Not enough demand to fill 2.5M square feet of new office space in downtown Austin, report says

With the post-COVID spike of people working from home, "there's less demand for larger office spaces" downtown, said DeWitt Peart, CEO of the Downtown Austin Alliance (DAA).

AUSTIN (KXAN) — With the post-COVID-19 spike of people working from home, "there's less demand for larger office spaces" downtown, Dewitt Peart, CEO of the Downtown Austin Alliance (DAA), said.

According the DAA's latest State of Downtown released Wednesday evening, downtown's weekday population last year was at 63% of 2019 levels. The report also mentioned there's currently 2.56 million square feet of office space currently under construction downtown.

"As these buildings are delivered to the market, vacancy rates will likely continue increasing unless we see significant changes to current trends," the report reads.

Peart noted this as one of the primary challenges downtown currently faces.

"We started construction before the pandemic and during the pandemic and those offices are now being delivered and the demand isn't quite there. But when things turn around, we'll be really well positioned," he said.

When KXAN asked if there was any concern about the lag time in between, Peart responded "the developers and the owners and the investors are not panicking at the moment."

Peart said Austin has an advantage over other downtowns when it comes to vacant office space because Austin's office buildings are newer and more modern.

"Because of the type of buildings we have downtown, the fact that they're newer, when the market does turn, we're going to be in a really good position," he said.

Storefront vacancies

According to the report, 88% of storefronts downtown were occupied in 2023. That took a slight dip from 2022, when 90% of storefronts were occupied.

"Realistically, there aren't that many vacant storefronts," Peart said.

Still, downtown business owners have expressed concerns to KXAN about vacant buildings on Sixth Street. Below is a transcript of our conversation with Peart about this topic.

Brianna Hollis, KXAN reporter: "Particularly [regarding] the few blocks on the east side of Sixth Street, where a lot of the vacant buildings are, and stakeholders are really concerned about that area not getting developed and worried about that kind of being a detriment to the whole street, is this something on the DAA's radar and what are you doing to address it?"

Peart: "Yes very much so. We have a collaborative effort happening now with the Red River Cultural district and east Sixth Street, we're meeting regularly. We meet with Council Member [Zo] Qadri on a frequent basis, too. The ultimate solution to this is the redevelopment and re-tenanting of some of the buildings on 6th Street, and that work has begun."

The DAA is also launching a new initiative allowing businesses to occupy some storefronts on a temporary basis, essentially offering a trial run to see if they want to move downtown full-time.

"Businesses who might not typically consider downtown as a location," Peart said. "We have groups that are creating incubator space, art is a big potential user, so having art galleries. Food establishments could test products."

Public Safety

The report addresses results of the 2023 Downtown Austin Alliance Retail Survey, where "nearly half of downtown retailers cited the threat of theft or property damage as a pressing issue."

However, the report also states that downtown crime rates have remained "flat" over the years.

The DAA spent $448,520 last year on a police overtime initiative, which places two additional officers downtown daily.

After a six-month pilot program that placed overnight security at Republic Square, the DAA said it "proved to be so successful at eliminating crime and disorder that we will fund it as a year-round program beginning in FY2024-2025."

See our interview with the DAA about the report tonight on KXAN News at 10 p.m.