Gladstone Commercial Corporation, a Virginia-based REIT, purchased 717 Parmer, a 320,000-square-foot, Class A office property from Karlin Real Estate.
General Motors recently leased the entire four-story property for its IT Innovation Center. Originally built in 2000, it underwent extensive interior improvements when GM came in.
“It’s a single-tenant, high quality Class A office building leased to General Motors at a significantly below market lease rate,” Mark Emerick, senior vice president with CBRE Austin, told Commercial Property Executive. “The building caters to large floor plate office users and has historically been a single-tenant building.”
The four story building sits on 23 acres with abundant parking, three volleyball courts and was designed with large open floor plates, including raised flooring throughout for flexible “plug and play” configuration.
Parmer is Austin’s corporate thoroughfare that connects the majority of the north to south arterials servicing Austin. The list of prominent companies with a substantial presence either directly on Parmer or in close proximity include: Apple, Oracle, eBay / PayPal, EA Sports, State Farm, Legal Zoom, General Motors, Dell and Samsung.
717 Parmer is less than one minute from IH 35, less than five minutes from Mopac (Highway 1), less than 10 minutes from Apple’s campus and Highway 183, and less than 15 minutes from the IH 45 toll road. It’s also immediately across the street from Karlin’s master-planned business park, PARMER, which will house future large corporate occupiers with several million square feet of planned office and flex buildings.
According to Emerick, the other big-selling factors are the tight Austin office market, particularly for large blocks of space; scarce new construction; rising rents; and the high demand of single-tenant, net lease properties.
A recent report by Marcus & Millichap shows Austin’s office market has returned to pre-recession vacancy lows with little to no new construction on the horizon, particularly when compared to the 2007-2008 cycle.
The report forecasts that “sales will rise this year as institutional investors, REITs and funds look to the metro for its strong growth prospects and relatively limited supply-side risks. Within Austin, the construction cycle can span two-plus years for a ground-up office building, discouraging purely speculative projects. While the -2 metro’s lower-risk profile and bright outlook often support premium prices for local office investments, these factors can also curb owners’ motivation to sell.”
CBRE agrees with that assessment and the fact that large blocks of space are essentially nonexistent.
“We are forecasting a spike in rents for the foreseeable future. We also project market conditions will foster a longer and more sustainable ‘growth cycle’ due to the limited amount of new inventory to offset tenant demand,” Emerick said. “This should allow the market to better absorb new deliveries as compared to previous cycles that were derailed by overbuilding and a slowdown in the economy.”