Austin among the Nation's Top 10 Office Markets

By Carey Eskridge

Sperry Van Ness just released its "Top 10 Markets to Watch" Report for the office sector. Austin made the list. The report considers factors such as population growth, office space inventory, vacancy, and rental trends to determine the areas with the greatest potential for income growth.

About six years ago, as the tech bubble was bursting and the Frost Bank tower was under construction, I had to wonder what was going to become of downtown. It seemed like it could go either way - the streets would be empty or the newest addition to the skyline would usher in a new era. As it turns out, downtown is exploding, and if this report is correct it won't be slowing down anytime soon.

WHY AUSTIN MADE THE GRADE

According to the report, Austin has some great factors to fuel further commercial interest.

• Austin had the highest relative population growth of all the office markets. With so much competition, the absorption kept the vacancy rate in a steady decline. 
  
• The vacancy rate is at 13.4 percent. As far as I can tell, most of construction around town, however dramatic, is mixed-use residential and retail development.
  
• The report predicts that office construction won't keep up with the demand through 2008, so the vacancy rate is expected to decrease by almost one percentage point in the coming year

Another reason Austin rated favorably is the long-term rent growth. In fact, Austin placed third (behind only New York and San Francisco) among metro areas with the most aggressive effective rent growth. Average effective rents are expected to increase by 7.25 percent in 2008, making Austin very attractive for investment opportunities.

THE REST OF THE BEST

I found the rest of the entries in the report to be very interesting. New York, San Francisco, San Jose, and Central New Jersey make up the largest metropolitan statistical areas on the list and their inclusion isn't all that surprising. Those office markets aren't likely to suffer any time soon.

The other cities in the report have all been featured in various "best places to live" lists over the past few years: Charlotte, North Carolina, Greenville and Columbia, South Carolina, and Little Rock, Arkansas. All these cities have a lot to offer, but in my opinion, Austin is the only one on the list that has so many of the advantages of living in a big city but maintains a more manageable pace and greater livability in terms of quality of life.

Other long-time Austinites may not agree, but I think we've got a very cool and very rare thing going here - a perfect blend of the cosmopolitan and the laid-back. Add to that the outdoor stuff that's available literally right in town, and what's not to like?

Now I guess we'll just have to be prepared for an increase in construction of commercial office space.

Check out our previous article on the state of the Austin Condo Market. You may also be interested in What's Happening in Downtown Austin.

Comments

[Scottsdale real estate]

This doesn't come as a huge shock. Austin has been on the radar for quite some time now.

[Dee Copeland]

Thanks for the comment. It's definitely not a surprise to many agents, but some buyers are still cautious since the mortgage market slowed. They really need to consider buying when the market is not overly hot. Industry reports expect the national market to be on the rise in 2008.