Austin Real Estate Blog

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.

Part 3: The Market for Condos

The market for commercial condominiums has been steadily rising for the past decade.

The office condo market is filling a need for small businesses and professional service providers as the owners realize the benefits of owning their own office space. Tax benefits, mortgage payments that can be potentially lower than lease payments, as well as the real estate equity owned by the business all help the bottom line and many businesses are take the plunge into owning their own space.

Owning ones own place of business means the occupant can make the office into a signature space. By purchasing a “shell” – unfinished space – the buyer can customize the finish out, putting their own touches on the space and benefiting, in the end, from any improvements made.

A typical condo buyer is looking for between 2,000 and 3,000 square feet, the business is five to ten years old, and their employment numbers are generally stable. Much like a first time home buyer, the business owner buying a condo has realized the futility of paying rent year after year, and is looking to add assets to the financial sheet.

The limited space requirements shouldn’t be a show stopper for those businesses with the potential for expansion, however. One option open to this sort of business is to purchase a larger space and lease out extra offices to other businesses. When the time comes to expand, the space is readily available to the growing business.

Part 2: Which Location, Location, Location?

The three most important words in real estate and business absolutely apply here: location, location, location. Deciding what the most desirable area is depends on the type of business and the desired clientèle. As the commercial condominium market heats up, though, an argument can be made for either a downtown location or the heretofore more typical suburban areas.

Traditionally, office condos are located outside the more desirable downtown and centrally situated areas. However, a movement is underway to renovate downtown spaces and offer them as office space for sale. As gas prices rise, business owners look for locations convenient to their employees and customers alike. Downtown areas are experiencing revitalization, also. There is a movement on to look closely at rejuvenating the downtown neighborhoods and commercial zones as urban sprawl becomes a concern.

Still, the outer edges of the city remain desirable for many reasons. The lower costs of real estate, room for expansion, room for parking, less congestion, are all good reasons to locate outside the city. Parking is a concern, though more employees are looking at public transportation options. Regardless of location, though, the benefits of purchasing ones own business space are many.

With a decline in new construction, existing properties are being snapped up. And vacancy rates are steadily declining, both downtown and in the outlying areas, particularly the northwest, over the past five or so years. And, as more companies and professional services move into the Austin area, desirable spaces are more and more in demand.

Part 1: Shoal Creek Plaza

The office condominiums at Shoal Creek Plaza are available for sale, many ready for immediate occupancy. Ranging in size from 400 to 10,000 square feet, these offices are located in a prime area and priced at between $165 and $176 per square foot plus the cost of finishing. Walls of windows and exposed brick add natural light and character to these spaces. The buildings are in a prime location, near the Arboretum and Domain shopping centers, one half mile from Mopac and US highway 183.

At 8500 Shoal Creek Boulevard, the Shoal Creek Plaza is an attractive prospective location for several different types of business. The property was bought in March of 2002 by Ogle Properties and renovated to be sold as condos. The plaza consists of four buildings with a total of 92,000 square feet of office space, some partially finished out, some ready as shells for the owner’s personal touches.

Formerly occupied by URS Radian International, for twenty years, it was a good time in the softening real estate market to make the move to split up the property into smaller office spaces and get on the commercial condominium band wagon. As the real estate market warms up again after a brief and mild market downturn, the Shoal Creek Plaza already begun to sign up a good set of tenants. The prices and reasonable, the location is ideal, and the terms are favorable for many types of small businesses and professional services.

An old abandoned car lot alongside a shabby, garbage strewn creek was transformed into 14 floors of luxury apartments, a project completed in 2004 by CLB Partners. Austin City Lofts, located at 800 W. Fifth Street, brought much needed living and retail space to the Central Business District of downtown Austin and converted an eyesore into a beautiful and distinctive looking high-rise building.

The first four floors of the building contain parking, retail space, a residential lobby and management offices as well as eight apartments overlooking Shoal Creek. The next five floors feature 54 apartments with 12 foot ceilings, and the final floors contain the loft apartments, with 20 foot high ceilings, including 20 two story loft-style homes.

All told, the building houses 82 one, two, and three bedroom apartments, between 1009 and 3049 square feet, with prices running between $325,000 and $1,300,000. The features include balconies overlooking views of the city, hardwood and exposed concrete floors, granite counter tops, and whirlpool tubs. There is 24 hour security, a pool, a gym, and private parking.

The exterior was designed by Larry Speck of Page Sutherland Page Architects of Austin. It features copper shingles and native limestone. Outdoor entertainment areas include a lap pool and spa, a fire pit, and community cooking area. Inside, the kitchens feature Jenn-Air appliances and European style cabinetry, as well as Moen faucets. Bathrooms boast over-sized showers and granite counters, along with the whirlpool tubs.

Austin City Lofts is conveniently located near Austin’s vibrant night life on 6^th Street, and within two blocks of retail and restaurant establishments, clothing shops and boutiques. Just across the creek are more retail and restaurant places and a 12 screen movie theater.

The tightened credit in the home mortgage field may actually be helpful to Austin area businesses. As we have reported, the impact of the subprime mortgage crisis has slammed the door on many borrowers — even those with “good”credit.More and more Austin area residents who, just a few months ago, might have sailed through a second mortgage application, a refinancing or a home purchase are finding it more difficult – if not impossible – to be approved for those loans today.This is where business borrowers come in. For the most part, Austin area financial institutions are eager to lend to businesses – especially small businesses with good credit records. This helps to offset their dwindling mortgage income. Not to minimize the crisis that is tightening the screws in the mortgage market. It’s a serious problem. But out of this problem an opportunity is emerging for businesses that may need to seek more money.

Jobs are a basic driver of the economy. And the Austin area is among the strongest in the nation in creating new jobs.For more than two years now, the Austin metro area has been adding new jobs at one of the strongest paces in the nation.Our metro includes the counties of Travis (Austin), Williamson (Round Rock, Georgetown), Hays (San Marcos) Caldwell (Lockhart, Luling) and Bastrop. The pace of job growth shows no signs of letting up.

Not only does Austin lead the state economically, but by at least one measure Austin is the best place in the US for business.

Moody’s Economy.com Inc. gave Austin the top spot over almost 400 US metro areas, based on current conditions and expected trends as well as potential risks.

- Excerpt from From The Neal Spelce Austin Letter (www.AustinLetter.com).

The Austin Market
When I read these tidbits yesterday I remembered that, like all markets and businesses, there are ups and downs. While the mortgage fiasco has made the real estate market slow a bit, Austin is still outperforming most places in the United States. I think the reactions from people has to do with the incredible (by Austin standards) year that 2006 turned out to be for real estate. Comparing the 2007 real estate market to the 2006 real estate market and going bearish, resembles stock market investors worrying about a few hundred point drops when the DJIA is higher than it’s ever been.

As you might guess, I’m still optimistic about the market in Austin as a whole.

That said, there’s at least one place where I wouldn’t want my money right now.

Downtown Austin Condos
Yesterday, Avera Development removed The Magnolia development from it’s website and is reevaluating it’s development plans. The Magnolia was planned to be 139 units and no definitive direction was announced by the owners although some sources expect the land to be used for an apartment complex.

Additionally, another development group working on a project announced as The View is selling the land and scrapping plans for their 69 unit green development.It’s understandable that people are starting to reevaluate their developments. With the number of planned and in development units for downtown at an all time high, I’d hate to be the last guy to complete my condos. While the condos in many of the developments have sold quickly, if the pace of building keeps up I wonder if we’ll wind up like Denver or Miami were 2006. Given that our market generally lags the nation a bit, we could be in for a bumpy ride in the chic downtown Austin condo market.