Aquila Commercial, an Austin-based real estate research and brokerage firm, on Feb. 9 published its fourth quarter Austin Office Market Report. The paper provides analysis of Austin’s commercial development health and economic factors that may contribute to real estate leasing and development trends.
According to the report, the Northwest Austin submarket—generally defined in the paper as an area west of MoPac and stretching as far north as Cedar Park—had a total office vacancy rate of 11.9% in the last quarter of 2020. In Northwest Austin, this is the third straight quarter of rising vacancy rates, or the percentage of all available units in a rental property, Aquila data shows.
David Putman, a principal on Aquila’s project leasing team, said the trend is being largely driven by an increasing amount of sublease vacancy. That is when companies are paying rent on an office space and attempt to sublease out space they do not use.
“Companies are not in the office right now,” Putman told Community Impact Newspaper. “Generally speaking, 20%-25% of companies that lease space are currently utilizing it. A lot of that space has been put on the market for sublease.”
Aquila data shows the total square footage sublease space available in Northwest Austin has nearly doubled since the beginning of the coronavirus pandemic, jumping from 298,878 square feet of vacant sublease space in the second quarter of 2020 to 586,722 square feet of vacant space in the fourth quarter of 2020.
Despite the spike in available office space, Putman said the numbers are related to economic factors and social distancing mandates resulting from the pandemic and added this trend is likely temporary.
“We believe people are trying to figure out how they’re going to use space moving forward,” Putman said. “Fast forward 12 months, with some of these companies going back to work, we think a lot of that sublease space will be reoccupied.”
In Northwest Austin, the direct vacancy rate—the percentage of unoccupied office space that is new or not under lease—sits at 7.4%, according to Aquila data. That rate is “pretty healthy,” Putman said, and Northwest Austin as a whole continues to outperform the commercial office market compared to other sectors of the city.
Austin’s citywide office vacancy rate in the fourth quarter of 2020 sat at 12.2%—higher than Northwest Austin’s rate—according to Aquila data.
“We think more jobs will be created, and some of the space on the market will get absorbed,” Putman said.