BYLINE: Shonda Novak AMERICAN-STATESMAN
STAFF
DATE: April 3, 2007
PUBLICATION: Austin American-Statesman (TX)
EDITION: Final
SECTION: Business
PAGE: D01
Space is getting tight in Austin's office market, with vacancies at their
lowest level in six years. Meanwhile, rents rose to their highest level since
2001.
In the first quarter, rents for top-tier, or Class A, office space averaged
$28.12 a square foot, their highest level since mid-2001, according to Oxford Commercial,
an Austin-based real estate brokerage. Class A office space was
9.4 percent vacant, a level not seen since early 2001 and far from the 30.7
percent vacancy rate in late 2002.
Downtown,
rents for first-class space averaged $32.13, the highest rate since late 2001.
Citywide,
the vacancy rate for all types of office space averaged 11.8 percent during the
first quarter of 2007, down from 16.4 percent a year earlier. Rents overall
averaged $23.28 a square foot compared with $20.91 a year earlier.
The
trends may not hold, Oxford Commercial warned, because leasing activity
is slowing and a lot of new office space is being built.
"If
I were about to break ground on a new building, I may want to sit back and see
if absorption gets back on track before I start construction," said Ford
Alexander, a partner and co-founder of Oxford Commercial.
Landlords
are optimistic about the Austin real estate market, resulting in
"rising rents and significant new building development," said office
brokerage CB Richard Ellis' Central Texas division.
Several
projects will add more than 1.3 million square feet of space to the market this
year, Oxford Commercial said. Last year, 220,000 square feet of office
space was added.
The
new space includes 211,000 square feet in the Park at Barton Creek complex at
South MoPac Boulevard (Loop 1) and Capital of Texas Highway (Loop 360), and
251,000 square feet at Research Park Place at Oak Knoll Drive and U.S. 183 in
Northwest Austin.
More
projects are in the pipeline. The next big one, Cousins Property Group's
Palisades West complex, is set to break ground soon at Loop 360 and Bee Cave
Road (RM 2244). When the development opens in mid-2008, Dimensional Fund
Advisors will occupy one building, with 210,000 square feet. A second building
will have 150,000 square feet.
Austin
closed the quarter with a milestone event, the $1.15 billion purchase by Thomas
Properties Group Inc. of some of the highest-profile office buildings in
Austin, including the Frost Bank Tower downtown. The deal is the largest office
purchase in Texas history, and the biggest transaction ever for Los
Angeles-based Thomas.
Alexander
of Oxford Commercial said some tenants are experiencing "sticker
shock" as they renew leases.
"Rates
are considerably higher than they were five years ago, and the current rates
are hard to swallow," he said. Alexander said he expects some tenants to
leave their first-class space for more affordable quarters.
snovak@statesman.com;
445-3856