2 Austin neighborhoods punch in among most expensive office rents in U.S.
You’ve no doubt heard about sky-high office rents in Silicon Valley, San Francisco, and New York City. In some cases, those rents are contributing to business relocations to Austin.
So, you may be surprised to learn that Austin lays claim to two of the country’s most expensive areas for office rents. According to CommercialSearch.com, East Austin and downtown ranked among the 50 priciest office submarkets in the fourth quarter of 2020. They’re the only submarkets in Texas to appear on the list.
With an average asking rent of $60.60 per square foot in the fourth quarter, East Austin ranked 40th on the list. Downtown landed at No. 46, with average fourth-quarter asking rent of $58.81 per square foot. Let that soak in for a second: Office rent in East Austin, once a business desert, now exceeds office rent in downtown Austin.
Austin is the only place on the CommercialSearch.com list that’s not on the East Coast or West Coast.
The office submarket in Menlo Park, a suburb of San Jose, California, tops the list ($109.57 per square foot). Submarkets in the San Francisco Bay Area and New York City’s Manhattan borough grabbed the top 10 spots. Other regions represented on the list are Boston, Los Angeles, Miami, and Washington, D.C.
The continued business boom in Austin is driving up rents for top-notch office space, corporate relocation consultant John Boyd says. But the city's office rents, particularly outside downtown and East Austin, fall well below those in business hubs like San Francisco, he says.
“So there are still big advantages on the real estate front [in Austin],” Boyd says. “Despite all of the enormous success, there are huge, huge real estate savings in Austin.”
Data compiled by commercial real estate services provider JLL shows two San Francisco submarkets, Silicon Valley, and New York City notched the highest office rents in the fourth quarter of 2020, with the Austin region ranked fifth ($49.93 per square foot versus $85.87 in San Francisco). Behind Austin were Dallas, Houston, and San Antonio, as well as business magnets like Seattle, Los Angeles, Miami, and Boston.
JLL lists fourth-quarter rent for various types of offices in downtown Austin at $63.71, with East Austin at $50.82.
The company says the Austin market continues to be “dynamic.” JLL points out that in the first 11 months of last year, 39 companies announced plans to add nearly 9,900 jobs near the Capital City.
“A beneficiary of corporate mobility brought on by an increase in remote working, Austin has seen companies attracted to its business- friendly climate, lower taxes, and lower cost of living. Increased interest in smaller, more affordable urban centers is expected to drive markets like Austin in 2021,” JLL says.