Al Lehtonen, an attorney in College Station, TX, has owned the property for about 40 years. Why build now when occupancy rates are rising and rents are dropping?
Lehtonen's son and partner, Al Lehtonen Jr. tells GlobeSt.com that while the Austin market looks scary now, several factors give construction a green light. He cites economists who say the economy will turn around next year; surveys that say Austin maintains a strong economy; low interest rates and construction costs; and the fact that other builders have put projects on hold.
"When the economy does turn around and gets going, they're still a year out of the loop," he says of builders. "We're thinking that toward the end of next year that the economy should be going fairly strong. A lot of the companies in Silicon Valley, Boston, New York, especially the high-tech companies are going to start looking at Austin a lot harder."
So, he says, "Based on that, Austin looks like a pretty viable market," Lehtonen says.
He hopes to mitigate the impact of the sublease market by marketing the building to companies looking for smaller spaces. Most sublease space comes in blocks of 20,000 sf or larger, Lehtonen says. He's willing to break the space up. "I'll take up to 10 tenants," he says, citing architects, engineers, lawyers and insurance companies as potential clients.
His company is getting permits together for the four-story building. It will have offices on the top two stories with parking on the first two levels as well as surface parking around the building. L.M. Holder III of Austin is the building's architect. Dallas-based Constructors is the project's construction company.
Lehtonen says his firm hasn't begun marketing the property. "It seems to me, that in the Austin market, that unless they begin to see the building going up a lot of people don't want to lease," he says. Prospective tenants feel more secure that they will have a place to move into on time if they see it as a work in progress.
The building site, on the north side of Shepherd Mountain, has been a work-in-waiting since Al Lehtonen acquired it about 40 years ago. As an attorney, he represented George Shepherd, who owned the Shepherd Mountain land, which sits high above Lake Austin and the Pennybacker Bridge on Capital of Texas Highway.
He had wanted to build a home on the property, but over the years the property became more of a commercial site, leading to the office building.
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