Newmark Grubb Knight Frank’s Managing Director Ryan Bohls will be one of the panelists speaking on “Austin’s Rising Stars” at the upcoming Connect Austin conference on April 19, 2017. Connect Media asked him about Austin’s tech scene, and the influence of millennials on the workspace.
Q. Why, from your perspective, is Austin considered a tech capital? What attracts technology companies here?
A. The tide of Central Texas started turning in the last 20 years. I can remember when this was still a sleepy university town and State Capitol. The Central Business District was a tenant pool of law firms and governmental relations agency.
The high percentage of young people that comprise the working population and economy is central to Austin’s growth. The University of Texas has done an outstanding job developing new talent. Then, there’s the political climate, which is more open, tolerant and frankly liberal-leaning than the other 253 counties in the State of Texas, which I think contributes to young people wanting to call this home.
Austin’s always been a very “liveable” city, with a lot of options for food and entertainment and a sizable body of water. The nightlife and live music certainly help.
When I think about what’s changed in my lifetime, it’s not so much that Austin’s changed, but that technology as an industry evolved. Different technology enterprises like apps, social media and e-commerce sectors emerged in the last 20 years, driving employment for young people. Many of these companies are geographically agnostic – they can locate anywhere, so it’s all about talent recruitment and retention, which Austin’s provided in spades, though that’s becoming increasingly challenging with the influx of tech companies competing for roughly the same labor pool.
When I think about what differentiates Austin from Dallas or Houston, it’s a younger workforce, a flagship university, and an open and tolerant political climate. State and city incentives aren’t what they used to be, but it hasn’t slowed the migrations.
Q. What types of commercial real estate seem to resonate with these companies? Are they looking for standard office space, or are they seeking out something a little more creative?
A. Most technology companies look for very similar things in their real estate. From a cultural standpoint, the common denominators seem to be open spaces, high ceilings, floor to ceiling glass in a somewhat central location or area like the Arboretum/Tech Triangle, where there’s a convergance of a number of similar companies that contribute to the vibe and provide a labor pool where tech companies can pull from.
From an economic perspective, tech users want scalability. They want to be as small and efficient as possible, so they aren’t spending unnecessary dollars on occupancy costs that could go to R&D or new hires. Conversely, they want the optionality to grow. Flexibility is mission critical. They want the shortest lease term possible, but, again they want to have a robust tenant improvement package to enable them with the space that subscribes to their “vision.”
What’s interesting is there is an idea among the high technology community and the tenant base that Austin has abundant options for creative, eclectic, unique office space. It’s highly inaccurate.
Q. Austin has a young workforce. What trends are you seeing as millennials become a more dominant presence in the workplace?
A. More than 90% of millennials are claiming that they want a “flexible work schedule.” These are contributing factors for the growth of companies like WeWork that allow for a more flexible work setup than traditional office space arrangements allow. We’re investing more time with architects to develop flexible space plans.
I think you’re going to continue to see more outfits like WeWork find success by democratizing real estate, allowing young people, younger organizations and startups to take down space in a more digestible way. For local homegrown businesses, the biggest deterrent to entering into a more formal lease agreement is the up-front costs created by security deposits, letters of credit and any number of out of pocket costs like furniture, fixtures, data cabling and moving.
A young workforce is critical to Austin’s success, but with a strong labor pool comes increased competition from companies like Amazon and Facebook and the like. As national companies expand footprints in Central Texas, rents increase along with the cost of labor. Landlords also have become more likely to scrutinize a local company’s financial wherewithal and require security enhancements. The barriers to entry for local users, for younger companies, have become more significant. Younger companies, as a result, have less capex to spend on research and development, or new hires to help growth their business.
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