Austin Office Market Shows Signs of Overbuilding

AUSTIN-Some 2.3 million sf of office product has delivered in Austin this year despite the unsettling times, vast blocks of sublease space and uncertainty of what the future holds, GlobeSt.com is told.

Fourth quarter numbers are still being calculated, but the oddity is the amount of new product coming about in the state capital’s worst year in more than a decade, Charles Heimsath of Austin’s Capitol Market Research tells GlobeSt.com. With the new product, Austin’s office inventory reaches nearly 31 million sf.

Is the market overbuilding? Yes, says a hesitant but confident Heimsath in his assessment.

Heimsath was particularly surprised that the amount of new product in 2001 has come about with only one major groundbreaking in the final six months of the year. Even more surprising is that another 1 1/2 million sf will deliver in the first six months of 2002.

Only Atlanta-based Cousins Properties Inc. braved the waters by breaking ground in the last half of 2001. Its 525,000-sf Congress at Fourth is 17% leased. The 33-story, class A structure, situated in the heart of the CBD at 401 Congress, carries a November 2003 delivery.

In January, CarrAmerica opens the doors on its 300 West Sixth Street, another class A CBD project. The 418,000-sf urban office tower at the intersection of Sixth Street and Guadalupe has 228,779 sf available. The project consists of street-level retail and 22 floors dedicated to office space.

With the new product coming due in 2002, Heimsath is predicting office rates will continue to drop well into the year although others believe the worst is over. Preliminary figures show 2001′s year-end vacancy will hover around 80%, including sublease space. That’s a 15% drop from December 2000 and the worst posting since the late 1980s, he says.