August 23rd, 2023 News Brief TLDR:

• Empty offices could solve housing? Only 30% feasibly convertible, says Gensler. 🏢

• Austin bolsters affordable housing with developer training & networking until October. 🏡

• First Light Books: New community hub in historic Austin suburb spot. 📚

• Texas' muni-bond spree benefits from AAA credit, despite no state income tax. 💵

REAL ESTATE MARKET DYNAMICS & DEVELOPMENT

We Are In the Middle of a Construction Boom, but not for Single-Family Housing

Source: ThemReport.com

Summary: The U.S. apartment construction sector is booming, adding 1.2 million multi-family units in the last three years with a prediction of opening an additional 460,860 rentals by year-end. Post-pandemic economic recovery, migration of younger generations out of parents' homes, and work-from-home factors are credited for this surge. Notably Dallas and Austin, Texas, feature prominently in lead roles for this upsurge, auguring well until at least 2025. However, developers face challenges primarily in finance with debt interest rates as high as 8%; obtaining lending for more than 60% of a project's cost can be difficult. Most of the housing units being built comprise high-end apartments targeting well-financed categories of tenants.

Why this matters: Austin clearly leads the market for new apartment growth, thus real estate professionals dealing in central Texas stand to benefit immensely both in terms of investments and diversified opportunities particularly in luxury housing considering majority being built are high-end apartments.

NerdWallet: Empty office buildings and the housing crisis: facts, myths a...

Source: NerdWallet.com

Summary: The article discusses the challenges and observations around converting vacant office spaces into housing units to help with the current housing crisis across major cities in the United States. It highlights certain hurdles including high costs, red tape, and complexity around "adaptive reuse". The story unfolds the fact that out of the total existing office spaces in U.S. and Canada, only 30% might be feasible for conversion, as analyzed by an algorithm from Gensler. Cities including Atlanta, Chicago, Houston, San Francisco, Seattle, and Washington, D.C., however, are still proposing and undergoing office-to-housing conversions. Given the severe shortage of affordable homes and an abundance of zoning regulations in most downtowns, figuring out if office-to-housing conversions can solve the crisis is significant and many suburban areas are actually seen as potentially successful sites for such transformations.

Why this matters: Insight based on this article suggests it important for commercial real estate professionals in Central Texas to understand the trend of office-to-housing conversions-house. Solving the housing demand while making repurposing of office spaces could offer sizable professional opportunities, but an understanding of the complexities of these conversions might also help in consulting and transaction processes.

Tesla leases over 1 million square feet of warehouse space in Kyle, Texas

Source: DriveTeslaCanada.ca

Summary: Tesla has extended its real estate portfolio by leasing more than one million square feet of warehouse space in Hays County's Kyle 35 Logistics Park, about 40 minutes from Austin. The undertaking, which is about 33 miles from Tesla's headquarters in Austin, may be entirely lost to Tesla, according to real estate experts. The warehouses, to be employed by Tesla for storage and lightweight assembly, occupy three buildings of varying sizes. The Kyle Logistics operation represents a $115 million initiative that predicted the potential creation of 1,500 jobs once its construction began in June 2022.

Why this matters: Tesla's visible reinforcement in the area, combined with the looming completion of Giga Texas, highlight a robust growth trend in the Austin/San Antonio industrial real estate sector. Commercial real estate agents stand to gain insight into burgeoning business locations, provide strong data-backed market trends to clients, and effectively strategize surrounding areas for all manners of commodity real estate possibilities.

Affordable housing program launches in Austin

Source: Kxan.com

Summary: The City of Austin has launched a new program aiming to support small-scale real estate developers and contribute to affordable housing initiatives. Running through October, the Austin Small Developer Training Program seeks to provide aid in the form of training, mentorship, networking, and financing opportunities. James May of Austin Housing Finance Corporation expects this program will empower developers to handle prevalent industry challenges in Austin, bolster business strategies, increase industry connections and amplify affordable housing investments across the city.

Why this matters: The new program offers commercial real estate professionals unique networking and specialized knowledge opportunities that could be leveraged for career advancement and to offer strategic insights to clients seeking to develop affordable housing in Austin's growing real estate market.

Local Developer Wants to Bring 2,100 Apartment Units to Austin, Texas

Source: CreNews.com

Summary: Austin-based real estate investment firm, Wildhorn Capital, is proposing significant property development launching a rezoning request which envisions the rise of approximately 2,100 rental flats at select locations Elevation limit adjustments from 40 feet to 120 feet forms part of this forthcoming plan.

Why this matters: Professionals practicing commercial real estate in Central Texas can employ this information to track shifting dynamics in the property market, consequently enhancing investment advice accuracy rendered to clients bearing further investment ambitions in the area's residential sector.

People in Real Estate

Source: RealtyNewsReport.com

Summary: The article provides key updates about personnel changes in various high-profile companies within the Real Estate industry. In Houston, Robert LaCoure has taken a position as Senior Director at Cushman & Wakefield, Kelly Baldwin is now director of operations at the Real Estate investment company, Pagewood, Jim Humphries has secured the position of Director at JLL Capital. In Central Texas, Colliers has scored Patrick Hill as a Senior Vice President, focusing on tenant and buyer/seller representation in the office sector.

Why this matters: This information is useful to professionals because the influx of highly-qualified individuals like Patrick Hill into Central Texas reflects the region's growing competitiveness and attractiveness which influences the office sector value in which they operate.

The Collapse Of WeWork Only Heightens Investors' Commercial Office Space Worries

Source: Financeyahoo.com

Summary: The U.S. office space sector is facing severe difficulties, with WeWork, once considered the pinnacle of coworking spaces, teetering on potential bankruptcy. Its fallout could lead to several leases being terminated, which in turn would generate substantial vacancies in office space throughout the country - impacting not just New York and London where its key operations are based but assumedly cities across the United States too, possibly impacting markets such as Austin, Texas. Anthony Sabino, law professor and bankruptcy expert, suggested that although detrimental to commercial real estate for the time being, adventurous investors might find opportunities amidst this scenario.

Why this matters: WeWork’s potential bankruptcy and consequent lease terminations could lead to available commercial office spaces in Austin, providing brokers and investor clients with opportunities to steer towards other rising flexible workspace providers or traditional office leases.

FINANCIAL & INVESTMENT LANDSCAPE

Moving to Texas Is All the Rage, Even in the Muni-Bond Market

Source: Finance.yahoo.com

Summary: Texas's allure of a lower cost of living and resulting population influx has caused a borrowing spree among local governments and school districts, leading to a climb in bond yields. The swell in municipal-bond issuance invites investors to capitalize on higher-than-average interest rates, while enjoying the safety net of Texas's AAA credit rating. The supply surge from Texas, particularly the low-cost bonds from school districts thanks to a state guarantee program, is incentivizing investments and projected to continue with proposed future infrastructure projects. However, this benefit in the Texas bond market is oval in nature due to Texas's lack of state income tax and thereby lack of an eager, built-in investor base.

Why this matters: Given the anticipated continuous issuance and projected infrastructure projects, understanding the dynamics of these favorable investment ecosystems can provide Commercial Real Estate professionals crucial insights on the regional growth and economic strength that can be leveraged for making strategic decisions, offering valuable investment advice to their clients and attracting potential investors.

Juicy Income With These 2 Hotel REITs

Source: SeekingAlpha.com

Summary: Hotel REITs, particularly Apple Hospitality REIT (APLE) and VICI Properties (VICI), show interesting investment potential in the recovering hospitality industry. APLE, with diversified upscale hotels in suburban markets, anticipates a RevPAR growth of 4%-8%. Maintaining steady performance, even in a post-pandemic high-rate environment, APLE offers a significant 6.6% yield, potentially growing to 8.3%. VICI, known for irreplicable Las Vegas assets, has started expanding into non-gaming sectors. Their resilience offering a 5.2% yield despite the pandemic and Vegas’s robust performance make VICI a strong choice for investment. VICI was also named as providing capital for the promising upcoming Canyon Ranch Austin.

Why this matters: With Austin's strong real estate growth and the noted investment in Canyon Ranch Austin by VICI properties, industrial REITs can monitor these patterns for investing in hospitality assets within the rising Central Texas market.

COMMUNITY & RETAIL SPACES

‘We’ve got one shot to open up this bookstore’: First Light Books opens in Hyde Park

Source: Kut.org

Summary: First Light Books is the latest addition to the cultural scene of Austin, perched on the corner of Speedway and 43rd Street. It inhabits a building that once served as a post office in Austin's oldest suburb. The 2,500 sq. ft retail space includes a coffee outlet and facilitates 10,000 books reinforcing it as not just a bookstore, but as a community space for book lovers. Enhanced with thoughtful design aesthetics touching upon 20th century European architecture style, made to encourage patrons to linger. As the couple signed a 10-year lease, it shows a long-term commitment to serving Austin readers. The community-focused aspect is highlighted with a membership program priced at $99 annually provides perks like a 20% discount on book purchases, free drip coffee, and home deliveries within a 5-mile radius. Additionally, the bookstore plans to rely heavily on customer preferences to steward its inventory.

Why this matters: First Light Books is the latest addition to the cultural scene of Austin, pe By understanding the appetite for spaces like First Light Books, realty professionals can emphasize the importance of shared community spaces, personalized experiences, and design aesthetics in their commercial offering to potential retail tenants looking to succeed in post-pandemic landscape.

TODAYS PERMIT RUNDOWN

Heads up, folks! The latest lowdown in Central Texas construction might just be the dose of joy you need today.

First up, we take a look at the Harold Court Service Center-WPD Campus Improvement project led by Huitt-Zollars. It's stirring up some dust with a permit portfolio that reads like a construction examiner's dream. They've secured a permit for Renovation/Alterations, infusing new life into our beloved Harold Court Service Center. Think transformative works and not just fixing those squeaky stairs. Putting security first, they are installing an exterior rolling gate.

Who doesn't like a new portcullis in this crazy world? They're also installing security cameras, keeping an electronic eagle eye on our property, because every fortress needs a watchful guard. For those of you rocking electric automobiles, they've covered you with an EV charging stations permit. You'll be juicing up your jalopy in no time.

Meanwhile, supported by the Door Installation permit, the humble shed at the facility will be getting a makeover. Here's to hoping they choose a color that pops! Taking center stage, is the design permit. Apparently, our friends at Huitt-Zollars aren't content with run-of-the-mill, they're bringing the wow factor to the old halls of the Harold Court Service Center.

We can't wait to see their master plan unfold. Last but not least, the estimated cost approval has been rolled out at $375,000. The City of Austin- Watershed Protection Department is playing ball, making sure the facility is shipshape for the folks who keep us dry.

That's the skinny, fellow construction and real estate enthusiasts!

Keep your hard hats on and hammers ready, we've got exciting work ahead of us.