Austin’s Office Market Net Absorption Turns Positive and Vacancy Inches Down
EXECUTIVE SUMMARY
Austin’s office market recorded 967,440 sq. ft. of positive net absorption in Q3 2025, a significant improvement from the previous quarter’s negative absorption. Unfortunately, the large amount of net absorption did not move the vacancy needle higher than 10 basis points due to a surge in deliveries. Class A properties recorded 655,257 sq. ft. of positive net absorption, while Class B properties posted positive absorption of 312,183 sq. ft. Leasing activity increased 17.8% between quarters; however, leasing activity was 40% lower than a year ago. The vacancy rate dropped 10 basis points over the quarter to 27.7% but is still up 30 basis points year-over-year. On the sublease front, available space has trended downward, decreasing 1.8% from the previous quarter.
The construction pipeline dropped significantly by 91.3% quarter-over-quarter and by 88.5% annually, with only 185,641 sq. ft. currently underway, concentrated South of Austin’s CBD. Deliveries increased from zero sq. ft. in Q2 2025 to 1.1 million sq. ft in Q3 2025. Rental rates rose 0.2% quarterly to $45.12 per sq. ft. and increased annually by 7.9%. Class A space commanded an average of $52.69 per sq. ft., while the CBD and North/Domain submarkets continued to command the highest Class A rates at $64.24 and $59.06 per sq. ft., respectively.
SUPPLY & DEMAND
KEY MARKET INDICATORS
MARKET OVERVIEW
AUSTIN ECONOMIC UPDATE
Austin’s unemployment rate was 3.7% in August, up from 3.5% in May, but below the state and national rates of 4.1% and 4.3%, respectively. In August, the local labor force increased at an annualized rate of 0.7%. Austin employment increased at an annualized rate of 2.2% in August, surpassing the 1.9% growth rate in July. In the six months ending in August, employment grew 1.4%, faster than Texas and the U.S., which rose 1.2% and 0.6%, respectively.
The most significant gains from December to August were in government (3,900 jobs) and education and health services (3,200 jobs). Sectors that declined include construction and mining (-3,000 jobs) and professional and business services (-1,300 jobs).
Average hourly earnings rose to $36.41, reflecting a year-over-year increase of 5.1%. At the same time, apartment rents in Austin fell 4.1%.
NET ABSORPTION TURNS POSITIVE IN Q3 2025
Net absorption—move-ins minus move-outs—was positive 967,440 sq. ft. for the quarter, which pushed the year-to-date total from -415,125 sq. ft. to 552,315. Class A properties contributed 655,257 sq. ft. in Q3 2025, while Class B’s contribution was 312,183 sq. ft. The CBD submarket contributed the highest amount of positive absorption in Q3 2025, posting 526,808 sq. ft., while the Northwest submarket posted the highest amount of negative absorption, -68,256 sq. ft. Notable move-ins in Q3 2025 include Vista Equity Partners taking 201,000 sq. ft. in The Republic on W 4th St. in the CBD submarket and Wise PLC taking 61,000 sq. ft. in Domain Tower 2 located in the North/Domain submarket.
DELIVERIES UP, CONSTRUCTION PIPELINE DOWN
Over 1 million sq. ft. of new space was delivered to Austin’s office market in Q3 2025. The under-construction pipeline fell 91.3% quarterly and 88.5% annually, with 185,641 square feet currently underway. All the current construction is in the southern submarkets.
QUARTERLY LEASING ACTIVITY UP 17.8%
Quarterly leasing velocity—comprised of new leases and renewals—stood at 1.3 million sq. ft., which is up quarterly, but down over the year. Notable new leases signed in Q3 2025 include NVIDIA Corporation signing a lease for 99,000 sq. ft. in Uptown ATX – Block A – One Uptown, Base Power signing a 43,000 sq. ft. lease at 205 E Riverside Dr., and Bazarrvoice renewing its 37,000 sq. ft. lease at Quarry Oaks III.
VACANCY RATE INCHES DOWN
The overall vacancy rate in Austin’s office market is 24.7%, 10 basis points lower than the previous quarter. Over the past few years, however, the total vacancy rate has been trending higher (up 40 basis points over the past year) due to a combination of new spec construction with minimal leasing and companies continuing to downsize their footprints when leases have expired. On the sublease front, which has been a drag on the market, has been trending downward since reaching an all-time high of 4.7 million sq. ft. in Q1 2024 and now stands at 4.0 million sq. ft.
INVESTMENT SALES TRENDS
CoStar Capital Market Analytics reports a cumulative 12-month sales volume of $914 million for Q3 2025. Over the past year, 381 office properties were sold, with an average price of $314 per square foot and an average capitalization rate of 6.3%. Some notable sales transactions that occurred in the third quarter of 2025 include Carpenter & Langford’s purchase of Westlake Oaks Building H from Sooth Limited Partnership for an undisclosed price. OakPoint Real Estate purchased Encino Trace I & II from Starwood Capital Group. The two buildings totaled 326,800 sq ft. The sale price was not disclosed.
AVERAGE ASKING RENTAL RATES INCREASE QUARTERLY AND ANNUALLY
Austin’s full-service average rent stands at $45.12 per square foot, which is up 0.2% for the quarter and 7.9% year-over-year. Asking rents for Class A and Class B space are at $52.69 per sq. ft. and $36.69 per sq. ft., respectively. At the submarket level, CBD and North/Doman have the highest rates, at $60.98 and $51.19 per sq. ft., respectively.
For More Information, Contact:
Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]
