Austin’s been growing like wildfire for the last five to 10 years, and companies (especially in the tech industry) are starting to be drawn to its young, educated population and lifestyle. If you’re thinking of developing in the Live Music Capital of the World for the first time, panelists at Bisnow’s Austin State of Office event have some ideas you need to leave behind when you board the plane.
Misconception No. 1: It’s a Value Play
It’s very expensive to develop in Austin, says Brandywine Realty Trust EVP Bill Redd (left, with Sutton Cos’ Wally Scott). TIs and entitlements will take a deep cut from your wallet, and Endeavor SVP Jonathan Tate says rents are definitely causing sticker shock. Austin’s rents are more expensive than Chicago’s on average, he warns. You may have heard that Texas is inexpensive, and Austin is cheaper than NYC or Silicon Valley, but you’ve got to head to Dallas or Houston to get a discount.
Misconception No. 2: There’s a Ton of Land
Our panelists shared frustration over the lack of prime sites. Jonathan says there are less than a handful of really buildable sites left Downtown, and there’s an awful lot of capital chasing them. World Class Capital CEO Nate Paul says that means you need to show up with a check in hand to close on a site quickly; sellers won’t let you tie it up for a long time while you try to get entitlements and make plans. Pictured is our Austin developer panel: moderator Drenner Group attorney Greta Goldsby, Nate, Schlosser Development director of leasing Daniel Morton, Sutton Co chairman Mac Pike, Jonathan and Bill.
Misconception No. 3: We'll Have Our Pick of Space
Most of Austin’s Class-A office space is occupied, especially Downtown. Nate says companies express interest in moving to Austin and come to town with a 100k SF requirement, and that’s just not going to happen in a hot submarket. And some think they’ll get tons of concessions to attract their business, but higher demand than supply means landlords don’t need to offer any.
Misconception No. 4: Things Are Simpler Down There
It’s very difficult to build in Austin. Permitting is especially rough, Daniel (pictured between Wylie Consulting Engineers’ Grant Wylie and Beck’s Matt Dungan) says. Schlosser has owned Shoal Creek Walk since 1998 and has had three site plans expire on the project. In ’07, the second plan expired and Schlosser immediately refiled the same plan. It took 18 months to get reapproved. Sutton Co chairman Mac Pike says it’ll be even more difficult for a new company unfamiliar with the process and the personnel to get it done. He calls permitting a true barrier to entry.
Misconception No. 5: Tech Scene=Funky Converted Warehouses
Jonathan says he gets some complaints about Austin’s lack of “interesting architecture.” He says that usually means that they wanted to rehab some abandoned warehouse, but Austin’s just too young and well-occupied for that. There are some unique opportunities (Nate says those get huge amounts of activity—one interesting space he leased had 20 companies eye it), and there’s quite a bit of cool creative office, but it doesn’t look like what you may be used to. Nate’s here with Invesco’s Joseph Tu.
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