California firm invests $57M in Southeast Austin

The article below from the Austin Business Journal talks about Industrial real estate. The reason I am posting it here is once again it contains quotes and information that are wonderful to hear for those of us in the Austin Real Estate business who have slogged through the recent slack years.

Austin Business Journal Staff

A California real estate investment firm nearly tripled the size of its local portfolio by buying eight office and flex buildings in Southeast Austin for $57 million.

KBS Realty Advisors bought the buildings, totaling 632,237 square feet, from Prudential Insurance Co. The deal closed Oct. 25. The $57 million purchase price equates to about $90 per square foot.

“We like the fundamentals in the Austin market,” says Bill Rogalla, senior vice president of KBS.

Rogalla, based in Chicago, also is director of acquisitions for KBS’ central U.S. region.

Those fundamentals — Austin’s projected job growth and expanding population — may mean KBS will add to its local portfolio, he says.

“Austin is definitely on my target list,” Rogalla says. “We are reviewing other opportunities even at the present time.”

Built in 2001, the newly purchased portfolio is 90 percent leased to 32 tenants, including Rockford Business Interiors, the IRS, New Era Publishing Inc. and Capitol Chevrolet Inc.

The portfolio, on nearly 27 acres, features the four-building SouthTech Business Center and the four-building SouthPark Commerce Center. The buildings are at Friedrich Lane and St. Elmo Road.

Randy Baird, Jack Fraker and John Robinson of CB Richard Ellis Inc. represented the seller.

Austin-based Hill Partners Inc. was hired to manage the eight properties.

Newport Beach, Calif.-based KBS has invested more than $5.4 billion in property since its founding in 1982.

The SouthTech and SouthPark deals will bring KBS’ Austin portfolio past the 1 million-square-foot mark. Before this deal, it owned 387,633 square feet in Austin — the 274,231-square-foot Bergstrom Technology Center in Southeast Austin and two 56,701-square-foot office buildings in the Escalade complex in Southwest Austin.

Trammell Crow Co. also considered buying the eight-building portfolio, says David Blackbird, an industrial leasing senior associate in Austin.

“It’s a very solid, Class A industrial portfolio,” Blackbird says. “It was a great chance for them to buy a Class A portfolio in a greatly improving market.”

Trammell Crow recently bought Southpark III and IV in Southeast Austin, which comprise 176,000 square feet and an extra 4 acres for growth.

Blackbird says the amount of Class A warehouse space in Southeast Austin is fairly stable, but the status of Class B and C properties drags down the sector’s occupancy rates.

Overall industrial vacancy rates in the Austin area recently declined for the second consecutive reporting period, with the rate dropping to 18 percent from 20 percent at the end of 2004, according to Austin-based NAI Commercial Industrial Properties Co. The last time the Austin industrial market saw vacancies that low was in the six-month period ending June 2002.

The study further found the industrial sector absorbed 657,287 square feet in the first six months of 2005, varying in strength by sector. The North, Northeast and Southeast sectors showed positive absorption, while the East, South and Round Rock sectors recorded negative absorption.

“Generally speaking, the market is healthy, and there’s a good equilibrium between the landlord and tenant,” says Greg Johnson, vice president at Transwestern Commercial Services in Austin. “I wouldn’t call this a landlord’s or a tenant’s market. But large blocks of space are getting few and far between, so that may change in the future.”