Government
BY BEN THOMPSON
As Austin office vacancies rise, residential reuse unlikely
One-fifth of Austin’s office space sat empty as of early 2024, leaving the market’s prospects uncertain with millions more square feet coming in the near future. The vacancies, shifting workforce trends and a large amount of new space arriving soon have led to some consideration to the potential for vacant offices to be used for other purposes, such as housing. Current situation Several commercial real estate firms found more than 20% of Austin offices to be vacant as of Q1 2024, a modern high for the city. Even so, more than 1 million square feet have been leased in 2024. And net absorption, or the amount of newly occupied space minus newly vacant space, is trending upwards after a negative 2023. Despite recent moves by companies such as Apple and Amazon, the bulk of leasing demand remains in the smaller 1,000- to 5,000-square-foot range—a trend that’s at odds with the amount of available space in new office high-rises and in the sublease market where larger footprints are common. Occupancy is slow in prime downtown space. Meta is still seeking to sublease hundreds of thousands of square feet it’s rented at Sixth and Guadalupe, while Google has yet to occupy the 601 W. Second St. “sailboat” tower. Looking ahead, 4 million more square feet of office space is coming over the next few years, including the “supertall” Waterline. After this wave of new development is complete, analysts said those significant additions likely mean no major projects will be added to Austin’s pipeline
Austin office market vacancy
The amount of vacant office space in Austin has risen since early 2020 given new working trends and the arrival of several new office builds.
Vacancy rates
23.8%
25%
19.7%
20%
20.6%
19.1%
15%
11.7%
10.9%
10.1%
9.7%
10%
11.5%
9.5%
9.3%
5%
0%
SOURCE: CBRE INC./COMMUNITY IMPACT
Auditors pointed to local barriers like the high costs of renovating aging buildings and the difficulties tied to the civic rezoning and permit- ting processes. They also said the projects would likely skew toward the luxury market rather than affordable or market-rate housing. Council member Mackenzie Kelly, who requested the audit analysis, said she’s still looking “at any and all ways” to add housing in Austin, including through possible office conversions in the future. Downtown’s historic Brown Building, com- pleted back in 2004, was Austin’s only modern office-to-residential conversion. Outside of hous- ing, recent reuse includes Magellan International School’s move into a former Northwest Austin office campus and The University of Austin’s lease at the Scarbrough Building downtown.
for a while. “Until we get larger users to have the confi- dence to come back into the market and take advantage of some of this vacancy or some of the sublease space, I think it will be hard for us to have a true market recovery,” said Carl Condon, an Austin-based principal with commercial real estate agency Avison Young. A closer look Given vacancy trends, city leaders asked to take a closer look at the concept of adaptive reuse, or the conversion of unused offices into residential or other uses. A new special city audit report found that conversion process may not be the best fit in Austin although there’s still some interest in seeing what might work out.
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