Trion World Network Signs 24K SF Austin Office Lease

Trion World Network recently signed a 24,000 square foot lease in NW Austin at the Avallon, located at Jollyville and Braker Ln.

From their website Trion is self described as

The publisher and developer of games and original entertainment for a connected world. We’ve assembled many of the most respected names in the industry—with the backing of the world’s biggest media companies and top venture capitalists—to fulfill the incredible potential that global broadband has created for games. With our innovative technology, we’re combining the best of online, gaming and traditional media to revolutionize the way connected games are designed, developed, and delivered.

Trion’s Web site notes that the privately held company has raised funding from investors including Time Warner and Peacock Equity, a global fund founded by General Electric and NBC Universal.

Trion currently  has lease space in Austin, operating a technology studio and company officials are not saying what the new lease space will be used for.  Based upon the number of square feet, the Austin American Statesman is projecting that the new lease space could provide work space for several dozen (36 perhaps) total employees.

The Austin American Statesman is also reporting that Trion is searching via online job postings for a number of positions in Austin, including a senior software engineer, a technical systems analyst and an SQL server database administrator.

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The Economist, Lone Star rising, A Special Report on Texas

tex triangleThe Economist a London based, English language weekly publication that describes itself as the premier online source for the analysis of world business and current affairs, as well as business and country special reports, recently published a Special Report on Texas called, Lone Star Rising.  

Why would a British publication put together a 10 page report on Texas, when they’ve got future special reports planned for The Arab world on July 25th, Indonesia on September 12th and China and America on October 24th?

Well they must think we’re doing something right.  Here’s what they say.

Texas now hosts more Fortune 500 companies than any other American state. They include AT&T, Dell and Texas Instruments; oil giants such as Exxon Mobil, ConocoPhillips and Valero; American, Continental and Southwest Airlines; Fluor, a huge construction firm (recently lured from California); J.C. Penney; Halliburton; and 52 others. Texas claims to have been responsible for 70% of all the net new jobs created last year in America’s 50 states, though since only a few states created any jobs at all that is not quite as astonishing as it sounds.

Texas’s unemployment rate, at 7.1%, was 2.3 points below the American average. Housing repossessions are still very rare; the state budget is still in surplus even as California and New York teeter on the edge of bankruptcy. Unlike those fellow states with large populations, Texas levies no personal income tax, and with almost unlimited space on which to build, its houses are big and affordable.

All this has brought people flooding in and made Texas America’s fastest-growing state. Net domestic inflows have been running at around 150,000 people in recent years, whereas California and New York have seen net outflows. Next year’s national census is expected to show that flourishing Houston has replaced struggling Chicago as America’s third city. Of the ten largest cities in America, three are in Texas.

Those three, Houston, Dallas and San Antonio, together with the state capital, Austin, and Fort Worth, make up what the boosters call the Texaplex: a densely packed triangle, with each side measuring about 300 miles, that is home to roughly 80% of the state’s population of 24m (second only to California’s 37m). This “Texas triangle”, containing America’s third-largest airport (Dallas-Fort Worth) and its second-busiest port (Houston, despite being 50 miles inland), has emerged as one of the most dynamic regions in all of America. 

 Specifically with respect to Austin, the Report says…

 Austin, as well as housing the machinery of state government, has developed into a thriving hightech cluster.

The University of Texas at Austin, one of America’s largest single campuses, has helped that city become a leading hightech centre. Dell, one of America’s 40 biggest companies, started life at the university in 1984, and smart industrial policy brought Sematech, a consortium involving the government as well as 14 big chip firms, to Austin in 1988. Scores of other tech firms have followed.

Second, Texas has benefitted from transplants.  Cheap property and low taxes have attracted corporate headquarters and startups alike. At a roundtable organised for The Economist in Austin by Angelou Economics, a consultancy that specialises in matching new economy businesses with cities that want them, only two of the 12 entrepreneurs taking part were native Texans. Most of them cited noneconomic as well as commercial reasons for being in Austin. Quality of place is a phrase you hear a lot in Texas

A big part of Austin’s draw is its music, and particularly its SXSW festivalAustin is a remarkably laidback place, with all the advantages of being a blue city in a red state.  

 In closing this probably best sums up the impression that the Lone Star state made on the writers of The Economist.

To visit America in the midst of the worst recession for decades can be a disheartening experience, but a tour of Texas is quite the reverse. Since suffering that big shock in the 1980s, it has become a well diversified, fiscally sensible state; one where the great racial realignment that will affect all of America is already far advanced; and one whose politics is gradually finding the centre. It welcomes and assimilates all new arrivals. No wonder so many people are making a beeline for it.

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Moody's Economy ~ Texas one of States to Lead Recovery

austin sunriseMoody’s Economy once again is forecasting good things for the Lone Star State. The latest is that they project Texas to be one of the first states to have their Economy turn the corner and begin recovery.  Why, you ask?  Well the high tech industry, oil industry, and the energy industry according to Andrew Gledhill of Read on!

According to economist Andrew Gledhill of, the high-tech industry is one element. The slowdown in technology spending last year and early this year has created a pent-up demand for technology. Gledhill says that Texas was among the last to join the recession and as conditions begin to turn nationally, “Texas will also be the first to bounce back.” Click Here for More

The recession didn’t start at the same time in every state, and it won’t end at the same time either. A new forecast from Moody’s Economy predicts that jobs growth will return first in those five states, starting in the last quarter of this year. Four of those states benefit from strong high-tech industries, and the fifth, Texas, has a strong base of energy industries.  Click Here for More

The criteria for the survey included the labor market, income, credit quality/banking, real estate and consumer spending. Moody’s conducts a regional employment forecast as well as an “adversity index” to gauge the status of state economies.

In the case of the northwestern states, the reason they got picked is because of their high concentration of high-tech companies, Moody’s economist Andrew Gledhill said. Analysts expect a pick-up in tech spending as the recession gets going.

As for Texas, it was the oil industry: The strength of the industry made the lone-star state one of the last states to join the recession, and therefore will make it among the first out.  Click Here for More

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Commercial Real Estate's Future in Texas and U.S.

Commercial Real Estate’s Future

Mark Dotzour, Chief Economist, Real Estate Center at Texas A&M
June 12, 2009

COLLEGE STATION (Real Estate Center) – The Center’s chief economist recently spoke at the 2009 Houston Real Estate Roundtable, where he had much to say about the future of commercial real estate in Texas and the United States.

Check out Dr. Mark Dotzour’s speech in the Center’s new 46-minute video, “It’s Showtime!,” now available online.

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Austin #3 on U.S. News & World Report's Best Places to Live in 2009

U.S. News & World Report lists Austin as #3 on their list of Best Places to Live in 2009. Why you ask? Well their criteria is as follows:

In selecting our Best Places to Live for 2009, U.S. News took a thrift-conscious approach: We looked for affordable communities that have strong economies and plenty of fun things to do. The cities we selected are as distinct as America itself—ranging from a quaint suburb to a live-music mecca. But whether you prefer hiking through the Rocky Mountains, pulling a fish out of the Atlantic Ocean, or grilling hot dogs at a college football tailgate, here are 10 places that will fill up your daybook without emptying your wallet.

What does the publication have to say about our Fair City? Read on…

Austin, Texas
If you’re a free spirit, music junkie, or barbecue lover—or if you simply have what it takes to “keep Austin weird”—Texas’s state capital is for you. Considered ground zero for live music, this city of 716,000 residents is home to legions of musicians and nearly 200 performance venues. In addition, Austin hosts the always popular South by Southwest festival. Since its inception in 1987, the event has mushroomed from a local gathering to a 1,800-band, 80-stage extravaganza of music, filmmaking, and interactive activities featuring performers from all over the world. Austin is also a high-tech hub, with companies like Dell and IBM, which employ thousands of residents.The city’s warm climate offers plenty of sunshine, while the open green spaces don’t provide any excuse for staying indoors. Head over to Lions Municipal Golf Course for an inexpensive round. Wander through the 351-acre Zilker Metropolitan Park until you find Barton Springs Pool, a 3-acre water source fed by underground springs that keep its temperature around 68 degrees all year long. To escape the city, head for the nearby Hill Country. “It’s rolling hills cut with lots of little creeks and streams,” says Tom Beach, a sales clerk at Austin Canoe & Kayak. “It makes for a nice road trip.”

Nothing really new here, just another feather in the cap of this place we like to call Home!

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Austin Chamber reports Milken Institute Study updated for High Tech Industry & Regional Economic Impact

Central Texas Economy In Perspective
by Beverly Kerr, Chamber Vice President of Research

On June 2, the Milken Institute published a new report, North America’s High Tech Economy: The Geography of Knowledge-Based Industries, that revisits indicators originally produced in an influential Milken Institute report from 1999 documenting the importance of high-tech industry to regional economic vitality.

Austin comes into the new report’s composite “Tech Pole” index ranking of metropolitan areas at 20th place. This is not very different from Austin’s place (21st) in the 1999 report (which did not include Canada and ranked based on a somewhat different methodology). However, the current report provides rankings based on 2003 as well as 2007 and Austin had been at 16th place in 2003.

The index is designed to be indicative of an area’s ability to grow and sustain high tech industries and the name of the index is mean to represent the relative technology gravitational pull that such regions exert.

Austin’s highest LQ, 10.5 in computer and peripheral equipment manufacturing, means that the local concentration of this industry is over ten times that of North America. The next most significant high tech LQ for Austin, 7.4, is in semiconductor and other electronic product manufacturing. San Jose has an over all high tech LQ of 4.6. Like Austin, its two highest individual tech industry LQ are in computer manufacturing (28.4) and semiconductor manufacturing (17.3).

The top scoring metro (San Jose) is given a score of 100 and each other metro is rebased to the top scoring metro. There’s an extraordinary spread between San Jose and the 2nd ranking metro, Seattle, which has a Tech Pole score of 46.4. Dallas, ranked 6th, has a score of 21.8 and Austin comes in at 20th with a score of 11.6.

Although Austin’s 20th place showing might not seem as elevated as we sometimes get used to seeing in other ratings and rankings, the new report nevertheless refers to Austin as a “poster child for the concept of a 21st-century knowledge-based community” and the 1999 report, which details the author’s arguments about the decisiveness of concentrations of knowledge-based industries in greater depth, references Austin frequently as an exemplar.

Austin Chamber of Commerce | 210 Barton Springs Road, Suite 400 | Austin, Texas 78704

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Updated Austin Texas Real Estate Market Report

The Real Estate Center at Texas A&M has updated the Market Report for Austin Texas after the 1st Quarter of 2009Click Here for More.

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Austin, Texas the Leader in Adding Jobs…

Austin, Texas continues to lead the country in adding jobs to their economy.  This is a testament to the efforts made locally to diversify the economy after tough economic times in the 80’s when the entire state’s economy was dependent upon the oil industry.  Austin knows jobs!

Thursday, June 04, 2009

Once again, Austin leads U.S. in big-city job growth, City alone among 38 largest job markets in growing for 3rd straight month

The Austin area had the nation’s strongest job market among big cities last month, according to data released Wednesday by the Bureau of Labor Statistics. Click for More.

CBS 42 Reporter:Ryan Loyd
Last Update: 6/03 11:02 pm


The Austin job market is getting some good news, with nearly 5,000 jobs added in the Capital City in April. For new Austin resident, Esther Newell, a job was essential to her success. “It’s a growing city, just look around,” she said. Click for More.

Austin Business Journal
Wednesday, June 3, 2009, 2:06pm CDT


Metro Austin continues to lead the nation in job performance.
The region added about 3,400 jobs between April 2008 and April 2009, making it the only one of the nation’s 38 largest cities to post a job gain, new data from the Bureau of Labor Statistics shows. This is the third consecutive month that Austin has outperformed all of the other U.S. cities with labor forces of 750,000 or more. The unemployment rate for April stood at 5.8 percent. Click here for more.

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Austin #8 in Kiplingers Best Place to Live & Work

Kiplinger’s: 10 Best Places to Live and Work
Where’s the best place to hide during this economic downturn?

Kiplinger’s Personal Finance magazine evaluated U.S. cities for their growth potential, analyzing their ability to hold onto jobs even if the economy softens further.

With assistance from Kevin Stolarick of Martin Prosperity Institute, the magazine concluded that cities where there are a lot of white-collar jobs are surviving the downturn better than areas where much of the workforce is employed in manufacturing or service jobs.

Stolarick says these creative-class jobs tend to help generate new businesses and that increases the vibrancy of the areas where they hold sway.

This employment analysis combined with data about income growth and cost of living led Kiplinger’s to choose these 10 cities as the best places to live and work in today’s challenging economy:

1. Huntsville, Ala.
2. Albuquerque, N.M.
3. Washington, D.C.
4. Charlottesville, Va.
5. Athens, Ga.
6. Olympia, Wash.
7. Madison, Wis.
8. Austin, Texas
9. Flagstaff, Ariz.
10. Raleigh, N.C.

Source: Kiplinger’s Personal Finance (07/2009)

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Valence Battery Plant Headed to Leander, 4,000 Jobs Forecasted

In big Economic Development news for the Austin area, Valence Technology a manufacturer of advanced batteries has announced plans to open a new manufacturing plant in Leander with a forecast of adding 4,000 jobs.  What does this mean for Austin Real Estate ?  Keep in mind job growth fuels new home construction which fuels the need for more office space, retail space and industrial space.  Great news for Central Texas!  Read on…

Valence to Open Leander Plant, add 4,000 jobs
Valence Technology plans to create 4,000 jobs with the operation of a new plant in Leander.
May 27, 2009, News 8 Austin Top Stories

Valence seeks Federal Money to build Battery Plant
Valence Technology Inc. said it has applied for $225 million in federal stimulus money to help pay for an advanced battery plant that would be built in Leander.
May 27, 2009, Austin American Statesman Business Blog

Valence to Leander for Battery Plant
Austin-based battery manufacturer Valence Technology Inc. said Wednesday that it has applied for $225 million in federal stimulus money to help pay for an advanced battery plant that would be built in Leander.
May 27, 2009, Austin American Statesman

Stimulus Money to bring Leander jobs
Valence Technology applied for a federal grant to build a production facility in Leander, Texas. There is potential for 4,000 new jobs by 2016 if this plant opens.
May 27, 2009, KXAN TV News

Valence wants to build Major Plant in Leander
Austin-based Valence Technology Inc. has submitted a grant application to the U.S. Department of Energy with plans to build a manufacturing facility in Leander.
May 27, 2009, Austin Business Journal

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Forbes – I ♥ Austin, Texas

Forbes Magazine’s love affair with Austin continues, recently naming it America’s best bargain City. Check out the other recent accolades Austin has earned from the magazine.  Nine different magazine features listing Austin as one of the best across a spectrum of categories.  Amazing!  Of course as a resident of this great City it’s no surprise to me…

Forbes Magazine Names Austin #1 of America’s Best Bargain Cities!
Forbes – May 13, 2009 … Four other Texas cities make the list of America’s Best Bargain Cities, but none come close to Austin, whose 5.5% unemployment is the best …

Austin’s Secrets For Economic Success
Forbes – ‎May 11, 2009‎ …Why Texas’ capital is such a great place for job growth–and the good life. Few places have received more accolades in recent years than Austin, …

Austin named one of best City’s for Outdoors
Forbes – ‎May 12, 2009
In general, Californians are a lucky bunch: San Diego, San Jose and Sacramento all ranked in the top 10, while Los Angeles tied for 11th with Austin, Texas. …

Austin One of Favorite Cities to Relocate To
Forbes – Mar 30, 2009 … The top three areas according to the data are Raleigh, N.C., ranking first, which jumped 4.29% to nearly 1.9 million; Austin, Texas, …

Best Cities to Live on $500K
Forbes – Feb 12, 2009
… Strapped-for-cash execs might consider these 10 locales.

Austin one of hardest drinking Cities
Forbes – Aug 7, 2008 … Austin, Texas, is famous for its parties. People flock from around the world to attend events like the annual South by Southwest film and …

Best Cities for Young Professionals
Forbes – Jul 9, 2008 … In Depth: Best Cities For Young Professionals. The City by the Bay, which ranked second in 2007, secured the top spot by attracting the …

America’s Recession Proof Cities
Forbes -Apr 29, 2008
Austin, Texas. Median home price: +6.4%. Unemployment: 3.6% (from 3.8%). Key growth: Natural resources and construction, +5.1%; leisure and hospitality, …

One of Best Cities for Drinking Water
Forbes – April 14, 2008
Austin, Texas. The “Live Music Capital of the World” has a lot going for it, including clean drinking water. The Austin-San Marcos region was among the top …

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1st Quarter Austin Housing

homeNew home starts in the first quarter of 2009 declined by 47% compared to 2008 according to Residential Strategies, Inc.  1,215 homes were started in January through March 2009 compared to 2,297 starts during the same time period in 2008.  

Part of the explanation for the low starts is that 2008 ended with a lot of finished inventory that builders needed to sell.  The good news acccording to Mark Sprague with Residential Strategies Austin is that

“builders have cut back on starts and focused on selling this inventory in the 1st quarter”.

Quarter 1 closings fell to 2,145 units, a 31% decline from the first quarter of 2008. The Central Texas housing market remains healthy compared to other parts of the country with a 5.3 month inventory of new homes compared to a six (6) month supply which is considered balanced. 

 The first quarter median price for a new home in Austin was $220,876, up 7% from 2008.

Because starts are down, homebuilders have reduced the number of new lots they are developing.  As a result the market runs the risk of a shortage of lots as the economy begins to rebound. Terry Mitchell, a local developer believes that this could occur in one year to 18 months from now.

PMI Mortgage Insurance Co.’s first quarter 2009 economic and real estate trends report lists the Austin metropolitan area as the 17th most stable housing market among the nation’s 50 largest cities. As a result the Austin housing market is at “low risk” for a home price correction. All four of Texas’ other major cities are in the top ten of the list.

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1st Quarter Austin Office Leasing

Office Market Trends Austin
Grubb & Ellis Research
First Quarter 2009

office towerAfter three (3) consecutive quarters of positive net absorption, the Austin office leasing market went in the red for quarter 1 of 2009 giving back 158,281 square feet.  Rental rates declined and vacancy rates went up.  Overall vacancy rose to 20% for the first quarter, up from 19% in the fourth quarter of 2008. 

Average annual rental rates per square foot went down from $27.65 in the fourth quarter of 2008 to $26.53 in the first quarter of 2009.   Sublease vacancy is up by 100,000 square feet from the 4th quarter of 2008. 

Absorption is expected to remain flat throughout 2009 and when considering that 300,000 square feet has been added to the market over the past year and absorption this quarter compared to quarter 1 of 2008 is down 4%, this equates to a stable office market especially compared to the rest of the country.

   Office Vacancy Rate  Full Service $/SF  Net Absorption SF  Sublease Inventory SF  New Office SF
 Q4 2008  18.8%  $27.65  345,781  904,663  0
 Q1 2009  19.9%  $26.53  (158,281)  1,006,419  486,370
 Change  1.10%  $(1.12) -46%   101,756 486,370 

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1st Quarter Austin Retail Leasing


village at westlakeMarcus & Millichap
Real Estate Investment Brokerage Company
Austin | 2009 Market Outlook

 2009 Retail

2009 NRI Rank: 10, Up 1 Place. Forecast household growth and only modest job cuts will support retail demand in Austin this year, allowing the market to move up one spot in the ranking.
Employment Forecast: Employers are expected to cut 2,100 jobs this year, a 0.3 percent decrease. In 2008, 9,500 positions were added.
Construction Forecast: Approximately 1 million square feet of retail space is forecast to be completed in 2009, following the delivery of 1.1 million square feet last year.
Vacancy Forecast: Easing tenant demand and continued construction are expected to push vacancy up 140 basis points to 10.5 percent this year, after a 60 basis point rise in 2008.
Rent Forecast: As vacancy creeps higher, asking rents are projected to dip 2.6 percent to $20.01 per square foot in 2009 while effective rents retreat 2.8 percent to $17.93 per square foot.
Investment Forecast: In South Austin, tenant demand near Southpark Meadows has been robust in recent months. As retail space on the perimeter of the metro comes online over the next 12 months, however, owners will have to compete for tenants by offering leasing incentives.

Austin American Statesman, Thursday, May 14, 2009
Third Base sports bar/restaurant leased 6,236 square feet at the Grove in Southpark Meadows, 9600 S. Interstate 35. This will be the third location for Third Base, which began on West Sixth Street and expanded last year to Round Rock.

Austin American Statesman, Thursday, May 7, 2009
Austin Regional Clinic leased 15,500 square feet at the Market at Slaughter, 1807 Slaughter Lane.
Antonio’s Mexican Restaurant leased 5,159 square feet at 12602 Research Blvd. It formerly was a Kerbey Lane restaurant.

Sprouts’ budding local presence grows with lease of 4th area site
Chain has stores planned in Rollingwood, Round Rock, Sunset Valley, Northwest Austin; negotiating fifth lease

By Shonda Novak, AMERICAN-STATESMAN STAFF, Friday, April 24, 2009

Sprouts Farmers Market, a natural foods chain that is moving into Central Texas, signed a lease for its fourth area store and is negotiating for a fifth site in Northwest Austin, local retail brokers said. Read more…

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1st Quarter Austin Industrial Leasing

industrialIndustrial Market Trends Austin, Grubb & Ellis Research, First Quarter 2009

The Austin Industrial market gave back 592,379 square feet of Industrial lease space in the first quarter of 2009, marking consecutive quarters in the red and the sixth consecutive quarter with an increase in vacancy.

Large spaces were vacated across a range of industries as businesses looked to consolidate or vacate their places of business. 

The overall asking rate for industrial space fell $.07 or 1% in the first quarter$7.44, the current average per square foot is at the lowest level since first quarter of 2007.

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1st Quarter Austin Job Growth

jobsAustin Business Journal
April 17, 2009
Austin fighting back; jobless rate drops for 2nd month

For the second consecutive month, Austin’s unemployment rate has decreased as the region tries to regain the losses it’s sustained in the recession.

Austin added 5,100 jobs in March reducing unemployment from 6.3% in February to 6.2%. In the past year, the area has added 3,300 jobs for .4% growth. Although this number is slight, growth of any kind is seen as very positive with job losses mounting elsewhere across the country. lists Austin as the #1 big city for employment potential.  Despite job growth rates of 1% in 2008 this modest number combined with Austin’s long term potential for creating new jobs, were the reasons noted by the website.

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Is the U.S. Economy Showing Signs of Recovery?

economy upA look at recent U.S. Economic news suggests that the Nation’s Economy is headed in that direction primarily due to the recent monetary liquidity inserted by the Fed. Does this mean the recession is over? No, but we may be close to bottoming out and the recovery may be achieved more quickly than previously projected.  A “V” shaped recovery is being talked about with a “bottoming out and quick uptick”.  Read on …

US Economy Could Recover Much Sooner than Expected
CNBC, Albert Bozzo, 4/9/09
A growing group of economists believe that the recession will not drag on as long as expected. These economists see a “V” shaped recovery similar to the 70’s and 80’s recoveries. The reasons for the optimism:
1. Easing of the credit crunch
2. Improvement in consumer spending
3. Better Auto Sales
4. Close to bottom out in housing market
5. Less grim job picture
Bottom line is that the recession isn’t over but the end is closer than many think. Some economists are projecting a flat or slight drop in the second quarter followed by sustained growth in the 3rd quarter.

“The velocity of downturn is lessening,”

says John J Castellani, chief economist and president of the Business Roundtable.

The Recovery Begins, Brian Wesbury, Robert Stein, 4/7/09.
As of Friday, April 3 the Dow Jones is up 22.5% in less than a month, the NASDAQ is up 27.8% and the S&P 500 is up 24.5%. What does this mean? According to Brian Wesbury and Robert Stein, economists at First Trust Advisors in Wheaton, Illinois, it means that the Economic Recovery has begun. Specifically, the economists state that,

“This sea of money is impossible for the economy to ignore”

referring to the vast liquidity that the Federal Reserve is providing. They also note that rising – 1. Home Sales. 2. Retail Sales. 3. Auto Sales. 4. Oil and other Commodity Prices. 5. CPI. 6. PPI. and 7. the Baltic Freight Index numbers all support the notion that the money is working its magic.

Housing Analysts Predict the Bottom is Near
Realtor Magazine, Daily Real Estate News, April 28, 2009

“The bottom of the housing decline is near,”

predicted analysts and home builders attending the National Association of Home Builders’ semiannual Construction Forecast Conference last week.  Observers generally agree that the feds efforts to shore up the housing market should take effect by the end of 2009 or early 2010.

Signs Point to Improving Economy
Realtor Magazine, Daily Real Estate News, April 17, 2009
Federal Reserve Bank of Atlanta, president, Dennis Lockhart stated,

“The economy is still very weak, but there are some encouraging signs that support cautious optimism”.

Economists point to several factors to indicate that the economy in general and the housing market specifically may be rebounding including:
1.  March home sales remained flat compared to January and February sales.
2.  Labor Department Claims were down the week ending April 11, 2009 and therefore some segments of the economy may be stabilizing.
3.  New home construction remains low because of the inventory glut, but the situation does not seem to be worsening.

Top Economists Say Recovery Has Begun
Realtor Magazine, Daily Real Estate News, April 7, 2009
Mark Zandi, chief economist of Moody’s says that economic recovery is about making people feel more confident. 

“Zandi evidenced increasing home sales and gains in the stock market are some promising signs that the worst is over and people will start spending again.”

He also notes that we are starting to see some pent up demand for goods.  However he warns that confidence is very fickle and can go from pessimism to a more balanced world view quickly. Robert Brusca of FAO Economics predicts strong growth in the labor market in the last half of the year and a quick recovery for the labor market. Joseph Carson, chief economist at AllianceBernstein, describes improving home sales, a rising stock market, and better than expected February and March retail sales as
good signs of a turnaround.

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Moody's March 2009 Report & the Austin Real Estate Market

This is consistent with other recent economic news and it’s good news despite the tenor of Mr. Friedman’s comments.  2010 is right around the corner and the steady improvement that will prelude a 2010 recovery means we should start to see improved economic news sooner (4th quarter 2009 perhaps) rather than later. 

Edward Friedman, March 2009

Moody’s has revised the near term outlook for Austin significantly downward, as the global recession has deepened beyond earlier expectations.  Employment will decline moderately over the coming year, as demand for IT hardware, software and services contracts. However, the overall decline will be proportionately less than for the U.S. as a whole. Although such factors as above average population growth, income per capita, and a highly educated workforce remain important long-term drivers for above average growth, AUS cannot count on recovery until 2010 at the earliest.

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2009 Austin Real Estate Outlook

While the national real estate market continues to struggle, the State of Texas and more specifically Central Texans can “thank their lucky stars” for their more promising near term outlook compared to other parts of the country. Consider that:

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2008 Austin Real Estate Market in Review

Residential in Review

Housing typically leads Real Estate Recovery with Commercial following. Here’s a look at the Fourth Quarter of 2008 as well as 2008 Totals to provide a glimpse at the Austin Residential Market.

Residential – New Homes Residential Strategies, Wednesday, December 31, 2008 Press Release

  • New Home Starts
    • 4Q08 – Builders started 1,459 new homes, 51% less than in 4Q07.
    • 2008 Annual – Starts fell below 10,000 to 8,987, compared to 13,624 in 2007, down 34%.
  • New Home Closings
    • 4Q 08 – Builders closed 2,289 new homes, compared to 3,259 closings in 4Q07, down 30%.
    • 2008 Annual – Closings totaled 10,933, compared to 14,809 in 2007, down 26%.
    • Finished Inventory totals a 2.9 month supply (2.5 months is considered optimum).

Residential – Resales Real Estate Center Texas A&M

  • Resale Closings
    • 4Q 08 – MLS reports closings of 3,922, compared to 5,486 in 4Q 07, down 29%.
    • 2008 Annual – 20,199 total homes were sold, compared to 25,151 sales in 2007, a 20% reduction.
    • 2008 ended with a 5.4 month inventory of houses, compared with 4.2 at the end of 2007.

Developed Residential Lots Residential Strategies, Wednesday, December 31, 2008 Press Release

  • 4Q 08 lot supply = 31,306 units, 218 units less. First lot supply decrease in (2) years. Starts are now outpacing lot deliveries.
  • The current lot supply stands at 42 months. 24 months is considered equilibrium.

2008 Commercial in Review

Retail led the Austin Commercial Market in 2008 with Office & Industrial #’s down from 2007. Here’s a look at 2008 in review.

Office Office vacancy rose to 19% overall in 2008 up from 14% in 2007 according to Oxford Commercial. 3.6 mil SF of new inventory contributed to this additional vacancy.

The office market is expected to remain flat through the first quarter of 2010. Vic Russo with Oxford Commercial expects that much of the vacant space will be taken by relocations to the area and not from local expansion.

Retail (Austin American Statesman 1/17/09, by Shonda Novak)
The Austin Retail market finished 2008 with 93% occupancy, the highest rate in the state.

New retailers for 2009 include Sprouts Farmers Market, Newflower Farmers Market, Nordstrom Rack outlet center and Buy Buy Baby a subsidiary of Bed Bath & Beyond.

Jeff Townsend with Endeavor Real Estate Group forecasts that it could be 1.5 – 2 years before we see any new retail construction.

According to NAI Austin, year end vacancy was 18% which came close to but did not surpass the high tech bubble years of 2002-2004 when vacancy was @ 21%.

However, the number of SF absorbed was at its lowest annual total since 2005.

Absorption is expected to remain flat in 2009.

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Q1, 2009 Austin Industrial Market


industrialIndustrial Market Trends Austin, Grubb & Ellis Research, First Quarter 2009

The Austin Industrial market gave back 592,379 square feet of Industrial lease space in the first quarter of 2009, marking consecutive quarters in the red and the sixth consecutive quarter with an increase in vacancy.

Large spaces were vacated across a range of industries as businesses looked to consolidate or vacate their places of business.

The overall asking rate for industrial space fell $.07 or 1% in the first quarter.  $7.44, the current average per square foot is at the lowest level since first quarter of 2007.

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First Quarter 2009 Austin Office Market


Office Market Trends Austin
Grubb & Ellis Research
First Quarter 2009

office towerAfter three (3) consecutive quarters of positive net absorption, the Austin office leasing market went in the red for quarter 1 of 2009 giving back 158,281 square feet.  Rental rates declined and vacancy rates went up.  Overall vacancy rose to 20% for the first quarter, up from 19% in the fourth quarter of 2008.

Average annual rental rates per square foot went down from $27.65 in the fourth quarter of 2008 to $26.53 in the first quarter of 2009.   Sublease vacancy is up by 100,000 square feet from the 4th quarter of 2008.

Absorption is expected to remain flat throughout 2009 and when considering that 300,000 square feet has been added to the market over the past year and absorption this quarter compared to quarter 1 of 2008 is down 4%, this equates to a stable office market especially compared to the rest of the country.

Office Vacancy Rate Full Service $/SF Net Absorption SF Sublease Inventory SF New Office SF
Q4 2008 18.8% $27.65 345,781 904,663 0
Q1 2009 19.9% $26.53 (158,281) 1,006,419 486,370
Change 1.10% $(1.12) -46% 101,756 486,370

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