Previously noted as one of Austin’s last frontiers of development by local real estate leaders, the roadway has served as a major draw for developers, employers and residents alike. However, in 2023, the future of Parmer is uncertain, multiple commercial real estate agents with prominent projects in the area said.
The threat of economic decline has resulted in potential purchasers moving slower, development taking longer and projects coming to a halt, said Mark Emerick, CBRE managing principal with The Parmer Innovation Center, a 300-acre corporate park east of I-35.
“Tenants are taking a step and then pausing, taking another step and pausing,” Emerick said. “What I haven’t seen is demand fall off from the tenant side, but it’s not moving at a pace that gives you a sense of when all of this is going to culminate, when it’s going to actually come to fruition.”
As the economic situation in the United States continues to hang in the balance, this trend is expected to continue with unforeseen consequences for the commercial real estate market on Parmer and beyond, Emerick said.
Projects in progress
From east of I-35 to SH 45 N, Parmer Lane is about a 20-mile stretch of road spanning East, Northwest and far North Austin.
Apple moved to Austin in the 1990s, and found a home on Parmer in the early 2000s, according to commercial real estate company Aquila. Instead of leasing, Apple decided to create its own campus in 2012 and now has two campuses on Parmer with expansions on the way.
Permits filed with the city of Austin as recently as May 9 indicate the company intends to add on several more buildings to its newest campus at 6900 Parmer Lane, though final site plans are still in the process of being finalized, according to the city.
Despite Apple’s continued growth, projects such as The Parmer Innovation Center and 7700 Parmer are facing slower turnaround from interested tenants, real estate agents with the projects said.
The Parmer Innovation Center, formerly owned by Dell, was purchased by Karlin Real Estate in 2013 with the intent to create flexible and affordable office space, according to previous Community Impact reporting.
Since Karlin’s purchase, the park has expanded from three buildings to 17, representing over 2 million square feet of office space.
Despite this growth in the past decade, the project is now awaiting a major tenant to buy in and pull the trigger on at least 200,000 square feet of new development on the property, Emerick said.
Development at 7700 Parmer is similarly slowed as real estate agents wait for tenants to make their move, said David Putman, Aquila managing principal with the 7700 Parmer project.
The 7700 Parmer project is a 120-acre commercial park at the intersection of Parmer Lane and Anderson Mill Road. Originally built in 2000 for Motorola, the property has 900,000 square feet of office space in four buildings with tenants such as HP and eBay. The developer has plans to nearly double that in the future with an additional 800,000 square feet in six buildings.
Despite the magnitude of these plans, the delivery depends on finding a tenant to buy into the project and push forward, Putman said.
“We need a lead tenant or somebody that wants to buy a building to take the next steps. We’re not going to build it speculatively,” Putman said.
Doing the math
Both the increasing availability of sublease space and the overall decrease in urgency for space indicate a slowdown in the commercial real estate market, Putman said.
Data from Aquila’s most recent report for October-December 2022 shows for much of Parmer in Austin and Cedar Park, the total amount of space available is not being leased out to tenants as quickly as it has in the previous four years. This delay in the turnover of space to new tenants indicates tenants are moving slower than they have in the past, Emerick said.
“Our volume of tenant demand continues to be robust; it’s just the velocity, the pace of the transaction or pursuit, that has slowed to a snail’s pace,” Emerick said.
One metric that highlights the change is the amount of sublease space available, Putman said. Sublease space is typically put up for lease by an existing tenant rather than the landlord, Putman said. This may mean the business no longer requires the amount of space it thought it needed.
For the far northwest market, the available sublease space for the last quarter of 2022 was higher than it has been for the fourth quarter of the last four years at 140,000 square feet, compared to 102,238 the previous year. Beyond the Northwest Austin market, of the 40 million square feet of office space Aquila tracks in Austin, about 5 million square feet are up for lease through subleasing, Putman said.
Amplify Credit Union is one company that downsized its headquarters on Parmer from 44,000 square feet to 18,324 square feet in 2023 as the work-from-home movement has meant less office space is needed, Amplify Chief Information Officer Charlotte Morrison said. The excess space will be renovated and subleased to other professional services, Morrison said.
“We’ve embraced remote work,” Morrison said. “That is the main reason we now are able to open up a lot of leased space in that building.”
While companies have traditionally had a formula to calculate their occupancy based on the number of employees, the work-from-home movement has raised more uncertainty for employers, Emerick said.
Another instance of this is 3M, which announced in May plans to sublease some of its space in Austin at the Parmer Innovation Center due to shifting workforce requirements.
“3M is reviewing its office space and service needs for all of its locations,” 3M Communications Manager Tim Post said in an email. “3M’s offices were built when working on-site was the expectation for all employees. Our space needs have changed as we’ve moved to a flexible work model with fewer employees working on-site.”
The promise of Parmer Lane
While slowed growth in the North and Northwest Austin markets has resulted in more office space availability, real estate agent Brandy Harrison said the residential real estate market is picking up after a slow start in 2023. Most of her clients move here for the tech industry, and she said she has not noticed a slowdown in interest.
Despite the continued demand for housing, tech companies are facing their own difficulties, said William Redd, executive vice president and senior managing director of Brandywine.
“You fast forward a couple of years [after COVID-19] and ... the big tech groups that are sort of leading the way in the immediate area, a lot of those guys had layoffs and ... are having to sublease more, which is not good,” Redd said.
Due to the unclear future of the market, Putman said the pace of new projects popping up is expected to significantly lessen compared to prior years.
“If it’s not under construction right now, there’s not going to be any capitalization of new developments for the next two years and maybe even longer,” Putman said.
Despite the economic setbacks for Parmer, the promise of projects such as Apple and the new Samsung Austin Semiconductor set to come to Taylor means good things for the thoroughfare, said Dave Porter, executive director of the Williamson County Economic Development Partnership.
“What drives that demand is good-paying jobs, and those good-paying jobs are typically at a Samsung or an Apple,” Porter said. ”Disposable income drives where commercial development goes.”
There are several projects in progress along Parmer Lane. Some projects are partially complete and operational, but awaiting buy-in from tenants to finish out their build plans.
1. 7700 Parmer (awaiting project buy-in to progress)
- Size of project: 900,000 completed, adding 818,100 square feet
- Estimated completion: TBD
- Description: This four-building commercial park is looking to add six additional buildings.
- Size of project: 1.5 million square feet of office space
- Estimated completion: by 2030
- Description: This mixed-use project will offer office and retail space as well as single-/multifamily homes.
- Size of project: 2.6 million square feet of office space
- Estimated completion: 2032-2037
- Description: This mixed-use project will provide office, retail, residential and parks space.
- Size of project: TBD
- Estimated completion: TBD
- Description: Apple’s expansion could involve the construction of multiple buildings.
- Size of project: 33,669 for building 1, 46,250 square feet for building 2
- Estimated completion: mid-2023 for building 1, building 2 TBD
- Description: The first three-story building of this project is under development.
- Size of project: 2 million square feet completed, adding 200,000 square feet
- Estimated completion: TBD
- Description: This 300-acre corporate park is looking to add an additional building to its site.