Experts say the Westlake commercial boom will expand to the Lake Travis region next
Recent commercial property construction along Capital of Texas Hwy. is one indication West Austin is no longer just a collection of wooded Hill Country neighborhoods.
The commercial property vacancy rate in southwestern Austin—including along Capital of Texas Hwy., also known as Loop 360, between the Colorado River and Hwy. 290—is only 9 percent, said Richard Paddock, office leasing specialist at HPI Real Estate Services and
HPI is developing San Clemente at Davenport, 3700 N. Capital of Texas Hwy., Austin, one of three remaining undeveloped available Class A office sites in the region.
According to the CoStar Group, Southwest Austin's local commercial property vacancy rate beats the national vacancy rate for office space that stands at 11.2 percent for the third quarter of 2014.
Transwestern, a real estate firm specializing in agency leasing and property management, reported July 31 the average Austin buyer pays $269 per square foot for commercial property, slightly more than a similar purchaser in Los Angeles who spends $262 per square foot on average for commercial property or a Miami buyer who forks over $231 per square foot for commercial property.
"If you just look at where the [commercial property] rates have gone in the last 16 to 18 months, they have continued to climb," Paddock said.
Last building sites
Tracts to accommodate big blocks of office space—10,000 square feet or greater—are hard to find, said Ralph Bistline, senior vice president of leasing at Brandywine Realty Trust. Brandywine manages the Cielo Center office complex, 1250 S. Capital of Texas Hwy., West Lake Hills.
At least 90 percent of Austin's available office markets—central, southwest and northwest—are leased, he said.
"That's a trend that has been going on for several months now," Bistline said. "[Of the] 3 million square feet of construction projects [underway in Austin], about 50 percent are preleased. In terms of potential tracts available—there aren't many."
San Clemente's 250,000-square-foot, five-story building is under construction with an opening planned for May, Paddock said. About 40 percent of the site is preleased to technology company Spiceworks, he said.
The San Clemente office complex includes three additional buildings, with two older facilities—90,000 square feet and 250,000 square feet—fully leased, Paddock said. The final building, slated to be 125,000 square feet, is on hold until the market conditions are right for preleasing and the site now under construction has tenants, he said.
Capital Ridge, a seven-story office building under construction at 320 S. Capital of Texas Hwy., Austin, is expected to be complete in April, said Riverside Resources team member Win Smith, who is developing the 216,000-square-foot project.
Although Smith said the environmentally sensitive area surrounding the Capital of Texas Hwy. limits adding office development to the area, Capital Ridge has turned this factor into a benefit.
"We are [located] across from Wild Basin Preserve, a benefit [because of] the views from our building," he said.
With the construction of a luxury, boutique hotel—Hotel Granduca Austin—underway on its adjoining tract, Capital Ridge presents a symbiotic situation for business, Smith said. Riverside Resources and the hotel's developer have agreed to work together on guest packages for executive visitors, he said.
"We envision Hotel Granduca jointly as a partner that will offer a unique amenity-based [hotel]," Smith said.
The last parcel along Capital of Texas Hwy. destined for commercial development—known as the Marshall Tract—lies within Lost Creek. Community residents are concerned about the effect of an office project on the surrounding residential neighborhood, Lost Creek Neighborhood Association president Jennifer Lamm said.
Cousins Properties purchased the Marshall Tract—a 37.25-acre parcel located at 1300 Lost Creek Blvd., Austin—to develop into an office complex, parking garage and possibly a fire station or senior living center, Senior Vice President Tim Hendricks said. The project is not in the permit stage yet, but a development assessment report was presented to Austin City Council on Nov. 20.
The height of the two proposed buildings will be about 100 feet for one and 74 feet for the other, Hendricks said.
"The proposed [project] would significantly impact the longstanding character of our neighborhood," Lamm said.
Finding the next real estate boom
During the past five to seven years, a number of commercial developments have sprouted up near RR 620 and Hwy. 183 in Northwest Austin, Paddock said. This location seems primed for continued growth in office space, he said.
However, given its close proximity to retail, amenities and a top school district, Paddock, Bistline and Hendricks agree Travis County's western areas—
Lakeway, Bee Cave and Hwy. 71—may be the next attraction for commercial real estate growth.
"[City planners] always contemplated [Capital of Texas Hwy.] would have substantial commercial development," said Hendricks, who is a board member of the Real Estate Council of Austin. "It has taken a substantial amount of time, but Austin has grown past [the Capital of Texas Hwy.]."
Hendricks said the Bee Cave area is very likely to be the next region of commercialization because residents desire to work closer to where they live.
"Each time a [commercial] market gets built out, Austin isn't going to quit growing," he said. "With congestion the way it is, who doesn't want to office closer to their residence?"