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Kim Gatley
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enior Vice President & Director of Research at REOC Austin

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REOC Releases 4Q 2016 Office Market Report

The Austin office market finished strong in the final quarter of the year with plenty of momentum heading into the New Year. New leases and expansions generated 567,035 square feet of positive net absorption in the fourth quarter.

No new office space was delivered in the fourth quarter keeping the year-end total at nearly 779,000 square feet. As a result, new leases and expansions tightened the citywide vacancy rate from 8.7% last quarter to 8.0% at the end of the fourth quarter.

Strong demand has propelled rental rates to an all-time high. At the close of the fourth quarter, the citywide average rental rate reached $34.83 per square foot on an annual basis which marks a healthy 3.5% annual increase over the same period last year. At the top of the market, Class A buildings in the CBD command an average quoted rental rate of nearly $53 per square foot. (To adjust for buildings which quote rents on a triple net basis, operating expense figures have been added into the equation to arrive at an average equivalent full-service rate.)

Strong rents coupled with a sub-ten percent vacancy rate signal a green light for developers to keep building. There is more than 1.8 million square feet of office lease space currently under construction and much of the space has already been pre-leased.

The booming local economy continues to fuel corporate relocations and expansions. According to the Texas Workforce Commission, the Austin-Round Rock metro area added 18,800 new jobs over the past twelve months ending December which equates to an annual growth rate of 1.9%. Essentially, Austin is operating at full employment with a reported unemployment rate of 3.2% which compares favorably to the Texas rate of 4.6% and the U.S. rate of 4.5%.

Click the following link to download REOC Austin’s complete 4Q 2016 Office Market Report

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