product.costar.com Open in urlscan Pro
23.66.198.178  Public Scan

Form analysis
0 forms found in the DOM

Text Content

Sign In

CoStar Insight


OFFICE INVENTORY IS EXPANDING FASTEST IN CENTRAL TEXAS


REGION HAS GROWN BY 4.7 MILLION SQUARE FEET OVER THE PAST YEAR



By Danny Khalil and Israel Linares
CoStar Analytics

September 26, 2023 | 11:25 A.M.



Austin and San Antonio in Central Texas are two of the fastest-growing office
markets by square footage in the country, due in part to the rise in speculative
development projects.

Over 4.7 million square feet of office space was completed collectively over the
past 12 months in the Central Texas region. The figure is comparable to the 5.1
million square feet built in Dallas-Fort Worth, which is double the combined
size of Austin and San Antonio's markets.

Austin's expansion over the past year was equivalent to 2.3% of inventory, while
San Antonio's came in at 1.9%. Encouraged by corporate relocations and
expansions in prior years, developers were active in starting construction
projects from late 2019 through early 2022.

The 102,000-square-foot Texas Bankers Association Building opened this year in
downtown Austin. (Saeid Zare/CoStar)




AUSTIN

Austin has consistently ranked among the nation’s leaders for office
construction over the past nine years. The market has held the first or second
spot in this category since the first quarter of 2020.

The trend shows no signs of slowing in the coming year. Austin has the most
space under construction of any major market when adjusted for the size of
inventory, at 5.3%. As a result, Austin is expected to maintain its status as
the fastest-expanding market in the United States by the end of 2024.

The quick pace is attributable to a substantial amount of speculative
development, with about half of the recently completed space still available for
lease. The rate of lease-ups for projects currently underway mirrors the trend,
with 55% of the 7 million square feet under construction still without a signed
tenant.

Recently completed projects in the East Austin and Northeast areas alone have
contributed 1 million square feet of office space to the market. The Alpha
Building in the Mueller Business District stands out as the largest addition in
East Austin. Shorenstein Properties completed that 265,000-square-foot building
last year and sold it to the Teacher Retirement System of Texas for its new
headquarters for $138.1 million, according to CoStar data.

Meanwhile, Parmer 5.1 and 5.2 have added 387,000 square feet of high-quality
office space.

The addition of unleased space during a period of waning demand is expected to
exert additional pressure on an already elevated vacancy rate. The vacancy rate
could surpass 20% by the mid-point of 2024, making it the second highest in the
nation, trailing only San Francisco, according to CoStar’s base case forecast.

San Antonio’s Jefferson Bank Building also opened this year. (Katelyn
Keiser/CoStar)




SAN ANTONIO

San Antonio is a smaller office market than Austin but is one of the nation’s
fastest growing, helping to round out the top two office markets in the country
for inventory expansion over the past 12 months.

The single largest office development over the preceding 12-month period was the
North Rim Corporate Campus, the new home of WellMed Medical Group. Overseeing a
network of more than 16,000 doctors offices across both Texas and Florida,
WellMed has doubled down on its presence on the city’s far northwest side,
adding more than 700,000 square feet to the local office market this year.

Jefferson Bank's headquarters also contributed a sizeable amount of new space to
the local office market. Moving from its previous location in the central
business district to the rapidly expanding Pearl district, Jefferson Bank’s
headquarters added 232,000 square feet to a section of Broadway Street now being
referred to as San Antonio’s financial district. This development joins Oxbow,
home of CBRE’s local offices, and Credit Human Tower along this stretch of Lower
Broadway between Brooklyn Avenue and Josephine Street.

San Antonio’s office development scene is likely to cool slightly as the market
moves into the final few months of 2023, as most major projects have been
completed at this time. With the exception of WatersEdge, there appears to be no
speculative office development in the eight-county metropolitan area with more
than 100,000 square feet. A lack of large, speculative projects will likely help
with the rising vacancy situation moving forward, which should support the
office market in Central Texas more broadly as it seeks to balance itself amid
ongoing challenges.

Follow us on Social Media

Have feedback or questions? Email us at news@costar.com