Austin Commercial Buildings

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Austin Commercial Buildings

Summary of Austin’s commercial buildings and activity for 2017 (portions obtained from Co-Star )

Austin is going thru expansions for commercial properties especially in the Downtown area.  Austin’s downtown commercial building leasing rates are up +30% compared with per-recession lows. Vacancies remain low as well with only approx 25,000SF of space avail for lease south of the Capitol building.  Pre-leasing activity remains strong for commercial buildings most of the new construction buildings deliver leased.  Over 2M square feet has been delivered to the Austin market since 2012.

Building Sales

Sales of Austin commercial buildings have hit highs , as high as $665 per square foot at a 5.9 cap rate. The specific Austin commercial real estate that sold for these numbers had new construction going for it as well as the average remaining lease terms were about 6 years and were to high credit tenants.

LEED Certified Buildings

Cap rates for commercial property

Unemployment rates in Austin stay Low

Another key factor is the robust population growth and how unemployment in the Austin area , for Q2 it hovered around 3.3% and moving into July of 2017, unemployment went below 3% . Business expansion was up to 5.7% . Key transportation issues and affordability has cropped up in the Austin area as it continues to grow. Vacancy rates have fallen to lows of not seen since the 2nd quarter of 2001.  For new construction moving into the third quarter, the sub-markets that saw the highest delivered new construction were East and Northwest Austin.

Office Condo Issues

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Here is a summary of Office Condo Issues

written by the ABJ during an interview with a local Austin attorney dated March 14,2014

Office Condo– More Demand – risks?

Do Office Condo issues and risk provide higher exposure than other deals in real estate?

  • 10% of claims against architects , only represents 2% of the architect’s business revenue
  • Developers of commercial office condos have more knowledge than the average consumer regarding construction
  • Major factors of the issues are the relationship between the condo owner and the architects and contractors

Prevalent Condo concernsOffice Condo Ausitn

  • Design and construction
  • Water issues – leaking windows, roofs etc.
  • Plumbing and or HVAC  in the condo

Important documents any buyer must read or understand before purchasing an office condo 

  • Purchase agreement
  • Resale certificates
  • Provisions about the maintenance of the project
  • Maintenance funds and how they are handled
  • Understand the dispute process
  • Financing an office condo purchase

Brokers that are buyer representatives can help consumers get the appropriate paperwork which is required for them to complete a due diligence on the office condo property. This will help you be proactive so that you can avoid some office condo issues. Selling your office condo may be easy or tough depending on the market. One rule of thumb to keep in mind is do not over-improve your condo. There are sellers-owners who feel they can get every dollar out of their improvements. Remember, improvements can be very subjective and personal. Just because you love it, does not mean it will work for the next owner.

 

 

 

Finance an Office Condo Purchase

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Austin TX Office Condo Conversions

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Office Condo AusitnAustin , TX Office Condo Conversions

Converting to an Office Condo

An office building owner may find it a good idea to do an office condo conversion . Just like  apartment conversions, the tenants can be given the right to purchase their offices. This will be prior to the office condo being offered to the general public for sale. It sets up as a strategic advantage for current tenants leasing the property.

 

Process of a Conversion

The office building owner can convert their suites to a condominium. After renovations and filing of condominium papers , they arrange financing. They can then promote the new office condo property and  have subsequent closings. The office property can be subdivided into individual private office condo ownerships that include an interest in the common areas of the office property.

 

Common Area Maintenance with an Office Condo Conversion

Common areas are typically roof, elevators, hallways, restrooms, entry areas as well as utility and storage areas. The new owners formally tenants would form a condo owners association (COA) and assess dues. Dues will cover the maintenance of the common areas as well as taxes. The COA is responsible for principal, interest, property taxes and insurance and common area maintenance plus a proportionate share of the common area.

One problem that could arise is if an office condo owner lost their property or properties through a bankruptcy. This would mean the other office condo owners would have to meet the property’s taxes, maintenance and insurance liabilities.  This issue could put a COA in jeopardy, so careful attention must be paid to all contingencies and provisions for this type of commercial real estate scenario.

Find Office Condos today

 

 

Purchasing an Austin Office Condo

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Purchasing an Austin Office Condo 

If you are a buyer of an Austin office condo or office building there is a process that takes place to make your purchase easier than if you did it on your own. The first 2 categories or we can say questions you should ask are  as follows: Are you looking to be an owner-user of the office condo or is this an investment in a property such as a multi-tenant condo or office building?  Each type of property is in different sub-markets and some are more plentiful than others in specific areas of Austin.  Another and most important question that sometimes is overlooked is : Are you going to require financing?

Purchasing with financing

As a rule when a buyer looks to purchase an Austin office condo and they need financing. There should be some pre-cursory discussions with their lender of choice. Within those discussions, the question ask is how much does the borrower qualify for? Pre-approvals move the purchase process further along initially.

All purchases of commercial real estate property has to go thru underwriting and different lenders have different requirements. These requirements are based on their portfolio and the type of office condo, office building or client that want to have on their books.  As the process moves along, Shire Commercial helps you as the client find the best potentials first. After potentials are found, then we start a tour. Once the tours of the commercial real estate property are complete, a short list of made of the best candidates.

Austin Office Condo Interior

Making an offer on an office condo

Can you make an offer at the same time on two separate office condos or office buildings? Yes you can.  Sometimes office condos for sale in Austin are part of a portfolio of properties. Portfolios are more of an investment scenario than an owner user scenario.  Once the purchase contract is in place and money is escrowed the property has to be inspected. Expect the cost to be dependent on the size of the office property.  Sometimes an offer is made to purchase and an inspection shows that the office condo in question may need some work that was not anticipated. Before the due diligence period has expired, it is up to the Buyer and the Broker to decide if they need to counter the sales price of contract with the seller. It all depends on the specifics of what the inspections showed and if the repairs are quite costly or just standard wear and tear items.

Sometimes in a purchase contract , independent consideration is made to the Seller. When would that happen? Typical situations may be where the Buyer wants to “buy more time” say 70+ days (in today’s market 2013) which is considered to be long.  Independent consideration is usually not refundable and if the Buyer does not move forward they will forfeit the funds to the Seller.