AUSTIN (KXAN) — Demand for office space in Austin is driving average asking rates to a record high in the first quarter of 2022, according to the latest report from real estate company CBRE Group.
Class A average asking rates were $53.34 per square foot, the first time it’s been above $50 since the company started tracking rates in 1989.
The group said Austin is one of the hottest markets for office development in the country, with 30 projects totaling nearly six million square feet currently under construction.
“The continued trend of relocations and expansions in the region, spearheaded by the construction of Apple’s new campus in northwest Austin and Tesla’s corporate headquarters relocation to the new Gigafactory in southeast Austin, drove strong population growth in the region over the past two years,” the report stated.
They said the bulk of those new spaces are in the Central Business District downtown and east Austin.
“There are companies that want to be in and around where Apple is. Same with Tesla, wanting to be in and around,” explained Katie Ekstrom, CBRE senior vice president.
She also said those areas offer amenities companies hope will attract workers to come back to the office.
“Because it has those walkable amenities and companies are willing to pay up for the, you know, the new stuff. So you’re seeing this flight to quality, because they want people to come back to the office for the culture reason,” Ekstrom said.
It’s a bounce back from the industry’s COVID slump, as employees return to work and demand for space surges.
The entrepreneurial spirit is one of the reasons why Steven Hollander recently moved to Austin from Atlanta.
“I think Austin’s community is very conducive to other entrepreneurs,” he said. “You’ve got the beautiful lake here; there’re great hiking trails. So, just a great, holistic place to live, in my opinion.”
Population growth is also driving up home prices and rental rates, according to Realtor.com.
The Austin metro area sits within the top 15 largest metros with the highest rent increase over the past two years.
The company said in March 2022, the median rent for 0-2 bedroom units was $1,777, an increase of 25.9% from March 2020.
“This is largely due to the mismatch between rental supply, with vacancy rates at record-lows and demand rising as some would-be buyers potentially turn to renting in the face of higher home prices and mortgage rates,” said Realtor.com Chief Economist Danielle Hale in a press release about soaring rental prices across the country.
“A lot of younger people are going to just continue to rent, because it’s in the urban areas, and it’s too expensive to buy,” Ekstrom said.
Apple opened its first office in Austin more than 25 years ago, according to the company. Its existing campus is on Parmer Lane, and the new $1 billion facility is being built adjacent to it.
KXAN’s media partners at the Austin Business Journal rank Apple, Inc. as the third-largest technology employer in the Austin area.
Tesla is already at No. 5, according to the ABJ.
“Companies are more than ever looking for highly-amenitized office space to lure employees to the office and recruit in a competitive labor market, which is benefitting Austin and driving more intense interest in office space in downtown, east Austin, and the Domain,” a CBRE spokesperson said. “Plus, the tight market for office space in Austin is driving development (companies will face a bottleneck of office supply, especially for the desirable buildings, in the next couple years).”