Exploring the Most Transformative Trends in Commercial Real Estate | PROPMODO METATRENDS 2023→

The Austin Office Building Designed to Attract California Companies

Austin’s office market has been a tech magnet over the last few years, drawing companies from other states like California looking for lower taxes, lower cost of living, and to tap into a growing talent pool in the state’s thriving capital. Developers have clamored to build offices, with major players like Kilroy Realty and Tishman Speyer recently making their entry into the hot market. As the city’s downtown grows with new towers that continue to get taller and taller, Austin’s hip creative office submarket on the city’s East Side has grown too. Amid a recent slump in the city’s office market that has led to a flood of sublease space on the market, the team behind a recently completed industrial-to-office conversion, Fifth & Tillery, is banking on a design that marries energy efficiency and an open-air concept in order to bring on tenants—especially those recent California transplants. 

Global design firm Gensler served as the architect of the 182,716-square-foot office building and was given a wide berth when it came to design planning. Michael Waddell, a Design Director in the firm’s Austin office, told me when they signed on to the project, much of the former warehouse building was still in its original condition. The local developer who originally purchased the former roofing supply warehouse (CIM Group purchased the project post-construction) had started remodeling and added some windows, but there was a lot more to be done. “This project was a giant parking lot with a warehouse on it,” Waddell said. “We came in and said, ‘let’s see what we can do to really transform this.’” 

The firm’s scope was somewhat limited due to local building codes, they had to use the existing building foundation, which had a huge floorplate at 60,000 square feet, and could only build up to three stories. But the owner put the bulk of the design vision in their hands, so the possibilities seemed endless. “The client said it’d be cool to use mass timber, but otherwise, not much else,” Waddell said. “`It was a pretty open-ended ask.” 

CIM Group’s industrial-to-office conversion Fifth & Tillery opened last year in East Austin. Source: Courtesy of Cushman & Wakefield

The very large (and unique for Austin) footprint of the building meant the interior would get almost no daylight, so one of the first challenges designers faced was how to bring in more sun. They started exploring skylights and atriums and even carving out a courtyard in the center of the building before deciding to go even bigger. “We said, why not turn the whole thing outside?” Waddell recalled. 

The idea came in large part from research into the health and wellness benefits of office design, which can lead to fewer sick days, more employee retention, and higher mental functioning. In the end, the final product was a result of several incremental decisions to do more with the project. “We kept thinking, well, we’re doing this, we might as well do this. It kept snowballing,” Waddell said. Some of the energy-efficient and sustainable design features at Fifth & Tillery include a significant amount of solar panels that generate 600 kilowatts of power, a water retention system created using old cisterns on the site, and a variable refrigerant flow (VRF) HVAC system that is more energy-efficient and more flexible. The VRF system cools continuously and adjusts the need for refrigerants, and while it’s more expensive upfront, it saves a lot in the long run, especially in the hot Texas climate. And though not considered a mass timber building, Fifth & Tillery does have touches of the material within the property in the form of horizontal structural beams. 

Other than a few mature trees on the outer edges of the building site, there was little green space, to begin with. A big part of the design was for the inner courtyard to have trees, landscaping, and walkways to give building tenants more of a connection to nature, while the outer open-air walkways extend to all three stories of the building. “I think by turning the whole building inside out, it allowed opportunities for engagement with the community,” Waddell said, adding that a lot of discussions during the planning phase focused on smaller tenants’ ability to have “in-between” space where employees could work and meet other tenants of the building.

One big challenge in designing the property was thinking about how the building’s open-air concept would be impacted by the notoriously brutal Texas summers. Waddell noted that the open courtyard is oriented to the south, and summer breezes in Austin are predominantly from the southeast, so the courtyard’s design takes advantage of a little natural cooling. Additionally, two water fountains at the front of the plaza add a bit of passive cooling, exterior walkways are covered, and the photovoltaic array provides at least one spot where there will be shade. But there’s no real escape from Texas heat, as locals know from experience, and relocated companies will get to know soon enough. “From the parking lot to the door, you will experience Texas heat, it’s unavoidable at some point,” Waddell laughed. 

Working in the Austin market over the past few years, during a time when more tech tenants entered the market, Waddell and his colleagues have gotten feedback from office brokers about what kinds of things the companies were looking for. One of the features tenants tended to like the most was big floorplates, usually anywhere between 40,000 to 50,000 square feet. In designing Fifth & Tillery, Gensler took that into consideration and looked to strike a balance. “That was definitely part of the conversation of how do we design a building suited both for corporate relocations with large unified plates but at the same time, in East Austin where there are smaller, more creative buildings, the ability to have six different 6,000-square-foot tenants on one floor,” Waddell said. “The goal was to design a building flexible for both possibilities.”

Fifth & Tillery was converted from a warehouse to an open-air, creative office property with more than 85,000 square feet of outdoor open space. Courtesy of Cushman & Wakefield

Cushman & Wakefield’s Matt Frizzell, Executive Director at the firm’s Austin office, is one of the brokers working on leasing at the project. So far, a life coaching company from the Bay Area has signed on to 35,000 square feet at the building. Frizzell said the building ticked off everything the company wanted: outdoor space, patios, community, and collaboration. It’s no secret that tech companies have been flocking to Austin over the last couple of years, driven by several factors, namely the lower cost of living, a more business-friendly environment, and a growing talent pool. Texas is now home to more Fortune 500 company headquarters than any other state, according to a Fortune ranking published earlier this year. Many of those firms are coming from California, where the weather is mild year-round, and open-air offices are more common. “Austin has had a long run of attracting companies from the Bay Area and all over California, and all the companies are relocating to Austin, so they wanted something that looked familiar to those companies,” Frizzell said of the vision for Fifth & Tillery. The project also benefits from being in a neighborhood that has seen massive growth in the office sector. In just four years, East Austin’s office market has grown from 0 square feet to about 2.6 million square feet, according to Frizzell.

Unfortunately, after a huge first half of the year that saw several massive office leases signed, including Meta’s enormous lease in downtown Austin, leasing has experienced a major slump, with vacant sublease space rising 28 percent from the second quarter to the third of this year. “I think the challenge Austin has right now is what does the use of office space look like for tenants going forward?” Frizzell said. That uncertainty amid a significant slowdown has led Fifth & Tillery’s owner to up the ante at the building. CIM Group will soon kick off construction of 40,000 square feet of spec suites at the building as well as amenities, including a building tenant lounge, coffee bar, and a fitness center. “There’s a growing need in Austin for smaller, more nimble companies with a younger workforce that want something different like this,” Frizzell said. “But it’s a challenge in Austin for tenants in startup and growth phases to go through a long process. We’re trying to make it easy.”

Whether or not the current slump is temporary or more long-term, the California-to-Texas pipeline looks to continue for the foreseeable future. How leasing plays out at Fifth & Tillery, especially with tech tenants relocating to the city, could lead to more office development with California design in mind, especially when it comes to energy-efficient features, which tenants are increasingly looking for as they have more clearly defined ESG goals. Somewhat surprisingly, especially given how much sun the Central Texas city gets, not a lot of office buildings in Austin have solar panels. But the city’s current building code requires buildings to have a certain amount of roof area ready to accept PV panels, and CIM Group and Gensler are hoping to build a strong case for solar with Fifth & Tillery to encourage more solar projects in the city. 

Image - Design