Starting Small, Where Investors Are Spending Their Money to Better Compete With One Another: A January 2025 Recap.

Opening Bell ??: Trade volume was way up at the close of 2024 and hit a pause as the dust settles making sense of what the latest is telling us. We saw properties like Sail Tower (a premier 100% leased class A building) go for $649/SF while Bridgepoint Square sold for $72/SF.

Leasing saw significant deals get done, with the top 8 lease sizes all coming by way of direct leases. Wise was the lone tech deal of note as they snagged 60,682 SF of office space at Domain Tower 2.

The Domain also saw significant movement on the sublease front as BigCommerce Holdings signed a sublease agreement with Expedia at Domain 11.

You can also get designer coffee, as Coach launched a coffee shop complete with designer coffee merch. Nothing compliments an $8 latte like a $40 hat.

Market Snapshot ??: Q4 2024 saw 7 major office asset sales. Lakewood on The Park was the only Class B asset to trade hands, selling at $108.33/SF.

While there is a wide spread in price per square foot, one thing is clear; investors are willing to play the long game and work with tenants to get deals done in the short-term.

Other trends to watch, both direct and sublease are trending downwards for the first time in awhile. A very positive sign as Net Absorption was a positive 480,994 SF over Q4.

Dive Deeper ??: The varying price per square foot is indicative of just how much work these new owners will have to put into each project to eventually see an ROI. Marbella Interests who purchased Bridgepoint Square likely won’t see an ROI on their $31.5 million in this generation of ownership. Across the board, these investors will have to pump some additional capital into their project to enhance their chances of attracting top-notch tenants.

Following the money, we decided to sit down with a number of experts on design and architecture to get a better sense of what these investors are doing with their Tenant Improvement (TI) dollars.

Pro Insight ???? : Speaking with experts like Andrea Corn at NuVū Interiors, owners are "buying complexes with 1,500-2,000 SF ready to move in spaces.” There’s a strong preference for elevated finishes, decorative lighting, and an emphasis out of the urban core. Andrea says a little goes a long way, with decorative backsplashes and pendant lighting in the entry as great ways for owners to enhance their curb appeal.

Tenants are also craving a more nature-centric experience. Stephen Levy with Levy Dykema noted an uptick in bringing fresher air inside thanks to smarter HVAC systems and a sustainable landscape to match. Levy’s latest project at Uplands was the perfect case study of how owners are incorporating what’s naturally available to them.

It’s not just newly acquired buildings that are doing some needed TLC. Laura Evans, AIA with Abel Design shared with us how Bergstrom Tech Center is upgrading lighting within spaces not just cut electric bills, but to also improve the overall feel of the space. This along with new tenant amenities like a market cafe seem to be paying off. Bergstrom Tech saw two of the top 8 leases in Q4 get signed.

Final Buzzer ??: While deals are getting done, the ball still remains largely in the tenant’s hands. Landlords are becoming increasingly more likely to demise larger floor plans into smaller spaces to attract growing tenants.

While the short-term challenges persist, Austin’s favorable economic outlook provides promising for the future. A full deep dive into our Q4 2024 office report can be found here.