Ready for some good news? The office market in Austin is not only showing signs of life, but it’s performing quite well compared to its other Texan peers such as Dallas, Houston and San Antonio. According to a new report from NAI Partners, the Austin office market has returned to positive absorption territory after three consecutive quarters of negative absorption. Just to illustrate how quickly the situation has improved in Austin, the latest second-quarter net absorption figure is around 208,500 square feet while the first quarter was -349,000.
A closer look at the stats highlighted in the report also indicates that the average asking rent is also increasing, though only slightly from $38.08 per square foot last quarter compared to $39.85 per square foot for the second quarter. Total inventory has also increased since this time last year, going from 92.72 million square feet in Q2 2020 to just shy of 96 million square feet in Q2 2021. Total vacancies are still higher than they were a year ago, at 14.8% in Q2 2021 versus 10.4% during Q2 2020.
Graphics via NAI Partners Austin had been experiencing exponential growth even before the pandemic, but since early 2020, the city has become the darling for a tech industry that has become tired and priced out of Silicon Valley. High-profile HQ relocation announcements include the likes of software giant Oracle, fitness brand F45 Training, cryptocurrency startup Blockcap, pre-paid bank card company Green Dot, and many others. There’s also been speculation about whether Tesla could make an announcement of a corporate HQ move to the Texas capital to be close to its $1.1 billion Gigafactory.
The NAI Partners report also offers employment data from the Federal Reserve Bank of Dallas which indicates that the city has shown strong economic performance and a steep decline in unemployment to 4.6% in May, well below the national and Texas state rates of 5.8% and 6.5% respectively. The city saw the creation or addition of 17,235 jobs between March, April and May, helping close the gap on the 133,000 jobs lost at the beginning of the pandemic. As of the end of Q2 2021, Austin’s workforce was at 92% of the total pre-pandemic employment.
While upwards of 150 people were moving to the city every day before the pandemic, Austin’s cost of living has also increased as more new residents plant roots in the Texas capital. And while the city has drawn much attention from the tech and commercial real estate industries, Austin will have to quickly address its growing pains if it hopes to sustain this ongoing economic boom.
Carr Properties, a leading owner, operator, developer, and acquiror of high-quality commercial properties in the Washington, D.C. and Boston markets, is pleased to announce the purchase of 100 Congress Avenue (“100 Congress”), a 22-story, 419,785 square foot, Class A office tower, located in the heart of downtown Austin, Texas. This acquisition marks Carr Properties’ entry into the Austin market, reflecting the company’s continued focus on strategic growth and investment in innovation markets. 100 Congress is one of Austin’s best and most prominent downtown office towers. Situated on over an acre of land on the corner of Congress Avenue and Cesar Chavez, Austin’s two most sought-after throughfares, 100 Congress overlooks Lady Bird Lake and is within walking distance of local attractions, such as Austin City Hall and ACL Live. This central location immerses customer workplaces in the life, energy, and entrepreneurial vibrancy of downtown Austin. “We are very excited to expand into Austin, a vibrant innovative market poised for long-term growth with rapid demographic, economic, and market momentum,” said Oliver Carr, CEO of Carr Properties. “Austin’s economic drivers of tech, government, and education will be a strong strategic complement to our existing portfolio in Washington, D.C. and Boston.” Click to read more at www.carpropp.com.
Austin is the U.S. city with the most interest from foreign real estate investors this year, a new survey found, signifying a shift in investment toward smaller metropolitan areas as the coronavirus pandemic and rise in remote working pushes people out of large cities. Nearly one in four survey respondents ranked Austin as the top market to increase real estate exposure in this year, while a third ranked it within the top three cities, according to an annual survey by the Association of Foreign Investors in Real Estate. Austin’s top ranking is a huge jump for Texas’ rapidly-growing capital city—in last year’s survey, it was ranked just tenth by international investors. It’s the first time a tertiary city, or a smaller metropolitan area, has ever ranked in the top three in three decades of AFIRE surveys, the investment association said, and marks a significant shift in investor interest. More than 60% of survey respondents said they expect to bump up their investment in tertiary cities over the next three to five years, and 80% plan to do the same in secondary cities, or medium-sized metropolitan areas. Investors indicated they are less interested in investing in large cities, like New York and Chicago, which were each ranked as one of the top three markets to lower real estate exposure by more than half of survey respondents, along with more than a third who ranked San Francisco in the top three. Click to read more at www.forbes.com.
When the real estate investment platform CrowdStreet was weighing where to relocate its headquarters from Portland, Oregon, its leaders considered a number of factors such as cost of living, the opportunity for growth, and access to a major research university. After some exploring, the choice was clear: Austin, Texas. “We did a search to understand where a majority of the investors were based. Texas came in at No. 2,” says CrowdStreet CEO and Co-Founder Tore Steen. “When looking at all the projects in the marketplace over the past seven years, the state is number one.” Steen adds that Austin also represents a diverse and highly educated population with a quality of life that is very similar to Portland, something that was important to the CrowdStreet team. “I plan to be the first Portland-based employee to move,” Steen says. “All of our employees have been given an option to continue working with our hybrid model (either in-person or remote as it works for them) or make the move to Austin with the help of a relocation package.” Click to read more at www.rednews.com.
Texans displaced by freezing temperatures and outages pushed the state’s occupancy to a 50-week high, according to an analysis by STR. During the week of 14-20 February, Texas hotel occupancy reached 56.3%. That 50-week high in the metric contributed 0.9 percentage points of the 3-point gain in overall U.S. occupancy (48.1%) for the week. Texas’ occupancy level grew 9.4 percentage points over the previous week, which is the largest week-over-week occupancy increase for the state in the last year. Average daily rate (ADR) rose 5.8% week over week, which was Texas’ largest gain in the metric since the week of New Year’s. “Texas hotels are no stranger to housing displaced guests during a pandemic,” said Isaac Collazo, STR’s VP of analytics. “Similar to what we saw with Hurricane Laura, there was increased hotel demand for most markets because there wasn’t a great deal of business to lose ahead of the storm. We would have likely seen higher hotel performance across the state had hotels not experienced similar power and water loss as homes, in addition to the limited number of rooms available in some hotels due to reduced staffing as a result of the pandemic.” Click to read more at www.hotelnewsresource.com.
RESOLUT RE recently closed five retail transactions in Texas. The deals included leases and sales in the Austin, Dallas-Fort Worth, El Paso and San Antonio markets. QuikTrip has purchased 1.47 acres at Webberville Commons (NWC of FM 969 (MLK) & Tollway 130) in Austin. Andrew Perkel of RESOLUT RE represented the seller. Brad Campbell of McAllister & Associates represented the buyer. North Texas Pharmacy has leased 1,330 square feet at Virginia Commons Plaza (2741 Virginia Pkwy, McKinney, Texas). Chris Flesner and Mai Nguyen of RESOLUT RE represented the landlord. CBD Pros has leased 1,019 square feet at 2601 N. Zaragoza Road in El Paso, Texas. Chris Duncan and Jeff Lewin of RESOLUT RE represented the tenant. Sergio Tinajero of KW Commercial represented the landlord. Fonz Salon has leased 1,050 square feet at Grandview Shopping Center (8005 Callaghan Road, San Antonio). Carolyn Bustamante and Aisha Chapa of RESOLUT RE represented the landlord. Juan Mata of Texas Premier Realty represented the tenant. West Hills Dermatology has leased 823 square feet at Plaza I-35 (12702 Toepperwein Road, San Antonio). Aisha Chapa and Carolyn Bustamante of RESOLUT RE represented the landlord. Parker LaBarge of CBRE represented the tenant.