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.

New rules proposed by the Community Development Commission could spell big changes for builders seeking variances for new developments in Austin.  The proposal is modeled on a similar law already in effect in Massachusetts and would require that builders who receive special permission to build larger-than-allowed residential buildings must devote a portion of their development to affordable housing for low to moderate income families.  The Community Development Commission is comprised of thirteen political appointees who are tasked with the development and implementation of programs intended to serve low income families and households in the Austin area.

Recent developments have also led to the appointment of a new Downtown Density Task Force, a result of stalemate on the part of the previous task force which could not come to an agreement at a meeting last month.  Many builders have noted that a proposed “pay-to-play” system that would require payments to a community development fund may also constitute a deterrent to new construction in the area during a time of economic uncertainty; most economic experts believe such requirements are unwise given the current housing market downturn.

Some experts have noted that the proposal as it currently stands is in direct conflict with Texas state law, which prohibits requiring builders to include affordable housing in their planned developments.  Supporters of the proposal, however, note that the rules do not force builders to include such housing, but simply withhold the required legal variances from builders who do not make such accommodations a part of their development plan.

The timing of the proposal is unfortunate, given the recent prediction in the 2010 Texas Construction Outlook that Austin construction projects are expected to increase by approximately 30% in the coming year.  Federal stimulus funds and projects are credited with a portion of this growth, and new housing starts are expected to make up much of the rest of the increase.  Many builders feel that adding new layers of expense and paperwork will put a damper on these expected gains and stifle much of the economic benefit Austin could derive from this infusion of cash and projects to the local building industry.  While the public works and utilities projects are not expected to be affected by the proposed rule changes, some new housing developments may be delayed or even canceled if these rules are put into effect at this crucial time.  Given the fragile nature of the housing market recovery, most builders believe that these rules should not be implemented or should be delayed until the housing industry is more robust and the recovery is well underway.

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.

Home builders are cautiously optimistic heading into the new year, according to a recent survey by John Burns Real Estate Consulting. The survey indicates that 57% of builders expect 2010 to be an improvement in terms of sales and revenues over 2009 figures. The extension and expansion of the First-Time Homebuyer’s Credit is anticipated to create increased demand for new home construction, while recent changes to the tax code have been advantageous to home builders as well.

The tax changes mainly affect net operating loss carrybacks; these tax mechanisms allow companies to offset profits in one year with losses in another, reducing their overall tax liability and allowing them to receive refunds for taxes paid in past years. These carrybacks usually are only allowed for two years, but the length of time has been sharply increased, allowing many firms to offset current losses against profits going back as far as 2003. This will provide more cash in hand for many financially-strapped builders and offer real help at a time when many home builders need it most.

Builders may get money back from taxes paid!

The survey follows on the heels of a recent prediction from Fitch Ratings that new construction and existing home sales will improve more than previously expected in 2010, due in part to the expansion of the tax credit and efforts by the government to stem the tide of foreclosures in recent years. Incentives and tax credits appear to be having a beneficial effect on the market, but many analysts worry that sales will slump as soon as the incentives are removed or phased out.

Austin builders are expected to benefit from the change in the tax code and the extension of the First-Time Homebuyer’s Credit. Austin’s real estate market has survived the recent housing crisis remarkably well; this is credited to Austin’s thriving economy and overall desirability as a center for culture and a great place to raise a family. While new building projects have slowed in recent years, the demand for new construction is still strong. Ironically, some Austin builders will benefit less from the tax code changes due to the fact they have fewer losses to offset against previous gains, and thus will not qualify for the full level of tax relief.

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.

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

These days, it has become very important to keep the environment in mind with pretty much every aspect of our lives. With so much emphasis on green living, it can sometimes be difficult to know if the choices that you make are actually eco-friendly. Of course, there are the obvious, like recycling and reducing energy output. What about when you are building a home, or just remodeling? Again, there are the obvious green choices like sustainable materials and energy efficient appliances. Beyond that, what is considered green living?

First of all, you will want to look at the site. For new construction, green living starts from the ground up. Take a look at the location itself. An eco-friendly builder will want to find a spot that reduces the need for car travel. Austin is becoming a hot spot for mixed use properties, making it an excellent place to be eco friendly. Smaller sites are also more environmentally sound, as they will require not only fewer materials, but less energy when complete. Older areas are also more eco-friendly in that they may have originally been designed with a walking commute in mind. While most of Austin is not necessarily convenient to the local grocery store, the newer designs are definitely taking it into account.

Austin is a city at the forefront of green living. There are several incentives offered by the city that encourage homeowners to make better energy decisions. The Austin Green Building Program has a rating system that can assist in making more environmentally friendly choices not just in building, but in day to day living as well. A little research can bring you to the proper choices in green living.

I am pretty much addicted to magazines and newsletters about a few things. Green building, architecture, home stuff, computers, and real estate. I thought I’d finally put some of my subscriptions to wider use and share a few links every day on this blog and on my West Austin real estate blog. Be sure to check out both sites for links of interest and let me know if you suggest any other magazines for me. I currently subscribe to about 25 or so and always love to get new ideas.

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Interested in Green Building and Sustainable Living? I got this a few days ago. I’m going so if you want to go and meet up, I’d love to meet ya.

Designing for Food Resources
Food is among life’s most basic needs.  Our current food production model is centralized and sells to a global market.  Like any other massed-produced commodity, our food product is cheap, abundant, and easy. There are many problems with the current model, leaving our food resources far from secure or sustainable.  Food production, transportation, consumption, and disposal each have a huge impact on our carbon footprint.

On a local level, grassroots groups are working hard to reduce Austin’s carbon foodprint. This presentation explores ways in which our planning process, building infrastructure, and operations policies can incorporate goals for responsible food resources. Changes in our single-family homes, multifamily homes, and commercial buildings can lead to more sustainable, reliable, and environmentally-responsible food resources.

This seminar will feature three speakers:

• Pamela “Sweetpea” Hoover is the assistant grounds master at Natural Gardener and a certified teacher of the square foot gardening method.  Sweetpea will address attainable and appropriate food production in Austin on a single-family scale.
• Marla Camp is the owner/publisher of Edible Austin magazine and also sits on the board of the new Austin Food Policy Council. Marla will speak on local food production, consumption and education on a community scale.
• Justin Doak is the founder of BlueBin LLC, a sustainability guidance firm for the retail industry and a partner in Austin Refuel, a Texas-based company that has developed a closed loop waste-to-resource network. Formerly the Program Manager of LEED for Retail, Justin will address marketing and money-making strategies in food waste-management for Commercial retailers and developers.

A Question/Answer period will follow the presentations.

You can get the full details of the meeting at Austin’s Green Building site.

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PROJECTS READY, CREDIT NOT

AUSTIN (get the full story at Austin American-Statesman) – Large Austin projects set to begin construction are stalled because of the recession and frozen credit markets.

JMI Realty is ready to start work on the Hotel Van Zandt, a 327-room boutique hotel at the eastern edge of downtown on Red River and Davis, but cannot receive the financing to do so.

“We have lots of jobs ready to be created with this project, but until the banking environment improves, we will be on hold,” said JMI Senior Vice President Greg Clay.

In north Austin, Atlanta-based Novare Group and its local partner Andrews Urban are holding off on a 28-story tower that would house condominiums and the 145-room Twelve Hotel at Endeavor Real Estate Group’s Domain. The developers say the delay of the $100 million-plus project stems from the postponement of three major retail projects at the mixed-use Domain. These include new stores for Nordstrom, Saks Fifth Avenue and Whole Foods Market Inc.

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From the Niel Spelce Austin Letter ( I highly recommend subscribing for anyone trying to stay abreast of what’s going on in Austin)

The information was released midweek that seven states posted an unemployment percentage above 10%.Texas was not in the group of seven.In fact, it was among the best overall.

The totals, as well as some major shifts, provide an interesting comparison. Let’s start with a few of the best states.Wyoming was the only state, at 4.8% unemployment, that came in under the 5% mark.Texas was one of the best, at 6.8%, ahead of New York at 7.6%.

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But some of the hardest-hit states appear to be reeling because of the suddenness of the impact. For instance, North Carolina (a state many consider competitive to Texas because of its technology industry centered in the Research Triangle) suffered the worst upswing in unemployment.At the beginning of 2008, its unemployment was a very reasonable 5.3% then, wham!, it hit 10.3% at the start of this year.A swing of five full percentage points!The number of workers looking for a job almost doubled.This is how you define “impact.”

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So what about the other big states?How do they compare to Texas January 2009 total of 6.8%.In addition to those mentioned above, Florida recorded 8.8% unemployment, Illinois notched 8.5% unemployment, Massachusetts tallied 8.1%, Ohio nudged near the 10% mark with 9.7%, and Pennsylvania came in at 7.7%.It’s pretty clear that Texas still stands out among the states that matter for future leadership and growth.

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On December 18^th, the Austin City Council voted to approve the first tax increment reinvestment zone in an East Austin area that uses land trusts for development purposes. A land trust is a private, non-profit organization that protects certain areas from over development. The goal is to preserve the natural habitat of the land trust area. In Austin, this approval is intended to create affordable housing and to redirect tax revenue from the protected land.

The Texas Legislature passed The Homestead Preservation Act in 2007 to protect those living in the designated areas from increasing taxes. This also included the tax increment reinvestment zones to filter financing to an area that may otherwise not be viewed as suitable for development or in need of redevelopment. The area in Austin that has been zoned is in need of redevelopment, and the land trust in place will assure no excess growth. Tax Increment Financing (TIF) is also in place for this area, if approved by Travis County. This allows the city to use tax revenue as part of the financing available for development. This type of financing has been helpful in many cities nationwide in encouraging the better development in otherwise overlooked areas. TIF helps to offset costs for builders so it can bring more bids to the table.

Austin continues to look for ways to increase the use of land in the city. This area between I-35 and Airport Road has been in need of redevelopment for some time, and the city is hopeful that with approval, it can finally be put to good use.