Austin’s office market continues to see large leases for even larger developments
Boots On The Ground Commentary by Thomas Matheney
Our “Boots on the Ground” viewpoint is the voice of our experts, who have broken down the market data and compared it to what they are seeing for themselves. This is their take on what the numbers actually mean for the Austin office market.
Austin has been named the Best Place to Live in the U.S. for the third year in a row. Therefore, it should not come as a surprise that our office market is still firing on all cylinders. Austin has over 3,000,000 square feet under construction and more than half of it (1.7M) has been leased prior to delivery. The usual suspects: Google, Facebook, Indeed, Apple and WeWork, all continue to battle for sought after, large blocks of space in Austin’s three hot submarkets - CBD, Domain and East. Amazon recently announced the addition of 800 jobs in the Domain after they signed a lease for half of Domain 10 back in Q4 2018. The real blockbuster news is Google laying claim on the entire Block 185 development, caddy-corner from their 210,000 square foot space in 500 West 2nd Street. The news leaked that the tech giant inked a lease for the 35-story, 723,000 square foot, high-rise just days before ground broke on the project, which completely dwarfs the 150,000 square foot lease they inked in Endeavor’s new development, Plaza Saltillo, in the East submarket. The Seaholm District will essentially be complete once Block 185 opens in 2022, with the additions of The Independent (a residential tower) and The Austin Proper hotel opening this year.
Following the announcement of Apple’s billion dollar campus in Northwest Austin, we are seeing a plethora of Apple’s partners and suppliers entering or expanding in the area with well over 200,000 square feet of those tenants in the market for office space. The Domain continues to dominate our submarkets outside of the CBD with tech giants Amazon, WeWork and Facebook having large blocks of space claimed in the soon-to-be-completed Domain 10 and 12 office buildings.
The East submarket, also known as the “East side” is not too far behind Northwest Austin with local developers AQUILA, Austin’s office market continues to see large leases for even larger developments Cielo, Cypress, Endeavor, Greenbelt and Riverside Resources all have developments underway totaling well over a million feet. In addition to these groups, local veteran investor, Peter Barlin, announced the renovation of over 250,000 square feet of warehouse space for creative office use. Google signing their 150,000 square foot lease on the East side is a good sign that the East submarket continues to be a solid bet for recruiting millennial talent, which makes up the majority of these tech companies’ workforce. With all of these developments delivering in the next 1-3 years, interested is high on how the East side infrastructure will fare.
Unemployment rates continue to drop, companies continue to commit to Austin and developers, both national and local, continue to build. $70.00 gross rates in downtown high-rises are no longer giving sticker-shock to the brokers and tenants actively looking in the CBD office market. Austin, along with the rest of the country (especially Texas) is not showing any signs of letting up.