Office vacancy in Austin hit 19.7 percent last quarter, setting a record high going back to at least 2009.
Even businesses that have already signed large footprints are getting skittish, as total sublease space reached 5.4 million square feet, according to JLL. In the last three months alone, tenants placed 1 million square feet back on the market.
So far, 2023 has been dismal for office owners. Some 940,000 more square feet have hit the market than come off it.
Net absorption on the quarter remained negative, even as IBM took a 320,000-square-foot lease at an as-yet unbuilt project in the Domain. Big Blue doesn’t plan to move into the space until 2027, so there will still be some time before the lease’s effects are felt.
Silicon Labs, which occupies one of the most visible offices in the Central Business District, at 200 West Cesar Chavez, is consolidating into a smaller footprint in the building next door. PayPal and Canva each moved into portions of newly built spaces that they leased less than two years ago, while subleasing the rest.
Even IBM’s lease is a downsize, as the firm currently occupies over 1 million square feet in Austin.
One bright spot: TikTok pulled its sublease at Cousins Properties’ new downtown tower, 300 Colorado Street, and now plans to retain the space.
About 6.7 million square feet of office are still under development, even as new properties are seeing blue-chip tenants get cold feet.
Austin is one of the top cities in the country for job growth, but the question is whether those jobs will be in person. And the troubles for Austin paint an even scarier picture of the office market nationwide: the city has the second-highest occupancy numbers in the country.
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