Austin office absorption levels during the first half of 2018 were relatively flat compared to the past three years, with slightly more than 80,000 sq. ft. of new space demand.
Despite the lackluster level of absorption, Austin's office market is durable during its advancement into the late expansion stage of the cycle.
Vacancy throughout the Austin market ticked upwards a full percent to 10.7%, largely due to the delivery of six new office buildings encompassing close to 580,000 sq. ft.
As expected, Austin operational costs rose once more climbing $0.44 per sq. ft. to a citywide annual average of $10.18 per sq. ft. The citywide NNN asking rate rose $0.41 quarter-over-quarter to $25.66 per sq. ft., and combined the Q2 2018 citywide annual average full service gross rate was elevated to a historic high of $35.84 per sq. ft. annually.
Despite the flat absorption and increased vacancy, CBRE Research has identified more than 7.4 million sq. ft. of demand in the market, which has motivated office developers to keep the office construction pipeline fully bolstered, with approximately 4.2 million sq. ft. of new construction currently underway.