Austin Commercial Real Estate Blog



Austin Office Market Q2 2017

Posted by on Jul 26, 2017 in Austin news, Commercial Real Estate Austin, Office space Austin | 0 comments

Austin Office Market Update Q 2 2017 There are always differing opinions as wide as there are people in the CRE market , brokers, agents and owners. Austin has been on a very long run approximately 8 years and some say this cannot sustain itself and some say it will continue. Truthfully, nobody really knows the answer. If we take historical into account every long up-cycle has an eventual down cycle and vice versa that is the law of the universe. So where is the Austin office market for Q2 2017? Currently, the news for the most demand seems to be Downtown Austin and the East Side. This sub-market is expected to be the leader as far as momentum however, lease rates are expected not to change too much. There are properties to be delivered in 2017 that will hold the lease rates in check unless the spaces are pre-leased at a fast rate then the formula would change. Nine office buildings has been completed in Q2 2017 in Downtown Austin with an 80% pre-leased occupancy. Citywide leasing averages increased approx $0.28 cents per sf per yr to $34.02 as an average for the downtown Austin office market. Among the best tech cities to live in, Austin still came in at number 1 against cities like San Francisco, New York, Boston and Seattle. As long as the media touts Austin as a number one city, the population growth will most likely continue regardless of growing traffic congestion and higher taxes and expensive housing relative to the rest of the state. Suburban Office Market The suburban market vacancy rates are a bit higher approx +3% and demand remains somewhat steady, however we are seeing a lot more sublease listings coming onto the market which shows consolidations, changes to locations preferences or slow-downs in Austin office demand. Class A Office space is still leasing at a flat to slight...

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Austin Office Space Market | Q1 2017

Posted by on May 9, 2017 in Commercial Real Estate Austin, Office space Austin, Office space for lease, Uncategorized | 0 comments

Austin Office Space Market | Q1 2017

Austin Office Space Market for Q1 2017 The one word that can describe the Austin office space market is “new construction underway” for the first quarter of 2017, 1M SF of new space has been delivered to the Austin market. In addition to the 1M SF , approx 1.7M SF is expected and is currently under construction. Sub-markets with the most new construction activity consist of Downtown Austin, Northwest Austin and Southwest Austin.  Although there is new construction the occupancy rate has slowed somewhat. Vacancy rates ticked up to 9.7% from 9.2% in the previous quarter.  Near term forecasts for positive momentum are in place still due to new population growth and employment activity.  With the softening of occupancy and office lease rates may be more adjustable in the tenant’s favor, however they may not be at a significant discount. Shire Commercial is starting to see more sub-lease activity which is a gauge of what the overall market may be doing.    Lease rates for Austin office space came down to $33.89 versus $34.89 in the last quarter which was a record high.    Potential More of the Same to Slightly Downward?   The commercial real estate market for Austin office space has been on an up-swing for sometime and just like all things that ebb and flow , so does commercial real estate. Shire Commercial tracks Austin office space consistently and does see room for movement a bit more towards the tenant’s favor...

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Austin TX Office Market | Q42016

Posted by on Jan 4, 2017 in Austin news, Austin office space for lease, Commercial Real Estate News, Uncategorized | 0 comments

Austin TX Office Market | Q42016

Austin Office Market for Q4 2016 Here is an overview of the Austin Texas office market ending for 2016.  Austin’s office market maintained itself with a consistent performance for all of 2016.  Growth and expansion continue moving into 2017. Lease rates for the Austin office market hit an all time high at almost $35.00 per square foot. New construction of perhaps the tallest building in Austin have been discussed which will cover almost 2M square feet of space  Class A office spaces hit a new high as well with a $0.55 cent increase compared to the 3rd quarter of 2016. Increasing Expenses for the Austin Office Market Landlords for 2016 pushed leasing rates higher along with higher expenses , which play an important stimulus on the rising lease rates. Class A lease rates moved up $0.55 cents tp $38.85 per square foot.  Occupancy continued a positive move with Downtown Austin, Northwest Austin and the Southwest Austin sub-markets along with more development in each sub-market. Vacancy for Office Properties Year over year vacancy moved downward in 2016. Overall vacancy came in at just under 12% down from close to 15% in 2015. The near term forecast for office space is for continued demand.  Also the sub-markets mentioned in the above paragraph are still the hottest sub-markets for demand and look like they will continue. There are currently 21 office development projects on the ground in Austin which equates to over 2M square feet , there is optimism about the future and influx of a growing population....

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Austin Office Market | Q3 2016

Posted by on Nov 8, 2016 in Austin news, Austin office space for lease, Commercial Real Estate News, Office space for lease, Office sublease | 0 comments

Austin Office Market | Q3 2016

Austin Office Market Update for Q3 2016 Here’s the latest on the Austin office market for Q3 2016, looks like more of the same folks. New records are being set with supply and demand at opposite ends of the spectrum. Lower vacancies overall and higher rents are forecasted for the balance of this year.  Vacancy rates are not in the single digits for Austin area wide.  The 2 largest tenant leases were tech companies expanding their current occupancy. One of the major tech companies coming to Austin is Oracle with a 25 acre, 560,000SF campus with the Austin office market. Citywide lease rates are now at $34.00 per sf which is a new all-time high for the area. Lowest vacancies remain in Downtown Austin, Round Rock and Northwest Austin. Population Growth Forecasts for Austin’s population growth are expected to double to 4M people by 2040. The Austin office market will be tied to the residential and job growth over the next 25 years.  23 Quarters of consecutive growth has now hit the office market in the area with the Northwest area of Austin being the most popular area for office occupancy. There are currently 21 office projects under construction across 7 different sub-markets equating to approx 2 M square feet of space.  The city still faces major challenges in infrastructure with transportation...

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Master Lease

Posted by on Sep 7, 2016 in Commercial Real Estate News, Commercial Real Estate Tips | 0 comments

Master Lease

Master Lease Making money and profits in commercial real estate require an investor or owner to control a property. The most common way of course is ownership. Some investors though do purchase the property at least not right away. Instead they can choose to master lease the property. Example: Let’s say you are looking at a multifamily property that needs quite a bit of upgrading.  The investor could offer to purchase the property , but perhaps you do not have the ability to acquire the financing and maybe the owner does not want to sell the property using a land contract or a mortgage deal. Solution Continuing with the property example, this property let’s say is not cash flowing to pay expenses , property taxes, and mortgage payments. The current owner wants to turn this money losing property into a profitable property but they don’t want to spend the time and effort it will take to bring the property up to speed. The investor offers a master lease on the entire building and then guarantees the owner a steady income with no hassles. In return as the investor you retain the right to upgrade the property and the property management so you can increase the NOI. Generally master leases give the lessee terms of 5-15 years, with an option to purchase at an agreed upon sales price down the road. During the period of the master lease, the investor would pocket the delta between what you pay to operate the property to include lease payments to the owner and the lease payments collected from tenants. This becomes a profitable venture if you upgrade the property and increase the NOI as discussed above. Obviously your goal is to collect higher rents than what you are paying to the owner of the...

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Austin Office Market |Q2 2016

Posted by on Jul 21, 2016 in Austin news, Buildings for Sale, Commercial Real Estate Austin, Office space Austin, Office space for lease | 0 comments

Austin Office Market |Q2 2016

Austin Office Market | Q2 2016 Austin’s office market has been up on the upswing since 2012. However,  Austin’s office market is now experiencing negative occupancy. The actual figures are approx -24,000SF of negative occupancy in Q2 2016.  Lease rates have had small changes for the most part in low vacancy sub-markets such as Downtown Austin. Here is a quick review,  lease rates for offices in Austin did not move much , only up +.9% to $34.65 psf per yr. The largest move was in Class A office space in the downtown area are coming in at an increase at approximately 2.7% to a whopping $47.31 psf per yr. Suburban Class A office lease rates only moved up on average $0.03 cents per sf per yr to $35.74 psf per year.  Current vacancy is coming in overall at 12% which is up from the last quarter by 1% point. Indicators for Q2 2016 Indicators are as follows: Vacancy down, Occupancy down, New Construction down , Under Construction down Offices for Sale Overview Q2 2016 The current trend for Austin offices for sale is showing an increase in sales asking prices of 8% , compared to last years asking prices there is a +31% increase in asking prices, coming in at averages of $237 per square...

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Capital Reserves

Posted by on Jun 14, 2016 in Commercial Real Estate Tips, Office space Austin, Office space for lease | 0 comments

Capital Reserves

New Accounting Rules- Shorter Term Leases? Banking institutions, financial service firms and other enterprises may have to take on new leasing negotiations. New rules regarding capital reserves against liabilities are going to be in place.  A Landlord -Owner can expect some of these types of organizations to negotiate leases with shorter terms and maybe fewer renewal options. This can provide some uncertainty for owners as to how they are going to manage assets with shorter lease terms for tenants. Capital reserves must increase by 5% on a balance sheet. If a firms lease obligations total 50 million annually, then their  capital reserves would increase by 5 percent, or $2.5 million, to cover the liability. To minimize tenant turnover, the landlord will need to think more strategically regarding improvements and amenities to the property to retain tenancy.  Example: Capital reserves to be required A financial institution that has a 3 yr term lease in place with $1M in rent and $3M of liabilities, they would be required to have at 2X the liabilities $6M in capital reserves. Negotiations on Office Lease Options Building owners will experience accounting changes regarding lease extension options.  This will require the existing tenant to review those options more carefully. If a lease offers  a tenant a better deal or discounted lease rate with a  lease extension at the end of the term, the “economic incentive” could impact how the lease is classified beginning on Day One. If a tenant signs a 10-year lease with two five-year renewal options that carry an incentive, such as a 95 percent of market rental rate during the extension period. Even though the lease is technically a 10-year lease, it could be viewed as a 20-year lease for businesses’ accounting purposes if it there is a “good chance ” that the options will be exercised. Within the new regulations, corporate real estate users will have to determine whether their office leases qualify for the finance or operating lease accounting treatment. This will require their assets and liabilities to appear on their balance sheets. Tenants may need additional time for lease negotiations because they have to bring additional people into the process.  An owner can expect possible delays so are advised to start the lease negotiation process as early as...

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Austin Texas Office Market 2016

Posted by on May 2, 2016 in Buildings for Sale, Commercial Real Estate Austin, Office space Austin, Office space for lease, Office sublease | 0 comments

Austin Texas Office Market 2016

Austin Texas Office Market 2016 The following is an overview heading into the 2nd quarter or 2016 for the Austin Texas office market. Overall it looks like Class A spaces are getting bit of correction on lease rates although it is not significant rates have come down approximately $1.00 per sf per yr. Whereas, the Class B office spaces in Austin are having lease rate increases. The reason for this could be the demand for Class B office spaces was a bit higher in Q1 due to tenants wanting a more affordable alternative as opposed to the higher priced Class A office properties in the Austin Texas office market. There are currently 208 Class A office properties, 407 Class B office properties and 78 Class C office properties in Austin Texas. Austin Texas Sublease Market for Office Space The current sublease market vacancy rate is coming in at around 1%, with this type of picture it bodes well for Landlords and shows consolidation and difficulties fulfilling lease obligations have gone down dramatically.  Currently there is about 418,000SF of sublease space available in the Austin Texas office market after the first quarter of 2016. There are still value offices available, however the closer you get to downtown Austin the tighter the office market gets as well as North Austin coming in at below 5% vacancy...

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Parking Ratios

Posted by on Apr 6, 2016 in Austin office space for lease, Commercial Real Estate Tips | 0 comments

Parking Ratios

Parking Ratios for Office Space Over the years, we have had folks contact us about leasing office space and there is one attribute that seems to fall thru the cracks more so than other parts of leasing an office in Austin. It comes down to parking and parking ratios.  A lot of tenants may think, no big deal, I can lease an office in Austin and parking is not a problem. Is this true? Actually, it is not true and should be of great concern. You see there are municipal codes in place called parking ratios that allow for only a specific number of parking spaces based on the type of use a tenant has and the square footage occupied.  Are there some parking lots for buildings that are overbuilt to handle more parking the answer is yes, however when it comes to a 100% occupied property the parking ratios will be more stringent. Parking Ratios based on Office type? So how does it layout and what should a tenant expect? Well the first question that has to be answered is : What type of use is the office going to used for? Why? Because certain uses have higher parking ratios than others. Here are some quick examples a Billiard Hall will have 1 space for every 100 square feet, a Medical office will have 1 space allocated for every 275 SF.  What about a general office space? A professional office is 1 space for every 275 SF , recently a potential client called us asking for 1000SF and enough parking for 20 people, well let’s do the math. If they are using this as a professional office on 1000SF they are only going to be allotted 4 parking spaces. So how are they going to find a space that has a parking ratio for 20 people?  You see a professional broker would have flagged this and said they do not have realistic expectations and it won’t work.  Let’s take a scenario, you lease a 1000SF office and there seems to be plenty of parking because after all the property only has 80% occupancy. All of a sudden a few big leases go down and now the property is 95% occupied and the fellow tenants are complaining that you are taking up their parking spaces, is that a problem? Yes, it is going to be.  So make sure your broker covers your bases with you before you are given an impression that it is no big...

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Listing a commercial property

Posted by on Mar 1, 2016 in Commercial Real Estate News, Commercial Real Estate Tips | 0 comments

Listing a commercial property

Listing a Commercial Property If you are a Commercial property owner, you can be tempted to market and list your own properties for sale or lease. Is listing a commercial property easy and is it a one step process? Are some brokers and agents more effective and efficient at marketing commercial property than others? Does it come down to just sticking the signs in the ground? Listing a commercial property is just the first step, there are many more steps than just listing a commercial property for sale or for lease. A good listing agent has a credible marketing plan and is responsive to requests unlike a larger percentage of average brokers who don’t return inquires or phone calls. What are some of the factors to weigh when considering a solid listing agent -broker for your commercial property? Visual representations Will a listing broker or agent use up to date technological standards for shooting pictures of your property? Today, it isn’t just about taking photos with your mobile phone. Some brokers may or may not have good photographic skills. Are the promotional images of good quality and are they used using the tools provided to potential buyers and tenants? Depending on the type of commercial property, will depend on what an image should look like. Obviously vacant land doesn’t require much photography that can’t be found on satellite images. Also there are drones today that can provide real time images of the land you are trying to sell. Most residential realtors use virtual tours, it has been our experience that most commercial brokers do not use them, however Shire Commercial does use Virtual Tours as a major benefit when we take on a listing. Flyers and Collateral Just because a flyer is made doesn’t make it effective, how is it marketed? And how often? Brochures or flyers must contain the most important information about a listing. Are the flyers detailed enough or are they missing key pertinent information? Some flyers are made without all the details just so the phone will ring from buyer or tenant reps or directly from potential clients because they are missing information. We have found over the past 12 yrs this really a time waster and doesn’t provide qualified leads. Can a flyer be updated periodically quickly and easily, is it marketed consistently? Flyers should be soft – copy for sure, hard copies are fine but with email today anything that you can hand somebody , you can always email them. Some residential agents use a 24/7 toll free line to access information, what about QR Codes are those being used? This is not an all-inclusive list, there are commissions to be negotiated – standards that the industry uses as well as the ability to draft purchase agreements and leases for the owner....

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