When looking back on how far downtown Austin has come in the last 20 years, many newcomers to Austin would be surprised by the state of downtown in 1993. Austin was just coming off a real estate recession, office towers built in the late 1980’s in downtown were vacant, many even repossessed, and national corporations like GE Capital Credit were purchasing downtown real estate for less than half of the building cost. Few people resided in downtown and retail in the urban core was nearly non-existent. Needless to say, Austin was faced with a fairly dormant downtown.
Thankfully, City leaders had a different idea and greater vision for Austin. At this time in the early 90’s, leaders from the Greater Austin Chamber of Commerce, City of Austin, and the Austin chapter of the American Institute of Architects collaborated in bringing a Regional/Urban Design Assistance Team (R/UDAT) to the city to assist in the planning of the revitalization of downtown. From the plan came a number of recommendations that began the wheels of transformation to create the vibrant downtown we all know today.
One of these recommendations was the formation of a downtown management organization, known today as the Downtown Austin Alliance (DAA). This organization was to be approved by petition by the majority of downtown property owners and, if approved, would include a mandatory assessment based on the valuation of the downtown properties. The creation of the DAA in 1993 meant there was an organization dedicated to building the value and vitality in downtown Austin.
At this time, activity in the entertainment districts, especially historic East Sixth Street, began to signify an interest in revitalization. This is typical in cities undergoing revitalization efforts. Entertainment districts come first, which leads to more residential, then office and retail. All of these factors together lead to growth and vibrancy.
In 1997 an update to the original R/UDAT report was made, and Mayor Kirk Watson made downtown revitalization a priority for his administration and quickly began a program to implement the study findings. Mayor Watson had two things going for him that led to the success of plan implementation. First, he had a built in constituency of 200+ stakeholders that participated in the study. Second, the city owned under-utilized downtown property that could be put in play for private development, known to us today as the 2nd Street District. This property was wisely used to ignite the work, live, play atmosphere that is key to downtown revitalization. They started by successfully persuading Computer Sciences Corporation to locate their Austin facilities on two of the city blocks rather than a campus style facility in the suburbs. Next, AMLI residential sparked the residential development of this area and Post Properties added to the inventory on the Poleyard site. Additionally, the City wisely retained the ground floor space to allow for enough contiguous retail property in the future to make a true shopping district.
These city-encouraged projects proved up the downtown real estate market and the momentum for downtown development has continued today. The downtown skyline has changed dramatically from year to year, and visitors coming for a return visit would be challenged to recognize the changing skyline.
DOWNTOWN BY THE NUMBERS
Office: It wasn’t until the mid to late 90’s when office occupancy and lease rates began to rise. Rates reached a peak in 2000, followed by a dip in 2002-03, due to the dotcom bust. Things started looking up in 2004, reaching another peak in 2008 as occupancy starting nearing 90% and rents in the low $30 per square foot range. Since that time, we have enjoyed a steady and sustainable occupancy level approaching 90% and $34 per square foot per year.
Today, the market is in a good place. The vitality in downtown has led to office tenants willing to pay an annual premium of $12-14 per square foot for Class A downtown office space over comparable space in the suburbs. We still have room to accommodate most users, but companies needing large amounts of space are a bit limited. For this reason, we look forward to two office projects that could break ground in 2013 depending on pre-leasing success. This would provide additional space to accommodate downtown office demand.
Residential: The residential market had a similar trend to office in the last two decades. It built steadily in late 90’s, slowed with the dotcom bust in 2002-03 and steadily started increasing in 2004. Today, downtown apartment rental rates of $2.20 per square foot are nearly twice that of apartments in the suburbs. As downtown vibrancy increases, so does the population with more than 10,000 people now calling the urban core home. The creative class of employees that work and play downtown increasingly want to live here as well to take advantage of great dining and entertainment options and recreational amenities like the Butler Hike and Bike Trail, the crown jewel of outdoor recreation in Central Texas.
Hotel: Hotels have also experienced similar increases in occupancy since the dotcom bust. Steady growth in occupancy is leading to new hotels being built in downtown. With a number of hotels currently under construction, we will increase downtown hotel inventory from 6,000 rooms to 7,500 in 2013.
Retail: The Downtown Austin Alliance works to recruit a mix of businesses to Congress Avenue and East 6th Street. Some of the businesses we helped bring to downtown include: Brooks Brothers, Patagonia, Alamo Drafthouse, and Easy Tiger. Slowly but surely, the retail mix in these areas is coming around to complement an already successful 2nd Street retail district.
While downtown is definitely on the right track, challenges still exist. Downtown can be a victim of too much success. With the number of people wanting to live, work, and play in one place, traffic congestion in accessing downtown is a particular challenge.
Additionally, the increasing growth of the entertainment district downtown has led to interesting dynamics of noise control and ensuring downtown remains a safe place to be. We continue to work to develop a variety of activities for all ages to be sure downtown truly remains everybody’s neighborhood.
The Downtown Austin Alliance celebrates the tremendous revitalization that our downtown has gone through in the last 20 years, and looks forward to enthusiastically responding to these challenges and continuing to make downtown Austin a great place to be.