After displaying a tremendous rebound in 2012, the Austin industrial market is off to a measured start in 2013, according to the survey of more than 37 million square feet of industrial lease space.  To recap, the total annual amount of industrial space absorbed topped two million square feet last year [...]]]>

Source: NAI REOC Austin

After displaying a tremendous rebound in 2012, the Austin industrial market is off to a measured start in 2013, according to the survey of more than 37 million square feet of industrial lease space.  To recap, the total annual amount of industrial space absorbed topped two million square feet last year but roughly 345,000 square feet of that amount was attributed to short-term leases. 

The lifespan of some of those short-term commitments expired in the first three months of this year which returned vacant space to the market and worked to slow the pace of growth.  As a result, the local industrial market experienced 141,372 square feet of negative absorption in the first quarter which increased the citywide vacancy rate slightly to 13.2% compared to 12.9% last quarter.  Vacancy, however, is down significantly compared to 17.4% recorded in the same quarter last year.

Despite the muted absorption outcome this quarter, the market continued to reveal encouraging signs of stability and growth.  A number of new leases and expansions were inked in the first quarter led by the renewal and 155,000 square-foot expansion of Flextronics at Research Park.  In addition to healthy leasing activity, the market is beginning a new development cycle.  On the heels of last quarter’s completion of Met Center II, Bldg 4 (172,800 sf), construction is now underway on Scottsdale Crossing Commerce Park (27,500 sf) in Cedar Park and 130 Commerce Center (120,000 sf) in Pflugerville. New product, generally commanding higher rents, along with improved vacancy will help lift average asking rental rates which have showed little growth over the past year.  At the same time, deep discounts and rental abatement concessions are no longer as available as they were a year ago.  The market is reaching equilibrium – a point at which the landlords and tenants are on an equal financial playing field. 

Looking ahead at an improving market, landlords are likely to tighten up their lease rates and be less flexible while tenants should anticipate the need to bring more to the table to make a deal.  This might be expressed in a longer term lease or more improvements paid out-of-pocket.  Developers will continue to look for opportunities to deliver new product but the challenge will be to strike the delicate balance between achieving rents necessary to justify construction costs and remaining competitive with existing available space.

For more information, download the 1Q 2013 Industrial Source Report.

The sale of Bank of America Tower, which has been in the works since last fall, is about to close, according to an article released by the Austin Business Journal.  Dallas-based Stream Realty is set to purchase the 26-story downtown tower located at 515 Congress Avenue which has been owned by T. Stacy [...]]]>

Bank of America Tower

The sale of Bank of America Tower, which has been in the works since last fall, is about to close, according to an article released by the Austin Business Journal.  Dallas-based Stream Realty is set to purchase the 26-story downtown tower located at 515 Congress Avenue which has been owned by T. Stacy & Associates.  The sale price was not disclosed but the property is valued by the Travis Central Appraisal District at more than $70 million.

Bank of America Tower is located in the heart of downtown Austin at 6th Street and Congress Avenue. The building features incredible downtown views of the Capitol, Hill Country and Town Lake.  There are nine levels of parking provided in the tower for approximately 350 cars.

Click to read Stream closes on downtown’s Bank of America tower, surrounding block (Austin Business Journal, 4-22-13)

The papers are signed.  The City of Austin has conveyed the Seaholm Power Plant on the southwestern edge of downtown to Seaholm Power, LLC – the developer who has plans to redevelop the property into a $100-million mixed-use project.  The beloved landmark, sitting on five acres of prime waterfront property, will be [...]]]>

Seaholm Power Plant

The papers are signed.  The City of Austin has conveyed the Seaholm Power Plant on the southwestern edge of downtown to Seaholm Power, LLC – the developer who has plans to redevelop the property into a $100-million mixed-use project.  The beloved landmark, sitting on five acres of prime waterfront property, will be converted to 60,000 square feet of office space that will feature a plaza and green space open to the public.  In addition, the construction of a two-story retail building is expected to be complete by next summer which will be anchored by California-based specialty grocer Trader Joe’s.  Construction of a 30-story apartment building featuring approximately 300 units will take about 30 months to complete.

The historic 1950s art deco plant (117,000 sf) has been sitting unused since the 1990s when the city shut down power operations. However, residents didn’t want to see the iconic building disappear from Austin’s skyline. Developers are working to maintain the structure. They say there will be changes, but the building should still have that open, industrial feel.

For more information, read the various excerpts and articles posted on the News page of the Seaholm Power, LLC website.

Three historic downtown buildings, commonly known as the Swift Building, the Day Building and the McKean-Eilers Building, were recently purchased by local investment group Cielo Realty Partners.  The three buildings, which date back to the late 1800’s, are located at 315, 319 and 323 Congress Avenue and span roughly 46,000 square feet.  

Cielo plans to [...]]]>

323 Congress Ave.

Three historic downtown buildings, commonly known as the Swift Building, the Day Building and the McKean-Eilers Building, were recently purchased by local investment group Cielo Realty Partners.  The three buildings, which date back to the late 1800’s, are located at 315, 319 and 323 Congress Avenue and span roughly 46,000 square feet.  

Cielo plans to upgrade the properties.  Current tenants include Annie’s Cafe & Bar, jazz venue the Elephant Room and restaurant Swift’s Attic.

Click to read: Cielo Realty Partners buys historic downtown office buildings (Austin Business Journal, 4-17-13)

In a nod to Austin’s promising economic future, Austin-based Endeavor Real Estate Group and Granite Properties plan to start construction soon on a 220,600-square foot office campus in northwest Austin — the first major office project to launch in the area in almost five years.

Champion Office Park is slated for the northwest corner [...]]]>

Champion Park

In a nod to Austin’s promising economic future, Austin-based Endeavor Real Estate Group and Granite Properties plan to start construction soon on a 220,600-square foot office campus in northwest Austin — the first major office project to launch in the area in almost five years.

Champion Office Park is slated for the northwest corner of RM 2222 and Capital of Texas Highway (Loop 360). The project will have two four-story buildings, one with 116,800 square feet and the other with 103,800 square feet, Endeavor officials told the American-Statesman.

The project’s announcement comes as space in the local office market has been tightening across the Austin region due to healthy job growth, putting upward pressure on rents.

Click to read entire article: Developers plan 220,000-square-foot Champion office project (Austin American-Statesman, 4-11-13)

Despite challenges – including gradually rising interest rates and government spending cuts – the outlook for commercial real estate is positive. The U.S. economy is [...]]]> Economic expansion and job growth will drive recovery as interest rates rise.  Recovery in the housing market augers for continued improvement in U.S. commercial real estate over the next two years.

Despite challenges – including gradually rising interest rates and government spending cuts – the outlook for commercial real estate is positive. The U.S. economy is expected to grow by 1.9% in 2013 and accelerate to 2.8% in 2014. This growth will spur the creation of 4.8 million jobs over the next two years. As job growth accelerates, so too will demand for commercial real estate, leading to continued improvement in vacancy rates.

“The key difference between the initial recovery in commercial real estate and future growth will be the contribution of interest rates,” says James Marple, TD Senior Economist and the author of the study. “As interest rates rise, the spread between commercial real estate yields and government Treasuries will narrow. Prospects for price growth will then depend on improving economic fundamentals.”

Click to read entire article:  TD Economics: Housing market recovery will continue to lift commercial real estate (MarketWatch, The Wall Street Journal, PRNewswire via COMTEX, 4-9-13).

Regardless of the decline in cap rates for office and industrial properties, [...]]]> Cap rates for the single tenant net leased market remained near historic lows for retail, office and industrial sectors in the first quarter of 2013. Cap rates for net lease office and industrial properties declined while retail cap rates remained at 2012 fourth quarter levels.

Regardless of the decline in cap rates for office and industrial properties, net lease retail properties remain priced at a 45 and 77 basis point premium over office and industrial properties respectively. Properties occupied by credit tenants with long term leases experienced the greatest compression in the first quarter of 2013.

Limited supply of properties, specifically new construction, continues to be a major theme throughout the net lease industry.

Despite the scarce property supply in the first quarter of 2013, the median asking versus closed cap rate spread for net leased retail and office properties rose.

The national single tenant net lease market should remain active throughout 2013 due to the stability and financing availability of this asset class.

A shrinking supply and a limited development pipeline will make newly constructed assets in the highest demand and command the lowest cap rates.

Click to read entire article: Net Lease Market Remains White Hot (National Real Estate Investor, 4-4-13)

A recent Commercial Property Executive article featured the recent KBS Strategic Opportunity REIT purchase of the Austin Suburban Portfolio, a group of three office properties totaling 518,000 square feet.  The REIT purchased Park Centre (203,200 sf), Westech 360 (175,500 sf) and Great Hills Plaza (139,300 sf) from TPG/CalSTRS Austin L.L.C., a joint venture involving Thomas Properties [...]]]>

Westech 360

A recent Commercial Property Executive article featured the recent KBS Strategic Opportunity REIT purchase of the Austin Suburban Portfolio, a group of three office properties totaling 518,000 square feet.  The REIT purchased Park Centre (203,200 sf), Westech 360 (175,500 sf) and Great Hills Plaza (139,300 sf) from TPG/CalSTRS Austin L.L.C., a joint venture involving Thomas Properties Group Inc. and pension fund CalSTRS, for a reported $76 million. 

Commercial Property Executive asked NAI REOC Austin’s Bob Rein to weigh in on the activity.  Rein believes that recently announced corporate relocations and expansions along with a booming high-tech sector are driving demand for office space. 

Rein went on to say that “When you have decreasing vacancies, you have rising rents. Rates haven’t gone up that much but some of the freebies are tightening up a little bit.”

Click to read entire article: KBS Strategic Opportunity REIT Ropes in 500K SF Austin Portfolio (Commercial Property Executive, 4-8-13)