This article was originally published in AQUILA’s 4Q 2018 Austin Office Market Report. This article will not be updated, but please contact us if you have specific questions regarding the information.
Since Apple’s announcement that it will build a new campus in Austin, our brokers have been fielding questions about the company’s Austin history and current presence. Apple’s history in Austin is interesting, both for its length and for the sheer volume of real estate involved.
Members of the AQUILA team have interacted with Apple since it first appeared on the scene in Austin in the early nineties and have continued to foster a relationship with the iPhone maker through AQUILA’s relationship with the Austin Chamber of Commerce’s Opportunity Austin program. In what follows, we leverage our perspective to take a deep dive into Apple’s history and presence in Austin through the following topics:
- Apple’s first move into Austin
- What Apple’s Austin presence looks like today
- Apple’s upcoming Austin campus
- Potential impact of Apple’s expansion
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Apple Comes to Austin
Apple arrived in Austin in 1992 with an office lease of roughly 200,000 square feet at Promontory Point in Northeast Austin. In the same year, the company purchased land at what is now 7700 Parmer from the Robinson family with the intention of building a campus for its Austin division.
However, due to financial difficulties in the 1990s, the company was unable to follow through with its campus plans and sold its land to Freescale/Motorola, which successfully constructed its own campus on the site.
Between 1992 and 2000, Apple also leased 39,000 square feet at Braker Center III, giving the company approximately 239,000 square feet in Austin, spread across the North and Northeast submarkets. Then, in the early 2000s, Apple consolidated its Austin operations from Promontory Point and Braker Center into 275,000 square feet at Riata Crossing (now known as Parmer Riata) in the heart of Austin’s Northwest submarket.
Apple’s Parmer Riata campus
Apple Grows in Austin
In 2010, Apple continued to grow its footprint in Austin by purchasing Intrinsity, an Austin-based chip designer. Originally occupying 20,000 square feet at Lake Pointe Center on Bee Cave Road, Apple moved the roughly 100 employees of Intrinsity into a new 55,216-square-foot lease at Vista Ridge II in Austin’s Southwest submarket, separate from Apple’s primary Austin location in the Northwest.
Moving forward to 2012, Apple began accelerating its growth in Austin by leasing 27,361 square feet at Highflex Technology Center, adjacent to its Parmer Riata offices in Northwest Austin. By this time Apple had also leased more space at Parmer Riata, giving them roughly 400,000 square feet at that location.
Additionally, Apple bought three tracts of land from McShane Development Co., also adjacent to Parmer Riata, with plans to build an Austin campus that would receive an estimated $36 million in incentives and would provide 3,600 jobs. Clearly, Apple was making plans to continue expanding its operations in Austin.
By 2015, Apple had developed seven Class A office buildings on this land, today known as Apple’s Americas Operations Center. These properties comprise 1,105,436 square feet of office space, greatly increasing Apple’s footprint in Austin. Apple also purchased the four buildings it fully occupied at Parmer Riata in 2015.
In 2016, Apple leased all 215,000 square feet of space at Capital Ridge in Southwest Austin, moving its Intrinsity/chip design group out of Vista Ridge II and keeping the office in the Southwest submarket (and separate from Apple’s primary Austin campus as it had been since Apple acquired the company). By this point, Apple’s Intrinsity acquisition had been attributed with 500 additional Austin jobs.
Today, Apple owns or leases approximately 1.7 million square feet of office space in Austin and employs roughly 6,200 people, spread across its Americas Operations Center, Parmer Riata, Parmer Business Park, and Capital Ridge.
While technically separate properties (Parmer Riata is now owned by Karlin Real Estate), the collection of buildings at Apple’s primary Austin location form a true campus community for Apple in Northwest Austin, something only a handful of companies have been able to accomplish here.
Apple’s Office Distribution in Austin, Texas
Apple’s Future Austin Headquarters
On December 13, 2018, Apple announced plans to build a new campus in Austin, not far from its existing campus and within the jurisdiction of Williamson County. Apple expects the new campus to initially house 5,000 new employees, with room to grow to 15,000 employees and make Apple the largest private employer in Austin. Development of the campus will involve an estimated $1 billion investment by Apple, and the final product will contain 50 acres of open space and run completely on renewable energy.
Location of Apple’s New Austin Campus
Bart Matheney, a founding principal of AQUILA Commercial and long-time resident of Austin, feels Apple’s expansion in Austin will “further solidify Austin’s status as a technology center and will continue to drive employment in the far Northwest Austin and Williamson County region.”
Matheney is not alone in his view that Apple’s decision will be beneficial for Austin. Steve Adler, Austin’s mayor, says “Apple has been a vital part of the Austin community for a quarter century,” and he is “excited they are bringing more middle-skilled jobs to the area.”
Williamson County Director of Administration Rebecca Clemons shares a similar outlook, saying the expansion “is a perfect example of the astounding growth and opportunity that are possible when a company and a community work together.”
Apple provided a few details regarding the development itself, explaining that site preparation can be expected to begin in 2019, with the first buildings delivering 36 months after construction begins. The campus will be built on 133 acres of the well-known Robinson Ranch site, a large swath of land in Northwest Austin, which developers have been trying to get their hands on for some time. Estimates indicate the campus will contain roughly 3 million square feet of space, 2 million of which will likely be office and research space.
Location of Apple’s New $1B Campus
Unlike Amazon’s recent search for a new campus, which received massive amounts of publicity, Apple’s announcement came as a surprise to many. Apple received no incentives from the City of Austin for the expansion, but could potentially receive up to $25 million in grants from the Texas Enterprise Fund. A vote by Williamson County commissioners on December 18, 2018, also confirmed that Apple will receive a 65% property tax rebate over 15 years from Williamson County.
Potential Impact of Apple’s Expansion
As with any major expansion, concerns have been raised about how the influx of new employees will impact the area surrounding the new campus. With the potential for 15,000 employees descending on the campus every day, traffic could clearly be an issue, and the question also stands of how the area’s housing market will react as new residents begin to pour in to fill some of these new jobs.
Luckily, this expansion is not Apple’s first rodeo, and, by looking at the company’s past expansions, we can get a good idea of how the market is likely to react as these changes take place.
In 2013, Cupertino City Council gave approval for Apple to begin construction on Apple Park, a roughly 3 million-square-foot building intended to house more than 12,000 of Apple’s employees. Also known as “the spaceship” due to its unique circular design, the campus was to be built on a site previously occupied by a Hewlett-Packard campus, not far from Apple’s existing Cupertino, California location.
While Cupertino and other tech hubs were already experiencing high levels of housing price growth prior to 2013, the announcement greatly accelerated that growth in neighborhoods close to the proposed site. From 2013 to when the campus officially opened its doors in 2017, home prices within one mile of the campus grew at an average rate of 18.4% per year, 3.4% above the Santa Clara County average. In fact, between 2015 and 2016 prices grew even faster at 20.5%, double the county’s rate over that period. Home prices near the campus continue to set records for the area, with 624-square-foot homes being listed for $5.5 million and offers being made at $600,000 over the asking price. Whether homes near Apple’s new Austin campus will experience similar growth has yet to be seen, but, with an already tight housing market in the area, it is not unlikely that homeowners will soon begin receiving purchase offers well above what the home was previously thought to be worth.
Another side effect of Apple Park is that it has led to more traffic in and around Cupertino, especially in the surrounding neighborhoods. A Transportation Impact Study done for the City of Cupertino in 2013 shows an estimated 35,106 daily vehicle trips, causing many intersections around the campus to be rated with an “unacceptable level” of traffic. Despite offering shuttles for employees and a 2017 decision by Cupertino to establish a traffic impact fee to offset traffic concerns, a limited public transportation system still leads many Apple employees to drive to work.
With that said, the positive financial impact of Apple’s new Austin campus could offset some of these potential drawbacks. Like many tech companies, Apple is known to pay its employees handsomely, with Austin salaries for mid-level employees ranging between $80,000 to $130,000 annually. This is well above the $51,840 average salary for the Austin-Round Rock MSA, giving these employees ample disposable income to spend on goods, services, and entertainment in and around Austin.
Based on a 2013 Economic Impact study, the 23,400 employees directly employed by Apple in Cupertino were expected to indirectly support an additional 17,700 jobs in the area, a ratio of .75 jobs supported per 1 Apple employee. Applying that ratio to Apple’s forecast for its new Austin campus, the 15,000 employees working there could potentially support 11,250 jobs in Travis and Williamson Counties. Although Williamson County will be missing out on 65% of property taxes from the campus for the first 15 years, the taxes and business generated by these employees living in the area will likely have a significant economic impact.
Conclusion
Apple’s expansion announcement is an exciting new addition to the long history that Austin and Apple have shared. Austin’s image as a tech-savvy city with a workforce of young, intelligent and motivated employees seems to fit Apple’s needs, and the addition of a new hub of innovation in Northwest Austin will surely lead to even more development in an already strong and growing submarket.
If you want to learn more about the Austin real estate market, download your free copy of our Austin Office Market Report.
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