Office markets in Texas’ largest cities are showing varied patterns of recovery since the pandemic, according to a recent report from JLL. While Houston and Dallas have made progress regaining occupancy, Austin’s market has experienced more volatility.
During the pandemic, Austin saw significant growth as developers constructed large office towers tailored for tech firms relocating from California. However, this momentum stalled quickly due to rising interest rates, which slowed down the market.
Data on office space absorption reflects these shifts. In Austin, absorption was positive in 2021 and 2022 but turned negative in 2023 with a loss of 1.5 million square feet in occupancy. The trend reversed briefly in 2024 before dipping again in 2025 with a modest loss of 3,600 square feet. Dallas and Houston have seen steadier improvement: Dallas recorded its first year of positive annual absorption since 2019 with an increase of 1.3 million square feet in 2025, while Houston posted a smaller negative rate of 311,000 square feet last year.
Vacancy rates remain high across all three markets. At the end of 2025, Austin’s vacancy rate stood at 26 percent—up slightly from the previous year’s 25.2 percent. Houston closed out the year at a similar rate of 26.3 percent after peaking higher in 2024. Dallas had the highest vacancy among the trio at 27.2 percent by year-end.
The contraction in office space use by major tech companies in Austin appears to be stabilizing this year. Google is moving into Sail Tower—a building it leased but left mostly empty for two years—at 601 West Second Street downtown.
Although annual absorption was negative for Austin in 2025, net absorption turned positive for the fourth quarter at nearly 24,000 square feet. Tech firms were behind the largest leases during that period: VMware renewed its lease for almost 135,000 square feet at River Place; an unnamed e-commerce company subleased over 100,000 square feet at Domain Gateway; and Nvidia renewed its lease for approximately 79,000 square feet at The Crossing at Lakeline.
Tech tenants represent close to one-third of pre-leased projects currently planned or under construction in Austin.
JLL notes that despite setbacks linked to tech sector contraction over the past five years, Austin could benefit from increased demand tied to artificial intelligence development starting in 2026.
Austin leads Texas’ major cities with nearly 1.7 million square feet of office space either planned or underway—slightly ahead of Dallas’ pipeline and significantly larger than Houston’s ongoing developments.
Landlords may also see higher returns on new properties: average asking rents for Class A offices reached $60.89 per square foot by late-2025—well above comparable rates reported for Dallas ($42.35) and Houston ($37.36).
