The Austin-Round Rock metro area saw an increase of 24,400 jobs over the twelve-month-period ending June 2012 which equates to an annual job growth rate of 3.1%, according to Texas Workforce Commission. Improved market fundamentals coupled with healthy job growth throughout the region, a strong technology sector and growing demand for medical office space are all factors that have drawn the attention of investors who are now competing to buy top assets in robust markets like Austin.
Newly commenced leases and expansions generated 218,690 square feet of positive net absorption in the second quarter which raised the year-to-date total to 345,100 square feet at mid-year. In response, the citywide vacancy rate improved to 16.4% compared to 16.9% last quarter and 18.6% recorded in the same quarter last year. Improved vacancy continues to support rental rate increases. The average quoted rental rate for office space in the Austin area climbed nineteen cents from last quarter to reach $26.22 per square foot per year – up seventy-four cents compared to the same quarter last year for a moderate annual increase of 2.9%.
Keeping an eye on rising rents and declining vacancy rates while, at the same time, lending an ear to tenants currently shopping for space, developers are eager for opportunities to deliver new construction. No new speculative projects have been delivered through mid-year although several are in various stages of design and development including Domain 7 located at 11510 Burnet Road and Cedar Bend Professional Center (70,200 sf) located at 12309 N. MoPac. Limited new supply will keep demand focused on filling existing space which will result in tighter vacancies and higher rental rates through the end of the year.