Boomtown Rising: Unveiling The Next Austin

Over the past decade, the eclectic beats of Austin's music scene melded with the steady pulse of a booming tech industry — a combination that's seen the city emerge into a top-tier market.

The Lone Star State's capital city is home to the University of Texas, Dell Technologies founder Michael Dell and country music legend Willie Nelson, all of which could have influenced its rise.

Austin ranks among the top targets for commercial real estate investment, taking the No. 2 spot for the second consecutive year in CBRE's 2023 U.S. Investor Intentions survey. Its job and office rent growth place the city second among North America's 30 hottest tech hubs.

The city's rise to a top-tier market has many in the real estate industry asking: What city will be the next Austin?

Raleigh, North Carolina, has the potential to emerge into a top-tier market, according to CBRE. Like Austin, it's home to research universities and a diverse tech industry that includes life sciences and advanced manufacturing.

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Top 10 Most-Preferred Markets

1. Dallas/Fort Worth

2. Austin

3. Miami/South Florida

4. Los Angeles

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5. Nashville

6. Atlanta

7. Charlotte

8. Phoenix

9. Boston

10.  Raleigh Durham

Source: CBRE

Other strong life sciences markets include Colorado's Front Range, which has the labor force to mimic Austin's growth, and San Diego, which has been overtaken by Boston over the last decade.

But like most metropolitan areas across the country, investment in Austin's office market is softening as interest rates rise. The post-pandemic work-from-home trend pushes vacancy rates up and rent growth slows.

While Austin's occupied office stock has hit an all-time high, it can't keep up with the pace of development, and vacancy has swelled to 20.6%, according to Marcus & Millichap's fourth-quarter office report for the metro. The city's occupied office stock surpassed its prepandemic peak by more than 2.4 million square feet but was offset by a 13.5% increase in office space since 2019, according to Marcus & Millichap. Only Salt Lake City, San Jose and Nashville came close to that pace at 8.8%, 8.3% and 8.1%, respectively.

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