Seller Disclosure

Commercial Office Space Austin | Seller Disclosure Truths

If you are selling a commercial office or office building , this primer (summary) can help with Seller disclosure and the truths around having to use one.

Disclosure Truth 1

As a seller you can use TREC’s seller’s disclosure of property condition document TXR 1406 or another form however it has to meet the statutory requirements for disclosures required by the Texas Real Estate Commission.    As a seller however, once you have a commercial real estate broker helping you listing your property for sale, they can provide you with the member’s only form from the Texas Realtors which provides more details and reduce you risk of a dispute.

Austin Office market

Seller’s should fill out a property disclosure statement even if it is for more than one unit, such as a duplex although it is not required. What is required is seller’s must fill a seller disclosure for residential one unit dwellings.  You should again engage with a knowledgeable commercial real estate broker to help you fill out the right forms.

Updating the Property Condition Statement

Once you fill out your property condition statement , provide it to the buyer.  Sellers are required to provide additional information if they find material issues with the property after the disclosure statement has been filled out. 

You can be provided an update form that is available for members only called TXR 1418.

A commercial real estate broker or agent should never fill out your disclosure document. Brokers or agents can provide consultations and support in filling it out however it is the Seller’s responsibility.

Shire Commercial represents Buyers and Sellers of commercial property in Texas. Brokers and agents are not allowed to provide any legal interpretative advice regarding documents.

Commercial Office Space Austin

Commercial Office Space Austin | Summer 2019

Austin’s commercial office space market for the summer of 2019 equals 2 words, higher rates!  Current lease rates for commercial office space have hit all time highs in the Austin area.  Vacancy rates are down now below 10%.

Lower vacancies and positive occupancy have pushed lease rates up to a historic high, overall construction is up currently for office properties. The lease rate quoted above is for a full service rate which includes all expenses, electric and janitorial costs.  Although leasing rates have increased, they did not increase as much as they did the previous quarter.

  • Operational costs have increased as well up $0.10 from the first quarter of 2019.

Commercial Office Space Terms Austin Office market

Commercial office space terms are typically 3-5 years. As far as costs go most multi-tenant buildings have a “FSG” full service gross lease quoted. Outside of that tenants may be looking at a NNN lease which has a base lease rate plus operating expenses added onto the lease rate and it does not cover electric or janitorial costs.

Expect TI finish out concessions to go in line with longer lease terms , short lease terms less than 3 yrs typically do not have leverage to negotiate finish out in the tenant’s favor. Your credit should be good to excellent if you want to lease a Class A or B Building in Austin.  Because we track lower lease rate deals, you can find these on our website page under “Office Deals“. We do not project much change near term for the next quarter of 2019.

 

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