Austin Real Estate Blog

According to the Forbes Business Journal, Austin is tied for first place as the metropolitan area showing the most signs of economic recovery; Washington, D.C. was the other first-place contender.  This is in line with 2009 estimates by Forbes that Austin was positioned for a swift rebound; financial analysts predicted at that time that Austin’s economy would grow by $5 billion before 2011.  Austin’s speedy recovery was attributed to its strong government sector; as the capital of Texas, Austin benefits significantly from stable government employment in the area.

Aggressive moves to attract new companies by both the city of Austin and the state of Texas have also provided additional employment opportunities.  The Austin area has attracted several new employers in recent years including the Hanger Orthopedic Group; Austin is currently in negotiations with Facebook to open an office, as well.  Austin’s historically strong education, healthcare, and green technology sectors have ensured that unemployment rates in the metropolitan area remain lower than the state and national average.

Recent figures indicate that Austin’s employment picture continues to improve.  Job growth in Austin over the past two years approached one percent, the best in the nation; while this growth rate may seem small, it’s worth noting that over the same period the United States as a whole lost jobs and saw unemployment rates skyrocket.  In fact, Austin’s employment picture is expected to improve even more over the next three years, with jobs in the area increasing by approximately eight percent overall.

One major factor in the stability of the Austin economy is the housing market.  While other regions experienced serious declines in property values and increases in foreclosures and unsold homes, homes in Texas retained almost all of their initial value and demand for these homes remained high throughout most of the industry crisis.  Most analysts credit reasonable real estate pricing and lack of overbuilding for Austin’s relative stability and economic performance; because Texas real estate prices were never overinflated due to real estate speculation, the collapse of the housing bubble had little effect on the area.

These recent figures and predictions spell good news for the Austin real estate and business community.  Increased growth and employment is expected to bolster the commercial and residential real estate market and boost new construction, creating still more jobs and growth in the area.  This synergy will maintain Austin’s position as one of the best cities in the nation in which to live and work.

A new mixed-use project is expected to break ground in Austin in 2010. The University Park development is within walking distance of the University of Texas-Austin, and will incorporate townhomes, condominiums, and apartment residences as well as a new movie theater, medical office space, and a luxury Andaz hotel. Construction is expected to commence in the second quarter of 2010. Located on the former site of Concordia University, the development is already pre-leasing commercial space and lead developer Andy Sarwal has indicated he expects to have tenants for 90% of available space before construction is completed on this project.

University Park is centrally located within easy walking or cycling distance of many of the prime attractions of the Austin area, including the State Capitol, the downtown financial and business district, and of course the University of Texas. Onair Development has announced plans for a 120,000 square foot medical office building in University Park in close proximity to St. David’s Medical Center. The building offers significant advantages for physicians who lease office space, including an exclusive tenant equity partnership plan that provides the potential for ownership over time.

Texas Monthly has already taken up residence in University Park; an Aveda Institute salon training facility has also signed a contract and is expected to open for business sometime in mid-2010. Premiere Cinemas will offer six or seven screens in a planned 450,000 square foot mixed-use building, which will incorporate 340 apartments and additional retail outlets as well. Developer Andy Sarwal is encouraging builders in University Park to commit to green standards and LEED certification, making this development even more attractive to tenants in the Austin area.

Austin’s downtown area has fared better in the recent economic downturn than many other cities; this is due in part to the vibrant medical, solar, and green technology sectors in the Austin area. Additionally, Austin’s business-friendly policies have attracted major employers to relocate their headquarters to the area; one recent acquisition for the Austin economy is Hanger, a major manufacturer and supplier of medical prosthetics and durable medical goods.

Offices and other commercial space in Austin are bucking the national trend of falling rents and difficult financing.

A recent Grubb & Ellis Company forecast lists Austin, Texas as the number one city in the nation for commercial real estate investment. Long considered one of the top ten markets in the U.S. for retail, industrial, multi-housing, and office real estate ventures, Austin tops the list for office real estate, beating out cities like Washington, D.C., Los Angeles, Houston, San Diego and Denver. Austin ranked seventh in the nation for retail investment opportunities; Los Angeles held onto the top spot in that category. Austin’s overall strong showing in the commercial market is the result of a number of synergistic factors that have allowed the area to weather recent downturns while remaining relatively unscathed.

Grubb & Ellis credited a strong local economy including government and educational sectors for much of Austin’s strong showing. Federal, state and local government agencies provide over 150,000 jobs in the Austin area, offering a stable employment base that has shielded Austin against the unemployment woes that have plagued other areas in recent years. During 2009, a year when many other major metropolitan areas saw severe job losses and worsening recession, Austin escaped the brunt of the economic downturn with an overall job loss rate of 0.7 percent.

Green technologies are bridging much of the employment gap. Solarbridge and Heliovolt have recently opened offices in the area, and Gemini Solar has begun construction on what will be the largest solar power plant in the country. The plant will be part of AustinEnergy’s overall plan to provide clean electrical energy to the region; located in eastern Travis County, it is expected to generate 30 megawatts of electrical power upon completion in 2010. These new expansions and construction projects will provide additional employment for Austin area residents, and are expected to stimulate growth in the local economy.

Austin’s real estate industry got another boost in a report by Oxford Commercial Inc., which showed that commercial office space leasing stabilized in the fourth quarter of 2009 after three straight quarters of steep declines. Prices for office space have increased in some areas, notably in the downtown area where demand is typically highest. The improvement in leasing figures is believed by most analysts to mark the beginning of an economic rebound in the Austin area. While Austin has experienced fewer difficulties than other areas, it has still felt some of the effects of the nationwide economic woes; this news along with the high ranking by Grubb & Ellis is expected to cement Austin’s position as one of the most desirable commercial markets in the nation.

Leander Commercial Listing by RE/MAX 1

Taxes may be going up for real estate investments

Real estate investment providers could be adversely affected by a bill that recently passed the U.S. House of Representatives that would tax real estate assets at the higher “ordinary income” rate rather than the existing capital gains rate. The bill, referred to as the Tax Extenders Act of 2009, would exempt owners of real estate held for investment purposes, including rental properties; however, advisors, managers, finance experts, and other consultants and support staff would be taxed at the higher rate.

The bill specifies that gains derived from real estate investment would no longer be classified as capital gains; interest earned would be taxed at the higher rate, and investors who use their own capital will be exempt from the legislation. Investors who use other entities in order to finance their real estate investments, however, will be affected by the legislation, which is seen as a crushing blow not only to speculative investors but also to publicly traded partnerships and real estate portfolio providers.

Existing real estate corporations that directly fund and build their own projects will not be affected by the legislation. Service providers, fund advisors and real estate management companies are expected to be hardest hit, since they depend heavily on a narrow margin of profit to continue operations.

The bill specifies that earnings derived from an “investment services partnership interest” will be taxed at the higher rate. An investment services partnership interest is defined by the legislation as the interest held by an individual or corporate entity that:

• Advises the partnership regarding buying and selling of real assets
• Manages, acquires and disposes of real assets
• Arranges financing for purchasing real assets
• Engages in other activities in support of management, acquisition and disposition of real assets

If you oppose this bill you can send a letter to your congressman and/or senator.

Real assets include securities, commodities, certain options and derivatives, and real estate promotes held for investment purposes. Property managers and real estate investment companies will want to watch the progress of this bill closely as it moves from the House of Representatives to the U.S. Senate for consideration.

Seymour Fogel Mural

The Starr Building located at 107 West 6th Street, Austin Texas, has been sold. CB Richard Ellis represented the owner in the sale of the roughly 77,000 sq ft office and parking garage. The building has been around Austin some 55 years and houses a famous (to art and architecture folks mostly) mural by Seymour Fogel.

The mural itself is very pretty. I hope that the folks who purchased it try and make the finances work without plopping another high rise in a downtown that already has enough “towerage”.

Kemp Properties purchased the property and has previously restored other buildings like the Brown building. I think that’s a beautiful building so we ca assume that the Starr Building is in good hands.

Take a look at some of the photos from the listing agents at CB Richard Ellis. It looks like it would be a perfect set for Mad Men!

Starr Building Interior

Starr Building Exterior

It’s not difficult to find mixed-use developments in any large city; Austin is no exception to this. At this moment, there is a developer that wishes to add another mixed-use development near the capitol. The project is called Capitol Terrace, and it is situated on the south-west corner of 14th Street and Lavaca. There is another mixed-use development just blocks away.

downtown development with tree lined streets

The city council would need to approve a zoning change for this quarter-block development, because the proposed height of the building (12 stories, up to 163 feet tall) is higher than the maximum currently permitted in the area (120 feet).

To say that this development would have “a little of everything” would be accurate. It is projected to have 5 floors of office space, or about 61,000 square feet. It would have 30 higher-end apartments for those with business at the Capitol. That could be lobbyists, or legislators. It would have small shops such as gift shops, and a white-tablecloth restaurant. It is also slated to have 5 levels for parking, of which 2 would be under-ground levels. Currently, only one lease would be displaced by the new development.

Pedestrians would be treated to spacious, tree-lined sidewalks.

The proposed zoning change is expected to be heard on December 12, 2009. If approved, construction is expected to begin in the second quarter of 2010.

Commercial real estate has been as strongly affected by the real estate decline as the residential real estate markets, for some areas more so. With this in mind many commercial real estate agent have alter approaches and watched the market for the best spots to focus on. The good news is that as the residential real estate market is rebounding so is the commercial. The vast majority of the market turned to commercial leasing.

As 2008 came to a close, the numbers appeared to be more solid than previously anticipated. After reviewing the numbers across two profound years there were significant changes in sales and leases. The numbers give a lot to reflect on. Between 2006 and 2008 commercial sales dipped 13% however commercial leases increase a huge 33% over the same period of time.

This means that although real estate sales have dropped the commercial market as a whole has not been stagnate. It continued to move forward as businesses needed a place to call home. They turned to leasing and commercial real estate agents versed in lease and leasing agreements. This means that being versatile enables success both in business and real estate locations.

As with any investment, real estate has several categories to evaluate prior to making the best choice for your plans. In some cases the categories are broken down further, thus it is important to evaluate your goals, and your skills alongside the options available to find the best real estate investment fit for your budget.

Real estate investment begins by a simple and obvious division, commercial and residential. With each side there are specific guidelines to justify their function, and value in real estate. Once you are aware of the kind of investment you want to make, you can learn what each sub-category is for the respective options.

If you are considering residential real estate, then the next obvious division comes with single family vs multifamily units. A single family home is independent of all others, and as the name indicates, only one family can reside in it. A multifamily unit indicates that more than one family will reside in portions of the building. Often these are apartments, condos or duplexes.  They do not have yards and the leasing or sales agreements vary only slightly.

In commercial real estate the next category varies a bit more. These properties can range from office buildings in specifically designed clusters or parks to manufacturing sites that require adaptation from lessor to lessor. The difference between these and a residential option is the regulations and taxes associated with each end. With regard to commercial real estate, zoning rules also apply.

Under unique situations there is the option to own both residential property and commercial property. In this case, the mixed use development has unique zoning laws that apply. This will require a clear understanding of the laws and tax regulations associated there with. Talk to your real estate agent or broker for details on the area and where to find the regulations associated with this unique form of real estate investment.

As real estate is often the most stable investment you can make, long term considerations and consulting with the right team is crucial. Finding the right real estate agent such as Joe Cline, will enable your real estate investment venture to be built on a solid foundation.

Downtown Austin thrives with incredible growth and opportunity. With the growth and development there comes constant conflict. The downtown historical locations are being lost by all of the development. At this time, not one building in downtown Austin has been submitted for historical protection or landmark status. Also perplexing, none of the local or national historic registers has listed the area, in whole or in part, as a place of value. One example of a future development that should concern local Austin historians is the recent permit obtained by what will become the Gables Republic Park, a 16 story apartment community. The demolition permit is intended to partially tear down the 1913 Nabisco warehouse. For the last fifteen years the location housed the Ginger Man company.

The local Preserve District Council has put forward some ideas and proposals to save at least part of Downtown Austin. The tools of the proposal made by the ROMA Design Group and HR & A advisers have created a significant and active debate among property owners and local groups like the Heritage Society of Austin and the Downtown Austin New Alliance. Also chiming in actively is the Central Texas Chapter of the Congress for the New Urbanism, the Downtown Austin Neighborhood Association and the city of Austin’s design and planning commissions. ROMA’s recommendations were then presented in public on July 23. Until now, this issue is in hot debate, as many of the supporters of the concept do not support the specific idea’s laid out here: www.cityofaustin.org/downtown It will be debated and discussed in council again on the 24th. Members will provide policy direction and a vote may occur to direct a draft of the density bonus and applicable ordinances with specific warehouse district rules.

There will be much debate on how to balance historic preservation while still allowing for development to progress as needed. Before the council votes on the measure, and before they determine exactly what tools will be used, the community will need to voice their opinion. The public meeting will be held Sept 24th

Many small businesses find that sharing a facility with other companies, while receiving the same benefits available to many large corporations, to be an economical and reasonable solution for their business needs. Which benefits are used here? The option to share copy costs, energy pricing and in some cases, phone or secretarial services as well. This offers the cost cutting over head choices and still allows for the prestige of having an office for your business.

Business Office Centers can be used by start-ups and small businesses, or organizations. Historically speaking, when a larger corporation has used them, it has been as a remote office for sales teams or investment holding. Now they are the alternative to their real estate holdings. This means that this design of office building is becoming more in need. For Austinites this equals the most efficient use of green resources for large corporations. There is no need for new building construction or major upgrades. There is also the opportunity for the Virtual Office bundle, which often includes a bill for the office and covers all the major services required to present the major corporation image.

The Office Centers are both cost effective and green, making them an ideal commercial location for many businesses. It enables a company to know they are creating the basis for a successful growth while helping the environment, and bettering Austin along the way.