Spec development on the rise in Northwest Austin as companies expand, open offices

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Construction had been underway for five months on an 11-story office tower near The Domain when Indeed.com signed a lease for the entire building.

Known as speculative development, development companies starting construction without confirmed tenants has become more commonplace as Austin continues to draw interest from companies looking to move or expand throughout the city, said Richard Paddock, office project partner with HPI Real Estate Services & Investments, which worked with real estate private equity firm Stonelake Capital Partners on the Domain Tower project that finished in 2018.

“With the velocity of deals and companies coming to Austin, a good amount of the recent development has been on a spec basis,” he said.

But for spec development to be successful in Austin, Paddock said it comes down to the location, and downtown, East Austin and The Domain are prime places for spec buildings.

“The city is tight on space everywhere,” he said. “This has been an ideal situation to go spec.”

Stonelake, the master developer for the southern portion of the Domain, is also working with HPI on a smaller five-story building also under construction. Domain Place will open in October and is now leasing, Paddock said.

Why Northwest Austin is seeing growth in its office market comes down to two things, said Tim Donohue, vice president at real estate services firm CBRE. The first factor is the presence of and growing amenity base at The Domain. Second, companies are finding increased costs, such as real estate taxes and parking expenses, are becoming greater, he said.

“The average cost of parking in downtown is certainly forcing companies to make decisions,” he said. “The lack of transit in areas [of the city]makes Austin vehicular-heavy.”

CBRE reports 5.6 million square feet of office space is under construction in the city, and that will drive up rent prices, Donohue said.

“I see demand continuing for the foreseeable future,” he said.

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Amy Denney
Amy has been reporting in community journalism since 2007. She worked in the Chicago suburbs for three years before migrating south and joined Community Impact Newspaper in September 2010. Amy has been editor of the Northwest Austin publication since August 2012 and she is also the transportation beat reporter for the Austin area.
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