Integra Realty Resources – Austin
Randy A. Williams, MAI, SR/WA, FRICS
Senior Managing Director
11675, Jollyville Road, Suite 205
Austin, TX 78759
Phone: 512-459-3440 x15
rawilliams@irr.com
2015 ANNUAL
Austin, TX | Office
Market Commentary
Office Snapshot
GOING IN CAP RATES (%)
10%
8%
7.0%
6.3%
7.5%
6.5%
8.0%
7.1%
7.6%
8.2%
7.8%
7.0%
7.4%
8.1%
As the economy has continued to strengthen, the Austin
office market has improved, overall, and shifted into the
expansion phase of the market cycle. Overall vacancy rates
were steady throughout 2014 and will likely continue to be
so into 2015, even with the increase in office construction
the Austin market is experiencing.
6%
4%
MARKET CYCLE (CBD + SUBURBAN)
2%
0%
Market
Region al
National
Expansion
Hypersupply
DISCOUNT RATES (%)
10%
8%
8.5%
7.8%
8.8%
8.0%
9.2%
8.4%
8.8%
9.4%
9.1%
8.3%
8.7%
9.3%
6%
4%
2%
0%
Market
Region al
National
Recovery
Recession
MARKET RENT ($/SF)
 CBD
 Suburban
$50
$40.2
$40
$30
$28.1$28.3
$19.1
$20
$27.7
$25.7
$23.2
$19.7
$17.8
$21.4
$24.1
$19.1
$10
$0
Market
Region al
National
CBD Market Cycle:
Expansion Stage 1
Suburban Market Cycle:
Expansion Stage 1








Decreasing vacancy rates
Moderate/high new construction
High absorption
Moderate/high employment
growth
 Med/high rental rate growth
VACANCY RATE (%)
Decreasing vacancy rates
Moderate/high new construction
High absorption
Moderate/high employment
growth
 Med/high rental rate growth
20%
16.4%
15.0%
15%
10%
11.5%
10.0%
8.0%
14.5%
12.7%
15.7%
12.9%
14.4%
13.0%
11.5%
5%
0%
Market
Region al
National
Legend
■ CBD Office Class A
■ Suburban Office Class A
■ CBD Office Class B
■ Suburban Office Class B
Rental rates in both the CBD and suburban areas continue
to climb, further indicating a strengthening office market.
Cap rates varied little in the past year and will likely decline
slightly as 2015 progresses. Discount rates were also steady
over the course of 2014 and will also likely decrease through
2015.
Integra Realty Resources – Austin
Randy A. Williams, MAI, SR/WA, FRICS
Senior Managing Director
11675, Jollyville Road, Suite 205
Austin, TX 78759
Phone: 512-459-3440 x15
rawilliams@irr.com
2015 ANNUAL
Austin, TX | Office
AUSTIN 12 MONTH FORECASTS
Suburban Office Class A Suburban Office Class B
CBD Office Class A
CBD Office Class B
Going In Cap Rate
Decrease 1-24 bps
Decrease 1-24 bps
Decrease 1-24 bps
Decrease 1-24 bps
Discount Rate
Decrease 1-24 bps
Decrease 1-24 bps
Decrease 1-24 bps
Decrease 1-24 bps
Market Rent Change (%)
4.00%
2.00%
4.00%
2.00%
Expense Change (%)
3.00%
3.00%
3.00%
3.00%
Absorption (SF)
98,555
49,278
671,000
223,667
Categories
1,878,539
601,150
Construction (SF)
$33
$17
$33
$17
2
3
2
3
Tim e
CBD Office Class A
CBD Office Class B
Previous 36 Months
Increase 2% - 3.9%
Increase .1% - 1.9%
Increase 2% - 3.9%
Increase .1% - 1.9%
Previous 12 Months
Increase 2% - 3.9%
Increase .1% - 1.9%
Increase 2% - 3.9%
Increase .1% - 1.9%
Future 12 Months
Increase 2% - 3.9%
Increase 2% - 3.9%
Increase 2% - 3.9%
Increase .1% - 1.9%
Future 36 Months
Increase 2% - 3.9%
Increase 2% - 3.9%
Increase 2% - 3.9%
Increase .1% - 1.9%
Tenant Im provem ent ($/SF)
Years to Balance
AVERAGE ANNUAL CHANGE IN VALUE
Market Commentary (continued)
Nearly 2.5 million SF in new office construction is slated for 2015, a
majority of which is set within suburban areas. Apple Inc. recently opened
the $27 million first phase of its new campus in north central Austin, with
another building under construction and an additional 500,000 SF in the
planning stages. Notable new projects in downtown Austin include the
370,000 SF Colorado Tower and the Seaholm Power Plant
redevelopment, which will include 130,000 SF of office space. The
strengthening local economy, population growth, and increased
construction should continue to drive the expansion of the Austin office
market.
Suburban Office Class A Suburban Office Class B
TOP SEVEN CAP RATE FACTORS







Supply/demand
Availability of financing
Interest rates
Property income growth
Local economy, job growth, unemployment
National economic conditions/GDP growth
Risk premium of private real estate
About IRR
Integra Realty Resources (IRR) is the largest independent commercial real estate valuation and consulting firm in North America, with over
200 MAI-designated members of the of the Appraisal Institute among over 900 professionals based in our 66 offices throughout the United
States and the Caribbean. Founded in 1999, the firm specializes in real estate appraisals, feasibility and market studies, expert testimony,
and related property consulting services across all local and national markets. Our valuation and counseling services span all commercial
property types and locations, from individual properties to large portfolio assignments. For more information, visit www.irr.com or
blog.irr.com.
Disclaimer
While the great majority of data and content contained herein is proprietary to IRR, this publication includes data provided by third parties,
and while the available data is presumed to be accurate, no representation or warranty is made regarding the accuracy of the information
contained in this publication. This publication does not render legal, accounting, appraisal, counseling, investment or other professional
advice. Should such services or other expert assistance be needed, it is recommended that the services of a competent person or firm,
having access to the details of the situation, be employed.