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Austin Tops the List for Commercial Real Estate Investment
July 19, 2021

Austin Tops the List for Commercial Real Estate Investment

by The CE Shop Team

Austin’s Commercial Real Estate Market Is Amped Up

The National Association for REALTORS® has released its top 10 commercial real estate markets for 2021, and Austin is a proud addition to this list. For those who have been monitoring Austin’s commercial real estate scene’s meteoric rise, this ranking is no surprise. Austin’s metro area has witnessed substantial growth within its economy over the last decade due to an increase in both its population and the number of jobs available. Let’s break down the national outlook for CRE this year before exploring just what makes Austin so attractive for commercial real estate opportunities.

2021’s Commercial Real Estate Outlook 

As retail, hotels, and office space prices declined 5–10% over the last year, industrial sectors, data centers, life-science spaces, and rentals all have increased in value. Demand has transitioned to these areas as remote work, travel, and tourism have all influenced the current commercial real estate market in the aftermath of the COVID-19 pandemic.

According to the National Association of REALTORS®, properties or portfolios of at least $2.5 million fell 28% year-over-year in the first quarter of 2021, with declines across all property types except for hotels. Across the country, commercial real estate is slow to make a comeback, as reopening unfolds carefully market to market.

"The top commercial real estate markets that are expected to outperform the rest of the nation are generally affordable and able to draw new residents with a greater flexibility to work from home," said NAR's Chief Economist Lawrence Yun.

Austin Commercial Real Estate Growth

Austin’s Commercial Appeal

Austin’s commercial market suffered during the beginning of the pandemic, but a year later, optimism has replaced despair. In a recent survey from CBRE, a leader in commercial real estate services, commercial real estate investors have ranked Austin first among U.S. metros for investment opportunities in 2021, knocking Los Angeles out of the frontrunner spot for preferred markets to invest in due to the city’s strong labor market and forecasted growth.

“Austin has become the clear darling of investors in the post-pandemic world,” said Russell Ingrum, vice chairman with CBRE. “What makes Austin attractive to investors is the unique combination of a high-quality lifestyle, high volume growth on a percentage basis, some barriers to new supply, and a tech-forward economy and workforce.”

Austin’s allure has led to steady population growth over the last decade, but over the past year, Americans have been relocating in droves to the city that likes to keep things weird. According to the U.S. Census Bureau, Austin’s multi-county metro population increased 3% in the last year, making it the fastest-growing metro area with at least 1 million residents.

While nearly 2.3 million residents don’t stack up to metropolises like Los Angeles or New York City, investor confidence has shifted from large cities to smaller metros that have experienced growth spurts during the pandemic. For the first time in CBRE’s history, large capital investors (those managing assets of $50 billion or more) have shifted their focus from markets like New York City to markets like Austin.

“[Austin] will see intense competition for good-quality assets from all types of investors,” CBRE reported in their survey findings.

Companies recognize this growth in population and realize the talent Austin holds, prompting software titan Oracle to move to Austin permanently. Even Elon Musk has his eyes on the Live Musical Capital of the World, though he’s hardly the first. Tech giants Amazon, Apple, and Facebook made the move to Austin early in 2020.

The initial impact of the pandemic resulted in a loss of 33,400 jobs in the Austin metropolitan area last year, but the influx of new companies helped Austin sustain the blow better than most other cities. A record 22,114 new jobs were attributed to businesses either expanding or moving to the city in 2020 compared to 13,562 jobs gained in 2019.

“These tech giants understand the rich access to talent, the friendly business environment, and the superb standard of living that Austin offers, so it only makes sense that it’s the hottest market in the country,” said Ari Rastegar, founder and CEO of Austin-based Rastegar Property Co.

Austin’s Commercial Growth

Nationwide, office vacancy rates rose to 17% by the end of 2020, according to a report released in January by JLL, a commercial real estate services company. Surprisingly, the market in Austin did not quiver; it remained strong with less than 1% net occupancy losses in 2020. In the same report, JLL named Austin as one of the rising stars for cities to invest in this year. Clearly, the city has plenty of big names in the industry rooting for its success.

New projects are popping up throughout the Austin area as more and more companies pack their bags and make the move to the Lone Star State’s capital. Get ready, commercial real estate agents — 2021 may be your hottest year yet.

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