Quarterly Market Report

Transcription

1 AUSTIN OFFICE OCTOBER EXECUTIVE SUMMARY Vacancy down despite new deliveries to market Austin s overall vacancy rate dropped to 8.4% in, a decrease of 20 basis points quarterover-quarter, and down 10 basis points yearover-year. Net absorption was positive 945,836 sq. ft. for the quarter, accelerating well beyond last quarter s -287,677 sq. ft. New construction delivered during the third quarter stood at 808,832 sq. ft., bringing the year-to-date total to 2.4 million sq. ft. Full-service average asking rents grew by $0.72 per sq. ft. quarter-overquarter to $34.87 per sq. ft., and up $0.62 per sq. ft. compared to this time last year at $ Austin economic indicators Austin s unemployment rate increased slightly to 2.9% in August, though still below its postrecession average of 4.8% and a percentage point below the state and national rates. Austin employment growth was modest over the three months through August, with professional and business services making a significant rebound, with a 1% rise in administrative services. and mining also increased, adding 1,800 jobs. Trade, hospitality and other services categories rose at a healthy pace, while health care and education services, finance and government all lost a significant number of jobs. Austin real GDP grew 6.9% in, 2 percentage points faster than the long-term average and the fastest pace among U.S. metro areas with a population of more than 2 million. Supply & Demand Millions - - Market Indicators Net Absorption Completions Vacancy Current Prior Quarter Q2 16.0% 14.5% 1% 1% 1% 8.5% 7.0% 5.5% 4.0% Vacant Direct 7.5% 7.8% 7.5% Vacant 8.4% 8.6% 8.5% Available Direct 11.3% 1% 10.9% Available 13.3% 13.5% 12.4% Net Absorption 945, , ,452 Leasing Activity 1,451,681 2,146,946 2,653,079 4,228,493 4,730,349 4,281, , ,4 209,208 Avg Asking Rent (Gross) $34.87 $34.15 $34.25 Year Ago Inventory 85,387,3 84,579,121 82,523,186 HOUSTON AUSTIN SAN ANTONIO

2 AUSTIN OFFICE Vacancy tightens and net absorption back in black Vacant space in the Austin market contracted to 8.4% at the end of, a decrease of 20 basis points quarterover-quarter and down 10 basis points compared to this time last year. Austin s office market has remained robust, with overall vacancy rates remaining at or below 9.0% for the last eight quarters (Q1 ). Supply and demand have corresponded for some time now. Fundamentally, growing property demand is supported by sustaining levels of new supply, which has been increasing in the Austin office market since. In addition, the Austin office market ended the third quarter of with close to 0,000 sq. ft. of positive net absorption, represented by positive million sq. ft. of space, and negative 10,6 sq. ft. of space. boom continues Millions As of there was 4.2 million sq. ft. of space under construction and another 800,000 sq. ft. delivered in the Austin office market, including buildings that are primarily owner-occupied. Projects in the development pipeline include Preserve at 620, a single-story 225,000-sq.-ft. office building located at 8201 North FM 620 in Northwest Austin. The property has 40,000 sq. ft. preleased to IAS and the remaining 185,000 sq. ft. available with a completion date scheduled for the end of. In addition, a 160,000-sq. ft. expansion of a office building at RR 620 is underway in the northwest submarket at Paloma Ridge. Delivery of the entire complex is scheduled for late 2019 and will total 3,000 sq. ft. in three buildings. Local experts estimate the rent around $25 to $ per sq. ft., before triple-net fees. Looking forward to late or early 2019, The Employees Retirement System of Texas (ERS) will break ground on a new 200,000-sq.-ft. tower. ERS will occupy 10% of the 192,000 sq. ft. of office space, with an additional 15,000 sq. ft. of retail space located in the building. Leasing activity remains steady Leasing activity slowed during the third quarter with a total of million sq. ft. of transactions in the Austin market 61% of which was fulfilled by space and 37% of space down from 2.1 million sq. ft. in Q2. Recent significant lease signings included social media giant Facebook, said to be the secret tenant behind the 320,000 sq. ft. lease covering 17 floors at the Domain 12 office tower. TIER REIT is developing the building at 3110 Esperanza Crossing that is scheduled for delivery in December Facebook currently leases over 100,000 sq. ft. in the neighboring Domain 8 building. In addition, Millions Millions Net Absorption - - Overall 2

3 AUSTIN OFFICE H-E-B has signed a long-term lease at 2416 E. 6th St. to develop a world-class tech facility. The recently converted industrial warehouse will become an office loft/creative space building for employees of the H-E-B digital team and Favor s corporate headquarters. The two-story, 81,000-sq.-ft. facility is scheduled for completion in spring Millions Leasing Activity 3.5 Office sales volume remains down The rolling 12-month office sales volume as of September has been down for 13 consecutive periods as investors continue to have a tough time locating assets to acquire in Austin. Real Capital Analytics data reports year-to-date office sales volume in the Austin area at $1.1 billion, resulting in a yearover-year decrease of -13.5%. The buyer composition is made up of 40% private, 40% institutional, 9% cross-border, 6% user/other, and 5% REIT/listed. A positive sign for the Austin office sales market was the acquisition by Intercontinental Real Estate Corp. of the 388,000-sq.-ft. two-building office complex Stonebridge Plaza I & II off N. MoPac Expressway in northwest Austin, for an undisclosed price, from KBS. Average asking rents continue to climb The market saw overall full-service average rates increase $0.72 to $34.87 per sq. ft. from last quarter, and $0.62 from a year ago. Although concessions such as free rent and tenant improvement allowances make posted rents less meaningful as a market indicator, the price of Austin s office space is climbing noticeably. The highest-quality space, with the best location, and ease of accessibility will generate the highest rents. Asking rates for space in the CBD are at an average of $50.36 per sq. ft. The buildings with the most available office space in the CBD include 200 W. 6th St., Block ; 111 Congress Ave., One Eleven; 600 Congress Ave., One American Center; 400 W. 15th St.; and 221 W. 6th St., Chase Tower. These four existing buildings, and one under construction comprise 2.4 million sq. ft. with 32.7% or 776,000 sq. ft. of superior available space for lease. In the third quarter of this year, the average asking full-service gross rate for space in these buildings was $48.68 per sq. ft. Billions Austin Office Cumulative Monthly Sales Volume Year-to-date volume ($): , Year-over-year chg: -13.5% Source: Real Capital Analytics J F M A M J J A S O N D Average Full-Service Asking Rent $45 $40 $ Direct Sublease Direct Sublease $38.99 $34.56 $30 $25 $30.30 $25.37 $20 $15 $10 3

4 AUSTIN OFFICE Submarket Stats Submarket Statistics ( reflects /B/C) Inventory Vacancy Availability Net Absorption YTD Net Absorpiton Leasing Activity Under Overall Gross Avg Asking Rent ($/PSF) Austin Market 85,387, ,836 1,8,654 1,451, ,832 4,228, ,460, ,030,0 2,091, , ,384 3,762, ,980, ,6-101, , , , Submarket Statistics ( reflects /B/C) Inventory Vacancy Availability Net Absorption YTD Net Absorpiton Leasing Activity Under Overall Gross Avg Asking Rent ($/PSF) CBD 14,563, , , , ,161, ,206, , ,4 9, ,161, ,188, ,623 7,038 24, Central 6,116, ,6 73, ,754 20,001 26, ,592, ,932-3,211 10,474 20, ,259, ,039 77,659 84, , Cedar Park/Georgetown/ Round Rock 5,966, ,676 40,257 7, , ,021, ,604 3, , ,626, ,072 36,6 7, , North/Domain 8,430, , , , ,883 6, ,418, , ,9 33, ,883 6, ,767, ,559-47,386 86, Northeast 4,369, ,6-44,530 52, , ,433, ,464 5, , ,246, ,6-76,994 47, , Northwest 20,767, , , , , ,508, ,138 11, , , ,840, ,537-1,438, South 3,431, ,587 46,309 45,456 90, , , ,411 99,058 3,889 90, , ,768, ,722-11,612 30, East/Southeast 8,513, ,3 966, , , , ,885, , ,519 1, , , ,756, ,787 4,762 85, , Southwest 13,2, , ,496 2, , , ,518, , , , , ,524, ,137 38,073 74, ,448 87, Suburban 70,824, ,9 1,574,2 1,066, ,832 3,066, ,253, ,974 1,767,737 5, ,384 2,600, ,791, , , ,1 118, ,

5 AUSTIN OFFICE Austin Office Submarkets 1. CBD 2. Central 1 3. Cedar Park/Georgetown/ Round Rock 4. North/Domain 5. Northeast 6. Northwest South Southeast Southwest Information and data within this report were obtained from sources deemed to be reliable. No warranty or representation is made to guarantee its accuracy. AUSTIN OFFICE OCTOBER NAI Partners Austin Office 701 Brazos Street, Suite 320 Austin, Texas tel Leta Wauson Director of Research leta.wauson@naipartners.com tel