Austin Investment Links
Developing downtown
Austin Business Journal - December 22, 2006
by A.J. Mistretta
ABJ Staff
They're coming from Chicago and Atlanta and everywhere in between to invest in
the core of Texas' capital city. Developers and property owners are putting a
lot of fiscal faith in Austinites' desire to live, work and play downtown. And
perhaps no other year illustrated the money-where-your-mouth-is mentality quite
like 2006.
Across property types, from offices and condos to retail and hotels, the
headlines were huge. Just two years after its completion, Austin's iconic Frost
Bank Tower sold in September for a record price to Equity Office Properties
Trust. Other deals, like the purchase of Chase Tower by a partnership of
Endeavor Real Estate Group LLC and Triple Net Properties LLC and the acquisition
of the storied Scarbrough and Littlefield buildings by a Chicago firm offered
further proof that, after a period of decline, the downtown office market is on
the mend.
"It's extraordinary," says Charles Heimsath, president of Capitol Market
Research Inc. Heimsath says with just an 85 percent occupancy rate, downtown
offices aren't where they could be. "Yet there's incredible investor interest in
downtown. I think that bodes well for the city because it means that we really
are on the national map. ... It's an affirmation of Austin's economic growth
potential."
Jerry Frey, managing director for CB Richard Ellis in Central Texas, says
Austin's restricted supply of downtown office space, coupled with the city's
forecasted job growth, make it a natural place for investment. Nationally, real
estate continues to be an attractive alternative to other asset classes and a
growing chorus of investors are looking to key markets like Austin that are
likely to realize property appreciation.
On the tenant side, Frey says amenities such as the arrival of commuter rail and
the proposed streetcar service will only increase businesses' desire to office
downtown.
One of the major questions going into 2007 is who will control Austin's premium
CBD office buildings. In November private-equity firm Blackstone Group announced
plans to buy Equity Office Properties in a $36 billion deal. In addition to
Frost Bank Tower, Equity holds such prime assets as San Jacinto Center and One
American Plaza.
Frey says that, based on Blackstone's track record with acquisitions, the
company may decide to put some of Equity's assets on the market after the deal
closes. "Most people anticipate that they could sell off some of the Austin
assets," he says.
Still, perhaps the most impressive news for downtown this year was the number of
new condo project proposals. As ground broke on several high-rise developments,
including the 44-story 360 Condominiums and the 29-story Monarch tower, several
more projects were announced that aim to dramatically alter the city skyline.
All told, more than a dozen condo developments are now in the works in and
around downtown.
"We're just beginning to see a 24-hour living environment in downtown Austin,"
Heimsath says. "Other cities around the country have successfully implemented
downtown condominium development. ... We have a long way to go, but I think
there's a huge appetite for downtown living."
Demand will be key to realizing Mayor Will Wynn's stated goal of getting 25,000
residents in downtown by 2015. Developers say they have the plans -- they just
need the buyers.
Please fill in the following information and one of our real estate professionals will contact you shortly with more information.
|
