City of Austin to consider shelling out $87 million for former Tokyo Electron headquarters

The city of Austin could spend almost $90 million for just over 100 acres in Southeast Austin that formerly housed Tokyo Electron's North American headquarters.

Tokyo Electron Ltd. put its 107-acre campus on the market late last year. The property is at 2400 Grove Blvd., just off East Riverside Drive. The Japanese company supplies equipment used to manufacture semiconductors and other electronics.

In a statement on his Watson Wire, Mayor Kirk Watson said the $87 million purchase would be "an incredible chance" for Austin "to take a big step" toward its affordable housing, climate change and transit goals.

The property is located near the city's future planned light rail line along Riverside Drive. Watson said he envisions a large mixed-use development centered around mass transit and affordable housing.

A city spokesperson said the site also could accommodate a second emergency communications center and future office space.

The Austin City Council will take up the potential acquisition at Thursday's City Council meeting.  

The Tokyo Electron property has one tract consisting of 46.8 acres with two buildings totaling almost 190,000 square feet. The other parcel is just over 60 acres of raw land that presents development opportunities.

In a statement, Shelley Parks, a city spokesperson, said the purchase "would meet greatly needed space for a second Combined Technology and Emergency Communications Center location as well as office space for future organizational needs. The extensive stretch of undeveloped land offers promising opportunities for substantial investment in the East Riverside/Montopolis community. However, there are currently no specific plans for the land."

In his statement, Watson outlined an overarching vision for the land, saying the acquisition "will help more folks to afford creating a life in Austin while also doing right by the environment."

"The vision is for a dense, transit-oriented neighborhood that could conservatively accommodate 1,100 living units," Watson said. "Think about something akin to the Mueller neighborhood (that's the project that transformed Austin's former airport northeast of downtown into a huge mixed-use development) — but intentionally built around public transit and with the benefit of the lessons learned about ensuring affordability and other challenges in a much-in-demand planned community."

The city's 2017 Strategic Housing Blueprint set out an ambitious goal to create 135,000 housing units by 2028, including 75,000 market rate units and 60,000 affordable units that require differing levels of public subsidy, Watson said.

"Using voter-approved affordable housing and anti-displacement funds, we’re going to be able to make some real progress toward that affordable housing goal," Watson said.

Tokyo Electron wants to lease back the two buildings on the campus through Dec. 31, and have the option to extend on a monthly basis through March 31 of next year.

What's happening to Tokyo Electron?

Tokyo Electron recently announced it is moving its headquarters into the new 15-story RiverSouth office building at West Riverside Drive, South First Street and Barton Springs Road, just south of downtown and Lady Bird Lake.

“The sale of our headquarters is still in process, and we cannot discuss the details," Rick Turner, executive vice president, chief financial officer and general manager of administration of Tokyo Electron U.S. Holdings, Inc., said in a statement. "We look forward to seeing what lies ahead for what has been our home for the past 30 years, and we are excited for our next chapter as we continue to expand in the Austin area."

Tokyo Electron, a supplier to Samsung, plans to open a 40,000-square-foot office in Taylor, where Samsung is building a large new plant. Tokyo Electron also is in the market for 100,000 square feet of space for a new research and development facility in the Austin area.

In Southeast Austin, the company's former headquarters campus has a 142,000-square-foot main office and a 47,800-square-foot research and development facility, which sit on 46.8 acres and are connected by an enclosed walkway. The property also has 60.3 acres of raw land.

Tokyo Electron officials said the RiverSouth headquarters will house more than 350 employees, in almost 100,000 square feet of space, by December of this year. The company headcount is 17,000 globally, with more than 500 people in Austin. Those employees will work at RiverSouth, a new to-be-determined research and development site and a new site in Taylor.

Tokyo Electron said the company plans to double the size of its research and development and training centers in Austin, and it is in the process of identifying an additional 100,000 square feet of space towards that goal.

That will increase the company's footprint in the Austin region from 189,800 square feet currently to 238,800 square feet of space between its new headquarters at RiverSouth, the training center and research and development spaces and an additional 40,000 square feet of office space in Taylor, the company said.

“We are currently evaluating facilities that will help us continue to revolutionize and modernize our research and development and training facilities, all right here in Austin,” Turner said.