- Avg. rent per sq. ft., Class A: $32.07
- Avg. rent per sq. ft., other classes: $21.06
- Large employers: United Air Lines, JPMorgan Chase, LaSalle Bank, Sears, Abbott Laboratories, Mittal Steel
- Percent of population over 25 with bachelor’s degree or higher: 31.6%
- Percent with advanced degree: 12%
- Median home value: $251,700
- Venture capital invested in 2007 (through Q3): $307 million
Sources: Reis Inc., U.S. Census Bureau, World Business Chicago, PwC/NVCA MoneyTree Report
Back on its feet after the 2001 tech bust knocked it down, Austin has once again become “the new ‘it’ place,” says PPR’s Havsy, thanks in large part to its high rankings for quality of life, low cost of living, and the presence of the well-respected University of Texas, Austin. Longtime home to Texas Instruments, Freescale Semiconductor, and Dell, the Austin area more recently has welcomed operations or regional headquarters for some 118 new companies, according to the Greater Austin Chamber of Commerce.
As Borland’s decision illustrates, a highly skilled workforce is the top attraction. That’s especially true in high-tech and financial services, says Terence Spielman, head of PayPal’s new Austin operations. Spielman plans to hire 220 people in the next two years. The biggest challenge, says Dave Porter, senior vice president of the Greater Austin Chamber of Commerce, is that the population is relatively young and lacks a strong pool of top-level management. Zilliant Inc., a local software company, freely admits that it poaches such talent from bigger companies (which often have the means to relocate executives), even to the extent that “there’s a good possibility we’ll find [a CFO candidate] here” when the company is ready to hire one, says chief talent officer Laura Hauck.
Austin’s real estate market has not been immune to the private-equity effect. In fact, Blackstone flipped its portfolio of buildings there to Thomas Properties in June for $1.15 billion, a price that assumes rents will rise. Year to date, the cost of Austin’s Class A rentals has increased 7.6 percent, significantly higher than the national average of 5.2 percent, according to research firm Reis. And while “new companies coming in still find it a bargain,” says Porter of CresaPartners, some, such as Oracle and ArthroCare, are expanding outside the central business district, in part to save costs and make housing more affordable for employees.
On the positive side, Austin will rank among the top three cities in the nation for new commercial construction as a percentage of existing stock, according to PPR. That means rent increases should slow — in fact, PPR projects they will even drop slightly in 2009 as supply catches up with demand. And the city is strong on incentives, tapping the state’s sizable “deal-closing” fund to land Samsung’s new semiconductor plant and two Hewlett-Packard data centers.