Tesla would fuel housing development in far East Austin, experts say

The secret's out: 'If the land isn’t spoken for, it will be soon'

By: Erin Edgemon – Austin Business Journal

Expect a sudden population boom in far East Austin if Tesla Inc. picks a 2,100-acre site straddling State Highway 130 for a $1.1 billion manufacturing facility, real estate experts say.

Homebuilders, office and industrial users and retail developers will rapidly flock to the area, which has an abundance of land and pent-up demand for more services from Del Valle residents.

“We have always said Southeast Austin is one of the best kept secrets in the city,” said Doug Launius, a principal at Marketplace Real Estate Group. “With an announcement like Tesla, it brings not just national but international attention.”

Vaike O’Grady, Austin regional director for homebuilding data company Metrostudy, said Tesla would be an “economic juggernaut” for that part of the metro, leading to more housing and jobs in East Austin and beyond, in places like Elgin and Bastrop to the east and San Marcos to the south.

For years, homebuilders have been buying land and building in far East Austin — much of the area is littered with signs advertising new subdivisions — because of the city's insatiable demand for houses. Because of available land, the area was already poised for massive growth over the next 20-plus years.

Within a five-mile radius of the proposed Tesla site, there are 240 apartment units under construction, according to ApartmentTrends.com, which is run by Austin Investor Interests LLC. There are 970 units proposed.

Within a 10-mile radius, there are 12,355 apartment units under construction and another 15,929 units proposed.

The prospective Tesla site had already been earmarked for dense, mixed-use development that would have created thousands of housing units and a regional job center. Those plans, a project that had been called Austin Green, would be nixed or dramatically condensed if Tesla picks the 2,100-acre site along the Colorado River for its next plant.

While the Tesla deal may not be done yet, the 2,100-acre site appears to be the frontrunner for the plant of up to 5 million square feet, which is widely expected to produce Cybertrucks and Model Y vehicles. It would employ around 5,000 workers with an average salary of $47,147.

Tesla has nearly finalized a contract to purchase all or a portion of the site from construction materials company Martin Marietta, according to the automaker’s application for incentives from Del Valle Independent School District. The sale, though, appears contingent on Tesla receiving millions of dollars in tax incentives. Read more about the incentives here.

Development of far East Austin

In the 1990s, when the term "smart growth" was embraced by Austin leaders and the desire to steer development away from the Edwards Aquifer on the southwest side of the city was more prevalent than it is today, far East Austin was no longer a pipe dream for some developers. People such as Pete Dwyer of Dwyer Realty Cos. rushed to buy land and bring homes to the area, only to have a hard time fleshing neighborhoods out.

Even the globally recognized Circuit of The Americas racetrack failed to lure substantial development to far East Austin.

One of the biggest influencers in that part of the region came in 2012, when the State Highway 130 toll road debuted. It was just the kind of big-city infrastructure the area needed.

Development of that far-flung part of East Austin — particularly east of SH 130 and south of SH 71 — has been slow because of the lack of utility infrastructure, said Eldon Rude, principal of 360 Real Estate Analytics. The creation of thousands of jobs in far East Austin would make it more feasible for developers to build water and sewer lines for new subdivisions.

Tesla would put fuel on the fire because it would be one of the first major employers to locate in Southeast Austin.

About 660 single-family houses were under construction within a five-mile radius of the potential Tesla site in the first quarter, according to Metrostudy. There are at least 15,299 building lots planned. Within 10 miles of the site, there are 51,639 future lots, of which 10,094 have some development activity.

“The depth of the market got deeper” with the news of the potential Tesla plant, said Lee Whitaker, vice president at Pacesetter Homes. Homebuilders will flood far East Austin, he added.

“If the land isn’t spoken for, it will be soon,” he said.

Tesla and other employers that could follow would create a demand for housing at a variety of prices but for smaller homes on smaller lots in particular, Whitaker said. The plant could “awaken Bastrop as an emerging market — the next stop for the homebuilding community.”

Pacesetter is already building homes in Easton Park between McKinney Falls Parkway and State Highway 183, and at Pecan Park in Bastrop.

Austin-based Marketplace along with Dallas-based Presidium Group are developing Velocity, a 314-acre mixed-use development set to include 7 million square feet of apartments, offices, industrial and other commercial space on 314 acres. H-E-B owns a parcel there for a potential future store and Austin Community College owns 124 acres adjacent to Velocity where it plans to build a regional workforce campus.

Velocity is about a mile away from where Tesla may build its plant.

If Tesla moves forward, Launius said the addition of those jobs would accelerate the development of apartments, office and light industrial space at Velocity.

“We are already fielding calls,” he said.

Since Tesla’s interest was made public, Marketplace has been getting way more calls from multifamily developers and automotive suppliers interested in all 900 acres Marketplace owns across Southeast Austin, Launius said. The developers are also already hearing that Tesla could attract corporate campus users to Velocity.