Starwood looks to sell Austin office portfolio amid record vacancy

Starwood Capital is shopping three Austin offices it bought as part of a blockbuster 1.2 million-square-foot deal in 2017. 

The properties all lie west of Austin, with two in the south near affluent suburbs and one north, closer to the Domain. Cielo Center, the Park on Barton Creek and the Crossings at Lakeline have hit the market seven years after Starwood purchased them and two other offices for $333 million. In that time, developers have flooded Austin with office deliveries, and the vacancy rate has risen to a record 25 percent. 

It is unclear what Starwood paid for each development. The portfolio is 73.4 percent leased, but occupancy isn’t distributed evenly among the complexes. 

Cielo Center, at 1250 South Capital of Texas Highway, is 87 percent occupied. The 270,700-square-foot complex of three connected buildings was constructed in 1983, making it by far the oldest in the portfolio. A marketing brochure from JLL claims rents at the building are 15 percent below market average, which would theoretically allow a buyer to raise rents. 

The Park on Barton Creek, at 3711 South MoPac Expressway, isn’t doing as well. The 205,300-square-foot building is just 42 percent occupied. The Crossings at Lakeline, at 11001 Lakeline Boulevard, is 85 percent occupied, with tech giant Nvidia as a key tenant. The complexes were built in 2007 and 2008, respectively. 

JLL brokers Ryan Stevens, Drew Fuller, Andrew Levy and Jonathan Napper have the listing. In the marketing materials, they describe the 709,000-square-foot portfolio as being available all together or on an individual basis, and at a “massive discount to replacement cost.” If a buyer decided to replace the structures anyway, the holdings sit on a combined 50 acres.Last quarter, Austin office developers finished 2.1 million square feet of space, and at the quarter’s end, almost all of it remained empty. Vacancy is expected to peak later this year or some time next year as the pipeline of projects that started before vacancy began to spike works its way onto the market.  

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