Shorenstein JV to Build 2 Office Properties in Austin
- Jul 10, 2013
Construction has begun on one of two new office buildings at The Domain, a 304-acre mixed-use community in northwest Austin, Texas, being developed in a joint venture between Shorenstein Properties, L.L.C., Deutsche Asset & Wealth Management and Endeavor Real Estate Group.
The cost of developing the two buildings – Domain 2 and Domain 7 – is about $45 million, according to Chad Marsh, managing principal with Endeavor Real Estate Group, a longtime owner and developer at The Domain. Domain 7 is a spec building while Domain 2 already has a long-term tenant signed up, he added.
HomeAway, Inc., a leading online marketplace for vacation rentals, has agreed to lease all the office space – about 114,600 square feet – in Domain 2, a five-story, 139,675-square-foot building, for 11 years, Brian Sharples, HomeAway co-founder and CEO, said in a news release. The 25,000 square feet on the ground floor will be leased to retail tenants. The site also includes structured parking.
The building is expected to be ready for HomeAway by September 2014, Marsh said. The build-to-suit property will be the fourth permanent office for HomeAway in Austin and will be twice the size of its downtown location, Sharples said. It will be home to about 750 employees. Workers at a Research Park office leased about 18 months ago as a temporary location will move to The Domain.
“They were out in the market looking for some temporary space,” Sharples told Commercial Property Executive. “We pitched them on the idea of The Domain.”
Sharples added in the HomeAway release that the company’s employees expressed a desire for an office in North Austin. The company, which started eight years ago in Austin with a staff of six, now, has more than 1,300 employees.
“With easy access to a new Whole Foods, shopping and other tech companies, The Domain provided the best answer for our growing and geographically dispersed HomeAway family,” Sharples said in his company’s release.
Marsh said they have had some interest already in space at Domain 7, which is expected to start construction within 45 days and be completed in October 2014. The six-story building will have 221,886 square feet of space. It will feature 33,000-square-foot floor plates and include structured parking.
“The goal is that we’re out in front of the next wave of construction,” he told CPE. “There’s a lot of pent-up demand for space here. Companies are moving here and companies are growing. There could quickly become a paucity of space.”
Marsh said there is an option for the JV to develop a third building. But he said they are taking a wait-and-see approach before beginning any plans for the third office building.
For Shorenstein, this is the San Francisco-based private real estate company’s first investment in Austin. Its Texas holdings include three Houston office properties.
“We see this as an excellent opportunity to make our first investment in Austin, a market which we have considered for some time due to its strong employment growth and office demand drivers,” Douglas Shorenstein, chairman & CEO, said in a Shorenstein news release. “The opportunity to participate, with highly regarded partners and substantial pre-leasing, in a multi-building development in a unique, mixed-use environment such as The Domain was highly attractive.”
Endeavor and Deutsche Asset & Wealth Management, formerly known as RREEF Real Estate, have been working together on developments in The Doman for eight years, Marsh said. He said Endeavor and Deutsche had previously constructed three office buildings at the site. They still jointly own two and the third was sold to KBS Realty Advisors, Marsh said. Working with Columbus Realty Partners, Marsh added that Endeavor and Deutsche have also been developing multi-family units at The Domain. More than 700 units have already been built or are under construction. Eventually the site could hold as many as 4,000 apartment or condo units.
Endeavor had originally partnered with Simon Property Group and built Phase One of The Domain with about 700,000 square feet of restaurants, office space, upscale retail, apartments and hotel. Simon later bought Endeavor out and also built Domain Crossing, an additional 350,000 square feet of retail, restaurants and apartments. Marsh concluded that Endeavor and Deutsche still own about 170 acres, including the site where the joint venture with Shorenstein is developing the office buildings.