Constructing a complex without a signed tenant can be risky, but cities are taking advantage of speculative buildings to promote job growth.
Speculative, or spec, buildings are built without a secured tenant and are put on the market once completed. Tenants can then customize and retrofit the buildings to their liking.
“Before you even get to the tenants, the capital investment of the space for the city and county is beneficial,” Buda Economic Development Corporation (EDC) Executive Director Ann Miller said.
In 2017, Buda announced a more than 600,000-square-foot, two phase, industrial building that would be put in on the east side of Buda in 2018.
The Hays Free Press reported in November 2017 that the building, “would most likely be used for commercial or industrial purposes, such as an e-commerce center for a large retailer, a medical manufacturing or distribution center, or even a distribution center for Amazon Fresh.”
Miller said if the tenant of the building was to be an e-commerce center, every person purchasing in the state of Texas would pay a local sales tax to the city of Buda.
Additionally, the city of Buda, county and the school district could receive anywhere between $7 million to $14 million in property taxes. Hays CISD alone could receive $107,000 to $215,000 toward its annual budget, according to Miller.
In January, Kyle’s Planning and Zoning Committee approved a conditional use permit for the construction of a logistics center off of Interstate 35. The 222,800-square-foot building was built with the intention of being used as a warehouse for shipping goods and services, due to its proximity to Interstate 35. Design documents also show a Phase 2 with another 206,000-square-foot building.
Kyle’s Director of Planning Howard Koontz says that spec buildings are appealing to business tenants who don’t want to wait around to build their own building, but can have a building ready to go from day one.
Spec buildings can also bring employment opportunities to the area.
“The city’s biggest priority, in regards to land development, is bringing employment opportunities,” Koontz said. “Not only do they represent opportunities for employment, but they also represent secondary employment opportunities.”
Victoria Vargas, economic development specialist with Kyle’s EDC, says the logistics center in Kyle is expected to bring 250 jobs over a five-year period. The amount of property taxes it would produce for the city and county were not available.
Although the trend rose up quickly, Miller says that at least for Buda, it is limited. She says that Buda only has a few tracks left with the appropriate zoning for this type of facility. Developers also have to be willing to take the risk of building the structure and hoping to find a tenant.
Kyle, on the other hand has plenty of land.
“We have acres and acres of land, from a zoning standpoint, which would allow for these large-scale buildings to be permissible,” Koontz said.
Koontz also said spec buildings can be perilous for developers, because they have to depend on future economic prosperity, but he says that Kyle is ready for more spec buildings in the future.
“We’re open and ready for business,” Vargas said.