When AQUILA won the leasing assignment for 301 Congress in 2007, the market outlook was positive, but within a few months, it turned bleak. The national debt crisis and Lehman crash had the economy reeling, and the Austin real estate market came to a standstill. Many local experts predicted that Austin would see a large exodus of tenants out of downtown, as had happened in previous recessionary periods – a scary proposition for 301’s new ownership.
At the time, 301 Congress was 83% leased, but most tenants were paying below market rents, and a significant roll of inferior quality tenants in the lower elevator bank was approaching. Additionally, a new JW Marriott hotel had been announced on the site to the south of the building, but with designs yet to be released, there was much concern from current and prospective tenants about how the new hotel would affect the views of the southern facing tenants. This leasing challenge was exacerbated by extremely dated common areas and tired amenities.
The previous ownership group, motivated purely by occupancy, had positioned rates to compete with lower-tier CBD buildings like 515 Congress, 816 Congress, and Austin Center, as opposed to the building’s real peer group – top-tier eighties vintage buildings – like 100 Congress, 111 Congress, San Jacinto Center, and One American Center. As such, the market largely saw the property as a second-tier option of lesser quality than its peers.
So, AQUILA had a significant challenge: Reposition the building to compete with the CBD’s top Class A buildings, raise rates, and battle a significant roll on the lower floors – all in the midst of an uncertain economy.
Devise a Strategy
Around the same time, AQUILA picked up early on a trend that was emerging in Downtown Austin – technology and social media companies were gobbling up space in the CBD. This new user was demanding a more creative office environment with open floorplates, collaborative areas, and connected spaces.
AQUILA decided to capitalize on this opportunity and devised a marketing campaign and strategy to appeal to and attract a high-tech user to the building. We developed renderings and plans for the lower floor spaces that showed exposed ceilings, open floorplates, and even rendered interior stairwells and exterior balconies to paint a picture that would be attractive for this growing CBD tenant base. Additionally, we hired architects to draw up estimates and renderings for modernizing the lobbies, exterior courtyard, and building amenities, including the fitness facility, conference center, and on-site café.
Land the Big Fish
We set out to target a firm that was technology-focused, expansion-oriented, and had the growth potential to absorb more space. We sought a firm that valued the live/work/play environment and path of growth that 301 offered and that we could grow and ultimately extract a premium rate.
After targeting and pursuing several firms that met the profile, AQUILA landed on WhaleShark (now RetailMeNot), an Austin Ventures-backed local start-up that was making waves in the technology sector and a darling of the venture capital world. AQUILA dug deep into the firm to help 301 owners understand the validity of their concept, the management team, and the strength of funding to make the most informed decision possible. We also had previous relationships and experience with the decision-making team and leveraged these relationships during the process to ensure success. After significant due diligence, the 301 Congress ownership decided that WhaleShark would be the perfect fit and AQUILA aggressively pursued and negotiated the initial lease for 20,000 square feet with built-in expansion commitments.
Upgrade the Building
Following the initial WhaleShark transaction, AQUILA and CommonWealth used this momentum to commence a series of upgrades to the property. A capital improvements campaign was launched and AQUILA was instrumental in making recommendations for enhancements as well as creating new collateral to market the upcoming changes to the building. Upgrades included an updated seminar room, upgraded fitness facilities, locker rooms and showers, a full renovation of the first floor common areas, and an overhaul of Floyds, the building’s on-site café.
These upgrades would be instrumental in not only renewing and expanding WhaleShark and Gerson Lehrman Group, but securing a slew of new tenants and pushing rents on these new deals, and renewing existing tenants such as Morgan Stanley, Chamberlain McHaney, Germer, Ogleree Deakins, Cordell & Cordell, and Drumroll.
Establish the Brand
As part of this effort, AQUILA worked through a rebranding campaign to reclaim 301’s position among the top buildings in the CBD and the 301 Congress brand. Our in-house marketing team worked with branding experts to design a new logo and rework all the marketing material for the building to show the market that this was a new era for the property. Amenities maps were created showing the stellar location, new photography was taken and a new brochure was created to market the building.
Restack the Tower
In June 2013, 301 Congress’s start-up bet paid off. WhaleShark changed its name to RetailMeNot and filed an IPO, sparking a major expansion for the company. The firm originally occupied the full seventh floor and three-quarters of the eighth floor. In 2013 they took the fourth and sixth floors and in 2014 they took the fifth floor. Finally, in 2015 they took the balance of the eighth floor secured an option on the ninth floor, and extended their lease 42 months, expiring January 2024.
This single tenant solved the lower elevator bankroll and allowed AQUILA to do a major restack of the building. Throughout the process, the leasing team was able to terminate some leases with lower-tier firms who were paying below-market rents, upgrade some top-tier tenants to the upper tower, and significantly push rental rates, while also driving occupancy up to 97%.
During AQUILA’s tenure leasing 301 Congress, the building saw extraordinary results:
- Asking NNN rates went from $22 to $33.50 – a 52% increase.
- Occupancy rates were raised from 76% in Q1 2010 to 97% in Q1 2015.
- Occupancy of over 90% has been maintained for four years (17 consecutive quarters).
- 80 transactions have been completed since 2007, totaling 704,942 square feet.
- The building now competes in asking rate and stature with its peer properties such as 100 Congress, San Jacinto Center, and 111 Congress.
- An all-star rent roll was secured, including prominent firms such as RetailMeNot, Teza Technology, Gerson Lehrman Group, and Morgan Stanley.
- The property value was increased by nearly 100%.
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