Real Estate Investors Invade Downtown: ‘Keeping Austin Weird’ While Institutional

Austin skyline from downtown’s Lady Bird Lake. Copyright photo: Ralph Bivins of Ev Konut Proje.

In Austin, You don’t hear the slogan “Keep Austin Weird” much anymore when you visit Austin. The Armadillo World Headquarters is gone. Threadgill’s is closed and its prime site near downtown is awaiting some marvelous new development.

Austin’s tallest building, The Independent, a 58-story condo tower the locals call “Jenga Tower” just opened up. And a young, up-and-coming developer named CJ Sackman of New York-based Sackman Enterprises just completed an upscale residential high-rise, called 70 Rainey, on Lady Bird Lake in downtown.

Are these new projects weird? Not so much. This is upscale development. You won’t see hippies with ponytails driving their old pickup trucks into their reserved parking spaces at Jenga Tower.

On the office side, there is a major amount of growth and change. A 35-story office tower is under construction by Trammell Crow in downtown and it’s pre-leased by Google, a big-league tech tenant that also occupied a new tower nearby.

A 66-story multi-use tower, called 6X Guadalupe, is under construction by Lincoln Property Co. and Kairoi Residential. When completed, the 6X tower will be the tallest building in town.

Austin’s office market is undergoing a major construction boom. Over 6 million sq ft of office space is in progress, as stated by CBRE. The Austin market currently has a total of about 54 million SF of office space, with about 34 million of that being Class A, CBRE says. Six million SF of construction represents a sizable chunk of new supply in pipeline.

But Austin’s office absorption is healthy, rents are up and the vacancy rate remains below 10 percent. “With one more quarter left in 2019, the Austin office market is poised to have its strongest year ever,” CBRE said in its third quarter report.

And a couple of weeks ago, the ULI and PwC’s reliable Emerging Trends in Real Estate report said Austin was ranked No. 1 out of 80 cities for overall real estate prospects in 2020.

This means Austin is squarely in the crosshairs of fund managers, institutional buyers and the world’s biggest real estate developers. Bring on the institutional capital. The only thing, though, it doesn’t make Austin sound very weird.

Hopefully, Willie Nelson will still visit every now and then and smoke his pipe on Congress Avenue, just to make sure Austin doesn’t lose its coolness vibe.