A 386-acre tract of land in North Austin will undergo a major transformation during the next several years from mostly undeveloped land to one of the largest business parks in the metropolitan area.
Los Angeles–based Karlin Real Estate bought the land from Dell Inc. in 2013 with a vision of creating flexible, quality and affordable office space called Parmer Austin for tenants in numerous trades, Vice President Vicky Canto said. The park—bounded by Parmer and Howard lanes, McCallen Pass and Harris Ridge Boulevard—will have more than4 million square feet of Class A and flex office space, retail and multifamily housing. Amenities will include food trucks, a running trail and outdoor space for meetings or activities.
"We want it to be a fully integrated 'live, work, play' tech park," Canto said. " The value, that's what we're really emphasizing. Everybody wants to watch their bottom line but have a nice environment."
Karlin and its business partners—developer Trammell Crow Co. and real estate firm CBRE Inc., both of which have offices in Austin—broke ground July 15 on the first project in the park: a 192,000-square-foot office building called Parmer 3.2. The project is located just south of former Dell buildings off McCallen Pass and Howard Lane. Plans are also underway for a sister building called Parmer 3.1. Canto said it made sense to begin construction near existing buildings and fan out.
"We don't have a timeline [for the park] because it depends on the velocity of the economy," she said. "There are a lot of variables. It could take five years or 10 years depending on the market and willingness of companies to relocate or grow in Austin."
Prime real estate
Canto said Karlin set its sights on the Austin real estate market because of its high leasing activity. She said the company focuses on creating "boots on the ground" relationships with companies before acquiring existing office buildings or land for development.
Parmer Austin's location near existing global companies such as Samsung and Apple Inc. were also reasons that made the site palatable for development, Canto said.
"It's proof of the concept that this is a viable market," she said. "The talent pool is here. You don't only have to be in the West to find talented, creative people. Apple, Samsung and Dell led the charge and made that first step."
Karlin started buying real estate from Dell a couple of years ago, starting with sites at 201 Howard Lane and 717 E. Parmer Lane, the latter of which General Motors now leases for its IT Innovation Center. Next Karlin bought the Parmer Austin land from Dell, which only built on about 90 acres, Canto said.
Trammell Crow Vice President Brad Maples said finding land in proximity to downtown Austin suited for large-scale development was key for building an office park.
"Those centers are hard to find," Maples said. "You have to have maximum density on-site to offset costs. Land is scarce in Austin. This is what makes Parmer such a unique opportunity."
Mark Emerick, senior vice president of leasing and sales at CBRE's Austin office, said the MetCenter, a 550-acre mixed-use business park located in Southeast Austin near US 183 and Hwy. 71, is the closest example to the vision of Parmer Austin in the city.
"Austin really lacks a true business park," he said. " Austin is a little more hodge-podge and has a scarcity of land. This happened to be an infill piece because Dell had owned it for over a decade."
Recruiting
Emerick said Parmer Austin will be ideal for companies expanding in or relocating to Austin. He said leasing rates will start at $17.50 triple net—the cost that includes taxes, insurance and maintenance—per square foot. In downtown Austin he said the triple net cost per square foot exceeds $30.
Other attractive features will be the flexibility of tenant build-out, Maples said.
"We can offer office space but also industrial, multifamily, hospitality and retail components," he said. "It allows us as a team to cast a pretty wide net.
Mark Turpin, CEO of staffing and recruiting firm The HT Group, said company relocations to Austin usually indicate more job openings and a positive effect on the city's economy and housing market. However, he said Austin actually lacks enough qualified talent to fill jobs, and his firm often recruits talent outside of the city.
"We're seeing the worst shortage in Austin right now in the technical field," he said, adding that finding talent in any field has been more difficult.
Turpin said The HT Group assists between 500 and 600 Austin workers to find employment each year. The company has a professional search department to fill executive positions and also fills technical jobs.
"We've had a lot of calls recently from companies that have relocated [to Austin] or a couple [of firms that] found us on the Internet and wanted to relocate and find out more on the Austin labor market," Turpin said.
Turpin said employees, especially those in the technical industry, want to know what companies will be able to offer them. Amenities such as a gym or day care could be a big draw for potential employees.
"Those will be helpful, especially if you split the cost with [multiple] tenants," he said.
Cost of doing business
Despite the high price tag that comes with leasing in downtown Austin , Nathan Smith said many companies are willing to pay. Smith owns Austin Tenant Advisors, a commercial real estate firm that assists companies with finding office space and focuses on startups. Smith said lower-cost options like Parmer Austin might be attractive to tenants because lease rates for office and retail space are the highest they have been since 2000.
"People talk about how the cost of doing business is less and taxes are lower, but the tide is turning," he said. "It's becoming expensive for people to do business in Austin."
Smith said even with new office space coming online, it might not have any effect on rental rates.
"The thinking is if you add more space then maybe it will stabilize lease rates, but we're not seeing that right now," he said. "Before buildings are finished, they're50 percent or more [preleased], and it's not making lease rates any cheaper."
