Austin Office Market Q3 2019

MARKETVIEW

Austin Office, Q3 2019

Searing demand drives fundamentals to record highs 9.9%

6,018,055 SF

446,637 SF

241,084 SF

$38.89 PSF

*Arrows indicate change from previous quarter.

Figure 1: Net Absorption and Vacancy

Vacancy Rate (%)

Net Absorption (000s SF) 2,400

26

1,800

23

1,200

20

600

17

0

14

(600)

11

(1,200)

8 2009

2010

Q1

2011 Q2

2012 Q3

2013

2014 Q4

2015

2016

2017

Total Annual Net Absorption

2018

2019 Vacancy Rate

Source: CBRE Research, Q3 2019.

Q3 2019 CBRE Research

© 2019 CBRE, Inc. |

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MARKETVIEW AUSTIN OFFICE Figure 2: Austin Office Market Statistics

Submarket CBD Class A Class B Northwest Class A Class B Far Northwest Class A Class B Northeast Class A Class B North Class A Class B Central Class A Class B Round Rock Class A Class B East Class A

Net Rentable Area 11,499,454 8,565,694 2,621,610 16,158,365 10,542,535 5,437,698 4,927,943 3,408,649 1,392,161 2,103,166 1,031,394

Total Total Avg. FSG Under Q3 2019 Q3 2019 2019 Vacancy Availability Asking Construction Deliveries Net Net (%) (%) Rate ($) (SF) (SF) Absorption Absorption 5.8 8.4 52.49 2,324,645 501,145 629,569 5.0 7.4 57.62 2,324,645 424,602 495,695 8.6 12.1 47.82 59,231 116,474 14.3 16.1 37.12 693,330 (348,065) 116,988 17.0 18.6 41.19 693,330 (387,448) 57,522 9.5 11.8 33.66 43,428 57,034 8.2 11.4 33.67 188,078 74,606 194,077 9.4 11.0 36.74 188,078 43,733 202,436 5.9 13.0 29.50 29,783 (9,746) 15.4 24.3 26.51 314,000 157,482 275,961 9.1 18.2 26.25 314,000 115,000 286,835

891,268 734,307 -

15.5 8.2 -

18.1 8.2 -

26.38 46.65 -

-

-

39,181 29,022 -

75,035 43,753 -

723,307 1,957,209 522,914

7.8 7.8 4.4

7.8 9.3 8.3

47.49 32.50 44.34

267,038 180,939

-

29,022 12,442 9,706

43,336 76,849 24,570

1,245,386 923,602 210,610 670,874 1,467,870 641,756

8.8 18.4 47.3 10.1 6.7 0.4

9.5 19.5 47.3 11.7 7.7 1.5

30.34 28.53 30.48 25.20 37.68 45.45

86,099 853,344

228,584

4,791 5,071 7,065 522 39,620

46,229 (1,736) (251) (1,484) 161,289

464,066

152,756

22,526

142,773

716,639

12.5

12.7

36.51

9.6 11.0

10.7 11.0

40.49

75,828 12,500

23,619 9,707

11,010 14,659

Class A

1,315,782 599,316

389,278 714,678

48.36

631,500

12,500

14,807

18,209

Class B

380,417

6.2

7.1

44.28

Class A

1,406,004 433,068

4.8 6.9

6.0 11.0

26.95 32.92

83,178 138,850 138,850

-

(1,535) (13,495) 4,470

(1,989) 146,409 8,695

Class B

876,225

3.1

3.1

29.33

-

-

(14,859)

143,129

8.3 8.2

9.3 9.6

38.07

524,092

-

(20,898)

467,789

Class A

11,102,764 7,730,533

42.90

459,339

-

(17,659)

380,261

Class B

3,225,191

8.1

8.4

31.72

64,753

-

(983)

95,457

Austin Total

53,596,466

9.9

12.0

38.89

6,018,055

241,084

446,637

2,125,607

Class A

33,686,469

10.3

12.3

44.65

5,394,747

165,256

236,802

1,616,745

Class B

18,180,776

8.8

10.8

34.41

623,308

75,828

212,200

574,485

Class B South

Southeast

Southwest

Although Class C is not shown, totals are inclusive of all classes of data.

Source: CBRE Research, Q3 2019.

Q3 2019 CBRE Research

© 2019 CBRE, Inc. |

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MARKETVIEW AUSTIN OFFICE Figure 3: Austin Labor Force & Unemployment

(Thousands)

(%) 8

1,300

Forecast

7

1,100

6

900

5

700

4

500

3 2

300 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total Employment (Non-Farm)

Unemployment Rate

Source: Moody’s Analytics, June 2019.

Figure 4: Historical Construction and Deliveries

MSF 6.0 5.0 4.0 3.0 2.0 1.0

Under Construction

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Q4 2017

Q3 2017

Q2 2017

Q1 2017

Q4 2016

Q3 2016

Q2 2016

Q1 2016

Q4 2015

Q3 2015

Q2 2015

0.0

Delivered Construction

Source: CBRE Research, Q3 2019.

Figure 5: Significant Leases / Sales of Q3 2019

Figure 6: Q3 2019 Signed Leases by Industry

Lease (Tenant)

Property

Total SF

St. Jude Medical SC, Inc.

Seven Oaks West

130,152

Farm Credit Bank of Texas

Plaza on the Lake II

111,166

Accenture, LLP

Riata Corporate 9

90,758

Sale (Building)

Address

Total SF

Chase Tower

221 W 6th Street

404,713

Campus at the Arboretum I 10415 Morado Circle

Source: CBRE Research, Real Capital Analytics, Q3 2019.

Q3 2019 CBRE Research

Technology

12%

21%

Business Services

9%

Engineering

9%

Financial

21% 18%

8%

318,226

Health Law Firm Other

Source: CBRE Research, Q3 2019.

© 2019 CBRE, Inc. |

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MARKETVIEW AUSTIN OFFICE Figure 7: Historical Market Statistics 2012

2013

2014

2015

2016

2017

2018

2019

CBD Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

177,023 36.08 12

64,099 38.15 12

369,822 40.1 167,871 9.4

649,300 41.33 557,470 7.1

97,639 47.67 195,863 7.8

564,236 44.95 745,936 7.9

558,794 47.88 122,667 6.3

629,569 52.49 492,637 5.8

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

677,714 25.83 15.3

179,614 26.28 10.4

224,246 29.48 143,331 9.4

669,701 31.96 591,973 8.8

286,950 32.8 372,235 8.8

471,598 33.84 386,921 8.6

445,607 36.72 308,000 9.1

116,988 37.12 315,862 14.3

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

N/A N/A N/A N/A

366,763 27.85 12.2

79,360 28.95 13.8

198,389 30.95 128,700 9.5

336,470 30.62 9.4

230,820 31.79 6.3

77,807 32.76 6.6

194,077 33.67 396,329 8.2

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

64,819 24.05 0 9.6

(35,900) 28.00 115,000 16.4

275,961 26.51 15.4

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

(109,170) 21.63 23

90,741 23.14 23.8

222,683 22.89 15.4

90,066 27.29 214,962 13.1

251,093 25.95 46,000 10.2

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

(18,159) 23.81 15.5

45,653 27.80 13.6

43,753 46.65 8.2

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

52,348 31.39 6.2

(1,941) 33.14 10.2

76,849 32.50 26,391 7.8

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

8,592 21.17 19.3

26,097 22.67 15.1

41,367 23.77 9.8

19,892 24.99 6.6

18,801 22.91 59,043 7

(9,845) 21.11 22,500 8.3

899 27.88 164,486 21.0

(1,736) 28.53 59,476 18.4

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

387,386 16.38 12.7

1,722 17.2 30,451 16.7

49,392 16.71 14.9

58,736 19.55 191,990 17.9

428,135 20.13 199,408 6.6

49,398 34.67 59,655 7.5

(24,059) 43.82 246,711 17.0

161,289 37.68 719,566 37.68

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

83,355 15.38 21

25,359 15.13 19.9

70,143 14.73 16.3

33,337 15.02 14.4

158,472 24.68 16

23,598 31.90 57,500 12.1

102,221 31.00 115,246 4.4

14,659 40.49 76,784 9.6

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

N/A N/A N/A N/A

71,123 23.55 29,205 20.2

49,905 26.47 16.1

146,409 26.95 4.8

Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

205,677 26.8 9.9

149,911 29.83 92,008 8.4

101,327 31.78 76,500 8.4

419,723 34.34 1,062,477 10.3

159,982 35.99 9.7

154,081 34.31 410,295 10.7

161,187 36.64 135,500 11.4

467,789 38.07 8.3

1,430,577 26.24 14.2

904,306 28.15 122,459 12.1

1,158,340 29.56 387,702 10.6

2,139,144 31.81 2,747,572 9.6

1,737,542 34.83 872,549 9.2

1,654,017 34.39 1,712,012 8.8

1,380,173 36.64 1,207,610 9.6

2,125,607 38.89 2,087,045 9.9

NORTHWEST

FAR NORTHWEST *

NORTHEAST **

NORTH CENTRAL***

NORTH**

CENTRAL**

ROUND ROCK

EAST

SOUTH

SOUTHEAST**

SOUTHWEST

AUSTIN TOTAL Absorption (Net SF) Asking Rent, Avg. Annual Delivered Construction (SF) Vacancy Rate (%)

Source: CBRE Research, Q3 2019.

Q3 2019 CBRE Research

*Submarket created in 2013 **Submarket created in 2017 ***Submarket removed in 2017

© 2019 CBRE, Inc. |

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