As Tesla, Apple draw people to Austin, the office market proves to be one of the hottest in the US

Demand for office space in Austin has hit a record high in the early part of this year and placed the capital city as one of the top markets in the U.S. for office development.

According to a new report by real estate group CBRE, competition for offices has surged average asking rates to more than $53 per square foot in Austin. This is the first time rates were more than $50 since the company began tracking in 1989.

Aside from office and building space analysis, the report says the overall economic health of the Austin metro is “robust” with an unemployment rate lowering since March 2021 and population growth that’s come with company relocations and expansions.

CBRE says this trend has been spearheaded by Apple’s Northwest Austin campus and Tesla’s gigafactory which held its grand opening last week. And it won't slow down anytime soon. The report goes on to mention Oxford Economics data that forecasts a population increase of roughly 243,000 people over the next five years.

“Following two disruptive years, the Austin office market is bouncing back from the COVID-induced slump,” the report says. “As daily COVID cases continued to decline substantially in Austin, there has been an uptick in employees returning to the workplace in early 2022.”

The tech industry has driven a return to the office lately. Kastle Systems’ back to work barometer shows the Austin metro at 63% occupancy, a slight increase from late March. Just this week, Apple joined other tech giants like Meta with easing employees out of remote work.

The tech boom has also contributed to developers’ interest in multi-use skyscrapers downtown and is where many of the new towers under construction are located.

In total, there are 30 projects totaling 5.8 million square feet of office space under construction. But CBRE reports that downtown accounts for 39% of the market’s new office construction. Just below that is East Austin, which accounts for 35% of new office construction.

Other highlights from the report include a drop in vacancy and the sublease market contracting, CBRE says.