A Closer Look at Austin’s Office Market
Texas boasts no personal or corporate income tax, and overall the state has one of the lowest tax burdens in the nation. In 2019, the Austin metropolitan area added 37,800 net new jobs, a growth rate of 3.5 percent, according to the Austin Chamber of Commerce. This makes Austin the second fastest-growing major metro in the nation. However, with coronavirus’s onset, the Austin market along, with the rest of the nation, saw unemployment skyrocket. Employment has slowly been improving, and in May, Austin added 18,300 jobs, narrowing the pandemic-related job losses to 110,300. Currently, Austin’s seasonally adjusted unemployment rate sits at 11.4 percent, compared to the 2.8 percent at the beginning of the year.
The Austin office market appears to remain resilient through the first half of 2020 as it has been one of the strongest in the country over the past decade. Job growth, absorption, and rent growth have been robust, drawing significant development activity. This doesn’t include construction projects that should break ground as the pandemic subsides, including Apple’s second campus and Oracle’s third campus. However, a large amount of construction could add more risk to the outlook as buildings remain empty, and coronavirus cases continue to spike. Although occupancies remain well below the peaks reached over the past two recessions, the risk for demand formulation remains the downside.
The COVID-19 outbreak continues to disrupt the Austin market as significant uncertainty surrounding market dynamics and long-term trajectories. Commercial real estate office growth will depend on how widely the virus spreads and how long containment policies are maintained.