As Austin Office Vacancies Rise, City Officials Explore Potential for Residential Reuse
As of early 2024, one-fifth of Austin’s office space remains unoccupied, sparking discussions amongst city officials for potential repurposing into residential units. The city is grappling with an uncertain office market future as additional office space developments are set to unfold soon.
Current Office Space Situation
According to numerous commercial real estate firms, over 20% of Austin’s offices were empty during the first quarter of 2024. This represents the highest level of office vacancy in Austin, due chiefly to business adjustments and the influx of notably new space, yet to be taken up.
“We did see spikes in the vacancy rate around the global financial crisis, but this indeed surpassed that due to the volume of construction that has occurred,” quoted Israel Linares, Senior Market Analyst at CoStar. Although the vacancy rate is still going upward, there are signs of fresh activity in the market.
As highlighted by Carl Condon, an Austin-based principal of commercial real estate agency Avison Young, “there are transactions, evidence of positive absorption. It shows that there is a demand for space and that people are looking to come back to the office.”
Corporate Moves and Market Recovery
Despite recent space leasing by technology giants like Apple and Amazon, analysts believe that much of the leasing activity remains focused on smaller spaces, primarily those within the range of 1,000 to 5,000 square feet. This contrasts with available space in new office high-rises and in the sublease market, where more significant footprints are commonly found.
Approaching Future Developments
In the coming years, over four million more square feet of office space will come up, including mammoth structures like the “supertall” Waterline and The Republic. There have been some actions by corporations indicating a continued interest in the market. However, Linares noted that these incoming developments are geared to raising the local office supply more than any of the 50 largest markets across the country would in the next few years.
Exploring Adaptive Reuse
With office vacancies escalating, city officials are paying closer attention to a concept attracting significant attention recently in the real estate industry: adaptive reuse. This involves the conversion of vacant offices into other usage types, such as residential units.
An audit report released in stark contrast to these conversions. It stated that the conversion of Austin’s empty offices into quarters presents numerous challenges, such as the high cost of revamping aging buildings and difficulties associated with city rezoning and permitting procedures.
The Prospect of Office-to-Residential Conversions
Office-to-residential conversions have succeeded in various cities. Austin stands out as only having one notable example. However, Morales believes there could still be scope for such conversions to take off in Austin.
At city hall, officials are continuously exploring policy approaches to these conversions. Council member Mackenzie Kelly suggests considering whether any city-owned offices may be suitable for this idea of reuse, with a goal to increase the housing supply.
Conclusion
The city of Austin seeks innovative solutions to manage the increasing office space vacancies. Exploring the idea of converting these unoccupied commercial spaces into residential use or other purposes highlights one such effort. While a challenging task, successful execution could significantly address the city’s housing shortage while drawing new life to dormant city spaces.
