office market report q1 2015
TRANSCRIPT
Austin Metropolitan Area
OFFICE MARKET
SNAPSHOT
Q1 2015
Office: 512-4873-9462
Fax: 512-454-3100
9442 Capital of Texas Hwy N
Plaza II, Suite 140
Austin, TX 78759
OFFICE MARKETFIRST QUARTER 2015
Market Trends
The Austin Office Market continues to boom, posting nearly half a million square feet of positive
absorption at the end of the first quarter. The majority of leasing activity took place in the CBD
submarket, where 563,087 square feet was absorbed this quarter alone, offsetting move outs
incurred in surrounding submarkets. Although the citywide vacancy rate for multi-tenant office
space remained steady at 10% when compared to last quarter, it is important to note the delivery
of over 500,000 square feet of new inventory this quarter, indicating leasing demand is strong
enough to offset new developments. Average quoted rental rates for all classes of office space
ticked up slightly to $28.22 per square feet, an increase of $0.15 when compared to the end of
2014.
High confidence in the Austin Office market and the city’s economy has spurred on new
investment and development projects with new office construction showing no signs of slowing
down. Approximately two and a half million square feet of new office product is expected to
come online this year and another one million square feet projected so far for 2016. Pre-leasing
activity continues to stay strong through the marketing of speculative projects with many
companies securing lease deals prior to delivery. These numbers also exclude the planned
redevelopment of the Green Water Treatment Plant, a 1.86 million square feet mixed-use project
that includes a 29-story office tower with approximately 500,000 square feet of space, expected
to be completed in 2017. Google has been reported to have signed a deal to lease approximately
207,000 square feet of the speculative building.
Economy
Ranked 2nd on Forbes’ list of “America’s Fastest Growing Cities 2015” list, Austin continues to experience
expansive economic growth which has influenced further positive real estate market trends. The Texas
Capital also ranked #9 on Coldwell Banker Commercial’s list of “Top 10 Commercial Real Estate
Markets” for 2015 based on factors including population growth, office, retail, and multifamily rankings,
and the city's unemployment rate.
According to data provided by the U.S. Bureau of Labor Statistics, Austin increased employment by
approximately 4,203 jobs since the beginning of the year. The city unemployment rate dropped down to
3.4% in February which remains well below the state and national unemployment rates of 4.3% and 5.5%
respectively. Overall, wide growth in multiple job sectors, expansive population, and tight demand for real
estate product has continued to influence the explosion of economic and commercial real estate activity in
Austin.
Summary:
Market
Statistics
Population Labor Force Employment Unemployment RateYTD
Job Growth
1,120,954 1,050,738 1,014,723 36,015 3.4% 4,203
Source: Texas Workforce Commission and U.S. Bureau of Labor Statistics for the Austin-Round Rock-San Marcos market, as of February 2015
* U.S. Census Bureau estimate for 2013
Lease Highlights
Sale Highlights
Lavaca Plaza
Buyer: Lavaca Plaza
LLC
Seller: BF Lavaca LLC
Riata Crossing Bldg 3
Buyer: Austin Riata
Investors LLC
Seller: Apple Inc
Colorado Tower
New Leases: 347,858 SF
Tenants: Parsley Energy Inc.,
Atlassian Software Systems
Pty Ltd, IPSoft Inc, Kelly Hart
& Hallman LLP, Invesco
Management Group Inc.
IBC Bank PlazaNew Leases: 49,077 SF
Tenants: Sizmek, First Trust Portfolios LP, HFF, LP,
Hill+Knowlton Strategies, Mitchell and Williams Law
Firm
Seaholm Tower
New Leases: 150,000 SF
Tenants: Athena Health and
Under Armour
Market Statistics:
Prominent Pointe One
Buyer: GLL BVK
Properties 2015 LP
Seller: DFW III Prominent
Pointe LP
CITYWIDE
TypeInventory
(SF)Buildings
Direct
Vacant (SF)
%
VacancyAbsorption (SF)
YTD Absorption
(SF)
Average
Rent
Under
Construction (SF)
Deliveries
(SF)
Class A 24,520,512 194 2,616,065 10.7% 583,970 583,970 $31.31 2,799,858 522,333
Class B 17,430,322 405 1,515,896 8.7% (121,314) (121,314) $24.51 - -
Class C 1,824,109 83 238,756 13.1% 14,141 14,141 $20.11 - -
Total
Office43,774,943 682 4,370,717 10.0% 476,797 476,797 $28.22 2,799,858 522,333
OFFICE MARKETFIRST QUARTER 2015
Under Construction / Deliveries
OFFICE MARKETFIRST QUARTER 2015
Colorado Tower
Encino Trace I & II
9
3
4
5
7
6
2
Parmer 3.2
Domain 1
12
# Name Total SF Projected Delivery
1 Colorado Tower 371,348 SF Delivered Q1-2015
2 3700 San Clemente 249,870 SF Q2-2015
3 Capital Ridge 238,000 SF Q2-2015
4 Parmer 3.2 192,000 SF Q2-2015
5Encino Trace I
Encino Trace II
160,000 SF
160,000 SF
Q2-2015
Q4-2015
6Rollingwood Town Center Bldg I
Rollingwood Town Center Bldg II
145,437 SF
69,150 SF
Q2-2015
Q2-2015
7 Lamar Central 131,721 SF Q4-2015
8Paloma Ridge 1
Paloma Ridge 2
130,000 SF
130, 000 SF
Q2-2015
Q2-2015
9 Domain 1 125,000 SF Q1-2016
10Seaholm Powerplant
Seaholm Tower
115,000 SF
31,000 SF
Q2-2015
Q2-2015
11 501 Congress Ave 110,000 SF Delivered Q1-2015
12 Austin Towers @ 311 Bowie 40,985 SF Delivered Q1-2015
11011
8
Austin Submarkets
Property Types
Class A
Top-tier office buildings situated in prime locations along major
thoroughfares featuring high quality standard interior finish and
excellent amenities which command premium rental rates.
Class B
Well-located but perhaps older office buildings with average standard
interior finish and some amenities which command average market
rental rates.
Class C
Older office buildings in secondary locations with few, if any,
amenities.
Criteria
Analysis and data provided by Xceligent and
approved by the Austin Office Advisory Board.
Study includes multi-tenant office buildings
20,000 SF or larger and does not include
single-tenant, owner-occupied, or government
buildings.
Rental rates reflect non-weighted strict average
asking rental rates quoted on an annual full-
service basis. Rents quoted on a non-full-
service basis have been calculated up to reflect
the full-service rate.
OFFICE MARKETFIRST QUARTER 2015
ResearchSan Antonio Office
40 NE Loop 410,
Suite 607
San Antonio, TX 78216
Phone: 210-477-3161
Fax: 210-572-4471
Peter Ikeda
Director of Research
Austin Brokerage
Team
Butch West
Lise Wineland
Stephen Pyhrr
Jeff Bomer
Bill Foster
Lennard Coplin
Richard Skipper
Su Kosub
Victor Russo
Kennedy Wilson offers a comprehensive array of real
estate services including investment management,
property services, auction, conventional sales,
brokerage and research. For further information on
Kennedy Wilson, please visit
ww.kennedywilson.com.
Founded in 1977, Kennedy Wilson is a vertically
integrated global real estate investment and services
company headquartered in Beverly Hills, CA, with 25
offices in:
ARIZONA
CALIFORNIA
COLORADO
FLORIDA
GEORGIA
HAWAII
ILLINOIS
NYSE: KW
Sources: Xceligent Austin Industrial Advisory Board, U.S. Census
Bureau, U.S. Bureau of Labor Statistics, Texas Workforce
Commission
This report is based on information from sources believed to be reliable and
honest; however, Kennedy Wilson makes no guarantees, warranties, or
representations as to the accuracy thereof. Reproduction of all or any part
of this information must be sourced to Kennedy Wilson.
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