Courtesy of the Austin Business Journal:
“The Austin office market saw a trifecta of positive developments in the third quarter with a dramatic boost in absorption, decrease in sublease and large corporate move-ins.
The shift is the best the local office market has seen since the recession began, according to Oxford Commercial’s latest quarterly report released Wednesday.
“I think you can now say that we’ve turned the darkest corner and have a stabilized market that has signs of further improving into the next two quarters,” Oxford Partner Kevin Kimbrough said.
Direct absorption for the office market in third quarter this year was 169,615 square feet, a dramatic uptick from third quarter 2009, when only 10,593 square feet was absorbed. The last time absorption was this high was in the fourth quarter 2008 when Austin had 341,022 square feet of positive absorption.
Kimbrough said this is the largest amount of space absorbed since the recession reached the market.
Absorption has been steadily increasing throughout 2010, from a negative 24,000 square feet to a positive 169,000 square feet just nine months later, the report found.
Sublease vacancies also have shrunk, the report found, considered a true sign of the market’s recovery because less employers need to offer up unused space, at the same time as more startups and growing companies snap up previously offloaded space. That in turn usually means more direct vacancy spaces will be leased moving forward.
Sublease space hit 846,000 square feet, the lowest in nearly two years since fourth quarter 2008 when the market was at 800,398 square feet. The sublease vacancy rate is now 1.96 percent.
Oxford's third quarter subleasing figures also match up with recent CB Richard Ellis data.
The decrease in the sublease space inventory is promising after most of 2009 showed available sublease space reached its highest mark since 2001, said Nate Stricklen, a CB Richard Ellis broker who compiled the data.
“The shrinking numbers could signal the return of demand, albeit slight, for office space in Austin, despite small increases in overall vacancy this quarter,” said Stricklen, a member of the tenant representation team, with brokers Charles Dixon and Erin Morales, that has leased more than 80,000 square feet of subleased space since October 2009.
As far as move-ins, the third quarter’s largest moves for companies going into new office locations including Hanger Orthopedics in a 75,000-square-foot spot at The Domain and Host Gator into a 31,000-square-foot space at 8100 Cameron Road.
There were about 10 move-ins and renewals over 15,000 square feet compared to only two large move-outs, the lowest in a few quarters: Unisys Corp. from its 52,000-square-foot spot at Monterey Oaks Corporate Park and Planview’s 45,000-square-foot downsize at the Park.
All direct and overall vacancy rates slightly decreased throughout all markets in Austin, with the only exception of a slight increase in the downtown area in its overall vacancy rate. That rate rose from 16.13 percent in second quarter 2010 to 16.48 percent in third quarter.
The overall vacancy rate in Austin for office is at 20.72 percent. Direct vacancy rate decreased for the second consecutive quarter to 18.76 percent and Class A direct vacancy rate decreased for the fourth straight quarter to 19.65 percent.”
