Two experts tell GlobeSt.com that outside investors came with one goal in mind: paying good money for buildings. One transaction broke the price barrier was the 531,000-sf Frost Bank Tower at 401 Congress St., which brought $118 million or $354 per sf. Class A buildings have been averaging $181 per sf at closing tables.
"I think that was the highest price per sf of an office building in Texas," says Greg Johnston, senior vice president with locally based Oxford Commercial Realty, a member of the Cushman & Wakefield Inc. Alliance.
Ernest Brown IV, Grubb & Ellis Co.'s managing director and executive vice president, adds that while one huge building sale doesn't automatically drive up all prices, it creates attention. "It has a positive effect on the market," he adds. "Guys that might have had Austin on a second tier for investment might be saying let's move it up to first."
The "guys" to which Brown refers include a variety of players, such as REITs, pension funds, tenants-in-common investors and private equity investors. "It's a market for anyone and everyone right now," Brown says.
Johnston agrees that a good chunk of the investment change is coming from out of state. "We're seeing a lot of institutional investors and private investors coming out of California, specifically," he adds.
Both professionals believe the investment interest will continue throughout this year, particularly from out-of-state investors. "A number of people out there were looking at and thinking about Austin. The number of people looking at Austin for first time has increased," Brown says. "In long term, that portends better activity."
Whether that will lead to a huge slew of investors coming into town and putting down money is speculation. But, Johnston believes with vacancies continuing to trend downward and rents upward, investor interest and prices will continue upward as well. "I think it's undeniable that Austin is in for a long, slow upward trend, barring something major and unforeseen happening," he adds.
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