Forecast: Real estate boom to continue in

2007

Austin Business Journal - 2:55 PM CDT Thursday

by A.J. Mistretta

Staff write

With rents and occupancy rising across different product types and economic indicators pointing toward further population and job growth in Austin, local commercial real estate professionals say the industry's high times are likely to continue into next year.

The Institute of Real Estate Management sponsored its annual forecasting forum today at the Hyatt Regency on Town Lake. A panel of experts from different sectors offered their assessment of the market and their predictions for 2007.

Office

The Austin office market has absorbed about 1.7 million square feet of space in the first three quarters of 2006, according to data from CoStar Realty Information Inc. By comparison, the market absorbed only 1.1 million square feet in all of 2005.

"As the local economy has picked up, so too has the office market," says Diana Holford, principal with the Staubach Co. Leading the way is the Southwest submarket, which has fallen below 8 percent vacancy. It's followed by the Northwest submarket, where several companies have announced new development projects to meet rising demand.

But Holford says companies today are more conservative in the amount of space that they lease than they were during the last boom.

"They're almost Draconian in their approach," she says. "They still have the scars from taking more space than they needed."

Holford says tenants are also less concerned about extra amenities associated with their space, often referred to as bells and whistles.

"They're really trying to make the most out of what they've got," she says.

Andy Smith, managing director over the Austin office of Equity Office Properties, says his company is busy making deals with expanding firms and even a few that are relocating. Smith says that with growth among companies from advertising to finance, this office market recovery is much broader based than the last. Equity Office is Austin's largest office landlord.

Multifamily

The local apartment market has absorbed more than 1,800 units so far this year, according to Austin Investor Interests. Occupancy rose less than one percentage point in the last 12 months to 93.8 percent, while rents are up to 90 cents a square foot from 85 cents at this time in 2005.