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It's been nearly a year since Redstone Investments spent $28.45 million to buy the five-building Austin Center in Tampa's tony Westshore district, and in the months since, the acquisition appears to be one that is paying off.
As Tampa area vacancies have fallen into single digits and rental rates have crept upward, toward $30 per square foot, well-located and maintained properties like Austin Center have profited more than many suburban office developments.
But Redstone could benefit to an even greater degree in the next year to two ahead, if solid markets continue to nudge developers to consider new construction.
Commercial real estate analysts maintain Austin Center is among a handful of sites in the Tampa area that are ripe for new development, thanks to an expanding business base and employment gains.
“Westshore has always been a top-performing market, and it's less susceptible to economic cycles than the urban core because of the mix of amenities, retail, transportation and proximity to Tampa International Airport that have developed there over the years,” says Brent Miller, a vice president in the Tampa office of commercial real estate brokerage firm JLL.
“In terms of fundamentals, it's always an easier path for development,” Miller adds.
Redstone co-founder Jonathan Levy, who runs the firm's Florida office, in Tampa, says for now the company is focusing on leasing and maintaining Austin Center as a premier office location.
“The market in Westshore has been very strong, and it feels like it's only gotten stronger in the past two to three years,” Levy says. “We've been very pleased. For now, we intend to keep operating Austin Center as it is and solidify what we have there.”
Levy notes that when Redstone bought Austin Center, in April 2015, the 312,000-square-foot complex had nearly 25% vacancy. Today, that figure has been shaved to around 15%, and many leases are being executed on a relatively short-term basis to provide Redstone with maximum flexibility.
He's coy on the subject of new development within the 10-acre center, however.
“We're looking at our options regarding future development,” Levy says. “There are a number of groups that are very interested in the site, and we continue to talk to them.
“But I don't know how long this particular cycle we're in is going to last. Interest rates have been low, and if they remain largely unchanged, I think we'd definitely be looking toward development or redevelopment of a portion of the property at some point.”
Developed beginning in 1967 by civic leader Al Austin, today Austin Center is home to dozens of office tenants, including AAA and PNC Bank. The project also represents the largest in Redstone's Tampa portfolio, which contains a half-dozen properties including Lincoln Center; Crossroads II and III; Sunshine Center Park; University Business Center; and the Telecom Technology Center.
In all, Redstone -- a company founded in 1991 by cousins Levy and Ohio-based Lee Burdman — controls 75 properties totaling 4.5 million square feet in 15 states, according to its website.
If Redstone does decide to push ahead with new development at Austin Center, it will likely have to compete with a raft of potential projects that are vying to get out of the ground.
In Westshore, Tier REIT has begun pre-leasing on Eisenhower II, a potentially four-story building with as much as 120,000 square feet; and Echelon LLC has proffered plans to add to its 432-acre Carillon Town Center, in Pinellas County.
JLL's Miller notes, though, that thanks to an existing development of regional impact agreement, Austin Center would not have to go through an entitlements process before it could build.
Westshore isn't the only place in Tampa, however, where new office development is being planned.
Strategic Property Partners is actively marketing a 500,000-square-foot tower that will be a centerpiece of its planned $2 billion Channelside district project in downtown Tampa.
Also downtown, Feldman Equities and Tower Realty Partners have outlined plans for a 52-story skyscraper known as Riverwalk Tower, a $200 million, mixed-use project designed to contain 215,000 square feet of Class A office space; 203 luxury condominiums; and ground-floor retail space.
Levy doesn't consider the two urban projects to be competition for Austin Center.
“They're very different markets, they have very different positive attributes,” he says. “We think it's great to see development possibly occurring downtown. Westshore has been very strong for a long time now, so we're very supportive of growth downtown, too.”
JLL's Miller contends that market dynamics will dictate that at least one of the proposals will go forward in the near term.
“I think the likelihood is high that someone will come out of the ground within the next 18 months,” he says. “Developers are very much of a mindset that they want to take advantage of current market conditions.”
But Levy says Redstone won't be hasty.
“Austin Center is a great property, so anything that would occur there, we'd want to make sure it's right for us and for Westshore. Anything that might happen there would take time because we'd only have one shot at it. But my hope is that it'll be a great asset in our portfolio for years to come.”
- K.L. McQuaid
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