Austin Is Moving Beyond “Weird” June 25, 2018 Gio Cordoves “Keep Austin Weird” is the slogan used by the Austin Independent Business Alliance to help promote small businesses in Austin, Texas. The “weird” refers to the city’s young, creative, hip, performing-arts vibe. However, there seems to be nothing weird about Austin’s phenomenal commercial real estate growth. The city is one of the top markets for commercial real estate investors in 2018, according to a recent Commercial Cafe study based on numbers from the Bureau of Labor and the Yardi matrix. The study is based on employment numbers, vacancy and lease rates, and the future of local office construction. Austin is already a top destination for job seekers — the unemployment rate is only 2.7 percent and the office vacancy rate is a low 11-12 percent for 2017 and in the single digits in Austin’s most desirable locations. Tech jobs in Austin grew four times faster than the national average, and are expected to remain strong in 2018, according to Commercial Cafe. Austin ranks 6th in annual tech-job growth, 10th in both rent growth and net absorption of tech markets (northwest Austin) and 11th in overall tech office rent growth. In 2017, the market’s office construction covered more than 2.5 million square feet. 1.8 million square feet is in the pipeline for 2018, representing a 3 percent growth in the city’s office inventory. Despite these additions, availability rates have remained low and rental rates continue to climb. This has been arousing investors’ appetites as property values continue to soar. Also adding to the excitement: Austin is on the short list as the location for Amazon’s highly anticipated second headquarters (Amazon HQ2). A good reason for Austin crossing its fingers and holding its breath: the project would bring an investment of more than $5 billion in new construction over 10 years and offer 50,000 new jobs to the local economy. Moody’s Analytics analyzed the metropolitan areas bidding for the headquarters and determined that Austin ranks highest among Amazon’s criteria. Amazon’s recent merger with Austin-based Whole Foods can also be a strong influence in the decision. Not surprisingly, Austin welcomed armies of Millennials between 2010 and 2015, according to a report published by the Brookings Institution, a nonpartisan research group (Austin ranked #6 on the chart). The Millennial population (age 18 to 34) grew 11.8 percent during that half decade. It also claimed the second-highest share of Millennials (27.2 percent) among the United States’ 100 largest metro areas (#1: Provo-Orem, Utah). When it comes to business, all of Austin is on fire. KBS has several properties in Austin: Downtown Austin includes the KBS property, 515 Congress (515 Congress Avenue) — this 263,058-square-foot, Class A, 26-story office sits at the historic “Main & Main” of Austin on Congress Avenue at 6th Street, and the tower features approximately 12,000 square feet of street-level retail. Its continuous windows offers unobstructed views of the State Capitol, Congress Avenue and Lady Bird Lake. Amenities include full-service banking, a private fitness and training center with showers and lockers, coffee bar, three fast-casual lunch options and controlled-access executive parking. 515 Congress was 98% leased as of the date hereof. Domain Gateway (2900 Esperanza Crossing) — this Class A office building — certified USGBC LEED Core and Shell Silver — was completed in 2009 and is currently 100-percent leased. The building is located in The Domain, a mixed-use development in Northwest Austin featuring Class A residential, office, retail, restaurant, hotel, grocery and entertainment space. Included in this area is a newer district called Rock Rose, offering a wide choice of local dining, shopping and entertainment. Stonebridge Plaza I & II (9600 & 9606 N MoPac Expressway) — these two 9-story, Class A towers are located in northwest Austin, conveniently fronting MoPac Expressway near its intersections with Hwy 183 and Loop 360 and adjacent to an abundance of retail, hospitality, and entertainment offerings and is situated in among the most convenient locations in all of Austin from an access perspective. Stonebridge Plaza was 100% leased as of the date hereof. Giovanni Cordoves is a senior vice president and co-director of asset management for KBS responsible for acquisition and management of commercial properties in Texas and Minnesota. Currently Gio manages a portfolio of office, industrial and flex properties totaling approximately 4.1 million sq. ft.