Key Takeaways
New supply: Approximately 500,000 square feet (compared to 154,000 square feet last quarter) Net absorption: 287,900 square feet (down from 321.8k square feet in Q4), but an improvement from the negative absorption in early 2023. Overall vacancy rate: 22.5% (up slightly from 22.4% in Q4 2023), reflecting continued challenges in the market Asking rent: $41.52/sq ft (down slightly from $43.12/sq ft in Q4 2023)
In the first quarter of 2024, Austin's office space market continued to face challenges due to fluctuating leasing activity and an increasing supply of office space. Austin's commercial real estate sector maintains a delicate balance of supply and demand amid an overall increase in inventory. While vacancy rates indicate ongoing challenges, positive net absorption rates suggest continued leasing activity. Despite some downward pressure on rents, Austin's robust economy and evolving market trends will continue to shape the commercial real estate market in 2024.
Austin's economic outlook remains strong and there are positive indicators of resilience. The city is seeing increased leasing activity, especially in smaller leases ranging from 1,000 to 5,000 square feet. Looking ahead, continued growth in Austin's economy could help stabilize the office market, despite ongoing challenges and additional completions expected.
In the first quarter of 2024, Austin's office market experienced moderate fluctuations. Inventory increased slightly to 89.5 million square feet. Net absorption decreased to 287.9 thousand square feet, improving from the previous negative trend. Vacancy rate increased to 22.5%, indicating market challenges, while new completions were modest at 10.5 thousand square feet. Under-construction inventory reached 5.4 million square feet, indicating continued development. Asking rents fell to $41.52/sq ft. The market maintains a delicate balance of supply and demand, with absorption stable, supply increasing, and pricing challenges moderate in early 2024.