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Demand for office space in Austin has hit a record high in the early part of this year and placed the capital city as one of the top markets in the U.S. for office development.
According to a new report by real estate group CBRE, competition for offices has surged average asking rates to more than $53 per square foot in Austin. This is the first time rates were more than $50 since the company began tracking in 1989.
Aside from office and building space analysis, the report says the overall economic health of the Austin metro is “robust” with an unemployment rate lowering since March 2021 and population growth that’s come with company relocations and expansions.
CBRE says this trend has been spearheaded by Apple’s Northwest Austin campus and Tesla’s gigafactory which held its grand opening last week. And it won't slow down anytime soon. The report goes on to mention Oxford Economics data that forecasts a population increase of roughly 243,000 people over the next five years.
“Following two disruptive years, the Austin office market is bouncing back from the COVID-induced slump,” the report says. “As daily COVID cases continued to decline substantially in Austin, there has been an uptick in employees returning to the workplace in early 2022.”
The tech industry has driven a return to the office lately. Kastle Systems’ back to work barometer shows the Austin metro at 63% occupancy, a slight increase from late March. Just this week, Apple joined other tech giants like Meta with easing employees out of remote work.
The tech boom has also contributed to developers’ interest in multi-use skyscrapers downtown and is where many of the new towers under construction are located.
In total, there are 30 projects totaling 5.8 million square feet of office space under construction. But CBRE reports that downtown accounts for 39% of the market’s new office construction. Just below that is East Austin, which accounts for 35% of new office construction.
Other highlights from the report include a drop in vacancy and the sublease market contracting, CBRE says.
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Historic preservationists, for their part, overwhelmingly support historic zoning, which would preserve the buildings in perpetuity. The Historic Landmark Commission unanimously voted to initiate historic zoning in July, citing architectural significance, landscape features and association to historic figures. City staffers recommend historic zoning, calling both structures one-of-a-kind examples of vernacular architecture.
Tarrytown neighbors have also banded together to stop the demolition. Many have written letters, and a few spoke at the meeting. “How could anyone buy this property with the intent of destroying it?” Ila Falvey said. “I think it’s an architectural treasure.”
Michael Whellan, an attorney representing the property owner, said that the claims made by preservationists are shaky. The buildings are run down, he said, and have had substantial renovations. A structural engineer hired by the owner said any attempt at preservation would involve tearing down and rebuilding – an undertaking Whellan said would likely cost millions.
Whellan also argued that any historical significance derived from the property’s association with Delisle and longtime owner C.H. Slator is dubious. “These men are not noted for any civic, philanthropic or historic impact,” he said.
What’s more, according to Whellan, Slator likely participated in segregation as the owner of the Tavern on North Lamar Boulevard between 1953 and 1960.
A city staffer, however, said she found no evidence to support the claim. “We would never landmark a property where a segregationist lived, or there was a racist person,” Kimberly Collins with the Historic Preservation Office said.
Commissioner Awais Azhar couldn’t support historic zoning in part due to lingering uncertainty about Slator. “Focusing on that factor is not here to disparage an individual or family. It is not about playing the race card. This is an important assertion for us to consider as Planning commissioners,” Azhar said.
Commissioner Carmen Llanes Pulido said that allegations of racism should come as no surprise. “We’re talking about white male property owners in the 1950s, in Austin, on the west side – and of course they were racist,” she said. But she argued that allowing the house to be demolished based on these grounds does nothing to help people of color who have been harmed by racism and segregation.
The question of tax breaks was also controversial. Michael Gaudini, representing the property owner, said that the tax breaks associated with historic zoning would exacerbate inequality by shifting property tax burdens to less affluent communities. City staffers estimate that the property, appraised at $3.5 million, would get either a $8,500 or $16,107 property tax break annually, depending on whether a homestead exemption is applied.
Commissioner Grayson Cox preferred the commission focus not on tax breaks but on whether the structures merit preservation. “To me, nothing in the historic preservation criteria lists, is this person deserving of a tax break or not?”
Azhar, on the other hand, said he plans to propose a code amendment getting rid of city property tax breaks for historic properties.
The commission fell one vote short of recommending historic zoning, with six commissioners in support and three opposed. Azhar and commissioners Claire Hempel and Greg Anderson voted against.
The odds of City Council zoning over an owner’s wishes are slim. Nine out of 11 members must vote in favor, and there have only been a handful of such cases over the past several decades.
