Barings, B&Z Break Ground on Austin Office Project
- Jan 08, 2020
Barings and B&Z Development are breaking ground today on a speculative Class A building that will bring nearly 120,000 square feet of office space to downtown Austin. The five-story project, 701 Rio, is expected to wrap up construction in June 2021.
Built by Colorado-based general contractor Hensel Phelps, the project will rise on a 0.45-acre site at the northeast corner of West Seventh and Rio Grande Streets. The neighborhood near the western edge of downtown is about a 5-minute drive from the Texas Capitol and the city’s financial district.
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B&Z Development, a partnership between local real estate veterans Diana G. Zuniga and Jason Berkowitz, is developing the project, while Barings, the more than $335 billion global investment management arm of MassMutual, is the equity partner. Financing is being provided by Bank of Texas, with Banc First as a correspondent lender.
The developers are confident that the project, with its central location and high-end amenities including a rooftop terrace, will fulfill a craving for premium office space in Austin, where average asking rents shot up 27 percent year-over-year in the third quarter of 2019, according to a report by JLL.
“701 Rio is poised to offer a one-of-a-kind work environment for creative, cutting-edge companies as well as established traditional businesses in Austin or those interested in relocating to the city,” Berkowitz noted to Commercial Property Executive. “There’s nothing else like this out there.”
Designed by Austin-based BGK Architects, the new property will feature 120,983-square feet of office space with floorplates ranging from 10,174 to 27,690 square feet and five levels of subterranean parking. The building will also house a 7,000-square-foot retail component. Aside from the rooftop deck with views of downtown Austin, amenities will include a fitness center, lockers, showers, and secure storage for bikes and scooters.
B&Z acquired the site in 2006 and last year it demolished the existing, low-rise commercial buildings on the component lots at 701 Rio Grande St. and 602 W. 7th St. The project will sit across the street from SEVEN Apartments, a 27-story residential tower owned by Greystar.
JLL is the exclusive leasing agent for the project, with Rachel Coulter and Travis Rogers of the Austin office leading the leasing and marketing efforts.
Tapping Austin’s growth wave
John Ockerbloom, Barings’ Head of U.S. Real Estate Equity, indicated in a statement that the new project would expand the company’s footprint in a well-established, high-growth market.
Overall office vacancy in Austin tightened to 8.7 percent in the third quarter, from 11 percent at the same time in 2018, driven in large part by the expansion of tech giants as well as activity by the government, health-care and coworking sectors, according to JLL. The central business district recorded even lower vacancy at 7.3 percent. Roughly 53 percent of the burgeoning city’s 5.59 million square feet of office construction activity was preleased as of the third quarter.
The overall average asking rent rose to $48.39 per square foot in the third quarter, from $38.05 a year earlier, JLL noted. However, rival brokerage CBRE found that rent growth stopped in the fourth quarter of 2019, in a rarity for the burgeoning city.
“The creativity, originality and amazing makeup of world class business cultures are driving our city’s growth and the economy,” said Berkowitz. “The timing for 701 Rio could not be better.”