AUSTIN, Texas — It’s been several years since the height of the COVID-19 pandemic, and yet many office spaces in Downtown Austin are still sitting vacant.
According to the Downtown Austin Alliance’s 2024 State of Downtown Report, the office vacancy rate rose from 14% in 2022 to 18% in 2023.
Leaders with the Downtown Austin Alliance (DAA) say that the increase in vacancy rates can be attributed to a few reasons, with the largest being lingering construction projects that were put on hold during the pandemic. Even though many of the buildings are now complete, they say it may still be a while until they’re occupied.
“It’s probably going to take three, five, maybe even seven years until that office space gets absorbed,” Dewitt Peart, the CEO of the DAA, said.
Shift from office to residential construction
Dewitt said in the coming years, there will be less new office space construction and instead more residential construction. The DAA says it's expecting 3,000 new residential units downtown next year.
“We’re seeing a bit of a shift in the marketplace moving from office construction, now moving towards residential construction,” Dewitt said. “It’s a shift in the marketplace.”
Seeing more people move downtown is something the DAA is hopeful for over the next several years. The DAA says there are currently 10,000 residential units downtown and 15,000 people living downtown.
“We’d like to see more people living downtown because it diversifies the area and it activates downtown,” Dewitt said.
The DAA acknowledges that downtown living is not exactly affordable for everyone, so it is also hopeful that with increased density downtown, it can work on transit options from downtown to affordable areas.
Tech companies using less office space
Other economic experts say that what’s going on in the tech industry can also be attributed to the increased office vacancies.
“Austin had explosive growth roughly two to three years ago, and it’s slowed dramatically because of these tech companies reevaluating their growth plans in the short term,” Steve Triolet, the senior vice president of Partners Real Estate, said.
Triolet said with companies like Oracle indicating that it may move its headquarters away from Austin, the uncertainty of TikTok’s future and Google not confirming when they will occupy their 800,000-square-foot building, there’s potential for even more sublease space to hit the market. All three companies occupy major office space in Downtown Austin.
“You had a record level of companies relocating to the market a few years ago, and you have all these high interest rates and other factors impacting people during corporate relocations – it’s going to impact the market,” Triolet said.
Experts agree that even if there’s been some pullback in the office space now, that’s not going to stop Austin's booming downtown with all the new construction on the horizon.
“This is a growing city, it’s a growing region and, you know, predictions are in 20, 25 years, we’re going to double in size,” Dewitt said.
Boomtown is KVUE's series covering the explosive growth in Central Texas. For more Boomtown stories, head to KVUE.com/Boomtown.