The 2025 Austin Economy Report

Austin, Texas is flourishing, boasting one of the nation’s most dynamic and resilient economies. Known for its innovative spirit, the city continues to attract industry leaders and entrepreneurial ventures alike. Ed Latson, CEO of Opportunity Austin, says “Over the past 20 years, Austin has been one of the top performing economies in the United States.”

A Snapshot of Austin's Economic Momentum

Between 2018 and 2023, the region's economy surged to become the top in the nation, with the tech sector alone experiencing an impressive 65% growth during that period. Companies like Apple, Tesla, and Google have established significant presences, joining homegrown titans such as Dell and Whole Foods. This robust economic growth is underpinned by a spirit of innovation, positioning Austin as a hub for cutting-edge technology, artificial intelligence, and sustainable energy solutions. Southside Bank President, Keith Donahoe says, “I think Austin is still the only city in America that has doubled in size every 20 years since they started taking the census. That’s a remarkable feat!”

Commercial Real Estate: Challenges and Opportunities

Austin’s rapid growth has brought remarkable opportunities in commercial real estate, but it has also presented challenges. The demand for office, industrial, and retail spaces reflects the city’s expanding workforce and infrastructure. While the multifamily housing market faces an oversupply, this has contributed to a much-needed stabilization in rental rates, which had risen steeply for years. Industrial and retail spaces, on the other hand, are thriving. Occupancy rates for retail have exceeded 95%, reflecting the increased demand due to population growth.

Interestingly, commercial lending structures are beginning to adjust to economic conditions. The rebounding rise in interest rates at the beginning of January 2025 has pushed developers to reconsider financing strategies.

Diversifying Austin's Economy

The key to Austin's resilience lies in its economic diversity. Beyond its established tech dominance, the city is making significant strides in sectors such as life sciences, manufacturing, and creative industries. The life sciences field, driven by investments from institutions like Dell Medical School and MD Anderson, is poised for explosive growth as it intersects with the region's tech expertise.

Additionally, the rise of creative consumer goods companies highlights Austin’s entrepreneurial spirit. From Consumer Packaged Goods (CPG) brands to innovative startups, Austin has become a launchpad for ideas that resonate on a national scale.

Infrastructure Investments to Support Growth

To sustain its meteoric rise, Austin is heavily investing in infrastructure. Over $25 billion in projects, including the I-35 revamp, airport expansion, and Project Connect, are in progress. These developments are vital for supporting the region’s projected growth, with the metropolitan population expected to soar from 2.5 million to 4 million in the next two decades.

Collaboration and Quality of Life: The Austin Advantage

What sets Austin apart isn’t just its economic strength but also its unique culture of collaboration and innovation. The city is known for welcoming individuals with diverse ideas and fostering a supportive environment for growth. This spirit of cooperation, coupled with a high quality of life thanks to the music and cuisine industries, continues to make Austin a magnet for businesses and talent.

Looking Ahead

The future is bright for Austin’s commercial sector. With a healthy mix of established industries, emerging opportunities, and strategic infrastructure investments, the city is well-positioned to remain a leader in economic growth and innovation. As Southside Bank continues to partner with businesses in the region, we look forward to contributing to Austin’s remarkable journey.

Learn more about Southside Bank’s involvement in the Austin community at southside.com/austin.