It’s no secret that some of the fastest-growing U.S. metro areas are in the South. So now seems like a good time to put together a major REIT focusing on the region’s commercial real estate.
That’s what recently happened when Atlanta-based Cousins Properties recently merged with Dallas-based TIER REIT in a $6-billion deal. The combination will equal about 22 million square feet, mostly in the South. Cousins’ portfolio of 15 million square feet is primarily located in Atlanta; Austin, Texas; Charlotte, N.C.; and Tempe, Ariz. TIER totals about seven million square feet in Atlanta, Austin, Charlotte, Dallas-Fort Worth, and Houston, as well as an asset in New Jersey. It is especially concentrated in the hot Austin market, where it owns The Domain, a 1.5-million-square-foot mixed-use development with offices, retail and apartments.
The deal will boost Cousins’ overall market cap from $5.4 billion to $7.8 billion, according to a company investor presentation. Bank of America will by far be the largest tenant housing the new firm’s portfolio, with just over 1.5 million square feet leased, or seven percent of overall GLA. However, the top five tenants only make up 16 percent of occupied space. Finance companies account for 22 percent of the total, while tech represents 20 percent.
The deal sits well when taking into consideration the Urban Land Institute’s Emerging Trends in Real Estate report for 2019. Austin, Charlotte, and Dallas, where another big chunk of TIER’s portfolio is located, are all in the top 10 markets to watch for overall real estate projects. Dallas is number one.
The combined firm, which will retain the Cousins name, will have a sizable presence in Austin, reportedly making it the largest office landlord downtown by square feet. Cousins has five office towers there prior to the merger, and it gains two more office complexes, as well as The Domain.
Austin’s office market was in a very good place as of the end of the fourth quarter, according to a Cushman & Wakefield report (download here). Vacancy was at a very low 10.6 percent, only rising 20 basis points from the same year-ago period, despite 3.7 million square feet being constructed over that 12-month period. Meanwhile, asking rents increased over the year, to $36.26 per square foot from $36.13.
And things are only looking up for Austin’s commercial real estate future, with Apple building a new $1-billion campus in the north part of the city. Once that gets underway, other tenants are likely to follow.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.