LiveOps is one of the latest companies to announce its move to Cedar Park.

The California-based firm, which manufactures cloud-based software for call centers, announced July 30 it would relocate to Cedar Park before 2017, drawn by a business-friendly climate and incentives from the city and the governor’s office. But LiveOps was unable to find existing office space within the Cedar Park city limits, LiveOps CEO Vasili Triant said.

“We wanted to be near [US] 183, close to places to eat and, if possible, to outdoor activities,” Triant said.

He said LiveOps will instead move to RM 2222 in Austin while the company builds its Cedar Park headquarters, which is expected to open on Brushy Creek Road by December 2017.

Other firms have also opted to build their own headquarters after failing to find existing buildings in Cedar Park. Phil Brewer, the city’s economic development director, said many Central Texas communities, including Cedar Park, have been facing commercial space shortages since about 2010. Many builders are still avoiding new developments after the 2008 market crash, he said.

The shortage includes a lack of office space for tenants wanting workstations for a small corporate headquarters or for a software development firm, for example. Other shortages include a lack of flex space for tenants wanting to adapt a building for business suites or light manufacturing.

“We just don’t have a lot of available product on the ground,” Brewer said. “Probably 80 percent of the projects that we see are looking for available buildings, something that they can get into in a very short [time]—go in and do a quick retrofit or build it out. … They don’t have the leisure to wait nine to 12 months for a building to be built for them.”

Tight spaces

The office vacancy rate is about 15.6 percent in Cedar Park and other areas in far Northwest Austin, according to a 2015 second-quarter report from market research firm CBRE. The report also shows an even tighter vacancy rate for flex space at 1.9 percent. No new flex space buildings in Cedar Park were constructed during that time period, according to the report.

Two buildings in Northwest Austin—Amber Oaks and a new project, Paloma Ridge—inflate the 15.6 percent office vacancy rate, affecting the commercial real estate market in Cedar Park, said Troy Holme, senior vice president of CBRE. Without those developments, the Cedar Park office vacancy rate would be at 9 percent, Holme said.

Demand is high because companies want to build in suburban cities around Austin. Cedar Park and Leander have highly ranked schools, a growing population and sufficient housing for employees to be located in an attractive community near their workplace, Holme said.

Triant said LiveOps evaluated potential new locations in California and Colorado, but chose Cedar Park because of the available workforce and cost of living as well as regional incentives.

“Since we are straight office space we needed a place that also had ample parking,” Triant said. “The great thing about the location we found is that people can live, work and play all within walking distance. Remove the traffic component from people’s lives, and productivity will rise.”

Average annual lease rates also decrease the further one goes from downtown Austin, Holme said. Office lease rates range from $43 to $50 per square foot per year in downtown Austin. But he said those costs decrease to about $30 per square foot per year in a suburban city such as Cedar Park, which also allows more room for a firm to grow.

Suburban cities are also more attractive for flex uses such as high-tech research, he said.

“It’s too expensive in downtown [Austin], and the majority of folks that live around downtown are paying a lot more in rent or mortgages,” Holme said. “The ’burbs have the right type of employee, coupled with land prices and affordability.”

One corporation, Voltabox of Texas, opened July 20 at Scottsdale Crossing Commerce Park on Toll 183A. The lithium-ion battery system manufacturer was unable to find flex space for its permanent headquarters in Cedar Park and decided to build its own, Chief Operating Officer Rick Herndon said.

“While we did look at some existing properties that were available, nothing met the criteria that we were looking for,” Herndon said.

Market recovery

Brewer said few new developers have responded to high space demand because of leftover uncertainty after the 2008 market crash. Brewer said the uncertainty especially affects speculative construction—proposed office or flex buildings that do not yet have tenants.

“Years ago financial institutions would fund a speculative building [construction] at the drop of a hat,” Brewer said. “With the crash in [2008] they became much more stringent.”

Holme said the 2008 crash made lenders and developers especially wary of funding speculative commercial projects in areas outside Central Austin.

“In the years of 2006 to 2009, the far northwest [area] had a bunch of buildings that were developed on spec … without having tenants who wanted them,” he said. “Fast forward to 2015, and while developers technically could get a lender or capital partner to [fund a project] on spec, typically they’re a little bit more conservative. … And as you venture out in the ’burbs, it just takes a while for money and developers to invest in that area.”

Development between cities often helps broaden perceptions of economic hotspots, he said.

“After a few more developments between The Domain and [SH] 45, you’re not going to know unless you look on a map where one [city] stops and the other begins,” Holme said.

Anticipating development

Brewer said Cedar Park is in discussions with companies to build new office or flex buildings in employer hubs such as Scottsdale Crossing.
However, the city could use a variety of employment centers at prime locations throughout Cedar Park, including developments that may blend both office and flex buildings. Brewer said the city’s proposed redevelopment plan for Bell Boulevard or any future development in Lime Creek Quarry—which the city will purchase from Austin—could include both kinds of uses.

A new 100,000-square-foot flex building or 30,000-square-foot office building would go a long way to easing the city’s space shortage, Brewer said. A developer proposing such a project may also find city leaders willing to consider reimbursing infrastructure costs, he said.

“We feel very confident that we could have tenants in those buildings as they were under construction,” Brewer said.

Already city leaders are talking with four developers who have expressed interest.

“A couple of them are basically looking at doing just office buildings, straight-up office space, and the others are talking about doing some sort of flex space that could be office, light assembly, warehouse distribution, [research and development] kind of space,” Brewer said. “We feel pretty confident that we’re going to see something come out of those discussions.”

Holme said trends point to inevitable growth in Cedar Park’s office and flex space.

“Naturally over time, as Austin grows, everything surrounding Austin is also going to grow with it,” Holme said. “In the world of development and growth over time, Cedar Park is a relatively new addition to the Austin metro area. Northwest  [Austin] has been there a long time, but only in the last five years or so have we seen Cedar Park’s real growth.”