Austin's 2015 Boom Not Slowing Down
Austin’s commercial real estate environment in 2015 was fueled by incredibly low unemployment and lots of development. We sat down with Avison Young managing director Mike Kennedy to look at the highlights of 2015 and what's coming down the line in 2016 and beyond.
Population growth, especially in-migration, has contributed to Austin’s growth, along with companies expanding their presence in the region, says Mike (right, with son, Patrick at a Bisnow event). According to Forbes, Austin ranked No. 1 in the US for in-migration from 2010 to 2014, gaining 126,000 more migrants from other parts of the country than it lost in out-migration. That accounts for an annual population increase of 1.69%. New Austinites didn't have trouble finding jobs; even with all the new faces, Austin's monthly unemployment rate remained under 4% for all of 2015.
Business expansion and growth could be seen in the rapid absorption prior to completion of three big office projects in Downtown Austin in 2015: the 195k SF IBC Bank Plaza at 500 W Fifth St, the 373k SF Colorado Tower at 303 Colorado St and the renovation of the 116k SF 501 Congress that Stream remodeled for creative office space. Despite those completions, Mike says, rents have increased downtown 34% from 2011 to Q3 2015 (which is a whopping 8.5% a year). Institutions typically estimate a 3% annual increase as result of downtown office space absorption and demand.
More Office Coming
Another 900k SF is under construction, Mike tells us. The 29-story, 500k SF 500 W Second St will be completed by Q1 2017. It’s 50% pre-leased largely by Google. Shoal Creek Walk (pictured) at 835 W 6th St is another 215k SF that will deliver in 2017. It’s about 50% pre-leased by Cirrus Logic. Lincoln Property has 5th and Colorado delivering Q2 2018 with 200k SF. More announced projects to be completed in 2018 include Third+Shoal, a 29-story office tower on the site of the current Austin Music Hall, and Waller Park Place, a mixed-use development slated to be 300k to 600k SF of office.
(Probably) No Overbuilding
While many projects were delivered or announced in 2015, the phased delivery dates over the next two or three years appears to mitigate risk of overbuilding at this point, Mike tells us. Just before year-end was another major announcement that is poised to further reshape the region’s real estate landscape: Oracle will construct a 560k SF complex and parking development on the waterfront of Austin’s Lady Bird Lake. An adjacent 295-unit apartment building will be purchased for employee housing options. Oracle’s new Eastside campus, and the recent Lamar Central, where Kendra Scott has located her expanded HQ, are examples of two projects and two locations in Austin that would not have been feasible 10 years ago. However, the increasing walkability and amenities in these areas position them as extensions of Austin’s downtown.
Stay tuned for next week’s Bisnow, when Avison Young San Antonio managing director Marshall Davidson Jr. looks at trends from San Antonio.