Austin, Texas...Why or Why Not?

The demand for more office space from various industries is driving the construction of over 750,000 square feet of office space in downtown Austin. The pre-leasing is on fire and is what is driving the development of these five spaces. The only problem is that they all are already almost 100% leased meaning there will not be an increase in office space supply. This could help the market see even more growth and show an increase the basic employment in the area which would stimulate the economy. 

With this tremendous increase Austin it is now on the verge on competing on occupancy rates with San Fransisco and New York City. Its occupancy rate has increased by 4% in the past two years. "Austin's rate rose faster than any of the top 20 U.S. markets over that period, CBRE researchers found" (Hudgins). 

The "demand for office space comes from a more diverse group of companies and industries, some migrating to the central business district from the suburbs and others arriving from locations around the nation and globe"(Hudgins), instead of them being just Texas companies. 

Overall, the increase in the space and the tenants that will fill them are from all sorts of different industries making this historical area a very attractive place to set up shop. The population will only grow, increasing employment and driving the need for office space supply. 

Works Cited: Hudgins, Matt. "Austin Office Space: More Supply, Less Demand? Guess Again." The Wall Street Journal. Dow Jones & Company, 23 Sept. 2014. Web. 30 Nov. 2015. <http://online.wsj.com/articles/austin-office-space-more-supply-less-demand-guess-again-1411507470>.

Wood is gold!

Hines L.P. is trying to break a new barrier in construction with the development of a office building that is made out of wood. It is not only environmentally friendly but something that is extremely innovative with an old-fashioned appeal. The project will be called T3, "for timber, technology and transit" (Taves). This building will be located in a popular district in Minneapolis. "If the building is approved by the city's preservation and planning agencies, T3 would be the tallest modern all-timer structure in the U.S." It will not be the only all wood building in Minneapolis, but will be the largest. 

This building would not only reduce the cost of construction but it would also impose an increase in energy efficiency. Wood has the ability to hold heat opposed to buildings constructed of steel. This is not a new concept but for a project of this size, it is setting a new precedent. "But with financial support from the timber industries and political support from the U.S. Agriculture Department, which is currently sponsoring the Tall Wood Building Prize Competition, architecture firms are hoping to reclaim wood for commercial construction" (Taves). 

Although the larger wood needed to sustain the weight for the building is not available, it can be made by forging small pieces of wood together. This could not only increase jobs in the lumber companies in the future but help bring back a style of construction that is not as prevalent in modern times. 

There are many potential problems with having a wood made building. Many cities have multiple concerns about its stability therefore they put limits on the size and height of wood made buildings. Architects and engineers are now approaching the city with remedies that can make wood extremely durable and a feasible alternative to steel and concrete. "In the end, the use of timber in construction will largely be dictated by environmentally minded landlords and tenants looking for buildings that emit less carbon to create and consume less energy to operate" (Taves).

Could this be the next big trend in development in the future? Only time will tell. 

Works Cited: Taves, Max. "Towering Ambition: Tallest Wood Office Building." The Wall Street Journal. Dow Jones & Company, 12 Nov. 2014. Web. 30 Nov. 2015. <http://online.wsj.com/articles/towering-ambition-tallest-wood-office-building-deal-of-the-week-1415755448>.

Texas is Growing...Where?

Looking at the current real estate market, the next big emerging cities with a current population under 150,000 could be almost anywhere. The correct way to get a proper estimate in order to analyze the market would be to calculate and understand cap rates, basic jobs versus nonbasic jobs, location quotients, and future population growth among other things.

If we want to find a growing city, we need to identify the basic jobs because those are fundamental to its growth. Basic jobs will provide income to the community from outside sources rather than a nonbasic jobs which will facilitate an internal revenue stream from existing dollars. To put it simply, you do not want to have money recycling in your city, rather have money coming in from elsewhere and drawing people in.

Location quotients will help us identify these basic jobs. When conducting this analysis you want to identify a location quotient greater than 1. Numbers that are greater than 1 mean that it is a basic job and that it is bringing external dollars into the market. This also means that when we comare the national to local employment in a specific industry its influence on that city or market and it's future population growth will be evident.  

Also, understanding cap rates and their effect on the current marketplace is important. The higher the cap rate the lower the prices and the lower the cap rate the higher the prices. Understanding why this would occur and how this could help a cities growth is imperative. 

We need to look at the city and say: what is going on currently and how is it changing? The more we know the more accurate our assumptions will be. 

I believe that the next big city in Texas will be Conroe in Montgomery County. This city lies due north of Houston and the Woodlands. The basic industries in this area are: mining, quarrying, and oil and gas extraction, construction, retail trade, accommodation and food services and finally other services, except public administration. These are the industries that bring new money into the economy and stimulate it. 

The static economic base multiplier is 1.39. The dynamic economic base multiplier is 20.48. Given the current employment of 127,042 in Montgomery county, the future forecasted increase in total employment will be 61,444. The forecasted total population increase is 241,408. 

As you can see, this area is on the rise and will continue to grow. The ability to calculate and predict these changes in the economy are key to real estate and the industry as a whole.