Downtown report: Office vacancies up, infrastructure growth continues

Downtown Austin is in a transitional period, with the latest “State of Downtown Austin” report highlighting diverging paths for public and private sector development. The Downtown Austin Alliance’s annual review, now in its seventh year, notes an increase in downtown office vacancies, up to 22 percent versus the 18 percent reported last year.

Office vacancies in downtown’s recently-built stock of new high-rise buildings have increased even as overall employment in the city center has climbed.

The report showed the downtown population now exceeds 15,000 residents, with a workforce of over 131,000, reflecting continued centralization of employment despite remote work trends. There are 13 major projects under construction totaling 6.63 million square feet, including more than 2,600 new housing units and nearly 900 hotel rooms.

Public transit and infrastructure planning remain high-priority issues for local leaders, with ongoing coordination around Project Connect and the Interstate 35 expansion project among the initiatives expected to reshape downtow mobility and land use. The report also notes the importance of diversifying land use, pointing to growing interest in mixed-use and mixed-income development, particularly on publicly owned land as a response to affordability concerns.

Jenell Moffett, chief impact officer for DAA, told Austin Monitor that while the office market has cooled, several major public infrastructure projects totaling more than $20 billion are moving forward at full speed. Moffett said the private sector hesitation in downtown real estate during public sector investment may prove beneficial and allow for needed infrastructure to be built or upgraded without interfering with new commercial tenants or large-scale private development.

“We’re in this sort of private sector period of adjustment, but the public sector is full steam ahead,” she said. “Austin has grown a lot over the past 10 to 20 years, and now the public infrastructure is trying to capture and keep up with that growth. It can’t all happen at the same time, so it is healthy for the private sector to have a slight pause and do some sort of stabilizing while these public improvement projects take shape.”

Moffett highlighted the report’s findings of sustained interest in experiential uses of downtown properties, particularly retail, restaurants and entertainment venues. While commuter patterns remain in flux post-pandemic, the downtown area still shows strength in discretionary visits and cultural activity. Parks and public spaces have become focal points for this type of engagement.

Pointing out that a significant share of downtown workers currently live well outside the city center, Moffett said the high cost of land has tilted most recent residential projects toward luxury developments. Balancing that trend to add affordable housing may require the use of publicly owned land—inclding the former HealthSouth property and the current Austin Police Department headquarters—to create more mixed-income or workforce housing options.

“There’s an opportunity to look deeper into how we can incentivize the use of that land,” she said, adding that a stronger residential base could support additional retail and services.

Regarding the city’s recently initiated planning effort to expand the boundaries of the Downtown Plan, Moffett said DAA plans to collaborate closely on that effort, contributing research on workforce trends, land use dynamics and subdistrict priorities. Since the many districts located downtown have distinct identities and needs, she said future planning should preserve those differences rather than apply a one-size-fits-all approach.

After the annual release, Moffett said DAA uses the report as a snapshot of economic conditions as well as a tool to frame and support its ongoing advocacy work with city and county leaders as well as development stakeholders. She said the reports have helped to anchor DAA’s support of the I-35 cap and stitch initiative to build deck plazas over a portion of I-35.

The new report also puts attention on work in under-recognized cultural districts, such as securing funds for the Red River Cultural District and establishing the Mexican American Heritage Corridor.

“(The report) allows us to create a snapshot of where are we in this current moment in time. The second piece of it is that we talk about the Downtown Austin Alliance and some of the work that we’re doing to intervene that moment,” she said. “Where have we seen some sort of metric or some sort of happening, or some sort of action or inaction, it affects how we have stepped in to change or shape things. That’s a lot of where that policy takes shape.”

Moffett also previewed the expansion of the Downtown Austin Space Activation (DASA) program, which temporarily repurposes vacant storefronts and public spaces for events, markets, and art installations. Plans are underway to bring a small business incubator component to the Old Sixth Street district, with initial tenant outreach and urban design assessments already in motion. A full impact report from the first year of DASA is expected this summer, with new activations likely launching by fall.

Photo made available through a Creative Commons license.

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Posted In: Austin, District 9