Austin's downtown recovery lags behind Los Angeles, Las Vegas, Nashville and more
By Joanne Drilling and Cody Baird – Austin Business Journal
Oct 27, 2023
https://www.bizjournals.com/austin/n...very-data.html
Compared to other major North American metros, Austin's downtown recovery has been fairly middle-of-the-road.
That's according to new data from the University of Toronto School of Cities and the Institute of Governmental Studies at UC Berkeley, which have been analyzing GPS data from more than 18 million North American smartphones to determine how downtown visits compare to pre-pandemic totals.
In Austin, downtown visits are now 73% of their 2019 levels, according to that data. By comparison, the national average is 74%.
Only Las Vegas reported a full recovery, with a 103% increase from 2019. Other major metros that outpaced Austin's recovery include Nashville, Atlanta, Los Angeles and San Antonio. On the other hand, Austin beat out Dallas, San Francisco and New York City's recoveries.
Much is riding on cities' efforts to get downtown activity back to pre-pandemic levels. The office market remains in a state of flux due to hybrid work schedules and mounting loan maturities. A host of retailers and other small businesses have struggled due to losses in foot traffic. And in downtown Austin, a handful of office towers sit empty.
A variety of factors have affected how metros have fared in the recovery analysis.
"It's about the diversity of the downtown economy," said Karen Chapple, director of the School of Cities program and a professor of geography and planning at the University of Toronto. "There are places that were specialized in finance and tech but still came back because of very strong entertainment sectors, or education or health. Those are the drivers of recovery."
To be sure, this data isn't the only metric to track downtown recovery.
According to Kastle Systems' Back to Work Barometer, which tracks office use across 10 major U.S. markets through the use of keycard swipes, occupancy rates for the Austin area from Oct. 12-18 were 42% on the lowest occupied day and 71% on the highest day. That roughly matches up with anecdotes from local office landlords.
The average occupancy for the 10 metros ranged from 32% to 60% — worse than Austin.
The Kastle Systems data indicates that, on average, Friday was the lowest occupied day and Tuesday was the highest occupied.
Vacancy rates in Austin-area office buildings have continued to rise over the past year — they hit 18% in the third quarter of 2023, according to commercial real estate firm Partners — and downtown is no exception. Class A office space vacancy in the Central Business District hit 26% in third quarter of 2023, a year-over-year increase from 25%, according to Partners' data.
But that 26% vacancy rate downtown isn't telling the full story. Even if about 75% space in downtown is leased, it isn't physically occupied.
As of Oct. 16, the Austin area had a record 6.2 million square feet of office space available for sublease, with 63% of that space being vacant, said Steve Triolet, senior vice president of research and market forecasting with Partners. Six million square feet is roughly tantamount to
Facebook parent company Meta Platforms Inc., for instance, has about 709,000 square feet of downtown office space on the sublease market, with 589,000 square feet of that space in the new Sixth and Guadalupe tower that's completely vacant.
Meanwhile, other companies such as digital coupon provider RetailMeNot are planning to drastically reduce their downtown real estate commitments as lease terms near completion.
Even more distressing than the sublease market exploding and companies opting to reduce their footprints, there are a few new office buildings in Austin's skyline standing completely empty and the Washington Post is reporting to the world, citing Cushman & Wakefield data, that 87% of new office buildings in Austin will soon open vacant.
Take Innovation Tower, for example. It is downtown, close to the University of Texas, and it's totally empty, as is Google's sail tower near Lady Bird Lake and the previously mentioned Sixth and Guadalupe tower that Meta leased in its entirety. On top of that, huge office campuses in the periphery are seeking tenants — such as the old 3M campus near Lake Travis....
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