Despite a challenging year, the amount of office space occupied in Austin, Texas, has remained above pre-pandemic levels following remarkable growth in 2021 and part of 2022.

The amount of occupied square feet in the third quarter of 2023 was 2.5% higher than in the third quarter of 2019, fueled by a period of rapid in-migration of so-called knowledge workers, such as lawyers, engineers and tech employees.

Austin has been on a high-growth trajectory over the last two-plus decades, with only four periods of negative year-over-year changes to occupancy since 2000. The last surge occurred in late 2021 and early 2022, when the market absorbed 3.5 million square feet of office space. That was the third-highest total in the nation at the time and the highest on a percentage basis, equivalent to 2.8% of total inventory.

That growth was propelled by an uptick in corporate expansions and relocations, particularly from professional and business services organizations. The trend was also supported by extraordinary office-using job growth, which averaged over 15% year over year, a historic high for the Texas capital. By comparison, Dallas-Fort Worth, the next fastest-growing office employment hub in Texas, grew at an average rate of 10.6% during the same period.

However, occupancies have declined over the past year, strongly influenced by economic uncertainty, cautious budgeting, slow headcount growth and a sluggish return to the office, particularly from the tech sector. This has led to a resizing of footprints, ultimately translating into a negative 1.8 million square feet of absorption in 2023, an all-time low for the market.

Despite the contraction, Austin has been able to retain much of the gains experienced in the three years prior. However, projections indicate an additional 3 million square feet of negative absorption for 2024. The volume of new leases has slowed by 45% compared to the first three quarters of 2022, as deal counts and average lease sizes decline. Availabilities have also risen incrementally, reaching historic highs from both direct and sublet spaces.

The outlook is also tempered by the deceleration in office-using job growth, which has moderated to 2.5% year over year, below the 10-year average of 6.8%.

Occupancy levels are expected to revert to late-2019 levels by the fourth quarter of 2024, CoStar forecasts, though Austin should preserve its lead over other major markets nationally, including neighboring markets such as Dallas-Fort Worth, Houston and San Antonio. A growing surplus of high-quality space, declining asking rents and a strong talent pool continue to serve as compelling factors for attracting businesses.

This article originally appeared on CoStar Insight. It has been republished here with permission.