By now, just about everyone in Austin (and probably the country) has heard that Apple plans to create a $1 Billion tech campus here in the Texas Capital. That’s welcome news after being passed up by Amazon for its HQ2. We’ve recently also learned that Google has committed to leasing all 35 floors of a commercial building that’s under construction downtown. The news is further proof that the Austin tech scene has certainly made a name for itself. As a result, tech companies large and small are migrating to Austin to set up bases of operation.
Apple’s $1B Tech Campus
In an article about the Apple announcement on MarketWatch, author Lou Shipley shared his views about the future of Silicon Valley’s dominance as the world’s base of operations for all things tech. Shipley, a lecturer at the MIT Sloan School of Management, pointed out that tech giants are seeing the benefit of developing satellite bases in smaller tech centers.
Although he acknowledged that Silicon Valley is certainly here to stay (at least for the time being), he explained that tech startups are setting up satellite offices in smaller tech hubs to take advantage of the lower cost of living in other cities.
“The operating costs for a tech startup in Silicon Valley can be three or four times that of one in emerging tech hubs such as Austin, Pittsburgh, Columbus, Ohio, the Charlotte-Durham, N.C. area, Wilmington, Del., and Boise, Idaho. A private equity investor recently observed at a CNBC investor event that a tech company in his portfolio relocated to a Midwest tech hub and added six months of cash burn onto its balance sheet. That’s not inconsiderable.”
In his opinion, other tech companies will follow suit.
“Doubtless many tech companies are already looking closely at Apple’s satellite strategy as they seek ways to grow faster and run their operations more efficiently while still attracting and retaining the best available tech talent.”
Google’s Downtown Office Takeover
An article in the Austin-American Statesman announced that Google has signed a lease on all 35 floors of a downtown Austin office tower that’s still under construction. According to the report, the tower will be nearly 800,000 square feet and could house up to 5,000 people. The building will be located right beside Google’s existing office in the city’s core at 500 W. 2nd Street. According to 9to5Google, “this would certainly be one of [Google’s] most expansive offices in North America” once the building is completed in 2022.
In a separate article about the office lease that appeared on Forbes.com, Mary Ann Azevedo described this move as a signal that the Austin tech scene has more growing to do. In fact, tech companies – and companies in other industries – might want to consider leasing out downtown Austin office space now for growth they expect to see in the not-to-distant future.
“Two tech giants committing in a major way to Austin is significant for the city, which in recent years has seen its tech scene explode. Besides being home to a growing number of startups, nearly all the large tech companies have a presence in Austin, including Facebook, Amazon, Apple, Google, Oracle, IBM and Cisco. And that’s had an impact on the city’s office market.”
The Future of The Austin Tech Scene
Downtown Austin is expected to be a popular destination for tech companies because it’s “the epicenter of Austin’s tech workforce,” says JLL Austin managing director/office tenant rep lead Russell Young. “This recent announcement [by Google] certainly solidifies this notion.”
Aaron Block, cofounder and managing partner of New York-based early-stage PropTech investment, advisory and startup acceleration firm MetaProp, said Google’s planned expansion in Austin is not a surprise and an example of the city’s process of building a critical mass.
“The city is becoming a magnet for mature tech firms. It’s got human capital associated with great universities, tons of young tech and management talent aggregated in one place,” Block says. “And with its lower cost of living, Austin is increasingly more attractive to mature tech companies than New York and San Francisco.”
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