NAI Austin Real Estate Blog

From now to the end of 2010, the economy of Austin is projected to grow by $5 billion, and unemployment has stayed relatively subdued. The city’s diverse economy, home to Dell, the University of Texas and the Texas state government, has kept the economy strong. Forbes.com also recently ranked Austin the Best Big City for Jobs.

Please click here to read the entire article.

Austin, Texas is in as good a position as any city in the United States in the current market, and in many regards, better-positioned.  In contrast to most cities, the unemployment rate here has dropped two-tenths of a percent.  Jobs are being added - 6,000 positions in February alone.  And Austin continues to accumulate accolades, receiving top positions on a variety of “Best Of” lists.  It was just named in Forbes magazine as one of the fastest growing metro areas in the nation, based on business opportunities, weather and affordable housing.

Retail

The Austin Retail Market, with a footprint of 65 million square feet, has remained surprisingly strong, given the current national economic conditions.  The overall vacancy rate for the Austin MSA increased slightly from 6.9% in 4Q 2008 to 7.1% the first quarter of 2009.  There was approximately 450,000 square feet of retail space under construction by the end of the first quarter of 2009.  The current total retail inventory in the Austin MSA is comprised of roughly 25 million square feet of general retail, 25 million square feet of shopping centers, 10 million square feet of power centers, 6 million square feet of malls and 300,000 square feet of specialty center retail space.  Two newcomers to the Austin Retail Market are Sprouts and El Rancho Supermercado.  Sprouts - an organic produce, prepared foods and general mid-sized supermarket - is working on their fourth location in the Austin MSA and has signed agreements for Sunset Valley, Round Rock and Rollingwood already in place.  They’ve taken approximately 30,000 square feet overall.  El Rancho Supermercado has taken slightly less square feet and has inked its first Austin location at 8700 Research Boulevard off Ohlen Road. 

The average quoted retail rental rate for the Austin MSA dropped only slightly from $20.64 last quarter to $20.41 in 1Q 2009.  The highest rates were $30.06 in the Central Business District and $28.67 in the Southwest submarket.  The lowest average rates were found in the North submarket at $15.88 and Southeast submarket at $16.52.   The highest vacancy rate was in the Southeast at 11.4% and the lowest vacancy rate was the Central Business District at 1.8%. All economic indicators show Austin to be a strong Retail market.  The future continues to look bright.

Land

The global capital market meltdown has had a tremendous negative impact on land sale transactions in the Austin area.   According to Costar Comps, land sales volume in the Austin MSA decreased by 85% between 1Q 2008 and 1Q 2009 and 93% from 1Q 2007 to 1Q 2009.  Liquidity issues have forced many banks to insist on unrealistically high equity positions from developers, and more seller financing has been required to help close transactions. Much of the activity that is occurring in the land market is user-driven with some large investment land plays on the periphery of the market. 

For the most part, only projects that commenced before the onset of the financial crisis are under construction.  Very few developers have started construction on new commercial projects.  There is still a “wait and see” and “it’s safer to do nothing” attitude from both banks and developers.

Up until recently, pricing has held steady as owners try to ride out the recession.  We are now starting to see owners who are more willing to concede on price due to their own liquidity issues. Austin by most accounts is expected to swing back out of these economic doldrums with a vengeance.  And it is the hope of many land owners that they can hold out until the turnaround.

Office

New construction of office space has had huge impacts on Austin over the past couple of years.  Most recently in the first quarter of 2009, Austin saw the delivery of almost half a million square feet.  Newly delivered construction is located in the Northwest and Far Northwest submarkets where the Domain Gateway, Pecan Park 2 and Travesia Corporate Park were completed.  Nearly half a million square feet is now under construction, which is an 80% decrease from this time a year ago.

Vacancy in office product increased to more than 19% in the first quarter of 2009.  This is a dramatic increase from one year ago when the vacancy rate was in the 14% range.

Full service office rates decreased from an average of $0.50 to $0.26.  Although rates in the Central Business District increased overall - mostly due to increased tax hikes - rental rates in the Northwest and Southwest submarkets decreased.

Naturally, sub-lease office availability has increased dramatically, exceeding one million square feet.  This number is likely to increase as layoffs continue and companies attempt to consolidate their space.

Industrial

From the start of 2008 through the 18 months ending in June of 2009, Austin added a whopping 3.1 million square feet to its base of 34.5 million square feet of industrial investment space tracked by NAI Austin. That’s a 9% increase and is a historical record for growth in the Austin market. Even without the new inventory, Austin vacancy rates were beginning to rise by late 2008 and have increased into 2009. Official numbers will be counted as of the end of June but we expect the vacancy rate could increase by as much as another 1,000,000 square feet resulting in a total vacancy of over 20%.

It is a great time for tenants to renew leases for long terms as lease rates drop by 15-20% and incentives for TI allowance or free rent are being used more each month.  About 65% of Austin’s industrial market is bulk warehouse and 35% flex space. Final industrial figures for the first six months of 2009 will be available in early July.

Click here to download the pdf version of the Austin Chamber’s monthly newsletter, the Member V.O.I.C.E., which includes the article below. 

The Austin Chamber of Commerce has released the results of a recent national survey of corporate leaders of companies with revenues in excess of at least fifty million dollars. The goal of the survey was to find out how these executives looked at Austin relative to other cities as a site for possible expansion or relocation.

Out of 15 possible metropolitan areas across the country, Austin was the city most often chosen as a desired target for expansion or relocation. Executives cited an educated workforce, top-notch universities, a thriving tech community and abundant quality of life as reasons to consider Austin, the Human Capital, when repositioning a company.

The survey, conducted in the fall of 2008 by The Benchmark Company, an Austin market research firm which numbers many national firms among its client base, mentioned that Austin was also perceived to be the city that would stand a greater chance of being recession resistant.

“Considering the current national malaise that has affected so many cities, the fact that Austin has maintained a strong, favorable perception among C-level executives across the country is extremely important,” said Dr. Robert Balon, CEO Benchmark. “This should bode well for increased corporate visits and interest in Austin from a cross section of large companies representing many industries. And ultimately, that should pay dividends for Austin businesses and residents.”

The survey shows a drastic increase in recognition of Austin-based companies over 2006, indicating that a greater number of executives not only distinguish Austin as a strong business climate, but also understand that Austin is an attractive market for headquarter relocation as well. 

The Austin Chamber, through Opportunity Austin 2.0, has made a commitment to drive the healthy growth and expansion of Austin’s business community with a committed focus on attracting new business from around the country and the globe as well as retaining and expanding existing businesses. The primary goal is to create 117,000 new jobs and $10.8 billion in payroll in the next five years.

Opportunity Austin 2.0 is targeting five specific industries to strengthen and grow, creating a greater depth of diversity in Central Texas: convergence technologies, creative media, green industries, corporate headquarters and health care/life sciences.

Austin a preferred target for expansion or relocation
Member V.O.I.C.E.
Austin Chamber of Commerce Monthly Newsletter

Austin is the 2nd-fastest growing city in the nation
Austin Business Journal

Austin home prices are up, still dropping elsewhere
Austin Business Journal

Austin’s unemployment rate drops; region adds jobs
Austin Business Journal

Austin is the nation’s top city for a “fresh start”
Austin Business Journal

Austin is at the top of the list for rising home values
Dallas Morning News

Texas tops the national new home market
Dallas Morning News

Austin is the #1 city for recession recovery
Forbes

Austin is the 8th best city for business and careers
Forbes

Austin is one of the best cities in which to ride out the recession
Forbes

14 Austin companies made the Deloitte Texas Technology Fast 50 List
Deloitte

Austin is one of America’s favorite cities
Travel & Leisure Magazine

Austin is one of the 5 cities on the verge of recovery (video)
MSNBC

Austin is one of the top 5 cities that Americans are relocating to
MSNBC

Austin is one of the top 5 U.S. metros likely to experience greatest retail success
Pitney Bowes

Jolie M. Schooler has joined NAI Austin as a member of the Retail Team. She was most recently Vice President of the Retail Tenant Representation Division at Endeavor Real Estate Group.

Mrs. Schooler was selected as one of the “Top Women in Florida Real Estate” for 2007 by the Florida Real Estate Journal. She was recognized at the ‘Real Estate Deal of the Year’ awards ceremony for being on the winning team that listed and successfully closed the ‘Best Industrial Deal’ in Broward County in 2004, which was also the biggest industrial building ever sold in Broward County. She was recognized again by the South Florida Business Journal for brokering the ‘Largest Industrial Lease in Broward County’ and was a CoStar Power Broker for two counties in 2005.

Prior to commercial real estate, Mrs. Schooler held leadership responsibility across Florida for IBM Global Services, a $40B division of IBM. She achieved top sales and closed the largest deal in Florida in 2001, earning her team national recognition for her $15M transaction.

With over 14 years of real estate and management experience, Ms. Schooler has experienced consistent success building creative strategies to identify, negotiate and close large commercial transactions.

NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com.

Martinez Painting LLC, a residential and commercial painting company, is expanding into 4,000 SF at 3401 Ed Bluestein in Austin. Rob Eaves, an Industrial Specialist with NAI Austin, represented the tenant.

The company, established in 1999, offers interior and exterior washing, painting and finishing as well as sheetrock and wood repair and replacement. Recent growth required it to expand. Its new location is near Calvin Electric, which should provide cross traffic for both companies.

NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com.

Easy Home, a new player in the merchandise leasing industry, has leased 4,500 square feet in Brazos Square, located at 1411 N. Valley Mills in Waco, Texas. Travis Waldrop and Sherry Naquin Sanchez, both retail specialists with NAI Austin, represented Easy Home.

Easy Home offers name-brand home furnishings, appliances and electronics on a rent-to-own basis. The company has over 200 locations in the United States and Canada.

NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com.

This article was written by the WSJ staff for the Wall Street Journal Blog Real Time Economics

Please click here to view the the Real Time Economics blog 

NASHVILLE –The latest big threat to economic recovery in the U.S., the commercial property market, could be the next target of an expanded special lending program from the central bank, Dennis Lockhart, president of the Atlanta Federal Reserve Bank, said Saturday.

“On our watch list this year as a risk to the [economic] outlook is continuing
worsening in the commercial real estate sector,” Mr. Lockhart said.

The central banker was speaking at a conference on financial policy hosted by
Vanderbilt University’s Owen Graduate School of Management to honor former Fed
Governor Dewey Daane.

Fed policymakers are still considering whether to include sponsorship for
commercial property loans under its Term Asset-Backed Securities Loan Facility,
or TALF, Mr. Lockhart said, adding that there’s been no official decision.

“The details haven’t been fully worked out,” he said.

Lockhart is currently a voting member on the Fed committee that deliberates
the bank’s policy actions. At the last meeting, March 18, the committee
announced a new plan to buy $300 billion in longer-term Treasurys and expand by
$750 billion the size of lending programs aimed at reducing mortgage rates. The
TALF program, which can accommodate around $1 trillion of support for the
asset-backed markets that support consumer and business lending, has only just
gotten underway, to a tepid reception from investors.

The commercial real estate market has suffered on a variety of fronts, from
rising unemployment in the corporate sector to a drop in business travel that’s
depriving hotels of guests. As a result, Mr. Lockhart said, there’s a real risk of a
spike in delinquencies and failure to refinance the roughly $400 billion of
commercial real estate loans coming due this year.

Alphagraphics recently leased 840 square feet of space in the Lakeway Town Center in Lakeway, Texas. Travis Waldrop and Sherry Naquin Sanchez represented the landlord, Lakeway Plaza Partners.

Alphagraphics was founded in Tuscon, Arizona in 1970 and now comprises over 260 franchise locations worldwide. The company offers the latest in visual communications technology, including brochure and report design, digital, large and offset printing, email marketing and more.

NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com.

Accelerated Marketing Program Attracts Property Owners, Financial Institutions in 20 States Across the U.S.

Monthly Sales Events Feature Internet Auctions, Sealed Bids to Help Sellers Achieve Optimum Value

More than 50 properties valued in excess of $150 million will be featured in the first round of the Commercial Property PowerSale™, NAI Global’s ongoing series of national, multi-seller auction and sealed-bid sales.

NAI Global, in cooperation with its longtime alliance partner Higgenbotham Auctioneers International, created The Commercial Property PowerSale™ as part of an Accelerated Marketing Program to help property owners optimize the value of their property in today’s extremely difficult selling environment.

“This first event has generated significant interest across the U.S., and is being embraced by motivated sellers who are frustrated by gridlock in the traditional sales channels,” said Jeffrey M. Finn, NAI Global President & CEO. “We’re excited about this program’s potential to bring together buyers and sellers to create a market where one doesn’t currently exist.”

NAI Global expects to move over $1 billion in premier investment properties, financially distressed real estate and real estate loans by the end of the year, through online auctions sealed bids and a unique combination of the two formats, Finn noted.

This unique program gives clients the opportunity to sell their assets quickly, reducing their holding costs and securing true market value for the properties. Sellers in the Commercial Property PowerSale™ benefit from the tremendous marketing leverage created by aggregating properties from multiple sellers into a series of nationally marketed events.

The first Commercial Property PowerSale™ will take place online on May 1, 2009. Interested buyers will have an opportunity to bid on properties in 20 states, including New York, Washington, California, Texas, Florida and Maryland.  The properties range from development-ready land tracts to investment-grade office, retail and multi-family properties. The full list of properties and detailed bidder information is available to the public on www.naiglobal.com/powersale. Interested buyers have the option of participating by submitting a sealed-bid or bidding live during the online auction, depending on the specific property.

“This is just the first phase of the Commercial Property PowerSale™,” said Finn. “We expect momentum to grow with each subsequent event.”

The second Commercial Property PowerSale™ is scheduled for June 11, with a property submission deadline of April 13. Future events are expected to be held on a monthly basis and will also feature the sale of performing and non-performing loans, providing another solution for banks and financial institutions.

Prospective buyers and sellers interested in learning more about the Commercial Property PowerSale™ should visit www.naiglobal.com/powersale. 

NAI Austin is one of Austin’s most experienced commercial real estate firms and the Austin area representative for NAI GlobalTM, the industry’s largest global network of real estate service-providers, comprising 5,000 brokers in 325 offices serving more than 55 countries worldwide. For more information on NAI Austin, please visit www.naiaustin.com.