Ascentris buys Austin office
Ascentris, on behalf of one of its public retirement system clients, has purchased Paloma Ridge, a 210,000-square-foot, class A multi-tenant office property in Austin.
The purchase price was not disclosed.
The property is comprised of two buildings on 23 acres, as well as 13 acres of developable land that can accommodate an additional 170,000-square-foot office building.
“Ascentris is currently targeting high-quality, differentiated, suburban office properties in historically resilient markets where there is a significant rent and valuation discount from their CBD counterparts. Paloma Ridge is a great example of what Ascentris finds attractive currently when investing in the U.S. office property sector,” said Jake Rome, Ascentris vice president.
Developed in 2016 by Alliance Bernstein and Stream Realty Partners, the property appeals to the submarket’s prevalent high-density office tenants by offering large flexile floorplates and abundant parking.
The Northwest submarket is the beneficiary of increasing rents with cyclically low vacancy and a limited development pipeline. Further, Austin’s current population growth is concentrated in the northern suburbs; Williamson County’s population grew by more than 25 percent from 2010–2016, which compares to 19.8 percent for the Austin MSA.
The office market has remained extremely strong and rates have seen a slight increase over the past quarter, according to Colliers International’s third quarter 2017 Austin office report. The trend of big companies eating up large spaces has become the norm and the expansions of tech giants and co-working spaces have continued to embolden landlords and developers to bring speculative product to the market.
Significant demand for space in close proximity to downtown is driving average rates higher and is responsible for much of the absorption seen in the past three quarters, suburban Northwest and Southwest submarkets have not fared quite as well. Rising central rates have incentivized enough tenants to explore the “burbs”, balancing those markets with healthy/flat growth. The exception, of course, is the Domain, which continues to successfully deploy the “build it and they will come” tactic.
The third quarter had more than 1.5 million square feet of new office developments break ground, bringing the total amount of construction activity to more than 3.3 million square feet, according to JLL.
