Latest Thoughts on Austin from last week:

1) Best in class tenants continue to be extremely selective with their sites. Just this week, I was asked to present an off market site to a specific client of mine...in prior times, this would have been a slam dunk. That is not the case now -- although happy to know about the site, the site missed on a couple of different aspects and it was a pass. This is becoming more and more common with many of the tenants I work with.

2) This is a good lesson for landlords -- if you want to chase best in class tenants, the location, parking, and surrounding tenant sales can all be excellent, but if you don't have a strategy to retenant the center with similar and like kind tenants, getting these top tier tenants is going to highly unlikely. Tenants want a story and a strategy from landlords, along with all of their other previous requirements.

3) Conversely, many landlords have decisions to make. Do they invest the money to try and get the best in class restaurants, coffeeshops, and retailers who tend to cluster together? Or do they choose to maintain the status quo and go with banks, wireless retailers, and more mass market tenants? Oftentimes, the rents will be the same but the investment is generally much less on the latter. I understand completely if landlords choose to minimize their investment -- as an owner myself, I sympathize...That being said, if a landlord wants to elevate their center to the top level, it requires a significant investment, both in time and money. This is not a decision that can be made halfway. It just goes to the importance of having a clear strategy on the landlord side and understanding the role of the property in the overall portfolio of the landlord.

All in all, it continues to be interesting times in Austin real estate. It's always fascinating to watch our city grow and become more prominent.

Reposting my Friday LinkedIn thoughts here:

It's a quiet Friday in Austin with the start of ACL Fest. I toured a couple of times this week with different tenants -- it's always good to see Austin through some new eyes. Here are three thoughts from those tours:

1) Tenants have become very selective. On both tours, the real estate representatives for both brands were hyper focused on the look of the center, the amount of people at the center, and the "vibe" of the center. Even discounting for time of day when we toured, each tenant had an expectation for amount of traffic and the customer base that would be required to be successful. If those metrics weren't readily apparent, the center would get cut, even if the cotenants and real estate location were both right.

2) Architecture and visual interest matters a great deal. A space was presented to one of my clients at one of the best performing centers in the MSA. The landlord would really love to do a deal with the tenant I'm representing...however, despite, all the boxes being checked, the tenant put the space on the back burner -- the question was "How can I express my brand identity?" when the center was so uniform and bland. For landlords and developers, creating some visual interest (differentiated roof lines, use of different materials) is very important, especially when trying to draw best in class tenants.

3) TI expectations from these tenants have gone up. When tenants are spending $400/sf or more (even on second gen spaces), offering a tenant $20-$30/sf in TI isn't going to cut it. Except in very rare situations, if landlords want the best tenants, they are going to have to play ball and invest at a high level with these tenants (many times well north of $100/sf). That's a big ask - it's understandable that it precludes most landlords. The landlords willing to do this are admittedly taking big bets on the tenant, but there still seem to be enough landlords nationwide willing to do those deals.

John

Lala Land opened on South Congress a little over a week ago. The opening drew huge crowds in the rain and was a resounding success. Lala Land's loyal customer base was out in force and very excited to see its first location in Austin.