The concept, known as XSspace, is a relatively new type of non-residential commercial property in the United States. The units can be used for office space, a showroom, a luxury car storage space, a podcast studio or whatever the owner-tenant really wants. Buyers of the 106 units—including former Major League Baseball All-Star Roger Clemens—will be invited to hobnob, network, or host events in XSpace’s upstairs business lounge and outdoor terrace with panoramic views of Lake Travis and the Texas Hill Country.
XSpace founders Byron Smith and Tim Manson started the concept a few years ago in Australia. Central Texas was a natural starting point for launching XSpace in the US because of lower business costs and the similarity of Austin’s demographics to what worked for them in Australia, according to Smith.
“We wanted to be in Texas and we thought Austin was a great early adopter city” because it’s home to a lot of “technology and early-stage companies growing here,” Smith said.
And it seems that the founders of XSpace were right: almost 80% of the modules in 4229 North Farm Road to Market 620, about 30 minutes northwest of downtown Austin, sold before construction was completed. Smith added that the units function as a combination of office or studio space with storage space, which would appeal to people looking to stop paying separate office rent and monthly storage unit rentals.
“It started as a place for car enthusiasts and personal businesses, but more small businesses are getting involved,” said Smith. If you can get the financing, you’re better off owning than renting. The numbers must be the same.
Austin’s population has jumped 33% over the past decade, reaching nearly 2.3 million residents in 2020, making it the fastest growing metropolitan area in the country over that period. The Texas capital has been a coveted destination for investors and multinational companies like Apple, Oracle, and Tesla over the past few years.
Ranked Austin No. 4 for overall prospects to real estate investors in the 2023 Emerging Trends in Real Estate Report from the Urban Land Institute. However, Austin’s rapid growth has led to some growing pains with regard to cost of living, housing affordability, and infrastructure quality, according to the ULI report.
Shravan Parsi, president and founder of Austin-based real estate firm American Ventures, said Austin’s rapid growth means increased demand for storage space. The average cost of a typical storage unit in Austin is up 13% from last year, Parsi said, but costs are still below the national average.
“This provides an opportunity for developers to invest in this asset class,” said Parsi, speaking of general storage rather than XSspace specifically.
Apartment use is more common for condominiums and garages, and usually not for commercial purposes. With rental prices still rising in some markets, apartment utilization is attracting more interest. XSpace apartment units can also be purchased as an investment and leased for future returns in what XSpace refers to as a ‘high-demand asset class’.
XSspace started as a storage space for people with expensive cars or fine art. It was then the pandemic hit, said Howard Ecker, XSpace Chairman of the Board, that the XSpace executive team discovered that there was a market for people, mostly entrepreneurs, to buy their own space that they could customize to their needs.
“It’s the kind of real estate that’s sold, mostly … to like-minded people. You can move in.” [top floor lounge] Ecker, who has nearly 50 years of real estate experience representing renters across the country as founder, president and CEO of Howard Ecker and Co. Chicago-based charter brokerage firm: “And networking with other entrepreneurs.”
“It’s a whole new chapter,” said Ecker. “It’s the fifth class of space. XSspace is what you want it to be.”
Most units have 18-foot ceilings and can be customized, such as placing a mezzanine floor to create a grand loft feel. The space, for those who buy it, can be cheaper than renting, according to Ecker.
Commercial apartments are certainly not for everyone. Parking and other common spaces can be controlled at the whims of a commercial version of a homeowner’s association, and it can be difficult to sell apartments if a change is needed, especially if the unit is too customized to fit the needs of the original owner.
Austin units range from 300 sq ft to 2,500 sq ft and almost all of them are sold out. Initial asking prices ranged from $95,000 to about $500,000, but units ended up selling for anywhere from $135,000 to more than $1.3 million, according to Smith, who lives in Austin.
An affiliate of XSpace purchased the 5.4-acre site for the Austin site in 2019, and the four-story, 100,000-square-foot project began in early 2021. Owners have access to a business lounge on the fourth floor that can be used as space for work, an event, or meeting and includes a commercial kitchen. Other amenities include 24 hour security, HOA style management and each unit can be reached by car.
One of those owners is Clemens, a former MLB pitcher and seven-time Cy Young Award winner who played college baseball at the University of Texas at Austin. Clemens plans to use his unit to store his baseball memorabilia and as office space for his charitable organization, the Roger Clemens Foundation.
The success of the Austin location led the co-founders to devise expansion plans, starting with Houston and then with at least 15 more locations planned to open by 2025 in high-growth US markets.
The Company owns the land under control of its Houston site 7022 Old Katy Road It is expected to be ready in 2024, according to the company’s website. Unit prices for the new XSspace in Houston will range from $199,999 for 429 square feet to $799,999 for 2,007 square feet. The first phase includes 80 units and a 4,000-square-foot rooftop business lounge overlooking downtown and uptown Houston.
Next he plans to add XSpace in Dallas and East Austin and find locations in The Woodlands north of Houston and out state in Las Vegas, followed by locations in Chicago and Miami and secure land in Atlanta, Denver and Salt Lake City by the middle of next year, according to an XSpace spokesperson.
Locations located in Nashville, Tennessee; New York City; It is expected that Scottsdale, Arizona will be secured sometime in 2024.
XSpace’s executive team plans to continue to position the company for property requirements that have changed during the pandemic, to meet the needs of businesses and individuals who want flexibility of scale and reduce long-term large floor plans.
“The downsizing of traditional office space and expansion into residential needs further underscores the opportunity for XSspace,” XSpace said on its website.
XSpace Lake Travis was designed by Fuse Architecture Studio and built by KDW.