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April 2001
Arboretum Space to Open Up
Source: Austin Business Journal

The owner of a 186,000-square-foot office building in the Arboretum area is looking for tenants to fill the space after Computer Sciences Corp. empties the project later this year.

Although 9500 Arboretum might be one of the few large contiguous office projects on the market, brokers say it constitutes only a fraction of a growing pool of properties vying for tenants in a softening market.

CSC is developing a new headquarters in downtown Austin and is scheduled to begin moving into its new digs later this year. CSC's lease in the Arboretum ends in January.

Pacific Realty Associates LP, the Portland, Ore.-based owner of 9500 Arboretum, have charged Insignia/ESG of Texas Inc. with the task of bringing in new users. The six-story building features a 30,000-square-foot, raised-floor computer center; redundant power; redundant heating and cooling; a four-story atrium; and views of Loop 360 and Bull Creek.

Bart Matheney, leasing director at Insignia/ESG, says 9500 Arboretum's location in the Arboretum and high-finish, tech-oriented offices will be a strong draw to potential tenants.

But the building is hitting the softest real estate market Austin has seen since the early 1990s. Although office vacancy rates remain in the single digits for space available directly from landlords, Austin companies have dumped more than 1.5 million square feet of leased space back on the market in search of subtenants.

A recent survey of current and pending subleases assembled by Michael Buls of Buls/Hodge Consulting indicates Austin has nearly 1.75 million square feet of leased space available for sublease. Adding that volume to the totals for direct availability puts the citywide vacancy rate close to 10 percent.

The subleasing cloud hangs heaviest over Northwest Austin, where 9500 Arboretum will be competing for tenants with what Buls calculates already is more than 922,000 square feet of subleases. And real estate sources say that figure could climb well beyond the 1-million-square-foot mark in the Northwest before CSC even begins to move downtown.

While real estate players anxiously watch the subleasing volume grow and speculate about which users might add their space to the market, some look for ways Austin might capitalize on the current correction.

Volney Campbell, first vice president of CB Richard Ellis Inc. in Austin, says buildings like 9500 Arboretum are the sort of large Class A space users only a year ago were hard- pressed to find here.

"There's an opportunity for the community to think outside of its city limits, and to try to attract the companies we tried to attract during the tech explosion but we didn't have the facilities and/or the labor to meet their needs," Campbell says.

The economic shakeup has eased the difficulty of finding trained workers and suitable space that until recently stood as an obstacle to companies moving here from other cities, Campbell says.

"Several thousand well-trained employees have been recently laid off -- that's a valuable labor pool," he says.

"Second, we've got a lot of facilities that are technologically advanced, that are available for companies to take advantage of," Campbell says.

Charles Heimsath, president of Austin's Capitol Market Research Inc., says California might be a good target for economic development efforts aimed at bringing businesses here. Austin offers advantages for California companies dealing with rolling blackouts, high labor costs and a lack of affordable housing.

Heimsath says 9500 Arboretum is in a particularly good position for attracting a single-building user.

Walter Saad, Insignia/ESG's managing director for Austin, says the building's redundant systems are impressive.

"This building has four 350-ton chillers, any one of which can adequately cool the project, and an abundance of power and backup power," he says.


MATT HUDGINS can be reached by email at (mhudgins@bizjournals.com).


Judge Robert O’Conor, Jr. and Associates
Based on your being referred to us, we moved forward with our search for a new, fresh office space with your diligent assistance. Knowing our needs were needed quickly, you moved forward with great haste to defer our paying the holdover provision set forth in our old lease. Your timely process allowed us to reduce our costs in a beautifully appointed environment. I look forward to our continued relations.
- Robert O’Conor, Jr., Managing Partner

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