Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.
Issue link: https://texasrealestatebusiness.epubxp.com/i/591312
32 • November 2015 • Texas Real Estate Business www.REBusinessOnline.com Operating as our state's political core and as the "live music capital of the world", Austin's real estate mar- ket is as distinctive as the people that make this city great. Austin is a one- of-a-kind place that's unique to Texas and the entire country. It defes stereo- types with its progressive and fercely entrepreneurial spirit, and continually gets top marks for its quality of life, pro-business culture and pro-environ- ment views. WalletHub recently ranked Austin as the 2015 best large city to live in and the data matches up — the city ranks second among 2015's fastest-growing cities in the U.S., according to Forbes, behind Houston and ahead of Dallas- Fort Worth. In the era of 'Walker, Texas Ranger,' Emmitt Smith and 'the Dream Team,' and the release of 'Dazed and Con- fused,' the tech boom of the 1990s drove the Austin ofce market. Dur- ing that same time, Austin's total pop- ulation increased 35 percent and close to 1,750 companies employed over 110,000 people in technology-related jobs in Austin. By the end of the 90s, Texas' capi- tal city was widely known as Silicon Hills, home to a critical mass of insti- tutional technology knowledge and major tenants like Dell, IBM, Motor- ola and other software and gaming companies. Despite this tremendous growth, the majority of technology companies chose to locate in suburban areas and the central business district (CBD) saw very little construction ac- tivity in the 90s. Austin's concentration on the tech industry and lack of diversifcation rendered it vulnerable when the eco- nomic downturn struck the U.S. in the early 2000s. Austin endured wide- spread job losses and downsizings and, in an attempt to combat the f- nancial setbacks, established Oppor- tunity Austin in 2004. 2000s Comeback The fve-year, fve-county initia- tive aimed to cultivate jobs and for- tify active industries like software, digital media, wireless technologies and tourism, in conjunction with at- tracting new businesses such as auto, biomedical and logistics to diversify Austin's fundamentals. By 2004, Austin boasted a wide- ranging spread of corporations who made the city their home, including Whole Foods Market, Opus Health- care and Progressive Corp. The 2000s brought two substantial new ofce buildings, both conceived prior to the major technology down- turn, to the CBD: 300 W. 6th, spanning 454,225 square feet; and Frost Bank, spanning 535,078 square feet, along with at least 10 renovations of older buildings. This new construction, combined with the economic downturn, sub- stantially impacted the CBD's occu- pancy rates and average rental rates. Following the downturn of the early 2000's, the market experienced little to no absorption and a vacancy rate that peaked over 25 percent in 2005. How- ever, strong suburban leasing ofset the increase in vacancy in the CBD, allowing the overall market to exhibit more acceptable market statistics. Austin once again was receiving ac- colades as an ideal location for com- panies to expand. Entrepreneur.com ranked it as the eighth best place for young companies and the ninth hot- test large city for entrepreneurs. Austin's northwest and southwest submarkets accounted for the major- ity of absorption in 2005, continuing the trend of Austin's largest technol- ogy tenants locating in suburban ar- eas. Some of the more notable expan- sions were Samsung's three-year, $500 million expansion to its memory chip fabrication facility, and Advanced Micro Devices's decision to build an 860,000-square-foot campus consoli- dating the company's 2,000 employ- ees in southwest Austin. By the end of the decade, downtown had more than quadrupled its housing stock — having become a preferred location for Austin residents, and Austin's total population increased 18 percent. Facebook moved in to 300 W. Sixth St., and Town Lake was re- named Lady Bird Lake. The infux of new residents bolstered demand for other services and paved the way for a more vibrant retail, restaurant and entertainment scene in the CBD. Austin's total population has in- creased 14 percent since 2010. Over the past 20 years, the amount of ofce space in Austin's CBD has increased 46 percent, and its vacancy is at a very healthy 7.8 percent. Austin, San Jose, Seattle, Orlando, Ft. Lauderdale and D O W N T O W N S N A P S H O T: A U S T I N GROWING PAINS — THE HISTORY, REVITALIZATION AND RELOCATION TO AUSTIN'S CBD Adam Nims Principal, Trammell Crow Co.'s Austin Business Unit