Austin’s Office Market Net Absorption Turns Negative, Vacancy Inches Up
EXECUTIVE SUMMARY
Austin’s office market recorded -193,678 sq. ft. of negative net absorption in Q4 2025, a sharp decline from the previous quarter’s positive absorption. Fortunately, the negative net absorption did not move the vacancy needle by more than 20 basis points, driven by healthy leasing activity and a lack of deliveries. Class A properties recorded positive net absorption, while Class B properties posted negative absorption.
The construction pipeline shrank by 30.7% over the quarter, and deliveries dropped significantly by 95.8%. Rental rates rose moderately over the year and grew slightly on a quarterly basis. Class A properties saw an increase in the average rental rate, while Class B property rent was flat over the quarter.
SUPPLY & DEMAND
KEY MARKET INDICATORS
MARKET OVERVIEW
Austin Economic Update
Austin’s unemployment rate was 3.8% in September, up from 3.7% in August, but below the state and national rates of 4.1% and 4.3%, respectively. In September, the local labor force increased at an annualized rate of 0.7%. The most significant gains from September to September were in government (4,100 jobs or 2.0%) and education and health services (3,100 jobs or 1.9%). Sectors that declined include manufacturing (-1,100 jobs or -1.5%), information (-1,100 jobs or -2.2%), professional and business services (-1,300 jobs or -0.8%), other services (-400 jobs or -0.7%), and construction and mining (-300 jobs or -0.3%). Average hourly earnings dropped to $34.32 in September from $36.41 in August.
Net Absorption Takes a Sharp Dive from Positive to Negative
Net absorption—move-ins minus move-outs—sharply decreased -120% over the quarter, moving from positive 967,440 sq. ft. in Q3 to negative -193,678 sq. ft in Q4 2025. The year-end total remains positive though, sitting at 358,637 sq. ft. Class A properties contributed 201,492 sq. ft. of positive net absorption in Q4 2025, while Class B’s contribution was -395,170 sq. ft. Southwest Class A properties contributed the highest amount of positive absorption of 107,625 sq. ft., while the Northwest submarket posted the highest amount of negative absorption, -185,864 sq. ft. Notable move-ins in Q4 2025 include Austin Community College taking 155,000 sq. ft. at 11928 Stonehollow Dr. in the North/Domain submarket and U.S. Money Reserve taking 60,000 sq. ft. in Seven Oaks East located in the Southwest submarket.
Deliveries and Construction Pipeline Down
Only 44,512 sq. ft. of new space was delivered to Austin’s office market in Q4 2025, a sharp 95.8% decrease from the previous quarter. The under-construction pipeline fell 30.7% quarterly and 93.7% annually, with 100,453 square feet currently underway. All the current construction is in the southern submarkets.
Quarterly and Annual Leasing Activity Down
Quarterly leasing velocity—comprised of new leases and renewals—stood at 1.1 million sq. ft., down 13.7% from the previous quarter and 29.5% year over year. Notable new leases signed in Q4 2025 include The McKinsey Club leasing 33,000 sq. ft. at the Summit at Addie Roy in the Southwest submarket, and One Gast signing a 22,000 sq. ft. lease at The Terrace 6 in the Southwest submarket.
Vacancy Rate Up Marginally
The overall vacancy rate in Austin’s office market is 24.4%, 20 basis points higher than the previous quarter. Over the past few years, however, the total vacancy rate has been trending higher (up 80 basis points over the past year) due to minimal leasing in new spec construction and companies’ decisions to downsize their footprints as their leases have expired. On the sublease front, which has been a drag on the market, has been trending downward since reaching an all-time high of 4.6 million sq. ft. in Q4 2023 and now stands at 3.2 million sq. ft.
Investment Sales Trends
CoStar Capital Market Analytics reports a cumulative 12-month sales volume of $303 million for Q4 2025. Over the past year, 70 office properties were sold, with an average price of $186 per square foot and a 6.5% average capitalization rate. Some notable sales transactions that occurred in the fourth quarter of 2025 include Artivion, Inc.’s purchase of a 87,000 sq. ft., 3-story office building located at 1200 E Anderson Ln. from Sentinel Net Lease for an undisclosed price. Also, Central Health purchased the 261,500 sq. ft. Northview Business Center office property from R2 Companies. The sale price was not disclosed.
Average Asking Rental Rates Increase
Austin’s full-service average rent stands at $45.64 per square foot, which is up 1.2% for the quarter and 9.1% year-over-year. Asking rents for Class A and Class B space are $53.17 and $36.68 per sq. ft., respectively. At the submarket level, CBD and North/Doman have the highest rates, at $60.57 and $51.92 per sq. ft., respectively.
For More Information, Contact:
Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]
