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An early look at redevelopment plans for the Austin Center in Westshore

A Big Squeeze

Redstone Investment’s Pat Kelly says that while many tenants are seeking higher parking densities in suburban office buildings, they are rarely fully utilized because more and more workers are telecommuting and working so-called “swing shifts” — non-traditional work schedules. Photo by Mark Wemple

Once upon a generation ago, developers built suburban office buildings that offered three parking spaces for every 1,000 square feet of leasable building space. Upscale, Class A buildings that charged higher rents often went all out in providing four spaces per 1,000 square feet as an amenity to tenants.

But today, as technology and “open” office designs have allowed companies to fit more workers into smaller spaces like never before, some tenants are demanding five or even six parking spaces per 1,000 square feet.

That shift has increased pressure on developers to acquire additional land for surface parking, increased costs and, ultimately, led to higher rental rates.

And in some cases, those additional parking spaces go unused, the result of changing demographics, more flexible work schedules and workers’ ability to conduct business from home or other non-traditional locations like coffee shops.

“If a developer is contemplating a new suburban office building, especially one on a speculative basis, I think they would almost certainly go with five spaces per 1,000, because in that case, you have no idea what tenants are going to show up,” says Pat Kelly, president of Redstone Commercial, a division of Tampa-based Redstone Investments, owner of the five-building Austin Center office complex in the Westshore area of Tampa and dozens of other office and retail properties in several states.

“We see larger tenants requesting a five-to-one parking ratios whether they intend to use the additional spaces or not.”

The trend comes as companies are downsizing their office space needs overall. Twenty five years ago, American workers occupied an average of 250 square feet each, a figure that included amenities such as kitchens, cafeterias and break areas. In many cases, workers occupied individual offices.

Law firms, meanwhile, typically allowed partners suites that stretched to double that amount of space to accommodate paralegals, secretaries and research support staff. Those figures also included space for expansive, book-filled law libraries.

Today, however, technological gains and more collaborative work areas have joined forces to compress the average worker space to below 150 square feet. Law firms and CPA firms haven’t been exempt, either, as floors once devoted to libraries and drawing rooms have disappeared as more material has been digitalized and filed in desktop computers.

“Four parking spaces per 1,000 just doesn’t cut it anymore, unless the space is for a more traditional law firm or a CPA firm or the like,” says Cheri O’Neil, a senior vice president at commercial real estate brokerage Savills Studley, in Tampa.

Demographic and social changes, brought about in large part by technological advancements, have also played a large role. As workers today are able to labor from their homes or their cars thanks to increasingly mobile technology, many companies are embracing the new dynamic and encouraging employees to spend more time outside the office.

In some places, “hoteling,” as it is known, has eliminated permanent worker desks completely while promoting more flexible work spaces.

But the worker compression hasn’t translated to a need for less parking, despite more flexible schedules, especially in suburban settings.

That, in turn, has led to widespread ramifications for a development industry grappling with immediate tenant need vs. long-term expectations. Additional parking also brings added costs, in the form of increased land, asphalt, concrete and labor, to name a few.

Structured parking spaces cost about $15,000 each to design and construct, developers note. And while surface parking is typically half that amount, when factoring in land and other expenses, buying more land than needed can dent a developer’s pro forma.

“There are both physical and cost limitations to how much parking you can provide in many situations,” says Dan Woodward, a vice president with Highwoods Properties, one of the Tampa area’s largest suburban office landlords.

“It’s not cheap,” Redstone’s Kelly says of adding additional parking. “And it directly relates to how much rent a landlord is going to have to charge.”

Mike Hoyt, a senior vice president of development at the Lutgert Cos., of Naples, notes that increased parking requirements also translate into “lost land value” and require ongoing maintenance.

“And if you create too much [surface parking] it has the effect of creating a sea of parking that looks unattractive as well as being underutilized,” Hoyt says.

Still, some developments are using increased surface parking as a lever to lure tenants, especially businesses that operate people-intensive call centers and dense high-tech enterprises that require ample space for employees and equipment.

NetPark, a former two-level mall converted in 1999 into the Tampa Bay area’s largest office structure, at 930,000 square feet, boasts around a six-per-1,000-square-foot parking ratio, which has allowed it to attract a number of call center and medical-related tenants.

In that case, however, surface parking had been put in by the original developer of the East Lake Mall.

Kelly notes many call centers need greater parking densities because the average worker space can measure around 100 square feet.

Medical office buildings require greater parking ratios, of around five spaces per 1,000 square feet, on average, because they typically have a high percentage of employees and frequent visitors who stay on site for relatively short periods of time, Lutgert’s Hoyt says.

Mixed-use projects, too, which combine office and retail or entertainment, such as Lutgert’s former Mercato complex in Naples, typically provide higher than average parking to accommodate patrons and workers alike — even though parking demand is usually staggered throughout the day and evening.

Still, he says many suburban tenants, especially in the Collier County area, remain comfortable with 3.3 parking spaces per every 1,000 square feet.

And while some tenants are pushing for increased parking, Woodward and others say developers consider macro-economic and demographic trends when designing parking areas. Millennial workers, for instance, those aged between 18 and 35 today and a growing segment of the office workforce, often eschew automobiles as a lifestyle choice — though many are drawn to more urban areas where owning a car isn’t necessary.

At the same time, in urbanized areas like Tampa and St. Petersburg, the debate about the need for mass transit and what form it will take rages — and will ultimately impact even suburban office developments and their parking requirements.

Future technology and existing ride-sharing services, too, could have an impact on how much parking is allocated to office buildings in the future.

“With the advent of automated vehicles, the onset of Uber and the like and maybe things we can’t even imagine right now, there’s a compelling argument to be made for the need for less parking overall going forward, not more,” says Highwoods’ Woodward.

Whether more or less, one thing remains certain, says Fort Myers and Naples commercial brokerage CRE Consultants’ managing partner Ray Sandelli.

“Parking will always be an issue.”

 

K. L. McQuaid
Business Observer

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Hitting Bull’s-eye

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
Business Observer

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Brad Salzer, Redstone Funding, Moderated IMN Panel

Brad Salzer, President, Redstone Funding hosted IMN Panel at the 6th Annual Bank & Financial Institutions Special Assets Forum on Real Estate, C&I, and SBA Loans. Brad moderated the “Buyer’s Panel” with the following topics:

  • What types of assets are you currently buying?
  • Yield requirements
  • Pricing/Deal flow/Financing
  • Loan-to-own/hold now vs. anticipating DPOs from borrowers
  • Can you swallow the Loan Sale Agreement?
  • Litigation strategies
  • Untapped value in the underwriting process

Click here to listen to the Buyer’s Panel presentation given by Brad Salzer.

Popular Tampa party site A La Carte Pavilion to make way for new waterfront homes

A la Carte Pavilion, which for decades has hosted hundreds of weddings, charity events and other functions, is being sold to David Weekley Homes, which plans an upscale waterfront community. [MONICA HERNDON | Times]

For more than three decades, A La Carte Pavilion has been the picturesque setting for hundreds of weddings, charity events and other functions.

Its tenure as one of Tampa Bay’s most popular party venues is about to end.

The owner, Egypt Shriners, is under contract to sell the 13-acre waterfront site to David Weekley Homes, which plans an upscale community that will include a mix of housing types. The price was not disclosed but the proceeds will help support the Shriners Hospitals for Children.

“What was really happening is that we were married to brick and mortar, and we decided it was time to reassess what our mission really is — is it brick and mortar or the children and hospitals so we can provide free care,” said James Lich, chief rabban, or first vice president, of Egypt Shriners. “We decided it was for the children and the hospitals.”

The Shriners built the pavilion on Dana Shores Drive, west of Tampa International Airport, in the early 1970s primarily as a meeting and event space for its own members.

“Since then our membership has come down, so there has been less and less use of it,” Lich said.

Fifteen years ago, Egypt Shriners leased the 56,000-square-foot pavilion to Bloomin’ Brands, parent of Outback Steakhouse, Carrabba’s Italian Grill and other chains. Bloomin’ Brands, in turn, rented out the facility for as many as 500 events a year, including gala fundraisers for Moffitt Cancer Center and the American Heart Association.

But A La Carte’s fate appeared sealed early last year when Bloomin’ Brands said it would not renew its lease.

“They made a business decision to refocus on their core business, and A La Carte was not a core business,” Lich said. “It was all very friendly; they gave us a year.”

Egypt Shriners listed the property through Redstone Commercial and quickly drew interest from prospective buyers. The deal with Weekley Homes came about recently, Lich said.

In a statement, Weekley said it liked the site because of its waterfront location and easy access to interstates, malls and beaches. Housing, which will be at a “broad spectrum of price points,” will range from two- to four-story structures with Weekley as the sole builder.

The company also said it might name some streets and parks after key Shriners figures to “honor this organization’s history and culture.”

Houston-based Weekley has become one of Central Florida’s most prolific builders. It replaced several older homes on St. Petersburg’s Snell Isle with mansions and is also active in numerous new-home communities, including Waterleaf in Riverview.

“I personally am familiar with their homes and am very pleased and very excited for the neighboring community,” Lich said.

No closing date has been set, but Lich said the pavilion will honor its commitments through this year.

The Shriners’ Egypt Shrine chapter, whose membership has dropped from 7,500 to about 2,500, covers a seven-county area. It is responsible for providing transportation for children and their families from the hospital on the University of South Florida campus to other Shriners facilities around the country.

Lich said the decision to sell the pavilion was easy, given the chapter’s declining membership, the rising value of the land and the loss of the Bloomin’ Brands lease.

“We made an executive decision based on those pressures to sell the property,” he said, “and focus our energy on our mission, which is the hospitals.”

Susan Taylor Martin
Times Senior Correspondent
Tampa Bay Times

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OP-ED “HOW THE NEXT FINANCIAL CRISIS WILL HAPPEN”

Auto Draft

Steve Schwarzman, CEO and Chairman of Blackstone, whose firm manages $93 billion in assets, suggests the pendulum has swung too far.

Stephen A. Schwarzman
Wall Street Journal

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REDSTONE WILL LIKELY PARTNER WITH OTHER DEVELOPERS ON AUSTIN CENTER

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Redstone Investments sees potential for a number of commercial uses on the Austin Center site in Westshore, from hotel to retail to multifamily.

Redstone closed on the five-building, 300,000-square-foot office park in early April. The company has said it will first and foremost be a landlord to the existing tenants in the property.

And while Lyle Fogarty, president of Redstone Properties, reiterated that on Tuesday, he also shed some light on the possible future of the office park, which sits on 10 acres.

“We are not a developer of humongous, mixed-use projects on our own,” Fogarty said at the Westshore Alliance annual development forum. “We’ll be talking to other groups about working on other components — multifamily, hotel, retail, but that’s all down the road.”

The Tampa Bay Business Journal first reported that Redstone was under contract to buy the site in October. Developed by late Tampa civic leader Al Austin, the property is considered to be one of the most prime sites in the city, if not the state, because it features 10 contiguous acres in a densely populated urban area.

“We do think that the site can handle a lot of different uses, and we’ve had a lot of interest since we’ve had it under contract,” Fogarty said. “Over the last few months we’ve been working on it, we’ve heard from a lot of people who have a lot of ideas for the site and we love that. We’d love to hear more.”

Ashley Gurbal Kritzer
Reporter-
Tampa Bay Business Journal

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ICONIC AUSTIN CENTER SELLS IN TAMPA’S WESTSHORE

TAMPA — A commercial development that predates Tampa’s Westshore district, and is tied to that business center’s founder, has sold.

The Austin Center, built in 1967 by the late Al Austin, sold April 6 to an affiliate of Redstone Investments. Located on North Westshore Boulevard between the 1111 and 1411 blocks, the terms of the sale were not released, nor were details of the sale immediately available through Hillsborough County property records.

The development is by far the oldest in Westshore, with 300,000 square feet on 10 acres near Tampa International Airport. It went on to become the cornerstone of a district eventually boasting 11 million square feet and employing nearly 100,000 people.

“Austin Center is strongly positioned in the Westshore area, and is well known to the Tampa Bay area business community,” says Jonathan Levy, managing partner and co-founder of Redstone Investments, in a release. “We are delighted to be the new owners, as we have always admired the vision Al Austin had for the entire Westshore Business District.”

Redstone, which concentrates its efforts in both Tampa and Youngstown, Ohio, owns more than 75 properties in 15 states, representing more than 4.5 million square feet of commercial space.

Austin, who was instrumental in bringing the 2012 Republican National Convention with nominee Mitt Romney to Tampa, died May 21 , at the age of 85.

Austin and his father bought several acres of vacant land between Interstate 275 and the then-young Tampa airport in the mid-1960s, according to the family’s website. At the time, the land was nothing more than cow pastures, orange groves and pine forests.

“Al was first in Westshore,” Tampa businessman Dick Beard said of Austin after his passing last year. “He was the visionary.”

Despite the growth and turnover all over Westshore, Austin never sold his original buildings, an investment the family would hold on to for nearly 50 years.

-BUSINESS OBSERVER

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WHY REDSTONE INVESTMENTS WANTED THE AUSTIN CENTER

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When Rhonda Hogan brought the opportunity to buy the Austin Center to Redstone Investments, the Redstone executives were immediately excited about it.

“We’ve always loved that piece of real estate,” said Lyle Fogarty, president of Redstone Development. “We think it’s one of the best properties in Tampa’s premiere business district.”

Redstone said Monday that it had closed on the five-building, 300,000-square-foot Austin Center, which was developed by late Tampa civic leader Al Austin in the late 1960s. A purchase price was not disclosed, and a deed for the transaction has not yet been filed in Hillsborough County.

The Austin Center’s location is a prime spot: It’s in the heart of Westshore, which has only a handful of vacant sites left for new construction — and none are as centrally located as the Austin Center.

“We think it’s an excellent location,” Fogarty said. “It’s a great business address, and obviously Westshore is rapidly evolving into a premier urban destination.”

Hogan said in a statement that “the transaction was personal” as she had known Austin for decades.

“Redstone Investments was selected because of their solid reputation,” Hogan said in the statement, “and I believe Al Austin would be celebrating this day.”

Fogarty said it was too soon to comment on any future plans for the property — in real estate circles, the site is looked at as a prime redevelopment play. For the foreseeable future, he said, it will remain an office park. Redstone will take over the leasing and property management. There’s about 60,000 square feet available, though it isn’t contiguous. Lease rates range from the high teens to the mid $20s, depending on the location within the park.

“Right now, we’re just focusing on a smooth transition for the tenants that are in place,” Fogarty said. “We’re excited about catering to the small and mid-size tenant market in the Westshore business district.”

It’s also too soon, Fogarty said, to talk about potential upgrades or renovations to the building, which are common in office buildings after a new landlord takes over.

“In the immediate term, we’re focusing on a smooth transition for the property management,” he said. “We have a couple tenants going through expansions right now, and we have to make sure we deliver those [spaces] on time.”

Ashley Gurbal Kritzer
Reporter-
Tampa Bay Business Journal

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AUSTIN CENTER SOLD TO REDSTONE INVESTMENTS

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 — The Austin Center, the Westshore District’s first office development, sold today to an affiliate of Redstone Investments for an undisclosed amount. Built in 1976 by the late Al Austin, known as “the pioneer of Westshore,” Austin Center is considered a landmark by some, located in the heart of Tampa’s Westshore business district.

“Austin Center is strongly positioned in the Westshore area and is well known to the Tampa Bay area business community. We are delighted to be the new owners, as we have always admired the vision Al Austin had for the entire Westshore Business District,” said Redstone’s managing partner and cofounder, Jonathan A. Levy.

Austin Center includes five office buildings totalling 300,000 square feet on 10 acres.

Redstone Investments is a fully integrated commercial real estate service company with offices in Tampa and in Youngstown, Ohio.

Tribune Staff

Tampa Tribune

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