Foreign Investment in Austin Commercial Real Estate

Foreign Investment in Austin Commercial Real Estate | Overview

Are you a foreign investor or business that wants to make a foreign investment in Austin Commercial Real Estate as a new home for your business? If so, this blog article is for you providing an overview of the process involved to purchase commercial real estate in Austin Texas.  To preface this article, you should contact a legal professional with direct experience in US Citizenship and Immigration services if you have deeper questions as you move along.

EB-5 is predicated on having a accepted Green Card (permanent residence) if they do the following:.

 

  • Make the necessary investment in a commercial enterprise in the United States; and
  • Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.

Foreign Investment and EB-5 Visa Overview Austin Office market

The EB-5 program was created by the US Congress in 1990 to stimulate the US economy through job creation and capital investments made by foreign investors.  Investors may also qualify for EB-5 classification by investing in regional centers designated by the USCIS.  The Regional Center Program has been extended thru Sept 30,2019.  Here are some of the rules  for a new commercial enterprise:

  • All EB-5 Foreign investors must invest in a new commercial enterprise which is a commercial enterprise :
  • Established after November 29 1990 or
  • Established on or before November 29,1990 that is:

“1. Purchased and the existing business is restructured or reorganized in such a way that a new commercial enterprise results, or 2. Expanded through the investment so that at least a 40-percent increase in the net worth or number of employees occurs”

Commercial Enterprise is deemed as a means for any profit activity formed for the ongoing conduct of lawful business practices, these can be

Sole proprietor, Partnerships, Holding company, Joint ventures, Corporation , Business trust or public or private entity.

 

Job Creation Requirements

A  new commercial enterprise must create full time positions for a minimum of 10 employees , for new commercial enterprises that are not located in the regional centers the full time positions created will be counted.  For move information on the Job Creation Requirements, click the respective link on this blog page.

Funding and Financing for Foreign Investment Austin Commercial Real Estate

Foreign investments in commercial real estate in Austin obviously require capital.  When reaching out to the commercial real estate brokerage, a potential buyer-investor from a foreign country should be willing and able to provide proof of funds.  Whether you are a cash buyer or financing your purchase, you should be able to provide documentation showing your ability to close on a transaction before a brokerage such as Shire Commercial can move forward.  Also in correlation to the above subject matter, a foreign investor should provide proof of a green card in place and that they have met the EB-5 rules for foreign investment in commercial real estate in Austin.
 

 

Austin Office Market for Q2 2019

Austin Office Market for Q2 2019 | Summary

How did the Austin office market fair for Q2 2019?  Positive signs were a part of the first quarter of 2019 are still in play with vacancy rates dropping below to a historic record of 9%.  Lease rates have risen to historic highs , pre-leasing activity drove most of the occupancy.

  • Large tenants and pre-leasing of approx half of new inventory driving the market.
  • Predictions of office occupancy are good for the rest of 2019
  • OPEX (operational expenses) have increased along with lease rates increasing $0.12 cents psf per month
  • Full Service on average coming in close to $40 psf per yr.

Austin unemployment remains low below 3%, employment growth is higher than the average of 6% coming in at 7.5%

 

Office Space and Vacancy- Highest vacancy sub-marketAustin Office market

Here is a quick snapshot of the highest vacancy areas in the Austin market, for more detailed information visit our vacancy data page.

  • Northeast Austin – which includes Round Rock Overall vacancy rates are 18-20%
  • North Austin 11.6%

 

Office Lease Rate Highs (per year)

  • Downtown Austin remains the highest cost area to lease office space, $57.00/psf for Class A property
  • South Austin and  East Austin come in 2nd with rates around $46.50 psf for Class A property
  • Northwest Austin is third at $42 psf

For more detailed information on current market office lease rates, you can visit our landing pages for specific square footage offices in the Austin Area.

Austin Office Market for Q1 2019

Austin Office Market for Q1 2019 | Summary

How did the Austin office market fair for the first quarter of 2019?  Positive signs for the first quarter of 2019 are still in play with vacancy rates dropping below 10%. Lease rates have risen to historic highs with an additional 5M square feet of office space added on.

  • Large tenants are driving the demand for the most part
  • Predictions of office occupancy are good for the rest of 2019
  • OPEX (operational expenses) have increased along with lease rates increasing $0.12 cents psf per month
  • Full Service rates are in the high $30’s

Austin employment grew close to 4% for the first quarter of 2019, however this is lower than the long term growth of 6%.  Unemployment still remains relatively low and below the national average of 3.8%

 

Highest Vacancy areas for office spaceAustin Office market

Here is a quick snapshot of the highest vacancy areas in the Austin market, for more detailed information visit our vacancy data page.

  • Northeast Austin – which includes Round Rock Overall vacancy rates are 17-18%
  • Southeast Austin – 15%

 

Office Lease Rate Highs (per year)

  • Downtown Austin remains the highest cost area to lease office space, almost $50.00/psf
  • East Austin comes in second at $43 psf
  • Northwest Austin is third at $37 psf

For more detailed information on current market office lease rates, you can visit our landing pages for specific square footage offices in the Austin Area.

Improvements White Box Space

Improvements | White Box Space

What is a white box space? A question like this may come up from a tenant that is looking to occupy a retail space or office space in Austin. White box is defined as an improved space that is “vanilla” , it really does not have any amenities or tenant specific improvements to the premises. Let’s think of a space that is completely unfinished. Minimum attributes do exist in a white box space such as

  • Electrical
  • Drywall- Sheetrock – painted white
  • Plumbing- restroom areas
  • HVAC – typical for office building space
  • Duct work-sometimes

Every tenant has their own look, just like you have a your own look when it comes to the way you dress. A white box allows the tenant to start with a blank slate and renovate it with a new look. Permitting does come into play depending on what the tenant wants , it could include many things such as : Relocation of HVAC systems, lighting , sprinkler systems, exit doors etc..

 

Costs of Improvements for White BoxWhite Box and Tenant improvements

Costs of improvements seem to be a grey area for most people and it is usually under-estimated. Trying to provide some clarity on costs of improvements even for white box solutions can be a bit tricky. Here are some guidelines for costs of improvements. 

  • HVAC unit replacements depending on the tonnage? $5000-$8000 per unit- this is typically for retail if your unit goes out while you are leasing the space
  •  Drywall $5 to $10 per linear foot
  • Drop ceiling $4 a square foot
  • Lighting $4 a square foot
  • Restrooms $8000-$15,000 (if it is a new restroom)
  • Flooring $4 a square foot
  •  Architect design $3 a square foot
  • MEP- mechanical electrical plumbing $1.50 a square foot (upper range)
  • Management fees for construction if you want it – 4-5% of the construction costs
  •  Permitting costs : Demo permit $250 where as a full building permit is $1500
  •  ADA review is require on projects larger than $50,000

Texas Department of licensing and registration requirements exist for projects as well and will cost up to $1,500.00

 

 

Austin Office Market -End of Year 2018

Austin Office Market | End of Year 2018

 

During the first half of 2018, the Austin office market was relatively flat.  Towards the end of 2018, the office market actually made a rebound. Austin vacancy rates did go below 10% , lower vacancies translates to higher lease rates.  New construction commenced for the office market in 2018 due to the steady demand.  For 5 straight years Austin’s office market has had over 1M square feet of space occupied.

  • Vacancy rates: Q3 10.2% , Q4 9.6% (Austin Metro Area)
  • Highest vacancies for Q4 2018: Round Rock , Northeast and Southeast Austin

Impact on Expenses for the Office Market and Lease Rate

Occupancy in Austin

The Office market will see continued pressure on expenses moving into the near future. There was a $0.20 cent plus increase in expenses from the third quarter of 2018 moving into the fourth quarter of 2018. Tenant demand remains solid moving into 2019 with forecasts calling for over 8 million square feet of demand. Lease rates for office space moved upward to $36.00 gross per square foot per year.  Gross rates are defined as the base lease rate plus NNN expenses included. Demand consisted of other types of businesses followed by technology type companies.

Round Rock Incentives

Round Rock Incentives

Summary taken from Round Rock Chamber of Commerce

The City of Round Rock and the Round Rock Chamber are offering customized incentive packages for relocation and expansion of businesses. Assistance may include tax abatements, waivers of fees, job training , and fast permitting. Here is a summary of the incentives on the table:

Tax AbatementsAustin Growth Population

Tax abatements are incentives being offered by Round Rock Texas for new businesses and existing expansions, included in this are personal property tax abatements associated with real property. If your business is making improvements to a facility or adding new equipment that add tax value those improvements may be considered for an abatement.

Financing and Grants Possible

Round Rock has a chapter 380 government code that provides authority to grant a loan of city funds to promote economic development. A 380 grant would be in the form of a municipal sales or property tax rebate. Performance based cash grants can be offered on job creation, capital investments and other factors as well.

Round Rock Incentives with Permitting and Job Training

Permitting incentives to fast track a project exist. Local officials can customize a development time table for businesses requiring and aggressive build schedule. Round Rock touts this as a distinct advantage versus their neighboring towns. The Round Rock Chamber can assist companies locating or expanding in Round Rock by securing state-provided job training. The Texas Workforce Commission offers the Skills Development Fund and other training to finance customized job training provided by public community and technical colleges. Please see the Job Training Resources page for detailed information.

For help with relocation and expansions, Shire Commercial has been helping clients since 2004 to locate their businesses.