Oracle Corp. is moving its headquarters out of the city. Tesla Inc. is pulling back after a rapid expansion. Almost a quarter of commercial office space is vacant, and nowhere in the country have residential real estate prices fallen further from their pandemic peak.

Austin, the cosmic cowboy paradise that became a Covid-era economic superstar as it lured Elon Musk and a host of California refugees with its low taxes and sunny weather, had become accustomed to a steady drumbeat of good news. But lately that’s changed. And on Tuesday, Larry Ellison announced that his software company will shift its headquarters from the Texas capital to Nashville, Tennessee. It was a brief marriage — Oracle only arrived in Austin in 2020 — but getting jilted is never easy.

“City Hall was as surprised as everyone else,” Mayor Kirk Watson said in a statement.

Bound to turn

But maybe he shouldn’t have been so shocked. Austin has been going so strong for so long that the tide was bound to turn.

After a 12-year streak as the fastest growing large metro area in the US, Austin lost that slot in 2023. An office glut has pushed the vacancy rate 5 percentage points higher than the US average, according to data from Colliers. Home prices have dropped 18% from the pandemic highs seen in May 2022, the most among the 50 largest US metro areas, Redfin data show. Even so, the city ranks as one of the least affordable housing markets.

That Oracle went to archrival Nashville is particularly painful for Austinites. The two cities compete over which has the more vibrant live music scene and who plays the better host to bachelor and bachelorette parties. There are heated debates over where to find the best custom-made cowboy boots. But until recently, there really wasn’t much controversy over which was doing better economically. As of the end of 2022, Austin’s $222 billion economy was almost 20% bigger than Nashville’s.

To be sure, even a slowing Austin economy is still hot enough to be the envy of a lot of other places. The 3.5% unemployment rate trails the national average, and the downtown skyline is full of construction cranes. Samsung Electronics Co. is opening a $17 billion plant in suburban Taylor, and plans to invest $40 billion in the area as it ramps up chip production. The city is also home to major operations for Meta, Apple and Google. Henley & Partners forecasts that over the next decade Austin will be the top US city for growth in the number of centi-millionaires, or people with a net worth of $100 million or more.

Just this week, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon declared that Austin has become a competitor to New York City.

But, he also mentioned Nashville.

Tech Cools

Austin saw a boom in corporate relocations during the pandemic that has since slowed. In 2022, 64 companies either moved their headquarters or significant operations to Austin, according to a local development group. That number dropped to 37 in 2023. This year, Austin has seen only 11 such moves.

And some major players are dialing back their presence. Meta decided not to move into a new office space in downtown Austin and instead sought to sublease 589,000 square feet. The Austin American-Statesman reported that Google still hasn’t moved into a 35-story sail-shaped building it leased that overlooks downtown’s Lady Bird Lake.

This month, Austin-based Tesla said it will lay off 2,688 workers in the city as part of a plan to slash more than 10% of its global workforce.

The increase in Austin’s cost of living over the past few years as home prices boomed has dimmed its attractiveness for relocations, according to Steve Triolet, a senior vice president at Partners Real Estate, which has an office in Austin. But he noted it’s still cheaper than coastal locations like New York City, and a lot more hip than other Texas cities like Dallas and Houston.

Austin has became one of the most overvalued real estate markets because incomes didn’t keep up with the soaring prices, according to Moody’s.

“Valuations just rose to an unsustainable level,” said Matthew Walsh, an economist at the firm. He’s expecting home prices in Austin to remain under pressure over the next two years as prices drop to be more in line with income levels.

Oracle had 4,200 employees in Austin as of September 2023, according to Opportunity Austin, and it isn’t clear how many may head to Nashville. An Oracle spokesperson didn’t respond to a question about what the move means for its footprint in Texas.

Ellison, speaking at an event in Nashville this week, revealed that the company is developing a campus in the Tennessee city, moving it closer to a major health-care hub to align with the software giant’s ambitions in the industry.

“It’s the center of our future,” he said.