Colliers 2Q 2015: Austin leads nation in startups

AUSTIN – It is the Texas capital and tech center, and not Silicon Valley, that is home to the greatest number of startup businesses, 180 all told. So says Colliers International, citing the annual Kaufmann Index report, in its second-quarter roundup on the city’s office sector.

The city’s technology job base has grown by 17.8 percent since 2011, thanks in part to eastward migration by California-based companies. Austin’s unemployment rate trended below both the state and national averages a year ago at 4.1 percent, and is now even lower at 3.1 percent.

All of the positive economic news is belied somewhat by the fact that Austin’s office vacancy citywide has crept up over the past few quarters. It increased 20 basis points from 10.2 percent in 1Q to 10.4 percent this past quarter, although CBD vacancy is trending in the opposite direction, dropping 60 basis points from 8.2 to 7.6 percent.

Overall, suburban vacancy increased 30 basis points from 10.7 percent to 11.0 percent in 2Q, due mainly to a 100-basis points increase in Class A suburban office vacancy.

Colliers is predicting a further vacancy increase and decrease in net absorption as more new space delivers in the year’s second half, although it also expects the pace of new construction to slow down.

Six buildings totaling 730,000 sf were delivered in 2Q, and another 2.2 million sf of office is now under construction.

The city’s average rental rate increased by 3.7 percent from $28.16 per sf to $29.20 over the course of 2Q.

The average CBD Class A rental rate decreased from $42.64 per sf to $41.58, and the average suburban Class A rental rate increased from $31.54 per sf in 1Q to $32.87.

Click to see Colliers Austin Office Research Report 2Q 2015 (PDF).

For other Austin office quarterly reports, click Austin Market Research.