Austin Tower Commands $522M
In what will likely be the largest office trade in Austin, Texas, this year, Cousins Properties has acquired 601 W. Second St., also known as the Sail Tower, for more than $521.8 million. Trammell Crow Co. was the seller, according to CommercialEdge data.
The downtown Austin building is fully leased to tech giant Google until 2038. Eastdil Secured served as the exclusive advisor on the transaction.
The purchase price, according to a Cousins presentation on the deal, is “well below replacement cost.” Current total rents in the area averages $56.22 per square foot, according to CommercialEdge data, with net rents averaging $40.12 per square foot. Average occupancy in the area is 81.2 percent.
Trammell Crow Co. completed the 804,000-square-foot, 35-story property in 2022 on a site that had been a vacant lot throughout the 2010s.
The building, which is certified LEED Platinum, includes 8,100 square feet of retail, a multi-level parking structure with 1,365 spaces, a fitness center and views of Lady Bird Lake from landscaped terraces. It is near the Second Street entertainment district in downtown Austin.
The nickname Sail Tower speaks to the sail-like design by the renowned Pelli Clarke & Partners. Other well-known office designs by the firm include Salesforce Tower in San Francisco, One Congress at Bulfinch Crossing in Boston and Petronas Towers in Kuala Lumpur, Malaysia.
Atlanta-based Cousins is no stranger to the Austin market, with an existing 1.7 million-square-foot office portfolio downtown near the Sail Tower. The REIT is also the largest owner of office space in the Domain district in North Austin, an interest that includes 2.5 million square feet in 11 buildings. Other Cousins tenants in the market include Adobe, Amazon, Expedia and Fidelity.
READ ALSO: When Office Meets Hospitality: A Love Story
Earlier this year, IBM leased 320,000 square feet at Domain 12. Big Blue will assume the lease for Meta Platforms on Jan. 1, 2026. The agreement was also extended from 2031 through 2040.
“We view this lease as a strong signal that the technology sector will continue to be highly invested in the Austin market, and particularly the Domain, over the long term,” Richard Hickson, Cousins’ executive vice president of operations said during the company’s third quarter earnings call in October.
“We know of a number of other technology companies that we already do business with, and some others that we don’t currently do business with, that are searching in the Austin market specifically,” Hickson said. “So, we feel good about the amount of activity that’s starting to come to fruition.”
Austin vacancies high, development still ongoing
For any tech companies who want to be in post-pandemic Austin, there is a large selection of office space on the market, which is characterized by sluggish demand and reduced office utilization, as well as continued development.
As a result, Austin office vacancy now stands at 27.7 percent, tied with San Francisco for the highest U.S. rate, and up 710 basis points from a year ago, according to CommercialEdge data.
Currently 3.5 million square feet of office is in the development pipeline, or 3.7 percent of its existing stock. On a percentage-of-stock basis, that is second-highest in the nation, CommercialEdge noted. Austin’s office footprint would grow by 12.1 percent, if current and planned projects all come to fruition.
Investors have backed away from the Austin office market lately, though some are in town for the discounts. The market, which led the nation in sale prices in September, saw a sharp decline from $379 per square foot that month to $287 per square foot by November. The drop reflects an increase in properties being sold at discounted prices, CommercialEdge reported.
The post Austin Tower Commands $522M appeared first on Commercial Property Executive.
