New report finds tenants in driver’s seat.
AUSTIN, Texas (May 16, 2025) –
Today, Franklin Street, a national and fully-integrated commercial real estate services firm released its quarterly report on the Austin office market. The report found that the vacancy rate increased by 50 basis points to 24.5% and availability rate increased 80 basis points to 31.4% quarter to quarter while commercial construction remained flat with 1.9 million square feet under construction. The average direct asking rate also increased $0.10 to $48.80 per square foot.
“Austin’s office market data in the first quarter tell a clear story, this is a tenant’s market,” Alex Taghi, senior director, Office & Industrial, Franklin Street, said. “With availability approaching record levels and absorption trending negatively, savvy occupiers are in the driver’s seat. Facing that imbalance, owners are aggressively competing by offering record tenant‑improvement allowances, double‑digit months of free rent, and flexible early‑termination provisions. For occupiers, this market represents an exceptional chance to secure best‑in‑class space on terms we haven’t seen since the Great Recession—while shifting much of the long‑term risk back onto landlords.”
Franklin Street’s outlook for 2025-2026 is cautiously optimistic according to Ryan Bohls, regional managing director for the firm’s Austin office even as net absorption year to date is down 131,274 square feet and sublease inventory is at 4.3 million square feet, down 11.7% year over year.
“Deal timelines are longer, and tenants continue to reassess space needs, making the outlook for the rest of 2025 cautiously optimistic. Pent up requirements and Austin being the nation’s top office-utilization rate, should result in modest positive absorption as we move into the second half of 2025. Vacancy will likely peak near 25% while asking rents should hold their ground. Although few and far between, opportunistic buyers will continue to reset deal economics for occupiers.”
Austin Q1 2025 Snapshot
- 24.5% – Vacancy rate, 0.5 bps higher than Q4 2024
- 31.4% – Availability rate, 0.8 bps higher than Q5 2024
- $48.80 per square foot per year – Average direct asking rate, $.10 higher than Q4 2024
- -131,274 square feet – Net absorption YTD,a decline of 348,598 square feet from Q4 2024
- 1.9 million square feet – Space under construction (all scheduled for 2025 delivery), no change from Q4 2024
- 4.3 million square feet – Sublease inventory, 11.7% lower than Q4 2024
- Demand and leasing hit its highest level since mid-2022, with 112 active requirements in the market, around 3.75 million square feet
- Flight to Quality – Class A product is absorbing the majority of new leasing. Trophy assets average $71.73 per square foot with vacancy of 16.4% compared to $36.76 per square foot and 20.3% for Class B.
- Supply Pipeline – Deliveries (300,000 square feet) outpaced absorption. Only one start—a 46,000 square foot creative office on St. Elmo—broke ground, the first in almost two years, signaling a near-term supply pause.
- Sublease Overhang Shrinks – Sublease availability fell for the third consecutive quarter, -14 % year over year. Tech still holds the largest share, 49 %, but insurance and consumer-goods groups are now returning pockets of space.
Franklin Street’s full Austin office market report, including a snapshot of all 15 submarkets and major transaction information in the first quarter, can be found here.
About Franklin Street:
Founded in 2006 during one of the toughest real estate climates, Franklin Street focused on delivering value-added solutions to meet the evolving needs of clients. Through a collaborative philosophy of leveraging the resources, expertise, and experience of each of its lines of business, Franklin Street has grown to include seven business divisions – Investment Sales, Tenant and Landlord Representation, Capital Advisory, Insurance, Property Management and Project Management. Franklin Street offers unmatched value and optimal solutions for clients nationwide. Headquartered in Tampa, Fla., the firm has teams located in top markets throughout the country and works with owners and occupiers of commercial real estate nationwide. Learn more about Franklin Street at FranklinSt.com.
