Austin’s office market is experiencing significant turbulence as it posts the nation’s highest vacancy rate increase, highlighting the growing disconnect between development momentum and market demand in one of Texas’s fastest-growing cities.
The state capital recorded a vacancy rate of 27.7% — tied with San Francisco for the highest nationally — marking a dramatic 710-basis point surge year-over-year, the steepest increase among major U.S. office markets, according to CommercialEdge’s November Office Market report.
This spike comes as the city grapples with reduced office utilization and weakening demand, even as development continues at a breakneck pace.
The market’s challenges are further reflected in tumbling sale prices. After leading the nation in September, Austin’s average price per square foot dropped sharply from $379 to $287, relegating it to sixth place among leading U.S. office markets. This decline is exemplified by Equity Commonwealth’s recent $64.5 million sale of two significant properties — Bridgepoint Square and Capitol Tower — both sold at substantial discounts to their original purchase prices.
Despite these headwinds, Austin maintains its position as a development powerhouse. The city ranks first regionally and third nationally in office space under construction, with 3.5 million square feet in development, representing 3.7% of its existing inventory. Including planned projects, Austin’s office footprint is projected to expand by an ambitious 12.1%.
The city’s asking rents remain strong at $46.75 per square foot, the second-highest in the region behind Miami’s $52.84, suggesting that property owners are maintaining pricing power despite increasing vacancies.
Meanwhile, other Southern markets are showing resilience. Washington, D.C. has already surpassed its 2023 sales volume, recording nearly $2.5 billion in transactions through October. Dallas-Fort Worth secured the fifth position nationally with $1.1 billion in sales, while Atlanta reached the $1 billion mark in transactions, despite lower-than-average sale prices of $145 per square foot.
Miami emerged as a regional standout, commanding the highest sale prices in the South at $369 per square foot, second only to national leaders, with transaction volume approaching $1 billion through October.
As Austin navigates these challenging market conditions, industry observers are closely watching whether the city’s ambitious development pipeline will exacerbate its vacancy challenges or if strong economic fundamentals will eventually absorb the excess supply.