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Q2 2014 Austin Office Market Research Report
1. www.colliers.com/Austin
Q2 2014 | OFFICE MARKET
AUSTIN OFFICE
MARKET INDICATORS
Q2 2013 Q2 2014
CITYWIDE NET
ABSORPTION (SF) 352K 171K
CITYWIDE AVERAGE
VACANCY 11.6% 10.7%
CITYWIDE AVERAGE
RENTAL RATE $26.53 $27.77
CITYWIDE
DELIVERED
INVENTORY (SF) 148K 188K
CLASS A RENTAL
RATE
CBD $40.94 $39.76
SUBURBAN $29.39 $30.71
CLASS A VACANCY
CBD 16.0% 16.0%
SUBURBAN 11.4% 10.5%
RESEARCH & FORECAST REPORT
AUSTIN OFFICE MARKET
Austin’s office market construction pipeline increases to
2.4M SF
Austin’s strong economy continues to spur office development with over
2.4M SF currently under construction. Over 188,000 SF of new inventory
delivered during Q2, bringing 2014 year-to-date delivered inventory to
587,657 SF. Seven buildings totaling 199,286 SF delivered in Q2, with the
most notable delivery being Seaholm Power Plant Building (117,000 SF)
which is now 97.0% leased to Athena Healthcare. Other notable deals for
Q2 are Dropbox (55,000 SF) at 501 Congress Ave., Whole Foods (40,000
SF) at 311 Bowie and Wework (34,000 SF) at One American Center.
Austin’s office market posted 85,623 SF of positive net absorption in Q2
2014, pushing year-to-date 2014 net absorption to positive 375,246 SF.
The citywide average rental rate increased 0.9% from $28.33 per SF to
$28.59 per SF over the quarter and 4.7% from $26.53 per SF to $27.77
per SF over the year. The average CBD rental rate decreased slightly to
$40.94, while the average suburban rental rate increased to $30.71.
According to local economists, 2014 job growth will remain strong with
68,000 to 72,000 new jobs forecasted for the year. Austin’s unemployment
rate fell to 4.1% from 4.6% over the year. Austin area home sales rose
11.0% between May 2013 and May 2014, a sign that the area’s economy
is growing.
Economy looks to remain strong in 2014 driven by employment growth in
the tech and hospitality sectors.
ABSORPTION, NEW SUPPLY & VACANCY RATES
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
-1,000,000
-800,000
-600,000
-400,000
-200,000
0
200,000
400,000
600,000
800,000
1,000,000
Net Absorption New Supply Vacancy
UNEMPLOYMENT 5/13 5/14
AUSTIN 4.6% 4.1%
TEXAS 6.3% 5.1%
U.S. 7.3% 6.1%
JOB GROWTH
ANNUAL
CHANGE
# OF JOBS
ADDED
AUSTIN 3.6% 31K
TEXAS 3.4% 375.3K
U.S. 1.8% 2.4M
JOB GROWTH & UNEMPLOYMENT
(Not Seasonally Adjusted)
2. RESEARCH & FORECAST REPORT | Q2 2014 | AUSTIN OFFICE MARKET
$26.00
$28.00
$30.00
$32.00
$34.00
$36.00
$38.00
$40.00
Class A Office Rents
CBD Rents Suburban Rents
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
CBD VS. Suburban
Class A Office Vacancy
CBD Vacancy Suburban Vacancy
QUOTED GROSS RENTAL RATES FOR EXISTING TOP PERFORMING OFFICE BUILDINGS
BUILDING NAME ADDRESS SUBMARKET RBA (SF)
YEAR
BUILT
%
LEASED
AVAIL.
SF
RENT
($/SF)
OWNER
Frost Bank Tower 401 Congress Ave. CBD 535,078 2003 93.7% 48,802 $50.97 Parkway Properties, Inc.
One American
Center
600 Congress Ave. CBD 519,109 1984 90.4% 124,170 $42.44 Parkway Properties, Inc.
300 West Sixth 300 W. 6th Street CBD 454,000 2001 93.4% 52,033 $49.17 Parkway Properties, Inc.
UFCU Plaza 8303 N. MoPac Expy Central 246,869 1987 90.0% 27,187 $31.43 University Federal Credit
Union
University Park 3300 N. Interstate 35 Central 206,657 2009 58.1% 86,524 $35.45 Spear Street Capital GP
LLC
7700 Parmer Lane
– Building B
7700 Parmer Lane Far Northwest 350,000 1999 19,7% 281,000 $29.95 Spear Street Capital GP
LLC
7700 Parmer Lane
– Building C
7700 Parner Lane Far Northwest 282,000 1999 82.3% 98,000 $29.95 Spear Street Capital GP
LLC
Research Park
Plaza – Building IV
12301 Research Blvd Northwest 184,159 2001 98.4% 99,789 $35.00 Union Investment Real
Estate GmbH
Prominent Pointe I 8310 N. Capital of
Texas Hwy
Northwest 151,092 1986 88.6% 20,012 $36.84 DivcoWest
Two Barton
Skyway
1601 S. MoPac Expy South 195,639 2000 83.9% 40,399 $37.62 DRA Advisors, LLC
Note: Avail. SF includes direct and sublet space as well as any future available space listed.
Source: CoStar Property
2COLLIERS INTERNATIONAL | P.
VACANCY & AVAILABILITY
Austin’s citywide vacancy rate decreased
from 10.8% to 10.7% between quarters, and
dropped by 90 basis points annually from
11.6% in Q2 2013. Between quarters, the
average suburban vacancy rate remained at
10.6%, while the average CBD vacancy rate
decreased 70 basis points from 12.0% to
11.3%.
The average CBD Class A vacancy rate
decreased 140 basis points between
quarters from 17.4% to 16.0%, and the
average CBD Class B vacancy rate
decreased 20 basis points from 5.0% to
4.8%. The average suburban Class A
vacancy rate decreased 210 basis points
from 10.1% to 9.8% between quarters, and
the average suburban Class B vacancy rate
fell 310 basis points from 14.7% to 11.6%
between quarters. Absorption could have
been stronger, but Apple relocated from
Riata Park Court to their campus, freeing up
approximately 90,000 SF in Riata Corporate
Park Building 4.
Of the 1,161 existing office buildings in our
survey, 4 have 100,000 SF of contiguous
space available for lease or sublease.
Further, only 3 have 200,000 SF of
contiguous space available. Citywide,
available sublease space totals 576,226 SF
or 9.7% of Austin’s total office inventory.
ABSORPTION & DEMAND
Austin’s office market posted 85,600 SF of
positive net absorption in Q2 2014.
The Northwest Class A submarket posted the
largest gain, with 133,215 SF of positive net
absorption, followed by the CBD submarket,
posting 78,105 SF of positive net absorption
and the Central submarket, which posted
21,481 SF of positive net absorption.
Some of the larger tenants that moved into
new space during Q2 include: SolarWinds
(229,792 SF) moved into The Summit at
Latana Building 4 in the Southwest
submarket; C3 Presents (29,947 SF) moved
into 300 West Sixth Street, located in the
CBD submarket; and Loan Science (28,920
SF) moved into Burnet Gateway II in the
North submarket.
RENTAL RATES
The citywide average rental rate increased
slightly from $27.68 per SF to $27.77 per SF
over the quarter and increased 4.6% from
$26.53 per SF to $27.77 per SF over the
year. Average citywide Class A rents
increased from $39.76 to $40.94 and Class B
rents decreased from $30.71 to $29.39 over
the quarter.
The Class A average rental rate in the CBD
decreased 1.0% from $40.37 per SF to
$39.76 per SF between quarters, while the
suburban Class A average rental rate
increased 1.0% from $30.37 per SF to
$30.71 per SF. The average Class B rental
rate in the CBD rose 1.1%, while the average
suburban Class B rental rate increased 1.0%
between quarters.
3. RESEARCH & FORECAST REPORT | Q2 2014 | AUSTIN OFFICE MARKET
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SALES ACTIVITY
Austin’s office investment sales activity included 13 sales transactions with a total sales volume of approximately $162.5 million,
averaging $297 per SF. Listed below are a few significant transactions that closed in Q2 2014.
LEASING ACTIVITY
Austin’s office leasing activity reached 1.2 million SF in Q2 2014 with transactions including renewals, expansions, subleases,
and pre-leases in buildings currently under construction.
1
Renewal
2
Expansion/Extension
3
Sublease
4
Pre-lease/proposed or under construction
Data Source: CoStar Property
BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE
MetCenterBusinessPark-Bldg10 Southeast 224,979 PharmaceuticalProductDevelopment
1
Jun-14
EncinoTrace Southeast 120,000 ARM HoldingsPLC May-14
Seaholm PowerPlantBuilding CBD 117,000 AthenaHealth,Inc. Apr-14
ColoradoTower CBD 73,843 ParsleyEnergy Apr-14
ProminentPointeII Northwest 62,752 Ixia
2
May-14
LavacaPlaza CBD 59,149 UniversityofTexas May-14
501Congress CBD 55,000 Dropbox Apr-14
311Bowie CBD 40,000 W holeFoods Jun-14
OneAmericanCenter CBD 34,000 W ework May-14
ColoradoTower CBD 24,141Atlassian Apr-14
CityView Center Southwest 15,927 CrossTexasTransmission,LLC May-14
W aterfordCentre North 12,050 TeleNetworkPartners Jun-14
Q2 2014 TOP OFFICE LEASE TRANSACTIONS
BUILDING NAM E SUBM ARKET SF YEAR BUILT BUYER SELLER
SALES
PRICE
$/SF CLOSED
TheAvallon Northwest 318,217 1992/2011 DivcoW estProperties HighbrookInvestmentMgmt $63.5M $200 Jan-14
ParkatAspenLake FarNorthwest 204,698 2008 FortisPropertyGroup CrimsonRealEstateFundLP $38.8M $190 Jan-14
ToweroftheHills FarNorthwest 169,886 1986 FortisPropertyGroup CrimsonRealEstateFundLP $32.2M $190 Jan-14
OverwatchCampus Southwest 164,700 2006 DrawbridgeRealtyTrust CBRE $42.5M $258 May-14
LasCimasIV Southwest 138,008 2008 GatewayShermanInc. KBS REIT III 43.2M $313 Feb-14
MiraVista Southwest 125,000 2001 ClarionPartners LionstoneGroup - - May-14
FourPointsCentre FarNorthwest 119,305 2007 DRA Advisors BrandywineRealtyTrust $41.5M $348 Apr-14
PlazaontheLake Southwest 118,745 1985 ClarionPartners GraniteProperties - - Jul-14
Q2 2014 SIGNIFICANT SALES TRANSACTIONS -(100,000 SF OR GREATER)
6. RESEARCH & FORECAST REPORT | Q2 2014 | AUSTIN OFFICE MARKET
COLLIERS INTERNATIONAL | P. 6
Data Source: CoStar Property
Q2 2014 OFFICE UNDER CONSTRUCTION – 10,000 SF OR GREATER
Q2 2014 OFFICE DELIVERIES – 30,000 SF OR GREATER
SUBMARKET BUILDING ADDRESS RBA
%
LEASED DEVELOPER
ESTIMATED
DELIVERY
DATE
CBD 303 Colorado Street 371,348 49.4% Cousins Sep-14
Southw est 3700 N CapitalofTexas Highw ay 249,870 38.1% HPIRealEstate Services & Investm ents M ay-15
North 11501Alterra Parkw ay 221,973 0.0% EndeavorRealEstate Group Sep-14
Southw est 320 CapitalofTexas Highw ay 217,490 0.0% Riverside Resources Apr-15
CBD 500 W .5th Street 195,378 50.3% EndeavorRealEstate Group Sep-14
Southw est 5707 Southw estParkw ay 160,935 75.2% Brandyw ine Realty Trust Jun-15
Southw est 5707 Southw estParkw ay 160,935 62.7% Brandyw ine Realty Trust Jun-15
Southw est 2500 Bee Caves Road 145,437 0.0% EndeavorRealEstate Group M ay-15
North 11800 Dom ain Blvd 143,331 80.0% EndeavorRealEstate Group Sep-14
Northw est 6500 N CapitalofTexas Highw ay 115,000 0.0% EndeavorRealEstate Group Oct-14
Northw est 6500 N CapitalofTexas Highw ay 115,000 0.0% EndeavorRealEstate Group Oct-14
Southw est 2500 Bee Caves Road 69,150 20.5% EndeavorRealEstate Group M ay-15
CBD 311Bow ie Street 40,985 100.0% EndeavorRealEstate Group Sep-14
Southw est 6838 Bee Caves Road 40,000 100.0% Equitable Com m ercialRealty Sep-14
Southw est 7710 Rialto Blvd 35,000 77.1% Barton Com m ercial Sep-14
Southw est 7710 Rialto Blvd 27,637 0.0% Barton Com m ercial Sep-14
Round Rock 411W M ain Street 26,563 0.0% Unknow n M ay-15
CBD 500 W CesarChavez Street 24,000 0.0%
Tram m elCrow /The Hanover
Com pany/Pacific Life Insurance Com pany
Oct-15
CedarPark 1785 W hitestone Blvd 16,000 0.0% Unknow n Aug-14
Northw est 10815 Ranch Road 2222 15,340 0.0% Equitable Com m ercialRealty Jul-14
Southw est 5920 W illiam Cannon Drive 14,868 0.0% Equitable Com m ercialRealty Jul-14
Round Rock 7201W yom ing Springs Drive 12,000 33.3% Healthcare RealEstate Services Jul-14
CedarPark ElSalido Pky & FM 620 10,500 79.1% Antenora Architects LLP Sep-14
SUBM ARKET BUILDING ADDRESS RBA
%
LEASED OW NER DELIVERED
Northw est 5205 Riata Park Ct 88,000 100.00% SpearStreetCapital M ar-14
CedarPark 1401M edicalPky 86,000 15.40% J Jacobs Construction Jun-14
FarNorthw est 11714 W ilson Parke Ave 44,020 72.70% Kem p Properties M ay-14
Southw est 6838 Bee Caves Rd 40,000 58.00% Equitable Com m ercialProperty Jul-14
Northw est 6611RiverPlace Blvd 36,000 93.00% OnairDevelopm ent M ar-14
FarNortheast 14008 Shadow glen Blvd 36,000 91.10% Arise CapitalInvestm ents Jul-14
East 2021E 5th St 30,451 100.00% EndeavorRealEstate Group Jan-14
7. RESEARCH & FORECAST REPORT | Q2 2014 | AUSTIN OFFICE MARKET
Accelerating success.
BRITTANY OFIELD
Research and Marketing Coordinator | Houston
1233 W. Loop South, Suite 900
Houston, Texas 77027
Direct +1 713 830 2120
brittany.ofield@colliers.com
LISA R. BRIDGES
Director of Market Research | Houston
1233 W. Loop South, Suite 900
Houston, Texas 77027
Direct +1 713 830 2125
lisa.bridges@colliers.com
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