Austin Economy: It Depends on Who's Talking

And the commercial real estate communities in those metropolises undoubtedly are buzzing daily, the same as Austin's, about what is fact or fancy. A steady stream of reports is rolling out with drastically different takes on Austin's economy, which is sure to ride out the downturn much in the same way it has in the past. In many cases, it's a vested interest as to whether the numbers are coming from a building owners' brokerage house or one supported by tenant rep dollars.

The Torto Wheaton research says that the negative office absorption is a historical first for the 53 markets that it tracks. Not only could the falloff reverse quickly, but also it's a shared belief "that the tech bust must end somewhere."

The Austin scene is getting pretty testy between the naysayers and doomsday watchers. Brokers say they are on the defensive with would-be investor buyers. The subject's getting nearly as sensitive between friends as politics and religion. One Austin veteran will caution about his competitors' optimism while another veteran will say the numbers prove all is copasetic. Meanwhile, the city's leading economist, Angelos Angelou, is rethinking his 2001 forecast.

The numbers spin also is having a serious effect on closings. There's the usual superstition at play, but it's more hushed these days in a fickle market where the fear is would-be tenants would back out at the last minute if they thought a better deal could be had down the road. Even Torto Wheaton says the cool first quarter is due in part to tenants waiting for some relief to high rents. One Austin insider says the same office that he rented in November 1997 at $11 triple net had spiked to $30 a year ago.

For every piece of sublease space, there most likely is an equal piece that could turn into direct space. Using that as a yardstick, the city's overall vacancy could well be closer to 13% instead of the more commonly touted overall 5% vacancy. Somewhere the reality is sandwiched between the 1.2 million sf of sublease space reported by Colliers Oxford Commercial and the better than 1.9 million sf from Mike Buls of Buls-Hodge Consulting in his accounting Friday.

Bolney Campbell, first vice president for CB Richard Ellis in Austin, is looking for a taker for 72,000 sf of class-A sublease space for "18 months to three years." Not an easy job, but one that the market has dictated.

BMC Software had signed for an 85,000-sf building that's under construction in its three building, 250,000-sf campus at the Avalon, owned by Crescent Real Estate Equities in Ft. Worth. Times have changed for the high-tech firm, as it has for so many of its counterparts in the Austin market. Now the strategy is to move into 13,000 sf, find a sublease tenant for the remainder and wait for the good times to start rolling again.

No matter who's doing the bean counting, Campbell is vying for tenants in the submarket with the highest vacancy and sublease availability in town. The space is first-class, the location is great and the building delivers in mid to late summer. Still, he's up against 200,000 sf that Motorola is subleasing, 50,000 sf that's coming from i2 Technologies and nearly 1.2 million sf of the city's 1.9 million sf of available sublease space, based on Buls' numbers. So what is Campbell's plan? "We're going to be competitive with the market," he emphasizes to GlobeSt.com. And, he quickly adds, it's the only space available on the Avalon campus.