Austin Ranks No. 2 in the country for overall real estate prospects and investor demand in 2021.

By Marissa Luck – CoStar Analytics

Brandywine Realty Trust Strikes Lease With Perkins Coie at New Skyscraper in Texas Capital

A recently completed office tower in downtown Austin, Texas, has scored a full-floor lease with the international law firm Perkins Coie in a sign that some tenants are starting to feel more comfortable signing deals as the pandemic recovery unfolds.

The Seattle-based law firm leased 18,000 square feet of space at 405 Colorado St., a tower recently completed by Brandywine Realty Trust, a real estate investment trust based in Philadelphia. The law firm plans to occupy the entire 17th floor of the building starting in early 2022, the landlord and tenant announced this week.

The new lease for Perkins Coie is positive news for Austin’s downtown office market, which has been dinged during the pandemic with tenants delaying leasing decisions and others putting more sublease space on the market.

In the past year, energy firms Parsley Energy and Rig Up put large blocks up for sublease, joining the Teacher Retirement System of Texas and NetSpend as the largest sublease blocks available in downtown Austin, according to CoStar analysts.

The downtown office market’s vacancy rate has shot up to 15.8% compared to 7.22% a year ago, according to CoStar analysts. Net absorption, or the difference between tenants moving into and out of space, stands at negative 228,000 square feet in the past year, meaning there is excess space in the market, according to Costar analysts. The market could see vacancies creep up again as the downtown office market has about 3 million square feet of space under construction, representing about 20% of downtown’s inventory.

At the same time, investors still seem keen to tap into Austin’s downtown office market with two big recent office trades in recent months. Kilroy Realty Trust bought Indeed Tower last week for the REIT’s first purchase outside the West Coast and Carr Properties, a Washington, D.C.-based REIT, purchased 100 Congress earlier this year.

The interest from out-of-state investors is likely still strong because of the solid underlying fundamentals in Austin’s real estate market, such as continued expansion among technology firms, corporate relocations plus robust population growth. Rents downtown have only fallen 1% in the past year to $54.76 per square foot despite the pandemic’s recession, according to CoStar data.

Austin is seen as a “boom market” in the Urban Land Institute’s “Emerging Trends in Real Estate” report this year, ranking No. 2 in the country for overall real estate prospects and investor demand in 2021.