Loading...

Follow AQUILA Commercial on Feedspot

Continue with Google
Continue with Facebook
or

Valid

If you are the landlord of an office building, chances are you have run into a few problems along the way. From marketing your building to negotiating with tenants, being a landlord can be a time consuming and frustrating process to take on.

Luckily, landlord brokers (also known as “project leasing brokers” or “agency leasing brokers” ) are there to assist landlords with these issues. Our experienced asset services team have outlined a few of the most common problems landlords face, and how the right landlord broker can help solve them.

In this article we cover those common problems, including:

  • Lack of leasing activity
  • Property is performing below the market
  • Not enough time to properly lease available space
1. My Property (or Space) Is Not Leasing

One of the most common issues faced by landlords is a property or space being left vacant for an extended period of time. When this happens, the landlord not only misses out on income from the space, but has to spend time marketing the space and chasing leads that may not end in a signed lease.

Landlord brokers, on the other hand, are perfectly suited for tackling this issue head on. Not only do they make a living from marketing available space and chasing leads, they also have the knowledge and resources to make that process as quick and painless as possible.

Landlord Brokers Have Connections

If a landlord broker has been active in a city for any reasonable period of time, they will likely have built relationships with other brokers active in the market. This is a huge benefit when it comes to leasing vacant space as those relationships can be leveraged to identify which tenants are in the market and whether their needs are in line with the space you have available.

Read Now: Interviewing Leasing Firms for Your Commercial Property? 5 Questions You Must Ask

A landlord experiencing difficulty identifying potential tenants and getting their calls returned from tenant representation brokers could see a major benefit from hiring a landlord broker. After all, people like working with the people they know, so why not hire someone who has already spent the time building those connections?

Landlord Brokers Have Access to Listing Sites

As with residential real estate, it is important to list available commercial space on major listing websites to advertise that it is available. By making the information public, the hope is to generate as much demand as possible with potential tenants.

However, listing sites for commercial real estate (CoStar, Loopnet, etc) can cost upwards of thousands of dollars per month for an account, making it unlikely that a landlord will be able to post available spaces on their own.

Landlord brokers, on the other hand, will almost always have access to these sites and be able to list your space for you. This ensures your space is being seen by as many eyes as possible, giving it the best chance to be leased within a reasonable time frame.

Landlord Brokers Are Experts at Marketing Space

In a competitive market with low vacancy like Austin, it takes a lot more than listing a space on a website to generate sufficient interest. However, most landlords do not have the time or the skill necessary to devote hours of time to creating fliers, press releases, floor plans and more.

That is where a landlord broker can save the day once again.

Landlord brokers are experts at promoting space through marketing efforts, and many brokerages have a team of marketing professionals on staff to create the collateral needed to lease space efficiently in a market like Austin. On top of the traditional fliers and emails used to promote space, brokerages today are utilizing drone footage, content marketing, custom promotional campaigns and more to fit the needs of every property they represent.

Read Now: What Marketing Materials Should A Commercial Leasing Firm Provide?

When you hire a landlord broker, not only are you receiving their expertise, but the expertise of their entire team as well. 

2. My Property Is Performing Below the Market

The second most common problem many landlords face is having a property that doesn’t seem to be performing as well as other comparable buildings in the market. Whether it be a lower rental rate, more tenant turnover or simply more vacancies, it can quickly become a point of frustration to feel that a building is not performing at its full potential.

Luckily, a landlord broker can help solve this problem on two fronts: research and leverage.

Landlord Brokers Have Market Data At The Ready

For many brokerage teams, market data is the backbone of their business. In order to achieve the best results for their clients, landlord brokers put a lot of time and effort into researching the market, uncovering trends and identifying opportunities to pursue. 

Want the latest Austin market information? Check out our latest Austin Office Market Report.

Through this research, landlord brokers can provide landlords with the most up-to-date information that can be used to bring a building up to par with its competition. If, for example, market data indicates that buildings with a certain type of amenity are receiving a higher rental rate, the landlord broker will be able to identify that trend and recommend that the amenity be added to the building in question. Market data can also give the landlord an idea of what other landlords in the area are charging for parking, whether they have limits on density, how many concessions are being offered and more, all of which have an impact on a building’s performance.

Unless you want to devote your own time to collecting this information and pulling insights from it (which can be difficult considering much of this information can only be gathered through relationships with other brokers), it is highly recommended that you utilize the expertise of a landlord broker.

Landlord Brokers Are Experts at Creating Leverage

Along with the collection of research comes leverage. By having an understanding of how other building in the market are performing and what leases are being signed at, the landlord broker is able to use that information in the negotiation process.

While a landlord may be able to create similar leverage on their own, having a landlord broker on the team could only add additional leverage.

3. I Don’t Have Time to Lease My Property

Lastly, many problems that a landlord will face when leasing a property on their own come down to not having an adequate amount of time to devote to the property. Unless your full time job is devoted to the management and leasing of your property, chances are that other activities demand your time, which will interfere with the necessary tasks of taking calls from potential tenants, touring available spaces and more.

Hiring a landlord broker can take all of those activities off of your hands, leaving you free to devote time to other activities without having to worry about the leasing of your building being a time-consuming process.

Conclusion

As you can see, hiring a landlord broker can solve a multitude of problems for landlords, especially those not interested in devoting all of their attention to the leasing of their building.

If you would like to learn more about the services landlord brokers provide, reach out to our landlord team today.

Related Articles: 

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Since the early 1930’s, Austinites have been resolving civil and family matters within the walls of Heman Marion Sweatt Travis County Courthouse in downtown Austin. However, soon these legal matters will be resolved in a brand new, highly efficient courthouse with 25 courtrooms, a law library and more.

In the same area as the new courthouse, a number of office and multifamily developments are also underway that are expected to bring new life to the northern edge of downtown that lies between the Capitol and the University of Texas campus.

This article will dive into the history of the current courthouse and what the makeup of the area will look like once these development projects are complete. We cover: 

  • The History of Sweatt Courthouse
  • The new site of Austin’s Civil and Family Courts facility 
  • An overview of the current development plans in the area
History of Sweatt Courthouse

Travis County’s civil courthouse is currently located at West 11th and Guadalupe street and was built in 1931. The building was first designed to house just four courtrooms but has been reconfigured over the years to accommodate 19, with demand only continuing to increase.1 

The Heman Marion Sweatt Travis County Courthouse in Austin, Texas. Photo courtesy of Chris Vreeland.

Due to the building’s age and the utilization of its facilities beyond their originally intended use, efforts to relocate the courthouse to a new facility have been in the works for years. However, even as recently as 2015 voters turned down a $287 million bond that would have paid for the construction of a new courthouse at 308 Guadalupe Street.2

Development Plans for the New Courthouse

After a few more years of negotiations and site selection, a development plan for the new courthouse finally started to move forward. In July 2018, Travis County Courthouse Development Partners, a group led by Hunt Companies, Inc. was selected to lead the project at a new site. The new Travis County Civil and Family Courts Facility will be located at 1700 Guadalupe Streetand is planned to comprise 430,000 sf over 12 stories.3 

The new courthouse will also include:

  • 25 Courtrooms 
  • Dedicated spaces for child testimony 
  • Child care center 
  • Large multi-function room
  • Law library 
  • Self Help center
  • Community plaza
  • 4-level underground parking garage

Renderings of the new courthouse project at 1700 Guadalupe Street. Image courtesy of Gensler.

Since the initial plans were released, Hunt Companies has announced potential for a second phase of the development, a 14-story office tower 60 feet from the courthouse. Together, the two towers will consist of 725,000 sf.4

All in all, it is estimated that this project will cost $334 million and will be paid for with a mix of county funds and certificates of obligation to be paid back over 20 years.5

New Developments Near Austin’s New Courthouse

In addition to the Travis County Civil and Family Court development, several separate private and public sector development projects are underway and planned in the surrounding area.

Developments surrounding the new courthouse in Austin, Texas.

Texas Capitol Complex Transformation

For years, developers have targeted areas closer to the heart of the CBD (south of the capitol) or projects near West Campus (north of Martin Luther King, Jr. Boulevard), largely ignoring the middle ground close to the Texas State Capitol. The Capitol Complex transformation aims to call attention back to this area and spark a change for the future.

Travis County’s goal is to build a walkable outdoor center that can be used by state employees as well as Austin’s citizens and visitors. Completion of the initial phase is estimated for May 2022.6 Phase I of this project will include:

  • George H. W. Bush Building: 14-story, 603,000-sf office building located at 1801 Congress Ave., the site of a former surface parking lot, estimated completion May 2022
  • 1601 Congress Ave: 12-story, 420,000-sf office building, estimated completion February 2022
  • Additional Parking: 3,800 parking spaces between underground and above-ground garages
  • Texas Mall: A pedestrian-oriented mall spanning from Martin Luther King Jr. Boulevard to 16th Street, formerly Congress Avenue

An additional two phases are planned for the project, which have the potential to add over a million square feet of office space. 

Page is the lead architect for this project.

Rendering of the Texas Mall, a part of the Texas Capitol Transformation project. Image courtesy of Page.

Read Now: The Highland Redevelopment in Austin, Texas: What’s Planned & Under Construction

410 Uptown

Address: 410 West 18th Street
Type: Office
Size: 186,960 SF

Rendering of 410 Uptown, a proposed office tower at 18th & San Antonio Streets.

410 Uptown is a proposed office development that will be located on the corner of West 18th Street and San Antonio Street, just a block from the site of the new courthouse. The site is also a block from the University of Texas campus and a half-mile to the State Capitol

The 12-story office building will be 186,960 sf and offer 2.5:1000 structured parking.

Gensler is the architect for this project.

Innovation Building

Address: 1836 San Jacinto Street
Type: Office
Size: 207,000 SF

Rendering of the ERS Innovation Building. Image courtesy of STG Design.

The Employee Retirement System of Texas (ERS) is significantly expanding its presence at its existing site at the northeast corner of the Texas Capitol Complex. ERS plans to keep it’s existing main building, but will demolish a smaller annex structure to make room for this new development. 

The new building will be home to both Class A office space and 15,000 sf of retail.7 The project will be nine stories in total, consisting of one retail floor, three floors of above ground parking, four floors of office space and a top floor for terrace use.8 

STG Design is the architect for this building. The project is expected to be finished in 2021.

17th Street Condos

Address: 1615 Guadalupe Street
Type: Multi-Family
Size: 117 Condos

Rending of the 17th Street Condos in Austin, Texas. Image courtesy of Rhode Partners.

Reger Holdings has plans for a new “moderately priced” condo complex at the corner of Guadalupe Street and West 17th Street.

This 140,000-sf development will be catty corner to the new courthouse. The project is expected to break ground in October 2019, and construction is slated to last 22 – 24 months. 

Rhode Partners is the architect for the project. 

1400 Lavaca (SXSW Headquarters)

Address: 1400 Lavaca Street
Type: Office
Size: 143,988 SF

Rendering of the SXSW headquarters building in Austin, Texas. Photo courtesy of Greenbelt Commercial.

SXSW is wrapping up construction on its new headquarters with expected delivery in 2Q 2019.

This Class A office building will stand 13 stories tall and include five levels of parking. Development plans have shown emphasis on the use of green space and saving the original oak trees on street level.

The building is mostly preleased with WeWork and Butler Snow taking 64,967 sf and 20,816 sf respectively in addition to the estimated 45,000-sf that SXSW will occupy.

Greenbelt Commercial is the developer and Gensler is the architect for this project.

Otis Hotel

Address: 1901 San Antonio Street
Type: Hospitality
Size: 347 Rooms

Rendering of the Otis Hotel in Austin, Texas. Image courtesy of White Lodging.

White Lodging Services is building a new, unique hotel in the Campus District. While half of the hotel will be dedicated to the traditional Marriott brand, the other half will contain a boutique hotel experience, a first for White Lodging in Austin. The new project will include a blend of Austin’s historic music and artistic culture, including vinyl record players in every room, paired with modern amenities like a rooftop pool. 

This 11-story hotel will allow visitors to easily access campus related activities, like tailgating or attending guest speakers, while remaining close to downtown shopping.9

Construction on this project is underway, and the hotel is scheduled to open early 2020. 

HKS Hospitality is the architect. 

Alexan Capitol Tower

Address: 700 E 11th St
Type: Mixed Use
Size: 276 Apartments, 9,176 sf of Office

Rendering of the Alexan Capitol Tower planned for East 11th Street in Downtown Austin. Image courtesy of GDA.

The tallest Alexan apartment tower in Texas is planned to be built a few blocks east from the Texas State Capitol building. The 30-story project is impacted by the Capitol View Corridor.

The tower will have 24 floors of multifamily (276 units total) atop eight total floors of parking (three underground and five above) and 9,176 sf of office space on the fifth floor. The 30th floor will be home to a private lounge, pool and clubhouse for resident use. In addition to the deck level amenities, the project will also include a fitness center, a dog park and wash, and a golf simulator.

Trammell Crow is the developer and GDA is the architect for this project.

Conclusion

What does this mean? In short, growth.

Austin has greatly expanded since the construction of the Civil and Family Courthouse back in 1931 and doesn’t show signs of slowing down. 

The new courthouse is surrounded by promising developments that are going to help shape downtown Austin’s future. People looking for new places to live, work, or shop will soon have even more reason to visit this area and take advantage of all the exciting opportunities these projects will bring to the city.

To find out more about Austin’s commercial real estate market, including a full list of all developments in the pipeline in both downtown Austin and across town, download our latest Austin Office Market Report. 

 

Popular Articles:

1 https://www.statesman.com/news/20180711/travis-county-settles-on-17th-guadalupe-site-for-new-civil-courthouse/1
https://www.bizjournals.com/austin/news/2018/02/21/travis-county-seeks-developer-location-for-new.html
http://www.tccourts.com/
https://austin.towers.net/heres-a-closer-look-at-travis-countys-new-downtown-courthouse/
https://communityimpact.com/austin/city-county/2018/12/11/initial-cost-estimate-new-civil-and-family-courts-facility/
https://www.bizjournals.com/austin/news/2018/07/31/work-starts-on-office-towers-underground-parking.html
https://www.cbre.us/about/media-center/cbre-marketing-200000-square-foot-mixed-use-building-for-the-employees-retirement-system-of-texas
8 CoStar
https://www.bizjournals.com/austin/news/2018/09/17/first-loowhite-lodging-breaks-ground-on-347-room.html
10 https://austin.towers.net/30-story-alexan-capitol-apartment-tower-planned-at-11th-sabine/
11 https://austin.towers.net/fun-facts-on-downtowns-upcoming-alexan-capitol-apartment-tower/

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

When looking at leasing office space for the first time, you may encounter a number commercial real estate terms that you’ve never encountered before. 

If it seems confusing, it’s not your fault. The commercial real estate world is full of industry jargon.

Our goal is to provide you with the tools you need to speak the commercial real estate language and feel confident on your search for your new office space

One of the most important and frequent terms you will come across during your search is “base rent.” 

In this article, we will answer the following questions: 

  • What is base rent? 
  • What does base rent include? 
  • Can base rent be negotiated?
  • What are base rent escalations?
What is Base Rent?

In a triple net or percentage lease, the base rent is the set rental rate that you will pay the landlord, before any additional operating expenses or revenue percentages each month.

For office leases, this rate is often quoted on a square foot per year basis, meaning that a 10,000-SF tenant paying a base rate of $20/sf will be paying $200,000 a year in base rent. 

You will typically see this written out as $20 NNN + opex. 

How Commercial Rental Rates are Calculated in Austin, TX - YouTube
What Does Base Rent Include?

This is where the landlord will derive profit from the building. The base rent of a space is the most realistic indication of the market value of the real estate. 

While other elements like your operating expenses are charged to cover the actual cost to own and maintain in the property, the base rent covers the cost the landlord incurred to purchase the building plus a premium to bring in revenue from the building. 

Can Base Rent Be Negotiated?

Because of this, base rent it almost always negotiable, while set costs like operating expenses are not. 

Typically, the higher the value of a property, the higher base rent the landlord will ask. However, if a leverage you have as a tenant, such as a long term lease requirement, a large size requirement, good credit, etc. the more you should be able to negotiate that rate down.

Find out why you should hire a tenant representation broker to help lead these negotiations: 7 Benefits of Hiring a Tenant Representation Broker

What Are Base Rent Escalations?

An escalation (also commonly called “bump”) is a marginal change that will increase the base rental rate of your space throughout the life of the lease. An escalation is a tool landlords use to protect themselves against inflation and changes in rental rates. An escalation only affects your base rate and is agreed upon during lease negotiation.  

There are three types of escalations that you will typically see: 

  • Amount: Each year the base rent will increase by a specified dollar amount. In Austin, you’ll usually see annual base rent bumps between $0.50 to $1.00.  
  • Percent: Every year the base rent will increase by a specified upon percentage each year. In Austin, this percentage is generally between 2% and 3% annually. 
  • Indexed: Indexed escalations are based on current economic conditions instead of an agreed upon fixed rate. These escalations are typically tied to a measure of inflation like the Consumer Price Index.

This escalation benefits the tenant because your escalation is fully tied to changes in purchasing power and will not increase the profitability of the landlord throughout the lease.

Conclusion

Understanding your base rent is a great first step toward understanding your commercial lease. 

To learn more about common office leasing terms, read our article Your Guide to the Elements of a Commercial Lease (Terms, Definitions). Or to learn more about rental rate structures, read Typical Types of Commercial Leases in Austin, Texas (NNN Lease vs. Gross Lease, more).

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Whether you are a current property owner or in the market to buy a property, understanding Austin’s zoning code is a crucial step to understanding your property’s value.

According to the City of Austin, the purpose of its zoning code is to create compatible land uses, ensure proper design and construction standards and promote the overall public good.

In other words, zoning tells you how big of a building you can build on your property and what the use of your building can be, i.e. residential, commercial, etc.

In this article, we will explain:

  • Zoning districts in Austin, Texas
  • The three main components of zoning
  • Development restrictions within zoning districts
  • How to find out what a property is zoned
  • What zoning could mean for you and your property
Zoning Districts in Austin, Texas

Each property in the City of Austin is assigned a zoning category, known as zoning districts.

Every property in Austin has a base zoning district; most districts are based on allowed use types, but some are location based. Each zoning district is represented by a code, such as CS (General Commercial Services), a use-based category, or CBD (Central Business District), a location based category.

There are 39 base zoning districts in Austin, that can be grouped into four different categories: Residential, Industrial, Commercial and Special Purpose.

Residential Zoning Districts

The Residential category includes 16 zoning districts pertaining to everything from ranches (Rural Residence – RR) to lake houses (Lake Austin – LA), and to single family houses (Single Family – SF) to multifamily (MF).

The City has seven different districts for single family properties and six for multifamily that dictate the size, density and type of construction allowed for each.

And although most commercial uses are restricted in residential zoned sites, civic uses are usually allowed to accommodate for schools, churches, daycares and even agriculture.

Industrial Zoning Districts

The Industrial category consists of the four zoning districts for warehouses, manufacturing, and research & development.

Although the industrial districts are intended to be used for manufacturing and warehousing, most commercial uses are allowed on industrially zoned sites. Residential uses are almost always restricted in these districts.

When compared to commercial districts, the height restriction and FAR max are quite a bit lower, resulting in a lower maximum density and height. Since developers almost always value a site based on what they can eventually build on the site under the site’s current zoning, these properties are typically less valuable than a commercially zoned property of the same size in a similar area in the eyes of a real estate developer.

Read Now: Evaluating a Property: Underwriting Commercial Real Estate Acquisitions

Commercial

The Commercial category has the most diverse set of development standards and is made up of 13 zoning districts, ranging from limited density categories such as Neighborhood Office (NO) with a FAR max of .35:1 to the Central Business District (CBD) category with a FAR max of 8:1.

The commercial districts have a wide range of permitted commercial uses, including offices, retail, hospitality and more.

In some commercial zones, industrial and residential use are also permitted while other areas restrict alternative uses.

Special Purpose

This category is rare to see and includes sites zoned for Airports (AV) and public areas (P) which are reserved for a civic or public institutional purpose.

A Planned Unit Development (PUD) is also in the Special Purpose category. The City defines a PUD as a large or complex single or multi-use development greater than 10 acres, planned as a single contiguous project that would otherwise exceed the standard development regulations. A good example of a PUD in Austin is the Mueller Development in East Austin

Combining Zoning Districts

The City of Austin may also combine districts to encourage multiple uses in a single development. In this case, when reviewing the zoning chart, you’ll see a series of codes like ‘CS-MU’ which indicate that the zone is designated for commercial services, but mixed uses (such as residential) are also permitted.

There are a variety of combining zoning districts you may encounter in Austin, but the three most notable are Conditional Overlays (CO), Mixed Use (MU) and Capitol View Corridor (CVC).

The full list and descriptions of the Combining Zoning Districts can be found on the City’s website.

Conditional Overlay

A conditional overlay is a modification to the existing zoning based on the specific circumstances presented by a site. The conditional overlay is more restrictive than the other restrictions that are already applicable to the property.

A conditional overlay may, for example, prohibit a permitted use authorized in a base district or restrict access to adjacent roads and require specific design features to minimize the effects of traffic.

Mixed Use Combining District

The Mixed Use Combining District can be applied in combination with a base zoning district to allow a combination of office, retail, commercial and residential uses within a single development.

Capitol View Corridor

Capitol View Corridors limit the height of structures within specific corridors around Austin. They are meant to preserve views of the State’s Capitol from publicly accessible landmarks such as the French Legation and the Texas State Cemetery.

Courtesy of City of Austin.

Three Main Components of Zoning

The City of Austin breaks down its zoning code into three elements – Allowed Use, Site Development Standards and Geography.

Allowed Use

The Allowed Use specifies the type of property that can be built on sites within a certain zoning district. Each zoning district typically allows for a variety of complementary uses such as single family residential, food sales and professional office.

Additionally, most Allowed Uses are not exclusive to a certain zoning district and are allowed in several zoning districts.

Uses can either be permitted, meaning they are allowed by right with no review required by the City; conditional, which needs Planning Commission approval or City Council approval; or Restricted, which means the use is not allowed under the existing zoning.

Site Development Standards

Site Development Standards are regulations that guide how buildings may be built on a site. They cover everything from building design to size and required landscaping.

Height Restriction

There are limits on building heights in all zoning categories in Austin, aside from the CBD (Central Business District) zoning district which does not have height restrictions. The height restrictions vary based on zoning category, but are typically 35 feet for single family zoned properties and range between 40 to 60 feet for commercially zoned properties.

Floor to Area Ratio (FAR) Maximum

FAR limits the density of a building and is stated as a ratio. The total size of the building that can be built on a site can be found by multiplying the lots size by the FAR.

The higher the ratio, the more dense the building will be. These higher ratios are typically found in urban construction.

Building Size = Gross Lot Area x FAR

For example, if the lot is 50,000 SF and the FAR is 2:1, you can build a building with 100,000 rentable square feet.

Surface parking and parking structures are not considered in FAR.

Setbacks

A setback is the required distance from the front, side and rear of a lot’s boundaries where a building is not allowed to be built.

Setbacks allow for space between adjacent buildings, as well as between the building and the streets around, typically for reasons of safety, privacy and environmental protection.

Courtesy of Underbuilt.

Neighborhood Compatibility

If two neighboring sites have different zoning districts, additional rules may be set by local officials to ensure that the adjacent sites are compatible.

For example a commercial services zoned property is next to a single family zoned property, rules may be put in place to  limit the development potential of the commercial lot such as additional setbacks and height restrictions (As Illustrated in the diagram below).

Courtesy of City of Austin.

Impervious Cover

Any surface that prevents water from seeping into the ground like buildings, driveways and garages is considered impervious cover. The City caps the ratio of impervious cover-to-lot size based on zoning districts as a means of flood prevention.

Geography

Of course, like everything in real estate, location plays a primary role in determining what type of zoning a site is given. All property within the City of Austin, plus land within Austin’s limited purpose jurisdiction, falls under the City’s development regulations and land use code and location is another important factor in how properties are zoned.

Zoning Districts Development Restrictions

In Austin, the following development restrictions apply.

Residential Zoning Districts
Zoning District District Title Minimum Lot Size Max Impervious Cover Max Floor to Area Ratio Max Units Per Acre Max Height
MF 1 Multi-Family Residence – Limited Density 8,000 SF 55% n/a 17 40 ft
MF 2 Multi-Family Residence – Low Density 8,000 SF 60% n/a 23 40 ft
MF 3 Multi-Family Residence – Medium Density 8,000 SF 65% .75:1 36 40 ft
MF 4 Multi-Family Residence – Moderate-High Density 8,000 SF 70% .75:1 54 60 ft
MF 5 Multi-Family Residence – High Density 8,000 SF 70% 1:1 54 60 ft
MF 6 Multi-Family Residence – Highest Density 8,000 SF 80% 70% X>54 90 ft
Industrial Zoning Districts
District Code District Title Minimum Lot Size Max Impervious Cover Max Floor to Area Ratio Max Height
IP Industrial Park 43,560 SF 80% 1:1 60 ft
LI Limited Industrial Services 5,750 SF 80% 1:1 60 ft
MI Major Industry 50 acres 80% 1:1 120 ft
R&D Research & Development 5 acres 50% .25:1 45 ft
Commercial Zoning Districts
District Code District Title Minimum Lot Size Max Impervious Cover Max Floor to Area Ratio Max Height
NO Neighborhood Office 5,750 SF 60% .35:1 35 ft
LO Limited Office 5,750 SF 70% .7:1 40 ft
LR Neighborhood Commercial 5,750 SF 80% .5:1 40 ft
CR Commercial Recreation 20,000 SF 60% .25:1 40 ft
GR Community Commercial 5,750 SF 90% 1:1 60 ft
L Lake Commercial 5,750 SF 50% 8:1 200 ft
CBD Central Business District n/a 100% 8:1 n/a
DMU Downtown Mixed Use n/a 100% 5:01 120 ft
W/LO Warehouse/ limited Office 43,560 SF 70% .25:1 25 ft
CS General Commercail Services 5,750 SF 95% 2:1 60 ft
CS-1 Commercial Liquor Sales 5,750 SF 95% 2:1 60 ft
CH Commercial Highway Serv 20,000 SF 85% 3:1 n/a
GO General Office 5,750 SF 80% 1:1 60 ft
How to Find Out What a Property is Zoned in Austin, Texas

If you are interested in determining the regulation around a specific property, you can look it up on the City of Austin’s Zoning Profile Report.

Once you’re on the zoning page, the search process is very straightforward. Type the property’s address into the “Address Search” bar and click the magnifying glass.

Your Zoning Profile Report will display your property profile, including the Zoning District as well as any zoning overlays that affect the site.

In an area with simple zoning requirements you will most likely see a simple code like “CS” or “LI”.

In a more diverse area, you may see a complex code which gives guidelines for each land use situation. For example, you may see a combined district “GO-MU-MF-5”. In this case GO (General Office) is the base zoning district that dictates the Site Development Standards, and the following codes set the overlays on the site. MU (Mixed Use) tells us that a mixed use project may be developed within the General Office site development standards and the MF-5 (Multi-Family Residence – High Density) overlay dictates the multifamily guidelines the developer must build within if multifamily is developed on the site.

What This Means For Sellers

If you are considering selling your property and believe it has development potential, the property’s zoning will be a big factor in its market value as developers usually value sites on a per buildable foot basis instead of per land foot. In some cases, it may be beneficial to consult a real estate professional to explore your options to rezone the property to maximize its value.  

What This Means For Buyers

It is important to understand the zoning of a property prior to closing, not only if you are planning on building additional square footage or changing the current use, but it will also impact the future resale value of the property.

If a property you are considering purchasing will need a zoning change, there are a few different ways to structure the acquisition to limit the amount of entitlement risk you assume when purchasing the property.

Whether you are buying or selling, it is important to remember that while zoning is a great place to start when evaluating a site, there are several other factors that could inhibit the development potential and permitted uses on a given site. All of this is something your commercial real estate broker should be able to help you with, so make sure your broker understands your current and future needs on your acquisition.

If you’d like to discuss your zoning questions further with one of our commercial real estate experts, please schedule your consultation today.

 

Or to continue learning about the Austin commercial real estate market, visit our Learning Center or read these popular articles:

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

While Austinites today are familiar with doing their weekend shopping at The Domain or Barton Creek Square, Austinites from yesteryear will remember spending their Saturday afternoons at one of the original shopping meccas of Austin: Highland Mall.

Although the mall is closed today, a new mecca of sorts is rising in its place. Austin Community College (ACC), in partnership with Redleaf Properties, is redeveloping the old Highland shopping mall into a new mixed-use project in North Austin. The project will include a new college campus, significant office, residential and retail components along with new parks and trails.

This self-contained ecosystem will significantly change the makeup of the Highland neighborhood and is already sparking new development throughout the surrounding area.

This article will dive into the history of the development and what the makeup of the area will look likeonce it is complete. We cover:

  • The key qualities of the Highland neighborhood
  • The history of Highland Mall, and how ACC acquired the site
  • An overview of the current redevelopment plans
The Highland Neighborhood’s Prime Austin Location

The Highland neighborhood refers to the area immediately surrounding the old Highland Mall, located on Airport Boulevard, just west of IH-35 and north of US-290/FM 2222.

The redevelopment is located at the heart of Austin, with access to many of the city’s major thoroughfares, including IH-35, US-290/FM 2222 and Airport Boulevard. Additionally, it is proximate to US -183, Lamar Boulevard and CapMetro’s Highland Station where the MetroRail Red Line stops.

The district is just three miles from the University of Texas campus, less than five miles from the Central Business District and ten miles from the Austin-Bergstrom International Airport.

Additionally, it is immediately surrounded by favorite Austin neighborhoods, Hyde Park and North Loop, and is just minutes from popular retail centers including Mueller, The Triangle and The Linc.

The Highland district is nearby popular Austin neighborhoods including Hyde Park, North Loop and Mueller, and is near Highland Station where the MetroRail Red Line stops.

Demographics of the Highland Neighborhood

To gain a better understanding of the Highland Mall area, it helps to look at the location’s demographic characteristics. For comparison, we have presented the data alongside the Domain’s demographics.

The population in a three-mile radius of Highland Mall is 173,998 with a projected five-year growth of 10.33%. In comparison, the Domain’s three-mile population is 120,506.

Highland’s current median age, household income and education in comparison to the Domain are demonstrated in the graphs below.

As you can see, the biggest takeaway from this data is how similar the demographics of the Highland area are to the Domain. Although slightly behind the Domain in terms of household income, the Highland area offers a comparably young, educated workforce.

WANT THIS REPORT AS A PDF?

Want to share this report with a colleague, save to your desktop for later, or print a copy for your records?
We know digital isn’t always the right format. For that reason, you can download a free PDF copy of this report.

 

The History of Highland

Highland Mall opened in 1971 as Central Texas’s first enclosed shopping mall. Notable anchor tenants like JCPenney and Dillard’s called the mall home, along with Austin-based Scarbrough’s and San Antonio-based Joske’s. However, it was quickly eclipsed a short 10 years later in 1981 by the opening of Barton Creek Square in southwest Austin. By 2006, anchor tenant JCPenney closed its doors, and the Domain opened a year later in 2007.

As the mall continued to decline, Austin Community College (ACC) began purchasing the buildings and surrounding land. Starting in 2010 with the acquisition of 18 acres and the Dillard’s building, ACC continued with its purchase of the Macy’s property and acquisition of Highland Mall’s ground lease in 2011 and 2012. By the end of 2012, ACC had purchased all of the buildings and approximately 80 acres at Highland Mall. When the mall officially closed its doors in 2015, ACC moved in and began renovating space to turn it into a college campus.

The ACC Highland Site Plan. Courtesy of RedLeaf Properties, LLC.

Redevelopment Plans for Highland

With the mall now closed and the acquisitions complete, extensive development is quickly taking off at Highland. ACC, with Redleaf handling the masterplan design, has released plans for a new college campus, office space, residential units and more.

The 81-acre development will include:

New Developments Near ACC Highland

In addition to the ACC Highland redevelopment, several projects have already popped up in the surrounding area as well.

These include:

Midtown Point

AQUILA is developing a 165,000-sf office at the old Highlander hotel site.

Renderings for the office development Midtown Point.

The City of Austin Planning and Development Office

Directly across the street from Midtown Point, the city has announced a 264,000-sf development that will house the new Planning and Development office. RedLeaf Properties, LLC and Ryan Co. are co-developing the project.

Highland Tech Center

Just to the north of ACC Highland, AQUILA is redeveloping an existing 65,000-sf office building. In addition, Slate is developing the surrounding four acres to the north and west into 300 apartment units and 3,500 sf of retail on the adjacent site.

Highland Tech Center in Austin, Texas

The Linc

Formerly Lincoln Center, The Linc is a retail center just east of ACC Highland that is currently undergoing renovations and retenanting. Popular Austin restaurant Easy Tiger recently opened a new location on the north end of the center. Other tenants include Vivo, Pluckers and the Austin Film Society. Lincoln Properties is the developer.

Easy Tiger at The Linc

Conclusion

So what does this mean? At the root, people.

Austin’s continued population growth justifies the seemingly endless development of new, more efficient communities. The Highland development is designed to be both walkable and transit friendly – a true “Live, Work, Play” environment – similar to the atmospheres of the Domain and upcoming Broadmoor redevelopment.

With a million square feet of office contained within this walkable landscape and the rejuvenation of a once popular hub of activity, the Highland Development will surely leave a lasting, positive impact on the area.

If you would like to learn more about the Austin real estate market, download your free copy of our 70-page Austin Office Market Report.

 

Or, to save this information for your records or to share with a colleague, download your free PDF copy of this report today.

Popular Articles:

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

To answer that question, we have taken a hard look to uncover exactly what it is that continues to draw new companies to our city and encourages existing companies to grow their operations here.

In this article, we go into detail on a few of Austin’s most enticing qualities, including:

  • Benefits of the city
  • The unique qualities of Austinites
  • How Austin’s business environment draws companies here
The City of Austin

Austin is the 11th most populous city in the U.S. with 950,715 residents and an estimated population of 1 million by 2020. The Austin – Round Rock MSA also has one of the highest growth rates in the country, coming in at 22.5% growth between 2010 to 2017.

Top 15 U.S. Cities by Population
Rank City Population
1. New York, NY 8,622,698
2. Los Angeles, CA 3,999,759
3. Chicago, IL 2,716,450
4. Houston, TX 2,312,717
5. Phoenix, AZ 1,626,078
6. Philadelphia, PA 1,580,863
7. San Antonio, TX 1,511,946
8. San Diego, CA 1,419,516
9. Dallas, TX 1,341,075
10. San Jose, CA 1,035,317
11. Austin, TX 950,715
12. Jacksonville, FL 892,062
13. San Francisco, CA 884,363
14. Columbus, OH 879,170
15. Fort Worth, TX 874,168
Source: U.S. Census Bureau

“Why are so many people moving here?” You may ask. Well, Austin is simply a great place to live.

Ranked the best place to live in the U.S. in 2019 by U.S. News and World Report, the city of Austin has transformed from a relatively quiet state capital into a bustling city offering opportunities around every corner. Its economy is robust, boasting a 3% unemployment rate versus 4% nationally, which is not surprising considering it was ranked the No. 1 most recession-recovered city in America in 2017.

Read Now: Why Austin, Texas is a Best Place to Live & Work

Top U.S. Boom Towns
1 Austin, TX
2 Salt Lake City, UT
3 San Jose, CA
4 Denver, CO
5 Raleigh, NC
6 Houston, TX
7 Dallas, TX
8 San Antonio, TX
Source: Forbes

Much of Austin’s recent notoriety in the business world has arisen from its popularity within the technology sector, with 138,500 jobs (14.1% of all jobs in Austin) concentrated in the technology industry across 6,500 different employers. In 2017, high-tech payrolls totaled $15.6 million, or 26.2% of the Austin metro’s total payroll. Ranked the best tech city in the world in 2017 by Savills, Austin is clearly making a name for itself among technology companies.

Largest Tech Companies in Austin, Texas
Company # of Employees in Austin
Dell 13,000
Apple 6,000
IBM 5,416
National Instruments 2,838
Oracle 2,000
HomeAway 1,500
Indeed 1,400
Amazon 900
Q2Banking 758
Facebook 700
Source: Built in Austin, 2017

Read Now: Apple’s Austin Offices & Headquarters: History, Details & Predictions

And while Austin is generally known as a hub of technology, that does not mean its economy is a one trick pony. Unlike cities in Silicon Valley, where tech companies can occupy as much as 60% of the city’s commercial real estate and employ 40% of the city’s jobs, no one company or industry dominates the Austin economy so significantly. In fact, the city has fostered a broad array of industries, from government to health services, giving it some resilience in the case of a downturn.

Major Employers in Austin, Texas
Employing 6,000 & over
Apple
Austin Independent School District
City of Austin
Dell Technologies
Federal Government
IBM Corp
Samsung Austin Semiconductor
Seton Healthcare Family
St. David’s Healthcare Partnership
State of Texas
University of Texas at Austin
Source: Texas Workforce Commission

Not to be overlooked, Austin is also quickly becoming one of the top cities for startups, ranking second in the nation for startup activity in 2018. Considering there were 105 startups for every 1,000 businesses in Austin in 2017, it is not surprising that venture capital funding has flooded into Austin in recent years. And with roughly 720,000 SF of coworking space throughout the city, there is no shortage of space for these startups to get off the ground.

 

The Unique Qualities of Austin, Texas

It’s not just the economic qualities of Austin that draw companies to our city; it also has a lot to do with Austinites themselves. According to the Austin Chamber of Commerce, 43% of the region’s population is in peak working years between 18 to 44 years old, compared to 36% nationally, and the Austin metro’s median age of 33.5 years old is four years younger than the national median of 37.5. Ranked the second most  millennial-friendly city in the U.S., Austinites present companies with a field of young and motivated employees willing to tackle the challenges of today’s modern work environments.

Austinites aren’t your average employee either; they are some of the most educated in the nation. Ranked in the top 10 most educated cities in America and the second best city for college graduates, a student population of 422,000 within a 200-mile radius provides one of the country’s strongest talent pools, leaving no shortage of employees to fill the ever-increasing number of jobs in the Austin metro. As for the Austinites in the Austin MSA who have already passed the college years, 42.8% hold a bachelor’s degree, putting Austin well above other Texas cities like Dallas and Houston.

Educational Attainment
MSA Bachelor’s Degree (or Higher)
1. Austin 42.8%
2. Denver 42.5%
3. Seattle 42.0%
4. Minneapolis 40.5%
5. Baltimore 39.5%
6. Dallas – Fort Worth 33.1%
7 Houston 31.3%
Source: U.S. Census Bureau

Between its highly qualified workforce and tremendous growth opportunities, it’s hard to find anything not to love about Austin (except maybe the traffic).

Read Now: Coworking in Austin, TX: Top Companies, Prices and Trends

Austin’s Business Environment

So, what else is influencing companies to move to and grow in Austin? Quite simply, Austin is good for business.

Ranked the best place to start a business in 2018, Austin is a business owner’s dream. The city’s favorable business tax structure, along with no state income tax for employees, makes Austin comparatively cheap as far as taxes are concerned. In 2016, Austinites paid an average of $87 per $1,000 of personal income, compared to $99 nationally according to the U.S. Census Bureau’s Annual Survey of State & Local Government Finances.

Initiatives like Opportunity Austin, a program focused on creating jobs for Central Texans, also help provide a solid foundation for businesses to thrive. And being located in Texas, often ranked as one of the best  states for business, doesn’t hurt either.

Austin has been the birthplace of numerous companies, from recent up-and-comers like Tecovas and Yeti to established, recognizable brands like Whole Foods and Dell.

The new Tecovas brick-and-mortar store on South Congress Avenue. Austin has been the birthplace of numerous companies, including recent up-and-comers Tecovas and Yeti. Photo courtesy of Tecovas.

The city has also been able to attract some of the largest companies in the world, with Amazon, Facebook, Apple, IBM and more all having a sizeable office presence. When it comes to business, whether large or small, it’s hard to go wrong by choosing Austin.

Conclusion

As you can see, it’s almost impossible to narrow down a single reason for why companies are choosing Austin. Our city has started to make a name for itself on the world stage, and the amount of growth it has experienced in recent years seems to confirm that we are doing things right.

Besides, our tacos are second to none, so why wouldn’t a company choose us?

To learn more about the state of the Austin office market, download your free copy of AQUILA’s comprehensive, 70+ page Austin Office Market Report.

Popular Articles:

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Combined with lighting, HVAC systems remain the largest consumers of energy in commercial buildings. While there are many practical ways to reduce energy consumption, preventive maintenance of your HVAC system remains one of the cheapest and most effective ways to uphold performance, decrease costs and increase the lifespan of your system.

In this article, we will explain the five simple steps you can follow to maintain your HVAC systems.

Commercial HVAC Maintenance Checklist

Although some maintenance tasks that ought to be restricted to HVAC professionals, there are many others that are quite simple and straightforward.

Therefore, your building maintenance staff can play a fundamental role in the upkeep and efficient running of your HVAC system.

With that said, here are some of the simplest HVAC maintenance tasks that can be carried out by pretty much everyone.

1. Change the Air Filters Regularly

In order for air to flow through your system efficiently, the filters need to be in good condition, otherwise they may restrict the airflow and result in your system having to work harder and, therefore, use more energy.

Dust, dirt and other small particulates are all common culprits of blocked and dirty filters, so if you carry out particularly “dirty” activities in your building, such as manufacturing or production, it’s even more important to examine your filters on a regular basis.

Ideally, you should change your filters as soon as they are visibly dirty., It is recommended that you carry out checks at least every three months, but there is certainly no harm in doing it more often if required.

2. Visually Inspect the System

Carrying out a simple visual inspection may seem obvious, but it is far less common than you may think.

Often, building engineers or managers don’t carry out any checks until after system failures arise.

In many cases these costly failures could have been thwarted much earlier, when they were likely smaller issues and less expensive to fix.

To perform a visual inspection, simply check all the major and minor components of your HVAC system and look for any possible sign that something may be wrong. That includes things like disconnected pipes, rust, leaks and dirty refrigerant lines.

Checking the vents is also very easy to do; they should be clear and free from anything that may cause a blockage such as leaves, sticks and mold.

Also, check to make sure your heating and cooling appliances have a clearance space of at least three feet.

3. Re-Calibrate Your System Bi-Annually

We advise that commercial property owners re-calibrate their HVAC systems before winter and again before summer in anticipation of a temperate increases or decreases. You’ll also need to make sure to adjust your thermostat settings to reflect that change. These minor adjustments may seem trivial but can result in major energy and financial savings.

Has the use and occupation of a certain part of the building reduced? Have shift patterns changed? Consider these types of questions on a periodic basis. You may have programmed your HVAC systems settings previously, but it’s wise to recheck to make sure the settings are still appropriate for the building’s current use.

4. Check & Clean Drainage Lines

Throughout operation both furnaces and air conditioners create water vapor, which needs to be efficiently funnelled out of the building to avoid structural damage.

Typically, this condensation is deposited through drainage lines into an exterior collection tray, where it naturally evaporates into the air. Over time this water tray can naturally attract a whole host of microbes including bacteria, algae and mold, all of which produce by-products that can lead to a system blockage.

In addition, if not emptied regularly, there is a chance that the tray could overflow and damage property. As a result, it’s important to routinely check if everything is working as required – drainage lines should be clear, the collection pan should not be overflowing and condensate should be evaporating as required.

5. Clean AC Evaporator & Condenser Coils

Evaporator and condenser coils are exposed to the air that circulates through them during operation. This air isn’t clean, meaning that dirt, fungi and mold is gradually deposited on them, which can have a significant impact on their efficiency.

For this reason, the coils should be cleaned at least once a year. This can be achieved using a range of commercial coil cleaners and pressurized air.

Unlike, the other tasks mentioned, many building engineers prefer to leave this task for their professional HVAC service check.

Professional HVAC Servicing

Although there are many tasks your regular maintenance staff can carry out, there are other tasks that need to be taken care of by a professional HVAC technician. This includes carrying out thorough diagnostics, maintenance and, if required, replacement and repair.

Energy Star recommends scheduling a professional pre-season service and maintenance bi-annually. The best time to have these performed are before winter and again before summer, as this will ensure everything is in order before you proceed into the seasons of greatest HVAC demand.

With professional and regular maintenance not only will you have the peace of mind that your system is safe but will also benefit from a system that is operating with maximum efficiency, thus making substantial savings and ensuring it provides optimum comfort throughout the year.

For other property maintenance tips, check out these articles:

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

The ability to expand your office footprint within your own building can be a valuable asset for quickly growing companies. But how do you do that in a competitive market like Austin, where spaces lease quickly and building vacancy is low?

This is why negotiating an expansion clause into your lease can be important.  

Read Now: Lease Negotiations: What You Need to Look for Besides Rental Rate

There are a number of different types of expansion clauses, each with their own intricacies. In this article, we will explain:

  • The three primary types of expansion clauses
  • The pros and cons of each clause type
  • Why landlords may be hesitant to offer expansion clauses
What Are Expansion Clauses?

An expansion clause is something that can be negotiated into a commercial real estate lease that allows the tenant guaranteed or preferential rights to expand within the building or portfolio from which they are leasing.

Types of Expansion Clauses

There are three basic types of expansion clauses seen most often in Austin. These are Right of First Offer, Right of First Refusal and Must Take.

Right of First Offer (ROFO)

A ROFO (pronounced “row-foe”) gives the tenant the first right to lease a space in the building should it become available before the landlord can market the space for lease or accept offers from any other tenant.

A ROFO will typically only apply to specific suites within the building and is usually limited to adjacent spaces. The spaces included in the ROFO should be detailed in the lease. Potential expansion spaces could also include other suites on the same floor or entire floors directly above or below the tenant’s space, depending on the size of the tenant and the building. For example, a full floor tenant may have a ROFO on the floor or floors above and below them.

However, this does not necessarily mean that the landlord must rent the available space to the tenant. A ROFO simply guarantees that the tenant will have the chance to take the available space before the landlord can market it to third parties. If the tenant and landlord cannot agree to terms, the landlord can then market the property to the public.

When a landlord has a new space available, it’s common for the leasing broker to approach the adjacent tenant to see if they’re interested in the space, regardless of any official rights. For this reason, the ROFO clause is more ceremonial than it is particularly beneficial, but it is better than nothing!

Pros

The tenant essentially has “dibs” on space in their current building. If a tenant is looking to expand within the same building, it gives them a leg up on the competition, which can be particularly advantageous in a competitive market where space leases quickly.

Cons

A ROFO does not guarantee the tenant will be able to lease the new space, only that they have the first right to the space. The landlord can potentially ask for unfavorable conditions, such as above market rent or a long lease term that the tenant does not want to commit to. In this case the tenant will need to either negotiate with the landlord or pass on the space.

Right of First Refusal (ROFR)

A ROFR (pronounced “row-fur”) clause works in a slightly different way than a ROFO clause. Similarly, however, the clause will typically apply to specific, adjacent spaces that are outlined in the lease.

But with a ROFR, the landlord is free to begin attempting to lease the available space to a third party. However, the landlord must then give the tenant the right to match a third party offer on the space. This means that if the landlord and a third party agree to a signed Letter of Intent signifying that the landlord will lease the space to the third party, the ROFR clause allows for the tenant to then assume those terms that had been negotiated by the third party and expand into the space in question under those terms.

Pros

The tenant can ensure the opportunity to expand regardless of what happens with competing tenants negotiation. Additionally, the tenant can typically get market rates or better, rather than relying on the landlord to set the terms.

Cons

The tenant does not get to negotiate the lease terms directly. The tenant is faced with the decision to either block the third party and expand with the given lease terms presented to them, or let the third party lease the space and forgo their expansion right.

Must Take

With a Must Take clause, the tenant agrees up front to lease the entire space they will anticipate needing in the future. However, in many cases, the tenant only pays rent on the part of the space they actually need for a certain negotiable period of time (a so-called “ramp up” period). Once the period of time is up, they begin paying rent on the entire space. This is a great way for a fast-growing company, or a company with a firm grip on their growth projections, to reserve space they may not currently need, but will need in the future.

Pros

The tenant gets “free rent” on part of the space they are renting for a given time period. This can be great for growing companies that currently do not need a large space but know they will as they grow. The tenant can also rest easy knowing that their growth needs will be secured and put off the hassle of going through a completely new search and possibly needing to sublease their smaller space that has been outgrown.

Cons

The tenant is contractually obligated to eventually pay rent on the entire space, even if they currently only need to use part of it. If the tenant does not grow at the pace they expect, they will eventually be paying rent on space they do not need.

How to Execute Your Expansion Right

No matter what type of expansion right you (the tenant) have, there will be terms outlining how and when they can be executed.

With a Must Take clause, these are generally straight forward. After a certain number of months, you will begin paying the increased rate for the additional space. However, with a ROFO or ROFR, terms can become more complicated.

When written in a commercial lease, a Must Take clause is shown in the rent schedule. It may be written something like:

Tenant shall only pay rent on 50% of the Premises for the first six (6) months of the Term. Beginning on Month thirteen (13) of the Term, Tenant shall pay on the entire Premises. Tenant shall have full access and use of the entire Premises for the entire Term of the lease”

With a ROFO, the landlord is required to notify you with an offer to the available space. You can then either accept or deny the offer. The time period you have to accept or deny the offer will be specified in your lease, typically between 5 and 10 days.

With a ROFR, the landlord and a third party agree to terms on the available space. Once the landlord offers you the terms the third party agreed to, you can either accept the terms or allow the third party to move in. The length of time you have to decide whether to take the terms or not is specified in your lease and is also typically between 5 and 10 days.

If you agree to expand into the newly available space, it is common that the landlord will require you to increase your security deposit and pay the first month’s rent – both are expected when leasing any new space. However, beyond that, there are typically no additional fees to be expected.

Similar language is written when including a ROFO or ROFR in a commercial lease. Below is an example of a ROFR clause:

Provided Tenant is not in material default hereunder, Tenant shall have the ongoing right of first refusal (“Refusal Option”) to lease any space contiguous to the Premises in the building which is currently available or which comes available during the Term (“Refusal Space”) for a lease term coterminous with the Term.  Upon notification in writing by Landlord of the receipt of a letter of intent from a third party tenant (the “Refusal Space Notice”) on the Refusal Space, Tenant shall have ten (10) business days in which to notify Landlord in writing of its election to lease the Refusal Space on the same terms and conditions (other than Term, which will run coterminous with the Lease) as those contained within the Refusal Space Notice.  In the event that Tenant elects not to exercise its Refusal Option for an offer on less than the full Refusal Space, Tenant’s Refusal Option shall survive on the remainder of Refusal Space. Should Tenant exercise its Refusal Option on the Refusal Space within ten (10) months of the Commencement Date, the terms and conditions shall be the same as those contained within the Lease, including a prorated Tenant Improvement Allowance, free rent period, and other concessions.”

Why Landlords Are Hesitant to Include Expansion Clauses in Leases

Expansion clauses give tenants significant advantages at the expense of the landlord and can make available space difficult for them to lease. ROFR clauses are especially burdensome on the landlord.

Prospective tenants usually look elsewhere if they find out a tenant has a ROFR on a space, as their deal can potentially be taken out from under them.

Additionally, if there are multiple tenants in a building with expansion rights, there may be an issue regarding which tenant has the right to different spaces. It can become difficult for a landlord to keep track of the cluster of rights and first priorities, and can put landlords at risk. As a result, landlords usually prefer to exclude them from the leases.

Whether the landlord will agree to an expansion clause often comes down to the tenant’s negotiating leverage. Large tenants in a weak market typically have significant leverage, whereas smaller tenants in a strong market will have much less leverage, if any at all. In Austin’s strong landlord market, expansion clauses are rare, as landlords typically will not allow them in a lease.

Having a professional tenant rep with strong negotiation skills is necessary if you are looking to include these types of clauses in your commercial lease.

To contact an AQUILA tenant representative to help negotiate a lease that best fits your needs, schedule a consultation here.

 

To better understand the different elements of a commercial lease, below are two articles that may help:

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Leigh Ellis is a principal with AQUILA Commercial and the leader of the firm’s industrial team. He has a deep understanding of the Austin industrial market, including knowledge of the market history, current status and future development plans.

Leigh specializes in both leasing and tenant representation, as well as acquisitions and dispositions. He represents national and local companies in industrial, flex and office transactions throughout Central Texas, including Goodwill, Stonelake Capital Partners, Protect America and more.

Family is everything to Leigh. He married his wife Lauren in 2013, and the two became parents to son Harrison in 2016. (They’re also expecting a baby girl due September 2019!)

An avid golfer, you’ll catch Leigh on the course all times of year, with either his son, his clients or his coworkers by his side. And come football season, you’ll catch the Ellis family at the AQUILA tailgates ready to cheer on the Longhorns!

Leigh with his wife Lauren and son Harrison.

I sat down for a Q&A with Leigh to learn more about him. Read his answers below to get to know him a little better!

Let’s Start With the Basics:

Q: Where did you grow up?

A: Houston, Texas.

Q: Where did you go to college?

A: The University of Texas.

Leigh is a proud Texas Longhorn; here at a UT game with his wife Lauren.

Q: How long have you been in Austin?

A: I’ve been in Austin off and on since 1998; I briefly lived in Montana, then moved back to Houston, and eventually back to Austin in 2007.

Q: What is it about Austin that has made you stay?

A: My wife loves it here. I like to be outside and there are so many outdoor activities here like hiking the greenbelt, going out on the lake and hitting the trail. I also love live music and love the music scene here. I basically love everything that everyone loves about Austin. I have some really close friends here. I love all the things Austin brings, and it is such a great place to live: it’s safe, comfortable, has a great vibe and great restaurants – Austin has all the things!

Q: What is your favorite part about working for AQUILA?

A: Obviously it’s the people! That’s an easy answer. If it’s not the people, it’s the cookies (laughs). We get Tiff’s Treats here all the time. I love the culture and the events – we do some really fun things here. And we all get along – we hire people who share a lot of the same commonalities and have the same mindset.

Leigh with AQUILA colleagues at dinner in San Francisco.

Q: What makes AQUILA different?

A: It’s a family. There’s more opportunity here and a great structure in place. Before working at AQUILA I was at a company with only 4-5 people.

Q: What would you say is your key differentiator? Why would I want to work with you?

A: I understand the market and know how to leverage certain situations. I have a photographic memory and market knowledge is something I pride myself on. I work hard, I’m dedicated and I’ll stay late to get the job done. I want what is best for my clients, and I put them at the front on every deal.

Leigh with fellow AQUILA principal Todd Tebbe and clients Michael Hanley and Scott Dean (SteelSentry) at a client event at Franklin Barbecue.

Now For a Little Fun:

Q: What is something on your bucket list?

A: Playing Augusta National (where the Masters is held).

Leigh loves to golf; pictured above on the golf course with his son Harrison.

Q: What’s your go-to karaoke song?

A: (Laughs) It’s been a while since I’ve karaoked – If I had to get up and sing I would do some sort of 60s song that was short and popular.

Q: If you won $50 million in the lottery, what would you do with it?

A: I’d take care of my family and enjoy the rest of my life. I’d love to travel more. I think I would still come to work, take care of investments and plan for a good future for my family.

Q: If you could live anywhere in the world and money didn’t matter, where would you live?

A: Carmel, CA (where Pebble Beach is located). I’d live on the 17th mile drive and play golf everyday. I’d have a jet and travel wherever I wanted to go!

Leigh with his dad Leigh and brothers John and Nelson on the 18th hole at Pebble Beach Golf Links.

Q: What’s something most people may not know about you?

A: I’m left handed.

Q: What is your favorite restaurant in Austin?

A: Matt’s El Rancho.

Q: What’s your favorite show to binge watch?

A: The PGA Tour – I love the Golf Channel. I don’t really have a favorite show.

For more on Leigh, check out his bio page on our website.

Related Articles:

  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

With a new year of commercial real estate underway in Austin, Texas, we looked to our AQUILA experts to make predictions about the year to come.

Nine trends rang through from their responses, from landlord concessions to tenant expectations.

In this article, we explain the nine trends to watch for in Austin’s commercial real estate market in 2019.

1. Continued Growth of Coworking Companies

In 2019, we will continue to see an emergence of coworking and coworking-style office spaces, à la open, dense office spaces and an abundance of on-site and walkable amenities.

This means we’re likely to see even more expansion of both local and national coworking brands. In fact, at the beginning of this year, it was reported that WeWork (now The We Company) purchased 4.7 acres in downtown Austin.

And it’s not just startups and small companies taking space at WeWork and the like.

“This past year showed an increase in tenants’ affinity for flexible lease terms with companies of all shapes and sizes leveraging WeWork en masse,” says Matt Wilhite, AQUILA Principal and tenant representation broker.

Companies like Facebook and Microsoft are finding value in leveraging these flexible, prepackaged work environments. And now the Army is getting in on the action; the Army Futures Command is officing part of its new Austin headquarters within Capital Factory.

2. Increasing Density & How Landlords Respond

While some companies are leveraging coworking spaces to achieve the desired dense and amenity rich workplace, others are sticking with traditional office leases and looking to the landlords to provide (or at least allow for) these environments.

Some landlords are beginning to respond to these changing demands, while others are pushing back.

“In order to limit the number of employees in the building, many landlords in the CBD [and in some suburban properties] have tried to implement density clauses, which is proving to be problematic for many tenants,” says AQUILA tenant representation broker Max McDonald.

The reasoning behind the restrictions are understandable. Landlords are trying to limit the load on the building and its restrooms, elevators, HVAC, etc., as well as maintain appeal to traditional downtown tenants, like law firms and professional service firms.

Interestingly, these traditional tenants are, in many cases, getting priced out of the downtown submarket.

New, denser tenants are reducing their price per employee with efficient office space design, and, in fact, AQUILA Principal Kristi Svec Simmons predicts that “landlords who understand and are willing to give the density could potentially get a slight rate premium.”

This premium may be enough to incentivize hesitant landlords to remove density restrictions in the coming years.  

Read more about how office density trends are impacting office design in our article How Office Density Trends Impact Commercial Building Design.

3. New On-Site Amenities for Today’s Tenant

On the other hand, many landlords are working to entice today’s tenants with new, innovative on-site amenities.

Particularly “landlords that may not have the abundance of walkable retail are attempting to bring the services to the building, like Fooda, an office lunch service,” says Wilhite.   

“The idea of pop up retail is hugely popular and I see that happening more and more,” agrees Svec Simmons. “Concepts like Fooda will become increasingly popular as people/tenants want things quick. They don’t have a 1.5 hour block for lunch.”    

Programs like Fooda (pictured) allow landlords to provide on-site meals for tenants in buildings that don’t have cafeterias or restaurants on the ground floor.

4. Higher TI Allowances or More Spec Space

Tenant improvement (TI) allowances will be another interesting area to watch as we move into 2019. With construction booming in Austin and many tenants opting to move into brand new space, these allowances will be an important factor during lease negotiations.

However, we may see some changes in TI allowances moving forward. Miles T Whitten, Senior Associate on AQUILA’s project management team, says “rising construction costs are impacting what TI allowances will cover. If landlords are going to ask for higher rents, I think they’re going to have to compensate with higher TI packages.”

On the other hand, AQUILA tenant representation agent Max McDonald foresees landlords taking initiative and creating more spec suite options for tenants in Austin’s fast paced market.

“Tenants (just like most consumers) seek instant gratification. With the lengthy construction timelines and high costs to build out space, I would look to more landlords to take on the risk of building out spec suites in order to offer tenants the ability to to move in on a shorter timeline,” says McDonald.

5. Last Mile Expansion

In the world of Amazon and same day shipping, there is a quickly-increasing need for industrial space. While Austin has historically not been as involved in the industrial market as Houston or Dallas, the addition of major corporations like Amazon and Apple have vastly increased demand.

“The continued growth of the eCommerce business in the industrial sector is driving an increased need for ‘Last Mile’ facilities in industrial markets like Austin,” says Leigh Ellis, AQUILA Principal and industrial specialist. “You will start to see more two to three story warehouses in heavily populated areas with limited infill land like New York, San Francisco, Los Angeles to provide ‘Last Mile’ distribution.”

Austin’s location in the Texas Triangle and the city’s booming population makes it a prime location for these eCommerce businesses to house their goods, so be on the lookout for more industrial construction down the road.

6. Property Taxes & Operating Expenses

Perhaps not unexpectedly, the continued increase in property taxes in Austin is another area of contention to keep an eye on in 2019. Landlords and tenants alike across all property types are impacted by property taxes, and most agree that these taxes are rising too high too quickly to be sustainable.

“High property taxes are adversely affecting both tenants and landlords,” says Jason Faludi, AQUILA Principal. “They’re driving operating expenses for retail tenants through the roof.”

Ellis concurs, saying “In regards to the industrial market, the operating expenses (read: property taxes) in Travis and Williamson County are getting out of hand and causing some of our larger tenants, like Calendar Club, to relocate to more affordable surrounding markets like New Braunfels, Schertz and San Antonio. With that will come huge chunks of vacancy that will need to be backfilled.”

On that same note, Ellis says “This will be of significance in the southeast market which is already losing one of its biggest leasing tenants, Travis Association for the Blind, to a build-to-suit purchase.”

It will be interesting to see whether tenants and landlords will have to continue struggling with this issue or if the taxing authorities will offer some relief in the future.

7. Continued Demand for Austin Office Space

If you have even had a passing glance at Austin over the last year, you know that the real estate market here is booming. Vacancy is low, rental rates are high and tenants from all over the country (and world) have started calling Austin home.

Large leases were the name of the game in 2018, and all indications point to that trend continuing in 2019. “Even without Amazon’s HQ2, West Coast tech giants (plus Indeed) have taken up the vast majority of new inventory and will have significantly larger effects on Austin’s economy over the next few years than anyone could have anticipated,” says Wilhite.

McDonald agrees, saying “it is really amazing how many large blocks of space have been pre-leased by big companies. The demand for Austin is still there!”

As projects like the Army Futures Command and Apple’s new Austin campus begin to attract more complimentary companies to the area, it stands to reason that this demand will only increase in the years to come.

8. New Office Markets

Taking a drive through East Austin today, you may be surprised at the number of cranes dotting the landscape. An area that was once primarily residential homes mixed in with Class B and C commercial properties now has multiple Class A projects underway that are commanding rental rates similar to that found in the CBD.

“The emergence of the Eastside as a viable, independent submarket, as validated by the creditworthiness of the tenants who signed leases there (including HEB/Favor, Google and GoDaddy) is in my mind most impactful,” says Wilhite. “Nearly all of the new product on the office and retail fronts have been leased, so once the multifamily and hotels stabilize, the submarket will be activated around the clock.”

Due to recent legislation, other areas of Austin not traditionally seen as office hotspots could soon begin seeing similar development as well.

“The Opportunity Zone legislation and what this means for development over next 10 years will be an interesting trend to watch,” says Whitten. “Particularly, which areas of Austin could be as-yet-unknown diamonds in the rough, maybe even the next Domain, Eastside or East Riverside.”

9. Earlier Leasing Process

In a competitive real estate market like Austin’s, it becomes vital for tenants to lock down space as early as possible. Pre-leasing has become a common occurrence for tenants in Austin, especially those looking for large amounts of space. Major tenants like Facebook, Amazon and Google have all pre-leased in recent years, taking space before other tenants have a chance.

“As noted by Talledega Nights, ‘if you ain’t first [or the largest], you’re last.’ Tenants that make Austin, Austin were pushed aside for larger national tenants taking enormous blocks of space,” says Kristi Svec Simmons. “Landlords were able to lease buildings to tenants over 50,000 square feet, meaning they were not willing to demise to smaller spaces and accommodate smaller tenants, which is a first in the Austin market.”

This trend will be important to watch moving forward, especially if vacancy remains low and new developments continue to deliver with most of the space already accounted for.

Svec Simmons says “larger tenants will continue to have to look earlier and earlier as large blocks of space are few and far between,” and due to rental rates being at all time highs across the city, “we could see office tenants look at industrial or flex space, thus pushing up those rents.”

Because of this, our tenant rep brokers recommend tenants begin looking for space at least six to 24 months in advance of their requirement, depending on size.

To keep a beat on how the 2019 commercial real estate year progresses, be sure to subscribe to our Learning Center.

And for the latest insights into market trends and rates, download the latest copy of our Austin Office Market Report.

Popular Articles:

Read for later

Articles marked as Favorite are saved for later viewing.
close
  • Show original
  • .
  • Share
  • .
  • Favorite
  • .
  • Email
  • .
  • Add Tags 

Separate tags by commas
To access this feature, please upgrade your account.
Start your free month
Free Preview