Manhattan Developer Makes Texas Push in Deal for Austin Offices

(Bloomberg) -- Tishman Speyer, the Manhattan-based owner of Rockefeller Center, is buying its first buildings in Austin.

The price for the properties in the Texas capital, which has emerged as a technology hub, was between $145 million and $150 million, according to a person with knowledge of the deal.

With a tech-savvy workforce trained by the University of Texas, the Lone Star State’s capital has attracted major offices for the likes of Google-parent Alphabet Inc. and Amazon.com Inc. as a lower-cost alternative to San Francisco, New York or Seattle.

Austin’s cultural allures also include the South-by-Southwest Conference and Festivals, and a hipster music and foodie scene. Tishman’s deal comes as companies in California and New York are increasingly opening offices in lower-cost states.

“Tishman Speyer is focusing on markets where the best tech entrepreneurs are collaborating with leading academic institutions,” Chief Executive Rob Speyer said in a emailed statement. “Going forward, Austin will be in our portfolio alongside Boston, San Diego, the Bay Area and more.”

Tishman Speyer’s new Austin buildings are Foundry I and Foundry II, east of downtown in a neighborhood known for its nightlife that has gentrified with the influx of tech workers in new low-rise or renovated buildings. About 1.1 million square feet of new office space is under construction in the area, according to Sam Tenenbaum, an Austin-based analyst with CoStar Group Inc.

The two buildings, developed by Cielo Property Group, have a combined 240,000 square feet of office space and 17 residential units. Foundry I opened in 2019 and Foundry II is scheduled to open in May.

The Austin metro area’s population grew more than 30% over the last decade, topping 2.2 million, according to the Greater Austin Chamber of Commerce. That compares with an 18% growth rate for all of Texas.

Tishman Speyer is arriving during a lull in the Austin party. Sales and leasing virtually froze during the Covid-19 pandemic and the pricing outlook is soft with as much as 9 million square feet (836,000 square meters) of newly built or renovated office space being readied for lease in the next two years, Tenenbaum said.

Asking rents declined and tenant concessions rose last year as inventory increased 1.2%, according to Jones Lang LaSalle Inc.

Founded in 1978, closely held Tishman Speyer has long been diversifying beyond its New York roots, with international offices in Europe, Asia and Brazil. It launched an initial public offering for a blank check company in November and recently announced plans for a second IPO to finance real estate technology service firms.

©2021 Bloomberg L.P.