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Real Estate Bisnow
January 16, 2013
Development Explosion?

Austin, we see cranes in your future. Stream Realty partner Kevin Granger says fundamentals will drive new development of Class-A office space in the second half of this year.
Kevin Granger
Kevin tells us office occupancy and rental rates are continuing to rise, and large blocks of space are becoming scarce in the Southwest and CBD submarkets. (Recovering business is hunting office vacancy to extinction and that's great news.) The Class-A market is particularly tight, with average occupancy over 90% in most areas. Users looking for larger blocks of space will have limited options and will have to consider alternative markets. Luckily, rental rates will soon hit the point that developers will consider new product.
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Jason Schnittger
San Antonio’s office market isn’t quite so rosy, according to Stream SVP Jason Schnittger. Rental rates are stable at $24/SF for Class-A, but vacancy is up 0.8% to 20.9%. Absorption actually increased by 200k SF year-over-year (from negative 138k SF in Q3 '11 to positive 68k SF in Q3 '12), but several large companies left leased space for build-to-suit campuses. (Eg, Nationwide left for its 300k SF campus in Westover Hills, AT&T moved out of two Downtown buildings, and NuStar left Heritage Oaks to build on I-10 north of Loop 1604.) The industrial market is looking good, though, with rents and absorption way up. Distribution/warehouse vacancy decreased from 13% to 9% in one year, and there are few large blocks of Class-A space available.

This Old House to High-End Apartment
Bill and Cathie Ward
When Remax Capital City One Realtor Cathie Ward was getting offers $200k less than asking price for a house (zoned CBD) she was selling at 93 Rainey St, her husband Bill Ward, commercial agent with McAllister & Associates, gave her a piece of advice: “Try to sell the lots around it, too.” Bill saw an opportunity to bundle the lots into a bigger parcel. Within a year, the duo managed to list eight lots (totaling about 85k SF) to sell to The Sutton Group of Austin & Dinerstein Cos of Houston. Plans call for a high-end apartment project. (When life gives you lemons, make a multifamily complex, and name it Lemon Hills Junction Place.) Bill repped the sellers, most of whom are old Austin families
Rainey Street properties
The site plan is under review by the city, but Bill believes the developers should be out of the ground by year’s end. The site—in the Waller Creek TIF District, but not in the Capitol View Corridor— is part of a larger area, The Rainey Street District, transitioning into a nice part of the city, he says. Within walking distance of the downtown attractions, businesses, the convention center, hotels, the property also has excellent visibility and traffic access to IH-35. 

Multifamily $ Headed for Development
Bob Faith
Greystar multifamily giant founder Bob Faith tells us the tightening cap rates on acquisitions of core multifamily properties are chasing capital to development in high-barrier-to-entry markets; hence the 7,586 units across 24 properties Greystar now has under development in the US.
South Lamar Plaza
He tells us Greystar remains very bullish on Texas. "Job growth is particularly strong right now, with Houston, Dallas, Austin, and San Antonio forecasted to have over 3% growth in employment over the next three years. The turbocharged energy industry is keeping growth in high gear,” he says. Evidence: Three Austin complexes (some under development) totaling 1,029 units in the portfolio with South Lamar Plaza (rendered here), Elan East End, and Tree (a Greystar Elan community).

Upcoming Bisnow Events!
Friday, Jan. 25, 7:30am-10:30am. Bisnow's San Antonio Future of Downtown event. Hear experts talk about development plans for an anticipated expansion in population and job growth and the future of real estate opportunity within the CBD. Register here.
Have you broken any of your New Year's resolutions yet? We're still on board with our goal of bringing you the funny and the news. Right? tonie@bisnow.com and catie@bisnow.com
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