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Austin’s booming market for office space is fueled largely by tech companies migrating downtown, according to a new report from leading commercial real estate company CBRE.
There are two main reasons for this: Astronomical rents in leading markets like San Francisco and Boston’s East Cambridge, where rent premiums have soared to 87 percent, and abundant talent in cities like Austin, where high-tech jobs grew 33 percent from 2012-2014 and the downtown rent premium is only 29 percent.
Austin also benefits from an educated workforce graduating from The University of Texas and a cosmopolitan culture that attracts talent from other cities in droves.
John Gump, Vice President at CBRE in Austin, said the city will continue to benefit from its strong brand.
“If employers start feeling like it’s too difficult to find labor here, that could change the trend,” he said. “But right now Austin’s brand value is very high. So I don’t see a bubble here anytime soon."
And while tech companies have historically favored the city’s northwest suburbs, a vibrant tech scene is flourishing downtown, making it an attractive area for startups despite the higher cost of entry. More than 100 tech companies are now in Austin’s central business district. That scene has been nurtured by coworking spaces and accelerators like Capital Factory, Techstars and Techspace.
Nate Stricklen, Senior Vice President at CBRE, said the atmosphere downtown is crucial for startups.
“There’s a collective vibe of collaborative people downtown,” he said. “You can go out for coffee and bump into a funding source, a software engineer, or a CFO in a two to three block walk.
“The co-working groups have allowed new companies to be able to get into this scene,” Stricklen said. “That’s a positive trend for downtown, primarily because there’s a lot of companies that are too young to make a long-term commitment. In the interim, they’re immersed in the scene with access to talent and opportunity."
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