Austin's Office Real Estate Boom May Already Be A Bust

An influx of working professionals has caused the city of Austin, Texas, to develop expansive office spaces in the city, but some experts believe these locations will remain largely vacant.

Austin, Texas, is now dealing with a real estate conundrum that offers a unique case study of the broader national office vacancy trends in the U.S.

Unlike areas with extreme office vacancy rates — like San Francisco or Chicago — Austin, much like Dallas and Fort Worth, Texas, is experiencing rapid growth with an influx of people moving to the lone-star state.

According to a recent article published by The Washington Post, this increase in population has caused Austin’s skyline to evolve, with new office buildings sprouting up and developers anticipating a post-pandemic commercial real estate boom. However, many of these spaces are projected by some experts to remain vacant — raising questions about the future of commercial real estate in an otherwise striving city.

One example cited by The Washington Post is the 66-story skyscraper “Sixth and Guadalupe”. Commercial spaces for this building initially captured the attention of tech giant Meta, but the company has since abandoned its move-in plans. This is reported to not be an isolated incident in the city. According to The Washington Post, data from commercial real estate firm Cushman & Wakefield reveals that about 87% of new office space in Austin is expected to open vacant.

The surge in construction was fueled by Austin’s rapid growth, with tech companies and young workers flocking to the city from metro areas like Los Angeles and New York City. This in-turn caused developers to embark on ambitious projects, often without guaranteed tenants. The belief was that the city’s expansion would continue at high rates, and migrating businesses and firms would soon occupy these new spaces.

However, the reality seems to be more complex. The pandemic has reshaped the way the workforce functions, with many companies adopting hybrid or remote work models. This has negatively impacted the demand for expansive office spaces across the U.S.

Since Austin has a healthy business climate, only time will determine the true trajectory of office vacancies in the city. Cities that don’t have this positive influx of professionals and workers but do have similar vacancy trends, will likely experience more of the negative economic impact in the short term.