Report: 'Too early to tell' if Northwest Austin commercial real estate market will suffer due to pandemic

(Designed by Mel Stefka/Community Impact Newspaper)
(Designed by Mel Stefka/Community Impact Newspaper)

(Designed by Mel Stefka/Community Impact Newspaper)

Across Austin, several of the city’s most iconic restaurants and businesses are closing their doors due to the economic downturn caused by the coronavirus pandemic. Now, for the first time in months, offices are allowed to slowly allow employees to come back to work.

A new market report from Austin-based Aquila Commercial states the Northwest Austin commercial market may be better positioned to survive the pandemic than other sectors of the capital city. But the report also cautions that it is yet too early to determine the true outcome of the market after the coronavirus.

“High density nodes such as the Domain and the [Central Business District] could very well suffer as tenants look to expand or relocate to lower density, campus-type settings. It is too early to tell what the effect of the pandemic will do to shape tenant demand, but we do think it will be drastically reduced in the short term,” Aquila principal Bart Matheney wrote in the May 7 report.

Developments such as the Domain and Domain Northside continue to add office and commercial space for tenants as construction has remained an essential business through much of the pandemic. According to the report, approximately 3.51 million square feet of commercial space are currently under construction in Northwest Austin.

Three new projects—Domain 10 and 12 in North Austin and Paloma Ridge in Northwest Austin—delivered more than 775,000 square feet of commercial space in the first quarter of 2020. Both Domain 10 and 12, however, are completely preleased, mostly by single tenants—Amazon and Facebook, respectively—according to the Aquila report.

The new building at Paloma Ridge is already 51.7% leased, the report states.

“Historically, the Northwest Austin submarket has been very attractive to larger corporate users,” Aquila principal Ben Tolson said.

While it is still early to forecast the true effect of the coronavirus pandemic on the area’s commercial real estate market, Tolson added the Northwest Austin market has a few advantages moving forward under current conditions.

For one, Tolson said he believes social distancing guidelines will likely force developers and large companies to reconsider office layouts.

“Fundamentally, the type of building that is in vogue will change. ... A lot of people realized they like a mid-rise environment,” Tolson said.

Developments such as Mueller and Saltillo Plaza in East Austin are enjoying sustained success and will likely continue to do so, Tolson said, as they offer mid-rise office spaces. As companies build up in high-density environments, he added, they have to consider things such as increasing land prices, employee parking and moving employees around the building.

“You throw in social distancing principles and elevator use in a tower, that’s a more challenging thing to manage than moving people up and down a four- or six-story building,” Tolson said.

Looking forward, four commercial developments are currently under construction in the Northwest Austin market, including Apple’s new 3 million-square-foot campus at 6900 W. Parmer Lane.

An additional 11 projects are planned for future construction in Northwest Austin, according to the Aquila report, including a handful inside or immediately adjacent to the Domain and Domain Northside. In all, these 11 planned developments will add as much as 7.8 million square feet of commercial space.

The Broadmoor campus redevelopment, one of those 11 projects in the pipeline, will ultimately deliver 4.9 million square feet of mixed-use space.
By Iain Oldman
Iain Oldman joined Community Impact Newspaper in 2017 after spending two years in Pittsburgh, Pa., where he covered Pittsburgh City Council. His byline has appeared in PublicSource, WESA-FM and Scranton-Times Tribune. Iain worked as the reporter for Community Impact Newspaper's flagship Round Rock/Pflugerville/Hutto edition and is now working as the editor for the Northwest Austin edition.


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