 2019

The metro's fast-paced economy and strong job growth are pushing up demand, leading to strong investor appetite and a burgeoning development pipeline.
Office-using employment in Austin, click to enlarge
Office-using employment in Austin, click to enlarge

Austin’s ongoing expansion is fueled by consistent population and job growth, strong investor appetite and a burgeoning development pipeline. The fast pace at which companies are relocating and expanding in the metro is driven by good market fundamentals, a growing economy, a skilled labor pool and a friendly business climate. Amazon, Apple, Google and Facebook are only a few of the major companies to announce expansion plans for the state capital in the coming years.

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Robust tenant demand is matched by unwavering construction activity. Some 5.8 million square feet was underway as of April, and developers delivered 10 properties totaling 1.3 million square feet during the first four months of 2019. Another 1.6 million is slated for completion by year’s end, a testament to strong tenant interest in new office product. As the bulk of developments is already preleased, developers are putting together plans for the future, with more than 15.2 million square feet in the planning and permitting stages.

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

Investor interest remained healthy, although transaction activity cooled in the first months of 2019, in line with national trends. Sales volume amounted to $898 million in confirmed transactions as of April, with some 4.6 million square feet in office assets trading year-over-year. Acquisition yields for top-tier properties hovered in the 5.5 percent to 6.0 percent range, putting Austin in step with expanding metros such as Denver and gateway markets such as Chicago.

Read the full Yardi Matrix report.