Available sublease o ce and commercial space has gone up due to the work-from-home movement, downsizing or layo s, local real estate agents said, meaning the pace of demand for o ce space is slowing.
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AVAILABLE SPACE
GETTING A PULSE Conversations with local real estate agents highlight the major takeaways of what is happening on Parmer Lane.
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Is development still happening along Parmer Lane?
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Yes, several projects are still under construction.
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Will development continue at the same pace moving forward? Real estate agents expect the development pipeline to slow down signi cantly for the next two years.
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SOURCE: AQUILA COMMERCIAL REAL STATE COMMUNITY IMPACT
of space to new tenants indicates tenants are moving slower than they have in the past, Emerick said. “Our volume of tenant demand continues to be robust; it’s just the velocity, the pace of the trans- action or pursuit, that has slowed to a snail’s pace,” Emerick said. One metric that highlights the change is the amount of sublease space available, Putman said. Sublease space is typically put up for lease by an existing tenant rather than the landlord, Putman said. This may mean the business no longer requires the amount of space it thought it needed. For the far northwest market, the available sublease space for the last quarter of 2022 was higher than it has been for the fourth quarter of the last four years at 140,000 square feet, compared to 102,238 the pre- vious year. Beyond the Northwest Austin market, of the 40 million square feet of o ce space Aquila tracks in Austin, about 5 million square feet are up for lease through subleasing, Putman said. Amplify Credit Union is one company that down- sized its headquarters on Parmer from 44,000 square feet to 18,324 square feet in 2023 as the work-from-home movement has meant less o ce space is needed, Amplify Chief Information O cer Charlotte Morrison said. The excess space will be renovated and subleased to other professional ser- vices, Morrison said. “We’ve embraced remote work,” Morrison said. “That is the main reason we now are able to open up a lot of leased space in that building.” While companies have traditionally had a formula to calculate their occupancy based on the number of employees, the work-from-home movement has raised more uncertainty for employers, Emerick said.
Another instance of this is 3M, which announced in May plans to sublease some of its space in Austin at the Parmer Innovation Center due to shifting work- force requirements. “3M is reviewing its o ce space and service needs for all of its locations,” 3M Communications Manager Tim Post said in an email. “3M’s o ces were built when working on-site was the expectation for all employees. Our space needs have changed as we’ve moved to a exible work model with fewer employees working on-site.” The promise of Parmer Lane While slowed growth in the North and Northwest Austin markets has resulted in more o ce space availability, real estate agent Brandy Harrison said the residential real estate market is picking up after a slow start in 2023. Most of her clients move here for the tech industry, and she said she has not noticed a slowdown in interest. Despite the continued demand for housing, tech companies are facing their own di culties, said William Redd, executive vice president and senior managing director of Brandywine. “You fast forward a couple of years [after COVID- 19] and … the big tech groups that are sort of lead- ing the way in the immediate area, a lot of those guys had layo s and … are having to sublease more, which is not good,” Redd said. Due to the unclear future of the market, Putman said the pace of new projects popping up is expected to signi cantly lessen compared to prior years. “If it’s not under construction right now, there’s not going to be any capitalization of new devel- opments for the next two years and maybe even
What projects are in the works? The largest projects in progress are Pearson Ranch, the rst part of 9500 Parmer and EastVillage.
What projects are waiting for a major tenant to buy in before continuing construction? The Parmer Innovation Center, 7700 Parmer and 9500 Parmer are awaiting buy- in from a tenant to continue work.
What is sublease space, and why does it matter?
Sublease space is space put up for rent by an existing tenant, which could indicate downsizing.
longer,” Putman said. Despite the economic setbacks for Parmer, the promise of projects such as Apple and the new Sam- sung Austin Semiconductor set to come to Taylor means good things for the thoroughfare, said Dave Porter, executive director of the Williamson County Economic Development Partnership. “What drives that demand is good-paying jobs, and those good-paying jobs are typically at a Samsung or an Apple,” Porter said. ”Disposable income drives where commercial development goes.” SOURCES: 7700 PARMER, 9500 PARMER, DAVID PUTMAN, MARK EMERICK, PEARSON RANCH, THE PARMER INNOVATION CENTER COMMUNITY IMPACT
For more information, visit communityimpact.com .
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