Real Estate

Bucking the Pandemic, Austin Is ‘the Hottest Market in the Country’

AUSTIN, Texas — In March 2020, the outlook in Austin was bleak after the pandemic compelled business closures, lockdown orders and the cancellation of South by Southwest, the annual pageant that brings in thousands and thousands of {dollars} for the metropolis.

A year later, optimism has changed despair. Across the nation, the coronavirus stays a menace and empty office buildings and eating places have hampered progress, however Austin, the Texas capital, has emerged as a sizzling spot for industrial actual property funding and a magnet for out-of-state company relocations which might be strengthening its attract as a middle of high-tech business.

“It’s the hottest market in the country right now,” stated Mike McDonald, vice chairman at Cushman & Wakefield who represents pension funds, insurance coverage corporations and actual property funding trusts. “Millennials are moving to the Sun Belt and companies are following the millennials. Investors are following the companies.”

The metropolis has develop into the No. 1 vacation spot in the United States for potential industrial actual property funding, in response to the CBRE Group, a nationwide actual property providers and funding agency. It displaced Greater Los Angeles as the most most well-liked market for 2021 due to the resilience in its labor market and an outlook for regular progress, in response to an investor survey that CBRE will launch this week.

A report 21,864 jobs had been attributed to companies both increasing or relocating to Austin in 2020, in response to a report released in January by the Austin Chamber of Commerce.

The metropolis’s prosperity is a part of a broad financial wave that has unfold throughout components of the Sun Belt. The Dallas-Fort Worth space, which ranked No. 2 on CBRE’s funding survey, has additionally been excessive on the checklist of city facilities which have seen stability throughout the pandemic.

“The Sun Belt markets of Austin, Dallas, Phoenix and Atlanta were among the top-performing metros where the least number of jobs were lost in 2020,” CBRE stated in its survey.

Home to places of work of tech giants corresponding to Apple, Dell, Facebook, IBM and Samsung, Austin is more and more thought of one in every of the nation’s dominant tech hubs after Silicon Valley, selling itself as “Silicon Hills,” a reference to its location in the Texas Hill Country.

That cachet has helped lure others. Elon Musk, the founder and chief government of Tesla, stated in December that he had moved to Texas from California, an announcement that got here as building crews had been erecting a $1.1 billion, 5,000-employee Tesla manufacturing unit in the East Austin space. Oracle, one in every of the world’s largest database corporations, introduced in December that it was shifting its headquarters to Austin from Silicon Valley.

“It’s become the second home for a large cluster of the larger tech companies,” stated Charlie W. Malet, president and chief funding officer of San Francisco-based Shorenstein Properties, which invests in 22 markets throughout the nation, together with Austin. “It’s no secret that a market like Northern California, the Silicon Valley job market, is incredibly tight. There’s massive competition for talent. And many of the growing tech companies have decided that ‘We can’t have everything in one location; we need to spread our wings.’”

Nationwide, office emptiness charges rose to 17.1 p.c by the finish of 2020, the third consecutive quarterly enhance, in response to a report released in January by JLL, a industrial actual property providers company. But the market in Austin was sturdy, “with less than 1 percent net occupancy losses in 2020,” the report stated.

New initiatives in Austin are including skyscrapers downtown and creating retail and residential complexes elsewhere in the metropolis. Although the pandemic has not held again growth, it has influenced design adjustments like touch-free elevators, expanded open house, operable home windows and improved air flow.

Experts attribute Austin’s counterintuitive financial efficiency to a lot of components: a stature as an training heart and tech hub, a business pleasant local weather, an abundance of social points of interest and the charming eccentricity that spawned the slogan “Keep Austin Weird.”

“All the things that make Austin an attractive place before the pandemic are still here despite the pandemic,” stated the metropolis’s mayor, Steve Adler, who famous that South by Southwest returned this month as a web-based occasion and organizers had been working towards its bodily return in 2022.

The flood of job-seekers coming to Texas has led to an inflow in out-of-state funding capital, stated William C. Jenkins, a principal of Stonelake Capital Partners, a developer in Austin that’s planning a 50-story office and residential tower downtown. As migrating corporations create new jobs in the Lone Star State, he stated, institutional buyers are searching for “new cutting-edge, best-of-market real estate in Austin and in Texas” with an eye fixed to “write big investment checks” for main initiatives.

Out-of-state builders are starting to note. Tishman Speyer, an actual property developer primarily based in New York, introduced in February its debut in the Austin market, buying the Foundry, a two-building office property in East Austin. Adding the metropolis to its actual property portfolio was a “logical choice,” Rob Speyer, the agency’s president and chief government, stated in an announcement.

Other main builders have lengthy made Austin an important ingredient in their progress technique.

Cousins Properties of Atlanta is one in every of the main office property homeowners in Austin after greater than 20 years there, with 4.8 million sq. toes of office house both accomplished or beneath building. Cousins is a significant developer of the Domain, a high-end complicated with a mixture of retail, residential and office house in the North Austin neighborhood.

Much of the metropolis’s attraction stems from its posture as a “very socially progressive and eclectic, creative city” that advantages from being in a state with decrease regulation and decrease taxes, stated Colin Connolly, the president and chief government of Cousins.

Brandywine Realty Trust, the largest landlord in its hometown Philadelphia, has operated in the Austin market for 15 years. This year, it’s beginning a multiyear growth on a 66-acre website close to the Domain. The Broadmoor campus, which is presently anchored by an IBM complicated, is predicted to be accomplished in about 10 years, at a price of about $3 billion. Planners say it would infuse the space with an uptown vibe combining office, residential and retail house between a minimum of 11 acres of parks.

The company can also be nearing completion on the 405 Colorado, a 25-story office tower that may start housing tenants this summer time.

“People believe long term that Austin is on a roll and continues to be,” stated William D. Redd, Brandywine’s government vice chairman and senior managing director. “If you’re a big investment firm, you want a piece of that action.”

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