September 13, 2016
It was recently announced that Indeed Inc., an online job-listing service, will relocate its sales office to a larger space on the top two floors of the new Fifth + Colorado office tower at 201 W. 5th St. The office will cover 39,000 square feet of the 18-story building, and will accommodate around 275 employees covering sales and client services.
Indeed’s headquarters are located in North Austin’s Champion Office Park. The company plans to hire 1000 new employees for that location in the coming years.
These are positive developments in the Austin office market, where multiple factors play into the overall health of the local office sector. According to the Colliers International Q2 2016 Austin Office Market Report:
1) Absorption rates for office space fell into the negative range in Q2 of 2016. The first quarter saw positive absorption of just over 500,000 square feet, while the most recent numbers show negative rates of nearly 25,000 square feet.
2) Construction is slowing slightly, with just over 1 million square feet under construction, compared with around 2 million at this time last year.
3) Still, rent prices continue to go up. Average asking rents for the market stand at just over $34 per square foot overall, while the rate in the Central Business District is around $49.50.
4) Overall vacancy rates stand at just over 12% for the Austin office sector, still below the national average, which is at just above 14%.
5) Vacancies in the Central Business District (7.4%)are considerably lower than in suburban areas (13.4%), but both are up slightly from last quarter.
6) Vacancies are closely tied to employment rates. Austin’s job growth (3.9%) continues to outpace the national average (1.7%), and unemployment in Austin remains below 4%.
Continued strong numbers in employment and growth may counterbalance the weakening absorption numbers, particularly as construction slows. Demand continues to be robust, as Austin businesses thrive and expand, be they smaller operations like Indeed or giants like Apple.
That tech powerhouse is completing an Austin campus that will be its largest facility outside of Silicon Valley and house 7000 employees. The project, which will eventually include over 1 million square feet of space, comprises the lion’s share of the total office space currently under construction in the area.
Plans for office projects are in the works for Austin, including Waller Park Place, which will encompass 1.4 million total square feet, including three towers with 300,000 sq. ft. of office, a 150-room hotel, 498 residential units, and 60,000 sq. ft. of retail. The property is located next to the Austin Convention Center. A 90,500 square foot office building is also planned for 801 Barton Springs, with views of downtown. Nearing completion is an 18-story office building at 5th and Colorado.
The Central Business District leads the local office market, and additional incentives are provided in the city’s Public Improvement District, just north of Lady Bird Lake.
The slight rise in vacancy rates this last quarter may signal a leveling-off in the office sector’s growth for the area. However, activity in the CBD continues to be vigorous, with no indication of decreased demand.