Photo by Sara Behunek
With the wind of a strengthening economy at their back, some businesses in Northwest Austin are relocating to larger spaces or opening additional locations.
Real estate market reports provide statistics on vacancy and rental rates but not for relocations or expansions. However, Community Impact Newspaper data show a steady increase of expansions in Northwest Austin from April 2011 to March 2012 and a burst of relocation activity in the third quarter of 2011 as well as the first quarter of this year. All told, between April 2011 and March 2012, the Northwest Austin area saw 42 business relocations and 80 expansions. Expansions include physical expansions in an existing space or adding subsequent locations.
Community Impact Newspaper defines Northwest Austin as the area between Wells Branch Parkway and RM 620 to the north, RM 2222 to the south, Spicewood Springs Road to the west and North Lamar Boulevard to the east (see map on Page 19).
“Austin’s real estate market is pretty strong right now in terms of people expanding,” said Cole Brodhead, a principal with Retail Solutions, an Austin-based real estate firm. “Most of the national guys, national retailers, look at Texas as a great area to add more stores because our economy is so strong as opposed to the East Coast, West Coast, which still have some suppressed markets.”
Texas’ unemployment rate, at 7.2 percent as of February, the most recent data available, remains lower than most states in the nation. California, for example, has an 11.4 percent unemployment rate and New York has 9.2 percent. Austin’s unemployment rate in February was 6.1 percent.
One of the “national guys” that has expanded in Austin is The Advisory Board Company, a Washington, D.C.–based health care business consultancy. The company acquired local health care software firm Crimson and its 800-square-foot office in Northwest Austin about four years ago. Last fall, the company relocated to a larger space at Riata Corporate Park.
“We needed to find ourselves new space to accommodate our growth and to grow into,” Crimson CEO Paul Roscoe said.
The new office has 48,000 square feet with the option to expand to nearly 93,000 square feet. Roscoe said that in Austin, the company would be adding 100 new positions this year to strengthen its software development, user experience and product management.
“We looked at our existing employees and where they lived, and the larger office space is in Northwest Austin,” he said. “For our initial growth and in the long term, we wanted to be in one building.”
In another instance, Emulex Corp., a California-based communications manufacturing company that develops 10-gigabyte Ethernet, a high-speed connection between servers and storage centers, had outgrown two offices it maintained in Austin. The company chose to consolidate its workforce in September into a larger Northwest Austin office at 8303 N. MoPac, giving it the ability to increase its Austin presence.
Emulex CEO Jeff Benck said the larger office would allow the company to grow to 60 employees, up from about 40.
Movement and expansion in the commercial real estate sector in the Northwest Austin area is easier because of the area’s historically higher-than-average vacancy rates, said Nathan Smith, principal at real estate firm Austin Tenant Advisors. Many buildings constructed in 2007–08, primarily in the US 183, RM 620 and Toll 45 corridors, still have 10,000–20,000 square feet of leasable space.
According to market data from commercial real estate firm Oxford Commercial, the commercial vacancy rate for the Far Northwest Austin area—bounded by Capital of Texas Hwy., Burnet Road, the Round Rock city limits and Lake Austin Boulevard—peaked in 2009 at 26.9 percent and declined to 20.3 percent at the end of 2011. The Northwest region bounded by Capital of Texas Hwy., 35th Street, Burnet and Lake Austin topped off at 17.3 percent in 2010 and dropped to 16.7 percent at the end of 2011.
“There’s plenty of room for small companies to grow,” Smith said.
Movement in retail
Retail is often the last market to bounce back after down economies, Brodhead said, but the sector is expanding in Austin.
Frank Fleming opened his second business, Hot Tub Jacuzzi Store of Austin, in March in the Horizon Center at US 183 and Anderson Mill Road. Also in March, Make It Sweet, a locally owned retail shop that sells baking supplies, moved to the Crossroads Shopping Center at Burnet Road and US 183 to more than double the store’s space.
A need to double space also had Christa Graham, founder of Nifty Thrift, a nonprofit thrift store, searching for a new storefront earlier this year that could accommodate an influx of donations.
In January, Graham moved from a cramped location on McNeil Drive to 3,000 square feet at 12636 Research Blvd. She said the new store offers more visibility for donors and customers and will allow her to expand the service side of her business. Nifty Thrift donates a portion of its revenue to families in need.
“There’s a lot more we want to do. We want to work more with other organizations,” Graham said, adding that she would also like to create more jobs.
Brodhead said in the mid-2000s, many locally owned businesses, notably local and regional restaurants, were unable to open second locations because rental rates were too high. That has changed. Community Impact Newspaper found 29 food-related businesses expanding their physical space or adding new locations between April 2011 and March 2012.
“These guys have been able to flourish and have been able to take advantage of a strong market,” Brodhead said.
Brodhead said local restaurant chains, such as Torchy’s Tacos, have also taken advantage of an improving market to branch out by adding a location on RM 620 at Anderson Mill Road in 2011. College Station–based Blue Baker is bringing its bakery concept to the Austin market for the first time in April in the Arboretum. Houston-based Lupe Tortilla is expanding into Austin with a location at Arbor Walk.
“We’re hoping to see more local guys expanding, more concepts coming in that didn’t expand before,” Brodhead said.