It's not all bad though. Apparently they're dropping in downtown, which is where it's really important.
From the Austin American-Statesman
http://www.statesman.com/business/co...402office.html
REAL ESTATE
Office vacancies rising in Austin
By Shonda Novak
AMERICAN-STATESMAN STAFF
Wednesday, April 02, 2008
Vacancies are rising in Austin's office market and are expected to continue ticking up amid a glut of new space and heightened caution among tenants who are keeping an eye on the national and local economies, office experts say.
"We're still seeing activity; it's just a little slower," said Charlie Hill, a senior vice president of Oxford Commercial, which released first-quarter rent and occupancy figures for the local office market Tuesday. "Leases are getting signed, but it's taking longer. Tenants are on the sidelines and being a little more cautious."
Citywide, vacancies among all types of office space climbed to 16 percent, compared with 11.8 percent in the first quarter of 2007. The average rent rose to $26.43 per square foot, compared with $23.28 a year earlier.
For top-tier, or Class A, space, vacancies climbed to 15.9 percent from 9.4 percent a year earlier. Average Class A rent rose to $29.90 per square foot from $26.19 a year earlier.
Hill said much of the jump in rental rates has been driven by investment sales: New owners who paid record prices last year for Austin office buildings set rents that would justify their purchase prices, Hill said.
"There is demand, but not the demand to justify what those rents increased by," Hill said. "With the economy nationally slowing down, demand has slowed a bit as well."
Hill expects rental rates to plateau and then slowly decline throughout the year.
He also expects vacancies to slowly continue to rise as more than 2 million square feet of office space is added this year amid slower leasing activity.
However, Hill said Austin is in better shape than many other cities.
"The Oxford numbers are very much in line with our own forecasts, but with some interesting twists," said Andy Smith, managing director of leasing for Thomas Properties Group Inc. in Austin. "Vacancy rates in the central business district are actually decreasing, and that trend looks to continue through 2008. And no new supply is projected in the (district) for three or four more years."
Hill said the biomedical industry is one in which some companies are expanding and looking for space.
And there's a lot of it out there: Of the 651,791 square feet of newly built space that became available in the first quarter, slightly more than 100,000 square feet has been leased.
In the first quarter, more tenants moved out or downsized than moved in or expanded. This resulted in a net loss of 91,430 square feet of occupied space.
For example, AT&T Inc. vacated 112,000 square feet in River Place Corporate Park in far Northwest Austin and moved those workers into office space it hasin other buildings, Hill said.
Chase bank had earlier vacated 115,000 square feet at 700 Lavaca St. downtown, a move that showed up in the first-quarter numbers.
On the upside, Hill said, several new leases have been signed, but those deals won't be reflected in market statistics until the companies move in..
SolarWinds Inc., a provider of network management software, is taking 60,000 square feet in the Park at Barton Creek at Capital of Texas Highway (Loop 360) and South MoPac Boulevard (Loop 1). And Dell Inc.'s new ad agency, which has the working name DaVinci, will occupy 70,000 square feet in the Capitol Tower in downtown Austin.
"Obviously, we're affected by what happens globally, but we're a little bit insulated from the rest of the world," Hill said. "People want to live here, and we're more affordable than California."
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