CRE at SXSW

The traffic caused by SXSW put serious strain on our Lenten decision to give up cursing. But it was also a reminder that Austin’s gaining steam as a major tech hub. And not just once a year.

We caught up with JLL’ers from around the country: VP Cara Trani, research manager Amber Schiada, VP Blake Searles, VP Greg Matter, SVP Paul Formichelli, and VP Joanne Bestall. They tell us Austin is an established tech market, but it's gaining on San Fran, Silicon Valley, and New York as they become cost prohibitive, especially for startups. (We already beat them in food; now we're gaining in bytes.) Greg tells us there’s also less competition for talent here. The Capitol City racked up $255M in high-tech venture capital funding last year.

Tech deals keep rolling in, like Athena Health leasing 115k SF and Under Armour (it's not finalized, but it's taking over 35k SF Downtown for MapMyFitness, which it acquired recently). Overall last year, Austin’s occupancy increased 1.6%, while rents skyrocketed almost 10% to $29.72/SF. Northwest Austin, where Apple has a large presence, posted 2.5% occupancy improvement and 6.1% rent growth. The other larger tech submarket—the Southwest—has one of the highest occupancy rates in town at 90.2% and 12.7% rent growth last year.

The team’s takeaways from SXSW:

• Due to the shortening of product lifecycles, tech firms require flexible/scalable real estate solutions. Wearables (which were so in at the conference) are on the extreme end of this trend. But as this industry gains traction, we’ll see sustained demand for R&D and manufacturing space.
  
  
• Funding and recruitment are an overarching challenge for startups. Real estate plays a critical role; the right workspace influences recruitment, which enables companies to secure funding.
  
  
• We need to stop looking at tech as strictly startups. Media, healthcare, banking, consulting, manufacturing, automotive, retail, etc. all fully immersed in technology and share many attributes from a real estate perspective. In fact, real estate is a strategic differentiator for many of these firms and a way to demonstrate brand and attract/retain talent.