A trophy high-rise in downtown Austin has lost out on a high-profile potential tenant.
Lease negotiations between California-based Facebook Inc. and the leasing team at 300 Colorado have broken off, with the social media giant no longer seeking to fill up the entirety of the new building, according to sources.
Multiple sources who spoke to Austin Business Journal on the condition of anonymity confirmed Facebook (Nasdaq: FB) is no longer seeking a lease agreement at 300 Colorado, which is nearing completion and will have about 353,000 square feet of office space. ABJ reported in December that Facebook was searching for up to 1 million square feet in the Texas capital, which would more than double its current footprint in the city.
Facebook walked away from negotiations March 19, sources added.
Facebook did not immediately respond to questions about the negotiations or its immediate plans moving forward.
300 Colorado losing out on Facebook coincides with the nearby Indeed Tower signing Houston-based law firm Vinson & Elkins to a lease of more than 50,000 square feet. It’s a reminder of the uneven recovery of the Austin office market, which has multiple office high-rises under construction, as well as the increased influence big technology companies wield on the local real estate scene.
Sources told ABJ the leasing team at 300 Colorado passed up on multiple lease deals — including one with Vinson & Elkins — in hopes Facebook would take up the entire building.
Office space at 300 Colorado is now back on the market, sources confirmed.
The 32-story tower, under construction for more than two years at the corner of Third and Colorado streets, has had a roller coaster existence so far. In 2018, it was leased almost entirely by oil and gas company Parsley Energy Inc. But after Austin-based Parsley was bought earlier this year by Irving-based Pioneer Natural Resources (NYSE: PXD), its local offices were shuttered.
With Facebook pulling out, Parsley is still on the hook for the lease. Pioneer has been trying to sublease the space, according to Sam Tenenbaum, an economist and director of analytics at CoStar Group.
Chicago-based Jones Lang Lasalle Inc. is handling the leasing for 300 Colorado. JLL also did not respond to multiple requests for comment. Cousins Properties Inc., Riverside Resources Inc. and Ironwood Real Estate are the developers of 300 Colorado.
It remains unclear how the stalled negotiations at 300 Colorado will impact Facebook’s expansion plans in Austin. At least one broker wondered whether the company might consider a large lease at the 66-story 6 X Guadalupe skyscraper, which is rising at corner of Guadalupe and Sixth streets and is slated to deliver to tenants in the first quarter of 2022.
6 X Guadalupe, soon to be Austin’s tallest tower, is being marketed to tenants seeking office spaces of all sizes, according to Seth Johnston, a senior vice president at co-developer Lincoln Property Company. The last estimate from the developers put 6 X Guadalupe delivering in the first quarter of 2022.
When ABJ reported on Facebook’s possible Austin expansion, no single downtown building could accommodate its 1-million-square-foot request, so it was believed that the company was seeking space in multiple buildings.
Local real estate experts and insiders have been optimistic tech giants such as Facebook and Google would help shore up Austin’s commercial real estate market in the post-pandemic era.
Dean Barber, a Dallas-based site selection consultant and president and CEO of Barber Business Advisors LLC, previously told ABJ that the Big Four tech companies — Amazon, Apple, Facebook and Google — play by their own rules and will look to eat up more office space, even while other tech companies might downsize their physical footprint. Google LLC recently announced plans to invest $50 million in Texas this year, including in previously reported office leases in downtown Austin and East Austin.
Lincoln Property’s Johnston added there has been an uptick in leasing activity in downtown Austin, mostly during the past two weeks but overall since January. Many companies are targeting some form of returning to the office between this summer and January 2022, assuming vaccines continue to roll out successfully.
Facebook has had a presence in Austin since 2010, when it opened an office at 300 W. Sixth St. The social media giant also has an office on Parmer Lane in Northeast Austin, as well as 256,500 square feet of space at Third + Shoal. Facebook is also adding space at The Domain, where it is expected to eat up the entirety of the Domain 12 building — about 320,000 square feet.
Tenenbaum said Facebook has more than 900,000 square feet of office space in downtown Austin and The Domain. A 350,000-square-foot lease at 300 Colorado would have made Facebook one of the largest office tenants in town.
At last count, Facebook had about 1,300 employees in the Austin area.