Austin’s talented workforce and growing economy has helped sustain an incredibly strong real estate market.
This past year a number of large tech companies expanded their real estate presence in Austin by leasing space in some of the city’s prime office developments.
In this article, we will countdown the six largest office leases (with so many big deals this year, we couldn’t pick just five!) that that were signed in the Austin area in 2018.
6. Bank of America
Size: 53,000 SF
Building: Third + Shoal
Industry: Financial Services
In Q1 2018, Bank of America leased three of the upper floors (53,000 SF) at Third + Shoal, the downtown office tower that replaced the old Austin Music Hall.
The project is being developed by Austin-based Cielo in partnership with Dallas-based TIER REIT. The building is primarily leased by Facebook, who signed a significant prelease in 2017.
While most of the large transactions this year were driven by tech expansion, this is actually a move to consolidate and improve efficiency by Bank of America.
The bank currently has two downtown offices, split between 111 Congress (23,000 SF) and 515 Congress (28,000 SF) .
The bank plans to relocate all operations from the 111 Congress office and a majority of its operations from its current office at 515 Congress to Third + Shoal by the first quarter of 2019. The retail bank in the lobby of 515 Congress will remain, but the commercial bank and business bank as well as its U.S. trust private wealth management division and Merrill Lynch division will all move to Third + Shoal.
With Third +Shoal, it really puts us in the middle of the tech corridor… being next to some of the growth that is happening in downtown Austin really provides a unique [opportunity] for us.”
– Nikki Graham, Austin Market President, Bank of America
The ground floor of Third + Shoal will include a “high tech banking center without tellers where customers can access financial services via video conferencing and touch screens,” Graham shared with the Austin Business Journal.
This move by Bank of America will also leave two large vacancies totaling 51,000 SF between 515 Congress and 111 Congress. It will be interesting to see who fills these large vacancies coming to market soon.
5. HEB / Favor
Size: 89,577 SF
Industry: Grocery Retail
HEB signed one of the largest office leases of the year in 2018, not for a new grocery store but a tech center.
HEB is leasing 81,600 SF in the new development UpCycle on Austin’s eastside. The location will be home to HEB’s tech center and will also house Favor, an on-demand delivery app company that HEB recently acquired.
Denver-based developers EverWest Real Estate Partners developed the project after acquiring the site from Cypress Real Estate Advisors.
This state of the art space will be a hub for creativity and innovation as we continue to develop the ultimate digital experience for our customers”
– Jag Bath Chief Digital Officer, HEB; President and CEO, Favor
This office is set to open in the spring of 2019.
Size: 89,577 SF
Building: 801 Barton Springs
WeWork, the world’s largest coworking company, kicked off the year by signing an 89,577 SF lease for all of 801 Barton Springs. The transaction was brokered by AQUILA, and the project was a spec development by Generational Commercial Properties with financial support from HTZ Investments of Houston. Runa Workshop designed the building, and WeWork managed the interior design and build-out.
801 Barton Springs marked WeWork’s fifth Austin location showing the strength of the coworking market in Austin, Texas.
This location holds 1600+ desks, 22 meeting rooms and 8 lounges over 4 floors and is rumored to already being close to capacity.
This location is WeWork’s first location south of Lady Bird Lake and provides members easy access to south and west Austin without the need to go into downtown.
3. Parsley Energy
Size: 302,000 SF
Building: 300 Colorado
Parsley Energy, an Austin-based oil and natural gas company, preleased the entire 302,000 square feet building at 300 Colorado in January 2018.
The 32-story tower is expected to break ground in 2019 and deliver in December 2020.
Atlanta-based Cousins Properties is developing the building at an estimated cost of $175 million. Parsley Energy is familiar with Cousins Properties as the company also developed Colorado Tower, home to Parsley Energy’s current Austin office.
“Cousins has developed some of the premier office properties in Austin and this (new) building will be no exception,” Bryan Sheffield, Parsley’s chairman and chief executive officer, said in a written statement. “In addition to the quality of their properties, Cousins has demonstrated a commitment to meeting our business needs and helping facilitate our rapid growth.”
The Austin real estate community is also excited about this new lease.
We are pleased to see another successful company thriving in Austin, especially an expanding headquarters in our downtown corridor.”
– Gary Farmer, Chairman, Opportunity Austin
Farmer, the Chairman of Opportunity Austin, said in a statement that he believes this move will diversify Austin’s economy, making it a more attractive destination as a whole. Opportunity Austin is an economic development initiative led by the Austin Chamber of Commerce.
Size: 307,771 SF
Building: Block 71
Industry: Employment Services
In 2Q 2018, Indeed signed one of the largest leases of the year, preleasing the top 10 floors (307,771 SF) of Block 71, located at 200 W 6th St.
Dallas-based Trammell Crow is developing Block 71 specifically with tech companies in mind. The building will have first class amenities such as a fitness center, dedicated conference center and outdoor terraces. In addition it will have large floor plans with an average size of 33,000 SF and as an offset core, which are particularly attractive to tech companies.
Indeed currently occupies 57,261 SF at 5th + Colorado, but plans to relocate its downtown office to Block 71 upon completion.
Construction for Block 71 began in May of this year, with plans to deliver in early 2021. Upon completion, the project will be the largest office tower in the CBD at 709,000 SF.
We are committed to growing in Austin, a city that is a proven tech hub with excellent access to talent and a community that encourages innovation”
Indeed has backed up this statement by signing two of the largest leases of the past two years, totaling 615,000 SF in the Austin Market. In 2017, Indeed signed the largest office deal of the year, when it leased the entire 310,000 SF at Domain Tower. It is clear Indeed believes in its company and Austin’s talent pool, setting the trend for other companies to follow suit, signing large leases and consolidating operations in new developments.
Size: 316,345 SF
Building: Domain 12
Much like Indeed, Facebook is betting big on the Austin talent pool.
[The lease at Third + Shoal will] expand our presence in the Austin area as part of our continued commitment to this thriving technology community. We’re delighted to be here and excited for what the future holds.”
– Katherine Shappley, Vice President, SMB North America, Facebook
Facebook showed its commitment by signing a prelease for all of Domain 12, a total of 316,345 SF, in Q3 2018.
The building is currently under construction and should be completed in the fourth quarter of 2019. Domain 12 is being developed by Dallas-based TIER REIT and Austin-based Endeavor.
Similar to Indeed, Facebook also had one of the largest leases of the year in 2017, when it signed a lease for 231,507 SF at Third+Shoal.
In the past two years alone, these two tech giants have signed a total of nearly 1 million square feet in new, quality developments showing confidence in their companies as well as the city of Austin. Facebook and Indeed also are showing that they prefer to sign suburban as well as CBD leases, as both have offices in downtown and in the Domain, which is an interesting trend to follow.
As you can see, the major theme driving large lease transactions in Austin is access to a large educated workforce with a price point more desirable than the West Coast alternatives.
Almost every company that signed a large lease in the Austin area this past year cited Austin’s talent and quality of life as the main reasons behind their continued commercial real estate investments in the city.
For a full list of large leases (over 20,000 SF) that took place in the last quarter, download your free copy of our latest office market report.
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