This is the time that many of the commercial brokerages in town publish their first quarter reports surveying the Austin office market. The Austin Business Journal asked NAI REOC Austin’s Bob Rein to elaborate on that company’s results.
ABJ: What stood out about this month’s office report?
Rein: It appears that the local office market is on a steady road to recovery and the downtown market continues to tighten. In addition to a solid first quarter performance, many office properties gave advanced notice of new leases and expansions that will generate additional absorption in coming quarters which bodes well for the remainder of 2012. There is clearly a direct correlation between job growth and leasing activity and absorption.
ABJ: How does your office report differ from other companies?
Rein: Three reasons. First and foremost, the research department of NAI REOC Austin is headed up by a veteran in the commercial real estate market. Some companies use the role of researcher as an initiation and training ground for junior brokers but the director of research at our company, Kim Gatley, has 20 years of experience in tracking and reporting on commercial real estate.
Second, unlike some local companies who rely on national real estate information providers that survey the Austin market from out-of-state, or others who rely on website searches and inventory listing reports, we utilize experience and technology to reach out to every leasing representative for properties included in the tracked set. Every quarter, we launch a campaign of calls, faxes and emails to gather updates. Before any numbers are released, the whole office team reviews the stats to double check activity and to assure accuracy.
Finally, after years of looking at the Austin market in terms of the same old submarket boundaries, the office team here recently collaborated to create a new submarket map that we believe better represents the growth and changes that the Austin market has undergone over the past decade. For example, some companies still categorize the territory beyond Loop 360 as “far northwest” when, in fact, Loop 360 is no longer the outer perimeter of the market; FM 620 now serves as the outer corridor.
ABJ: Why is that important?
Rein: Having a veteran research director supporting our effort to track the market is a vital key to a more accurate reporting; Kim’s knowledge and expertise also allow for more consistent and in-depth analysis. We see real value in gathering updates by contacting leasing agents directly instead of relying on data processed by some caller in New Jersey and the new submarket map better represents the current Austin market which is especially helpful when working with outof-town prospects looking to relocate to Austin.
ABJ: What do you anticipate will happen in the office market in the upcoming quarter?
Rein: Based on advanced notice of new leases and expansions, we anticipate that the second quarter will bring more positive absorption. With vacancy tightening, we expect upward pressure on rental rates to result in slight increases. Market activity will likely record more horizontal movement between buildings in the market as tenants seek to take advantage of lease concessions while there are still some to be found before the market moves further in favor of the landlord. As the market continues to tighten, talk of new development projects will increase but developers still face a challenging financial environment.
ABJ: What development projects, if any, are imminent for construction?
Rein: Developers are itching to move forward with projects that have been sitting on the drawing board and waiting for the market to support new construction. Success and momentum at The Domain will likely support kick-off of Endeavor’s planned Domain One — 182,000 square feet — before the end of the year.