Real Estate Center Online News

August 26, 2014

High-Tech Industry Bolstering Austin Office Space Demand

AUSTIN (Marcus & Millichap) – The city’s booming technology industry will be the driving force behind advancing office fundamentals through the remainder of this year, reports Marcus & Millichap in its third-quarter 2014 office market overview.

Several soft-tech companies, including Websense, Dropbox, Metacloud and Box will create hundreds of jobs over the next several years, the firm said.

The majority of space will come online during the second half of 2014, and light preleasing could cause short-term softening in some submarkets, putting downward pressure on rent growth into next year as tenants relocate to newly delivered space. However, construction is occurring in some of the most high-demand areas, such as the CBD, northwest and southwest Austin, and strong demand from companies seeking space in these submarkets will quickly reverse effects.

Other report highlights:

  • In 2014, employment in the metro will rise 3.8 percent with the creation of 33,500 jobs. Healthy gains in nearly every sector will contribute to the increase, though growth is slowing from the previous year when employment grew 4.3 percent.
  • Nearly two million sf of office space is slated for completion in Austin during 2014. Last year, developers delivered approximately 274,000 sf.
  • Office vacancy is forecast to end 2014 at 11.9 percent, which reflects a ten-basis point reduction for the year. In 2013, the local vacancy rate declined 150 basis points.
  • Improving property operations will give owners leverage to continue raising rents, with average asking rents rising 3.8 percent in 2014 to $27.71 per sf. This follows an 8.2 percent surge last year.

25 Years, 34M SF Later: AllianceTexas Growth Continues

FORT WORTH (Dallas Morning News) – Twenty-five years after breaking ground, the AllianceTexas development north of Fort Worth continues to grow.

“There’s 3.5 million sf under construction in just three buildings — one million sf of it is preleased,” said Mike Berry, president of developer Hillwood Properties.

About 37,000 people work in the development, which houses more than 370 companies.

There’s now almost 34 million sf of warehouse space at Alliance housing everything from FedEx packages to merchandise and Nestlé chocolate.

Along with warehouse space, new development includes almost one million sf of shopping, an office building that just opened and hundreds of apartments. The apartments are in a mixed-use district that includes a $71 million HCA Hospital under construction.

Berry estimates that the project is only about half built.

Check out NewsTalk Texas for more stories about AllianceTexas.

UPS Delivers Big with North Texas Distribution Center

FORT WORTH ( – And speaking of AllianceTexas, UPS is leasing almost 500,000 sf there.

The shipping company’s distribution center is expected to open in Alliance Gateway I in November.

Serving UPS customers in North Tarrant and South Denton counties, the facility will bring 300 package handler jobs and over 50 tractor-trailer driver positions to the area.

E. Smith Realty Partners represented UPS in the 27-acre purchase. Hillwood Properties was self-represented.

Latest Building Permit Data Now Available

COLLEGE STATION (Real Estate Center) – July building permit data for Texas has been posted on the Real Estate Center's website. The data is provided by the U.S. Census Bureau.

Just over 9,040 single-family permits were issued last month, up 12.2 percent from a year ago. The average value per dwelling unit was $206,000, up from last July's $199,800.

The website also includes permit data for buildings housing two to four families and buildings housing five or more families. Data is searchable by state, MSA or Texas county.

San Antonio Office Space Demand to Strengthen

SAN ANTONIO (Marcus & Millichap) – In its third-quarter office market update, Marcus & Millichap expects demand for area office space to strengthen in the coming months, with local buyers dominating the market.

Among the report's highlights:

  • San Antonio employers added 22,200 positions during the last 12 months, with more than 14,000 jobs created during the first half of this year. Approximately 6,100 jobs created in the past year were in the primary office-using sectors, including professional and business services, information technology, and financial activities.
  • Hiring was broad-based during the past six months and all sectors added workers. The professional and business services sector led employment expansion during the time frame, increasing payrolls by 5,400 workers. Trade, transportation and utilities followed, generating 3,600 jobs.
  • USAA, the metro’s second-largest private employer, has announced plans to expand by 3,500 employees over the next three years. Approximately 1,000 of those positions are expected to be created locally.
  • Developers completed 440,000 sf of office space over the past four quarters. An additional 250,000 sf of office space is underway and scheduled for delivery this year. The 129,000-sf first phase of WestRidge at La Cantera will be one of the largest deliveries this year, coming online fully occupied in the second half.
  • Just under two million sf of office projects are in the planning pipeline. Nearly half of those projects are in the northwest submarket.
  • Broad-based hiring will increase demand for office space this year, and vacancy will reach 13.5 percent by year end, down 100 basis points from 2013. Last year, vacancy fell 90 basis points.
  • Average asking rents ticked up during the past year at 0.1 percent to $18.86 per sf in the second quarter. Rising demand for space in the metro will contribute to stronger rent growth in the coming months.
  • Despite sharp declines in Class-A vacancy over the past two years, operators have struggled to raise rents, which dipped 0.8 percent during that time to $22.70 per sf.
  • Class-B and C asking rents remained relatively stable over the past 12 months, rising just 0.4 percent to $17.86 per sf.

Houstonís Hot Multifamily Market

HOUSTON (CBRE) – The Bayou City's multifamily market is strong, with positive net absorption, fast rent growth, plenty of new construction and investor interest.

According to the latest research from CBRE, Houston's apartment market had positive net absorption of 21,394 units — the highest among the 50 largest U.S. markets and the highest for the city in nearly a decade.

Rents are rising at the fastest pace on record with the same-store rent index seeing a 4.9 percent year-over-year and 1.4 percent quarter-over-quarter increase.

Construction activity has steadily risen since the post-recession low recorded in 2011. Nearly 18,000 new units are expected by the end of this year.

Houston posted $1.2 billion in multifamily sales in second quarter 2014, a 48 percent gain from the first quarter of this year, according to Real Capital Analytics.

LA-Based Company Buys SA Retail Center

SAN ANTONIO (San Antonio Business Journal) – Los Angeles-based Tryperion Partners has closed on its purchase of Gateway Plaza.

The 138,510-sf center at the I-35/Loop 1604 interchange is anchored by Burlington Coat Factory. It is 97 percent leased.

Vacant land for future development was also included in the acquisition.

Endura Advisory Group has been hired to oversee leasing for the property.

Luxury Community Coming Near Exxon Mobil Campus

THE WOODLANDS (Houston Business Journal) – Frankel Building Group will build 44 custom homes on 23.6 undeveloped acres just south of The Woodlands, three miles away from the new Exxon Mobil Campus.

Called The Lakes of Shadow Creek, the community will have homes ranging from 3,500 to 5,500 sf on lots from 12,000 to 25,000 sf. Home prices will start at $895,000.

Designs for homes will be in accordance with U.S. Green Building Council’s LEED for Homes standards.

The first phase of construction will include five model homes, expected to be completed by the end of the year.

Tower at Frisco Square Rising

FRISCO (Encore Enterprises) – Ground has broken on The Tower at Frisco Square, with more details of the project revealed.

The building’s lead tenant, Gearbox Software, will have its headquarters on two of the building’s five floors. Retail, office and restaurant space will be on the other three levels, including XP Bar and Restaurant.

The property is 51 percent leased.

Andres Construction is directing construction on the project slated for completion by second quarter 2015.

Fund Takes Plunge at Barton Springs Office Property

AUSTIN ( – A fund managed by Cornerstone Real Estate Advisers has purchased 811 Barton Springs.

The nine-story, 143,183-sf Class-A multitenant office building was 99 percent leased at the time of purchase.

Transwestern brokered the sale.

News, News and More News

COLLEGE STATION (Real Estate Center) – Hungry for more Texas real estate news? Then feast your eyes on NewsTalk Texas, our online news database. Here are a few of the stories you'll find there this week:

NewsTalk Texas is updated each weekday, throughout the day.

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