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Austin Office Graphs Q4 Hero

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Increasingly robust Austin Office market ends 2021 with substantial gains in leasing activity and positive net absorption.



The Austin office market is showing signs of demand improvement, as leasing volume increased in the fourth quarter by almost 250% to 2.8 million sq. ft. compared to Q4 2020 at 819,000 sq. ft. With major tech companies like Apple, Google, Oracle, and Tesla in the process of major expansions, Austin looks like it is beginning to recover in the office market. However, a close eye will need to be kept on the possibility of increasing remote work as Google has once again delayed its return to the office as the Covid-19 Omicron variant spreads. Google is a significant technology employer in Austin, with more than 1,500 employees as of September. It has leased all of the 35-story office tower going up at Block 185, overlooking Lady Bird Lake. Round Rock-based Dell Technologies Inc., the largest technology employer in the Austin area, indicated that it will move forward with office reopening’s but that employees whose jobs allow it can continue to work remotely.

Austin has made up all of 2020’s pandemic-related job losses and currently has 49,200 more jobs than it had in February 2020, ranking as the 6th best performing major job market over the last 12 months and the 2nd best performing since the beginning of the pandemic. The professional and business services sector added 10.8% or 22,500 jobs over the last 12 months, second only to leisure and hospitality at 17.8% or 18,900 jobs. Austin’s seasonally adjusted unemployment rate was 3.3% in December, improved from 3.5% in November. In addition, Austin’s economy grew by 1.2% in 2020. This gain in real GDP makes it the second best performing among the 50 largest metro economies in 2020.

Austin Office Graphs Q4 Graphs


Net absorption closed 2021 to end the full year at positive 1.5 million sq. ft. This was a significant turnaround compared to this time last year at negative 549,000 sq. ft. The availability rate is 19.4%, up from 18.5% year-end 2020. The difference between this figure and the vacancy rate reflects expected future move-outs. The overall vacancy rate in the CBD is at 15.5%, although the availability rate for that submarket is at 22.5%. This wide margin also tracks for Class A space in the CBD at 20.0% vacancy, compared to 28.2% availability.

Quarterly leasing velocity—which is comprised of both new leases and renewals—increased to 2.8 million sq. ft. during the fourth quarter—up from 2.0 million sq. ft. quarter-over-quarter. Top transactions during the fourth quarter included Facebook’s parent Meta signing a new lease in December for 574,165 sq. ft. allowing it to grab 32 floors of Austin’s soon-to-be largest skyscraper—Sixth and Guadalupe—delivering Q4 2022; Amazon signing a new lease for 332,865 sq. ft. at Domain 9 in the North/Domain submarket in December; Hanger inking a deal for 79,292 sq. ft. in The Domain in December; and Capital Factory taking 46,662 sq. ft. in Austin Centre at 701 Brazos St. in the CBD in October.

Construction levels in Austin are among the highest in the nation. 6.6 million sq. ft. is underway (60% preleased)—representing 6.7% of inventory—on top of the 4 million sq. ft. (56% preleased) that delivered during 2021. There is 9 million sq. ft. of proposed projects that have been announced, although they have not broken ground yet. The amount of construction underway and in the pipeline is easily understandable as the Austin office market has been one of the most dynamic in the country. Multiple projects breaking ground this quarter include Parmer 5.1 & 5.2 (386,367 sq. ft.) at Karlin’s Parmer Innovation Campus in Northeast Austin. The campus is now home to several companies including BAE Systems, 3M, and Infosys. In addition, Austin FC officially opened their $45 million, privately funded, state-of-the-art training facility, St. David’s Performance Center, at the beginning of 2021.

Real Capital Analytics data reports the cumulative monthly value as of December 31, 2021 in the Austin area at $3.6 billion, over five times the amount of year-end 2020 at $694 million. One of the most notable office transactions in Austin in 2021 was Kilroy Realty closing the deal on Indeed Tower for $580 million. The 36-story building located at the intersection of W. Sixth and Colorado streets is approximately 730,000 sq. ft. and currently 63.2% leased. Trammell Crow developed the new tower that was completed in Q1 2021. The building occupies a full city block in the central business district and includes 10,000 sq. ft. of ground-floor retail space. Tenants include Indeed, Vinson & Elkins, Heritage Title, and Brown Advisory. The primary capital composition for buyers in 2021 was made up of 43% private investors, and 25% REIT/listed. For sellers, the majority was 54% private investors, and 24% REIT/listed.

Tesla relocated its headquarters to Austin last year from Palo Alto, California, and owns more than 2,500 acres around the factory off the State Highway 130 toll road. Tesla’s investment is one of the largest economic development projects in the region, with thousands of jobs expected and many suppliers already locating in the region. It is reported that the company has begun to file the necessary paperwork to begin production at the $1.1 billion facility, which in about 18 months has been significantly completed—measuring at almost 4.3 million sq. ft. Recently on Twitter, Elon Musk said that the new Tesla factory east of Austin would represent a long-term investment of at least $10 billion, generating over 20,000 direct jobs and 100,000 indirect jobs.

The Austin Office market’s overall full-service average rates are at $40.57 per sq. ft., up 7.1% from this time last year at $37.87, and 0.8% quarter over quarter. Overall asking rates for Class A space are averaging $46.14 and Class B are averaging $33.47 per sq. ft. Over the long term, the outlook for rent growth in Austin should be optimistic. During the past ten years, average annual rent growth has been about 5%, with a couple of peak years during 2015 and 2016 at 8%. Considering the performance over the past decade there should be little doubt that the market can return to strong rent growth.

Leta Wauson
Director of Research
[email protected]
tel 713 275 9618

Additional Research from NAI Partners

Austin Office | Quarterly Report | Q3 2021
Austin Office | Monthly Market Snapshot | December 2021

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