AUSTIN (KXAN) --- According to commercial real estate information company CoStar, Austin has a record high office vacancy rate. The company said vacancies could keep growing because of millions of square feet of additional office space still under construction.
"Approximately 4.4 million square feet that's under construction right now, and two million of that is currently unleased," CoStar Senior Market Analyst Israel Linares said.
Linares said the vacancy rate sits at 16.8%, which is among the highest in the country. Linares said the construction boom contributed to that.
"In the 2021 and early 2022 phase, you saw a lot of hiring happening during that period of time that gave owners, investors, developers, you know, the green light to say, 'Let's build more office space to meet this demand,'" Linares said.
However, these vacancies might not be all that bad for potential tenants. Linares said a landlord might be more inclined to make a competitive deal because of all the available supply.
"The prioritization is to get someone in the door. Whether they are reducing the term of the lease or maybe offering a little more in concessions," Linares said. "They would rather much have someone fill the space as opposed to being empty."
The Downtown Austin Alliance said since last year, it has signed more than 250 leases. But DAA Chief Impact Officer Jenell Moffett said businesses coming are taking up less space.
"A lot of these corporations are just taking on maybe three or five floors versus nine or ten floors. Looking at their particular workforce needs is shaping or changing the way leasing is happening in downtown."
DAA Chief Impact Officer Jenell Moffett
Moffett said they're also noticing a shift in how buildings in downtown are being used.
"In the past, you might have seen a full tower that is 100% office use, but in the last three to five years, we are seeing towers that are both office, hotel and residential," Moffett said.
