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Rolling Tenants Will Decide The Future Of Austin’s CBD In Next Couple Of Years

CohnReznick partner Mike Celkis, Cousins Properties SVP Tim Hendricks, Cielo founding principals Rob Gandy, Brandywine EVP Bill Redd

Downtown Austin office rents might sound like a bargain at $35/SF, but with $19 in operating expenses, options in East Austin and Manor are comparable on price. Many tenants will be rolling in 2017, Cielo founding principal Rob Gandy said at Bisnow’s Future of Downtown Austin event earlier this month. “When these tenants see only $3 or $5 savings for options in other areas of town, I think they’ll re-sign.”

Cousins Properties SVP Tim Hendricks agreed. When tenants add up all that TI, they’ll sit, he said. But those rolling tenants will tell the story of the CBD in the next couple of years and their potential to re-sign or relocate will have a major impact on Downtown.

Not all tenants will want to stay in older buildings when newer buildings charge lower rents. That’s right, Gandy has seen some new buildings charging less than his buildings at Cielo’s 823 Congress and others. Cousins’ Frost Bank Tower and Colorado Tower are only a couple of bucks lower than the new guys, Hendricks said.

Here are panel moderator CohnReznick partner Mike Celkis, Tim, Rob and Bill.

CohnReznick partner Mike Celkis, Cousins Properties SVP Tim Hendricks, Cielo founding principals Rob Gandy, Brandywine EVP Bill Redd

Landlords only undertake renovations when there’s ROI, Brandywine EVP Bill Redd said. That’s still true Downtown.

Cousins’ properties at One Eleven Congress and 816 Congress both just underwent millions in capital improvements and Hendricks has seen 150 basis point returns. 

Other cities might be wary of overbuilding with this much product in the pipeline, Redd said, but Austin keeps meeting demand.

Here are Mike, Tim, Rob and Bill.