A developer is set to start work on a seven-story office building that will rise on South Lamar Boulevard just south of Lady Bird Lake.

Demolition has begun on a one-story former Schlotzsky's restaurant on the property, and construction of the office building, called Zilker Point, will follow. The 1.26-acre site, at 218 S. Lamar Blvd., is just south of downtown Austin and next to Zach Theatre.

The developer, Austin-based Generational Commercial Properties, led by founder Joe Llamas, has obtained a $124 million construction loan from New York-based MSD Capital. MSD Capital is a private investment firm that manages the assets of Dell Technologies founder Michael Dell and his family.

When it is completed in two years, Zilker Point will have 192,00 square feet of office space, 15,000 square feet of retail space and amenities on the ground floor, and 635 parking spaces. Designed by the architecture firm of Runa Workshop, the office project will have a tenant fitness center, a rooftop terrace and a community art gallery.

Generational Commercial Properties is partnering on the project with San Francisco-based DivcoWest. Generational Commercial Properties also developed 801 Barton Springs, a midrise building on Barton Springs Road across from the Palmer Events Center.

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Work is starting on Zilker Point as the Austin-area office market continues rebounding from the COVID-induced slump and benefiting from growth in its technology sector by companies including Google, Indeed, Amazon, Apple, Facebook, Tesla and Oracle.

In the part of town where Zilker Point will rise, "demand has been strong for Class A (top-tier) office space in neighborhoods south of the river on a consistent basis," said Matt Frizzell, executive director in Austin at Cushman and Wakefield, a global commercial real estate services firm.

Several new projects in that submarket — Music Lane, RiverSouth and Bouldin Creek Commons among them — "have attracted a wide array of tenants in the last few years — Gensler, Deloitte, Baker Botts and Atmosphere, to name a few," Frizzell said. "The successful projects offer unique designs, modern amenities, and give a real sense of place in one of Austin’s most sought after ZIP codes that has featured everything Austin has to offer for the last few decades except for office space."

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Earlier this year, commercial real estate services firm CBRE said office demand in Austin "shows no signs of slowing down as the city’s growth continues."

In the second quarter, CBRE said Austin contined to lead the nation in the number of employees who are returning to the workplace, citing data from Kastle Systems. Austin's average building occupancy rate was 58.9% as of June, according to Kastle. That's well above the top-10 city average occupancy of 43.8% reported by Kastle.

Roughly a third of workers in the San Francisco Bay area are working at the office, while more than half of employees in Austin, Dallas and Houston are back at their workplaces, Kastle said.

Austin registered more than 1 million square feet of office leasing activity, on a net basis, in the second quarter that ended in June, CBRE said. Seven office buildings totaling nearly one million square feet of space broke ground in the second quarter, while construction wrapped up on about 973,000 square feet of office space in the quarter, CBRE said. One of those, CBRE said, was "the highly anticipated ... sail-shaped tower that is 100% occupied by Google."

NOTE: This article has been updated with corrected information from CBRE regarding the number of office buildings and square footage of space broke that ground in the second quarter.

This article originally appeared on Austin American-Statesman: Work begins on 7-story office building south of downtown Austin