One of the country’s hottest tech hubs is facing a flood of vacant office space amid ongoing layoffs of tech workers across the country and a volatile economy. Austin, Texas saw a significant increase in vacant sublet space in the fourth quarter, up 28% from the second quarter to the third quarter, reaching nearly 2.5 million square feet, according to Colliers data. did. At the same time, the city, which has attracted corporate relocations and technology companies in recent years, has millions of square feet of new office space in the pipeline. However, some projects have been put on hold in the face of a potential recession next year. Overall activity in the Austin office market has slowed “significantly” and rising interest rates have put many businesses on the sidelines. Difficult and similar to leasing activity, most sellers are in a holding pattern through Q1 2023.
Austin is not alone. Other tech cities across the country are also seeing a surge in available subleasing space. In Seattle, subleasing vacancies rose 9.2% quarter-over-quarter. And in Raleigh-Durham, another mid-sized tech hub, there’s a record amount of subleased space on the market. Total available subleased space reached 3.2 million in the third quarter of this year, up 65 percent from the same period last year and nearly 14 percent from the previous quarter.
Office fundamentals have struggled across the country over the past three years after the pandemic rocked the sector and made remote and hybrid work models a permanent part of the workplace. In recent weeks, large office occupiers have cut or withdrawn office leases as companies prepare for a looming recession and develop hybrid plans. Meanwhile, as the real estate industry prepares for the recession expected next year, many large commercial real estate brokers are implementing cost-cutting measures, including layoffs. These latest figures for subleasing space across the country, especially in Austin, are even worse news for the office market, which sees demand decline as unemployment is expected to rise in 2023, according to the Federal Reserve. There is a possibility.