EXECUTIVE SUMMARY

Austin’s office market in Q2 2026 experienced positive net absorption, lower vacancy, and decreased leasing activity. Net absorption decreased to 651,422 sq. ft. from 1,085,274 sq. ft. recorded in the previous quarter, with Class A properties contributing -73,759 sq. ft. and Class B 752,191 sq. ft. Vacancy edged down to 22.7%, a 60-basis-point decrease from Q1 2026. Leasing activity decreased 14.8% to 1.2 million sq. ft. Construction deliveries totaled 151,190 sq. ft., and the under-construction pipeline stands at 154,397 sq. ft. Rental rates decreased 0.7% quarterly to $44.69 per sq. ft. Sublease vacant space rose to 1.8 million sq. ft. from 1.8 million sq. ft. in Q1 2026.

Austin’s office vacancy rate declined sharply quarter over quarter in Q1 2025 after the market’s largest big-block space was taken off the market (Highpoint 2222). Despite this improvement, the market remains far from balanced, with vacancy levels historically elevated and a significant about of newly built office space available.

SUPPLY & DEMAND

KEY MARKET INDICATORS

MARKET OVERVIEW

Austin Economic Update 

Austin posted the strongest relative job growth among the Texas majors, adding 14,900 jobs (+1.1%) for total nonfarm employment of 1.42 million in May 2026. Professional and business services (+3,000), financial activities (+2,700, +3.0%), and health care (+2,200) led gains, while information (−1,600, −3.2%) continued to contract. Office-using employment of 428,400 grew 4,100 jobs (+1.0%) — the fastest office-using growth rate of the five metros. Unemployment remained the lowest of the Texas majors at 3.4% (April), up 30 basis points from a year earlier.

Austin’s $207.5 billion real GDP (2023) grew 4.5% year over year and has compounded at 6.8% annually over five years, the fastest of the Texas metros. Population stands at 2.55 million with the highest median household income of the group at $99,897. Home prices declined 0.8% year over year (Q1 2026) — the only Texas major in negative territory — and residential permitting fell sharply, down 29.1% year-to-date to 8,240 units.

Net Absorption Down in Q2 2026

Net absorption—move-ins minus move-outs—was positive 651,422 sq. ft. in Q2 2026, down from 1,085,274 sq. ft. in Q1 2026. Class A properties contributed -73,759 sq. ft., while Class B properties recorded 752,191 sq. ft. At the submarket level, 5 submarkets posted positive total absorption, with the Northwest submarket recording the strongest gain and the CBD submarket posting the largest decline. Notable Q2 2026 move-ins include NXP Semiconductors, which moved into 121,000 sq. ft. at 6433 N Champion Grandview in the Northwest submarket.

Quarterly Leasing Velocity Decreases 14.8%

Quarterly leasing velocity—comprised of new leases and renewals—decreased 14.8% to 1.2 million sq. ft. from 1.4 million sq. ft. in Q1 2026, and is down 7.9% year-over-year. Notable leases signed in Q2 2026 include Capital Area Council of Governments’s 52,650-sq.-ft. lease at Bldg A in Southwest, and Alpha Schools’s 33,596-sq.-ft. lease at The McGarrah-Jessee Building in CBD.

Vacancy Rate Decreases

The overall vacancy rate in Austin’s office market decreased to 22.7% in Q2 2026, down 60 basis points from 23.3% in Q1 2026 and down 180 basis points year-over-year. Class A properties reported a vacancy rate of 25.7%, while Class B properties reported 19.6%. Direct vacancy was 20.5%. Among submarkets, Northeast posted the highest vacancy rate at 41.9%, while Cedar Park/Georgetown/Round Rock was tightest at 12.5%. Sublease vacant space stands 44% below its high of 3.2 million sq. ft. (2002 Q2).

Deliveries Up, Construction Pipeline Down

New office deliveries in Q2 2026 totaled 151,190 sq. ft. up from 0 sq. ft. the prior quarter. The under-construction pipeline stands at 154,397 sq. ft. across 5 properties. The pipeline fell 45.9% over the quarter and declined 88.0% year-over-year. The largest project underway is the 45,000-sq.-ft. Ascalon Medical Office Park in Georgetown, 0% pre-leased.

Investment Sales Trends

Austin’s office investment market saw solid velocity in the second quarter, with roughly 1.5 million square feet trading across eighteen transactions. Buyer demand split evenly between local and national capital, and owner-users played an outsized role. The quarter’s largest trade was Austin Community College’s acquisition of a two-building, ~560,000-square-foot complex on Burleson Road for $130.5 million (about $233/SF), while Great Hills Baptist Church bought the HighFlex Technology Center for $14 million ($196.50/SF). No cap rates were disclosed. Institutional dispositions to owner-users — often following rising vacancy — defined the quarter, underscoring a market where users, not yield-driven investors, are clearing deals.

Asking Rental Rates Decrease

Austin’s full-service average rent stands at $44.69 per square foot, down 0.7% for the quarter and up 1.9% year-over-year. At the submarket level, CBD has the highest average rates, while Northeast has the lowest. On a gross-equivalent basis, Class A asking rents averaged $50.62 per sq. ft. and Class B $36.73.