office market report q1 2015

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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

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Page 1: Office Market Report Q1 2015

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

Page 2: Office Market Report Q1 2015

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

Page 3: Office Market Report Q1 2015

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

Page 4: Office Market Report Q1 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

Page 5: Office Market Report Q1 2015

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

Page 6: Office Market Report Q1 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

P: [email protected]

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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