Austin Office Campus Changes Hands

A joint venture between AQUILA Commercial and Serpa Partners has acquired a 286,000-square-foot office campus in the Austin-area suburb of West Lake Hills, Texas. Starwood Capital Group was the previous owner of the asset, called Cielo Center, according to Yardi Matrix.

Neither the buyers nor the seller disclosed financing details. Yardi Matrix shows that Starwood Capital purchased Cielo Center from Brandywine Realty Trust in October 2017 as part of a portfolio sale.

The asset, which was built in two phases between 1983 and 1985, consists of three connected office buildings of six stories each, with floorplates ranging from 12,300 square feet to 22,249 square feet. Current tenants include NFP, Regus, Genesys Spine and Southside Bank, according to Yardi Matrix, and the buildings collectively have an 11.7 percent vacancy rate.

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Chad Barrett, managing principal at AQUILA, told Commercial Property Executive that the Southwest submarket of Austin, where Cielo Center is located, is the area’s strongest-performing submarket with vacancy sitting at 12.8 percent—down from 16.7 percent last year.

“With Cielo’s proximity to downtown, strong demographics and no new supply in the pipeline, we believe this submarket will continue to strengthen,” Barrett said.

Cielo Center includes a fitness center with showers, conference facilities, covered parking and tenant lounges. The new owners plan to update the common areas and outdoor amenities.

The property is located at 1250 S. Capital of Texas Highway, along the high-traffic Texas State Route 260. Downtown Austin is within about 8 miles from the asset, while Austin-Bergstrom is some 13 miles away.

AQUILA will handle leasing and property management for the campus following the acquisition.

New stock impacting Austin’s office market

Austin had nearly 4 million square feet of office space under construction as of July, according to a Yardi Matrix report, representing 3.6 percent of existing stock. That figure is well above the national figure of 0.9 percent, placing the metro ahead of its peers.

The new construction is contributing to the area’s vacancy rate of 27.2 percent as of July—in line with broader office real estate trends but still well above the 19.4 percent national rate. Austin’s figure marks a 430-basis-point increase since the same time last year, and the city’s vacancy rate is expected to continue to climb, according to the report.

Austin also had an average asking rent of $45.61 per square foot, above the $32.72 national figure. The Texas capital recorded $343 million in transactions as of July, with properties trading at an average of $223 per square foot.