Quote:
Originally Posted by GoldenBoot
I would not worry. Additionally, most of these projects are not being developed by "Austin developers." They are developers based elsewhere and with quite a portfolio nationally. These are mid-term/long-term plays. They are not going to hurt. Also, occupation is not slated until 2026 or later. A lot will change over the coming 18-36 months.
Having said that, I do not anticipate any new (major) spec office projects to break ground in the short-term.
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I should have referred to downtown Austin developments instead of developers. The point remains that vacancy rates are the highest since 2009. According to a recent report in The Real Deal, office vacancy in Austin hit 19.7 percent last quarter, setting a record high going back to at least 2009.
Even businesses that have already signed large footprints are getting skittish, as total sublease space reached 5.4 million square feet, according to JLL. In the last three months alone, tenants placed 1 million square feet back on the market.
So far, 2023 has been dismal for office owners. Some 940,000 more square feet have hit the market than come off it. I am not certain how many square feet of Class A are currently under construction downtown, but I know it easily exceeds a million square feet. I don't have an iron in this fire, but I think I can spot a potential real estate bust when I see one. In commercial real estate, 3 years out or 4 years out is a blink of the eye. A lot of construction loans are going to have to be refinanced, and existing office portfolios nationwide currently holding 3 percent paper are looking for a financing reset in the next few years as well. It took a decade or longer for downtown high rises to lease out after the bust of the 1980s. It was the era of the "see-through" office building, and there was considerable collateral damage.
This Atlantic article sheds some light.
https://www.theatlantic.com/ideas/archiv...real-estate-crisis-empty-offices/674310/
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