- February 2020 Planned future meeting topics. The future of Office is still uncertain; members desire to check in with one another other quarterly as the pandemic dictates flux in our professional lives.
- December 2020 Year-end (virtual) Happy Hour! Outlook on Commercial Real Estate; members reflected on 2020 and shared their own personal silver linings
- November 2020 Topic: Future of Downtown, Power of ULI engagement, Riverside Resources Strategy past and present; Guest speaker Jeremy Smitheal, Riverside Resources
- October 2020 Topic: Guide to reentry in a post COVID-19 world; Guest speaker: Jeff Coddingto, JLL
- September 2020 Planned future meeting topics: Future of Well Building Code; Changing design standards due to COVID-19; Leading indicators that will shift the future built environment
- August 2020 Summer Happy Hour
- July 2020 Summer Happy Hour
- June 2020 Topic: PropTech; Guest Speakers: David Luebke, Offerd and Decker Stanley, Braclet and JLL Sparx
- April 2020 Topic: Post-COVID Economic Recovery; Guest Speaker: Veronica Briseño, City of Austin
- No meetings Jan-Mar 2020 due to emergence of COVID pandemic
- November 2019 Topic: Deep Dive Proforma; Guest speaker: Ryan McClurg, Endeavor; Takeaways: 1) Discussed hurdles and waterfalls as it pertains to investor returns and how deal types drive hurdles. Hurdles for large deals will be less than riskier deals. The market drives the hurdles; 2) Compressing of cap rates happens when value increases (subject to particular properties). Cap rates are dictated by the market; 3) Deal is given go/no go based on Yield on Cost.
- October 2019 Topic: Proforma; Guest speaker: Chris McColpin, Senior Director, JLL; Takeaways: 1) Taxing authorities is the largest expense line for Multi-family projects; 2) Affordability Unlocked is the CoA Development Bonus Program which waives or modifies some development restriction in exchange for providing low/moderate-income housing.
- September 2019 Planned future meeting topics: The group spent some time discussing what program topics we would like to cover over the next 6 months. The following are ranked high to low: Development Proforma, CRE-Technology Disruptors, Code Rewrite, Market/Trends.
Retail & Office Market Overview (2-part series)
- From 2013-18, office market growing rapidly – added 5.8M sf, absorbed 7.6M sf; 34% increase in rent; 15% decrease in vacancy rate. Lowest vacancy rates in Southwest and highest along Eastern Crescent. Most desired are Central Business District (CBD) and Domain. It is a ‘landlord’s market’ in office.
- Even with new buildings opening in CBD vacancy rates are declining — “CBD is not overbuilt, but cautious.” Of the five newest buildings in CBD, 7% were leased at ground-breaking and 97% leased by delivery date. Demand primarily is coming from technology and professional services sectors. Four of the newest office towers are by two developers: Trammel Crow (Blocks 71 & 185) and Lincoln (600 Guadalupe, The Republic).
- Austin MSA hosts 48M SF of retail with more under construction. It is 96% occupied yet still competitive (not ‘tenant’ or ‘landlord’ market). Trends include increase in temporary and pop-up leases, focusing on “experience retail” & “showroom retail” (ex. Yeti, Kendra Scott, Modcloth, Bonobos), and marked increase in tenant improvement allowances. Retailers are using sophisticated demographic & psychographic analyses in order to best reach their customers; it is highly segmented market. Change and evolution will be the norm for retail in the near term with many tenants requiring shorter leases or termination clauses given uncertainty in the business model.
- Lack of workforce is critical issue within the hospitality and restaurant industries, ex., hotels busing in workers from San Antonio and surrounding areas.
- Since 2015, there’s been a dramatic rise in property taxes on commercial properties as a function of a 2015 lawsuit the City of Austin filed against the Travis County Appraisal District which caused commercial property tax appraisals to rise in some cases 400% in three years. This in turn has direct impact on sustainability and affordability for commercial tenants and owners. (Ex., Threadgill’s owner cited rising property taxes as why he’s closing the West Riverside location.)
- For both office & retail, the major trend is change, which is happening rapidly.
- Austin’s originality & ‘cool factor’ places it on an international radar for both markets; global brands want a presence in NYC, San Francisco and Austin. SXSW and Austin City Limits have done a lot to raise the level of Austin’s creativity brand internationally.
- Austinites demand “authentic retail” which isn’t true in other markets. Highest rents are on South Congress, then Domain, then other locations. A new building on South Congress rents at up to $100 psf, triple net, yet also seeing long-time local brands renewing at high rates because sales are up especially in highly walkable environments.
- Successful retailers integrate store with online shopping. People shop Amazon for lowest prices but customers want a connection. More and more brands want a local space for events to entertain customers, to create a community. However, store sales need to justify a store opening as the idea of a store as primarily a marketing presence or expense has faded.
- Key factors impacting office market are chasing talent pool & escalating property taxes. Commercial comparable are ‘hidden’ as Texas does not require public disclosure of property sales; the residential market is transparent (Zillow, Realtor.com, MLS).
- City of Austin is exploring ways to address affordability in commercial space for Austin creatives. Suggested Reading:
- ULI Austin 2016 TAP – Red River Cultural District, Live Music Preservation https://austin.uli.org/local-initiatives/technical-assistance-panelsadvisory-service-panels/tap-city-austin-red-river-music-preservation/
- City of Austin – Cultural Trust & Other initiatives Update: http://www.austintexas.gov/edims/pio/document.cfm?id=304254
Parking Series (3-part series)
- If you own parking, do not take reserved parking contracts. This limits the asset’s value as turnover is what generates revenue.
- The Texas market, including Austin, is slowly moving from “1 person = 1 car = 1 office parking space.” In the Central Business District, existing buildings average 2.26 space per 1,000 sf yet approximately 4 per 1,000 sf is true demand.
- What is a driverless car? If driverless car serves only one owner, it won’t change parking needs, but if it is a shared driverless car, it will move the market.
- New office trends, like co-working spaces, demand up to twice as much parking as traditional users.
- Discussions about when a project’s parking garage will be obsolete and how the asset can be converted to better use are happening in Austin today.
- City owns only 9 percent of the parking spaces in downtown Austin (5% in Central Business District!). Private garage owners are reluctant to participate in shared system, mostly due to liability concerns and commitment to residential tenants/owners.
- Design and planning for parking garage is to build the least amount of parking you need and find balance between full and empty. Mixing uses thoughtfully helps maximize 24/7 uses; for example, offices are full in day while hotels are full at night.
- Parking and rideshare work together and offer new revenue streams. For example, Car2Go pays City of Austin for parking spaces used based when and where a car is parked. Street parking kiosks and apps offer opportunities to advertise.
- Curb usage is changing! E-commerce brings increase in deliveries. Cities and stadiums are beginning to “geo-fence” curbs, designating safe drop off/pick up zones for people & packages.
- Technology/innovation in mass transit, parking, electric vehicles, autonomous vehicles, etc. is already underway to reduce costs and improve efficiency. For ex., Air B&B is a model for parking innovation: aggregating parking for convenience, efficiency, utilization & conserving resources.
- All major auto manufacturers will have autonomous vehicles (AVs) by 2021, and the most bullish advocates predict that AVs will make up 95% of miles driven by 2029.
- AV technology will disrupt current transportation uses. It could make today’s mass transit obsolete as it is expensive infrastructure without last-mile solutions and time-consuming for consumers. AVs may attract a larger audience due to convenient door-to-door service and lower prices, if use grows. This could have a marked effect on parking requirements, once adopted.
- We are only beginning to understand how the shift to autonomous vehicles may impact society at large. For example, will alcoholism and prostitution increase? Will organ donation decrease? The landscape is changing for insurance, real estate location dynamics/economics, and other industries may face declines, such as self-storage if residential garages become storage space? People will have more time & money when they do not own a vehicle or very limited use of a personal vehicle.
- What has not yet been solved with new parking technology is the underwriting of new projects which provide subpar parking. How will building industry pro formas change with these new models? Who will be first/early adopters?