October 15, 2023 at 7:00 a.m. EDT
The ATX Tower: A Unique Addition to Austin’s Skyline
Located in the vibrant city of Austin, the ATX Tower is a remarkable structure that rises high above the downtown skyline. With its elegant design and innovative features, it serves as a hub for the community, offering a diverse range of amenities and opportunities for businesses, residents, and retailers alike.
Originally, the tech giant Meta had secured all 19 floors of office space during the construction phase in early 2022. However, their plans have since changed, leaving behind 589,000 square feet of vacant offices, along with other impressive features such as 1,626 parking spots, 17 private balconies, and a beautiful half-acre of green space. Surprisingly, there have been no takers for these available spaces.
“Sixth and Guadalupe,” as the skyscraper is commonly known, stands as a stark reminder of Austin’s ambitious bet on the post-pandemic commercial real estate market. While other cities contend with surplus office space as workers resist returning to traditional work hours, Austin faces a Texas-sized challenge. The city’s skyline is rapidly transforming as new office constructions reach greater heights. In fact, the tallest building in Austin, Sixth and Guadalupe, is set to open this year with its offices unoccupied. As if that weren’t enough, the forthcoming 74-story Waterline skyscraper promises to be the tallest building in all of Texas once completed in a few years.
Amazingly, approximately 6 million square feet of additional office space is set to flood the market within the next few years, which is equivalent to a staggering 105 football fields. The rate of growth in the office market is unprecedented, with a nearly 25 percent increase projected, surpassing any other city on the continent. Exciting projects like the Waterline and the redevelopment of a former 3M campus into a 1.1 million square foot complex on the outskirts of the city demonstrate the scale of expansion. These projects, like many others, are moving forward without confirmed tenants, with an estimated 87 percent of new office space opening without occupants, according to data from Cushman & Wakefield, a prominent commercial real estate firm.
Developers and city officials remain optimistic, citing the city’s potential for continued growth and its appeal to tech companies and other industries experiencing rapid expansion. Yet, skeptics fear that this booming real estate market could quickly turn into a bust, underscoring the consequences of unchecked development and the uncertain future that follows.
“Despite the cooling economy, I find it truly striking that construction continues unabated, with cranes dotting the skyline,” remarked Julia Coronado, founder of MacroPolicy Perspectives and a long-time Austin resident. “Brand new, beautiful buildings stand vacant with ‘for lease’ signs. Who will occupy these spaces? I can’t say.”
Austin’s evolution into its current state was not immediate. Decades ago, the University of Texas served as a major economic player, and housing was affordable. However, as Big Tech expanded beyond Silicon Valley, the city experienced significant changes. Austin became a tech hub, with companies like Indeed, Apple, Google, Facebook, and Palantir establishing or expanding their presence. Even Oracle chose to relocate its corporate headquarters to Austin in 2020. The pandemic further accelerated this growth, with the tech industry booming and individuals seeking affordable housing and remote work opportunities.
Austin’s real estate boom was fueled by historically low interest rates until early 2022, enabling developers to secure financing for numerous projects. In Texas, it is common for commercial real estate to be built without confirmed tenants, allowing developers to obtain loans without guarantees of lease agreements. To cater to the needs of highly-paid young professionals, many buildings were designed as mixed-use complexes, combining office space, apartments, shops, and dining options. The upcoming luxury building, Paseo, promises to offer a complete live-work-play experience when it opens in 2025. Additionally, buildings like the Sixth and Guadalupe development feature 33 floors of apartments above 19 floors of offices, even hosting a restaurant on the ground floor opened by Elon Musk’s brother.
Seth Johnston, Senior Vice President and Market Leader of Lincoln Property Company, emphasizes that timing is crucial. Lincoln Property Company is involved in multiple Austin projects, including Sixth and Guadalupe, which commenced during a period of favorable financing conditions. Johnston believes that their developments, equipped with the latest amenities, will capture the attention of companies seeking high-quality spaces. He further mentions that new competition is unlikely, as financing for new projects has significantly diminished.
In response to inquiries about the vacant office spaces at the ATX Tower, Meta spokesman Tracy Clayton commented, “Meta’s goal is to build a best-in-class hybrid work experience.” The commitment to Austin remains steadfast, and efforts will be made to find suitable occupants for the available spaces.
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