FEATURE ARTICLE, MARCH 2007

THE CHANGING FACE OF DOWNTOWN HOUSTON
Mid- to high-rise mixed-use developments are beginning to rise up in this changing city.
Kenneth Levenson

Levenson

Mixed-use generablly refers to a project that combines more than one use — residential, retail, office, industrial or entertainment — under one roof. Mixed-use developments are typically stacked vertically, but also can be achieved through a horizontal layout like a lifestyle center.

Over the past few decades, one type of mixed-use development in particular has been sweeping the nation, helping to revitalize our modern cities. It is called an urban village — a live/work/play development typically seen with ground-floor retail, shops and eateries below levels of living space.

However, one Texan city that has been slow to adopt this growing mixed-use trend is Houston. For being one of the largest cities in the United States, Houston has been somewhat behind New York, Los Angeles, Chicago and other major cities in adding mid- to high-rise mixed-use developments. But there are some very good reasons why.

Key Factors

Due to an abundance of available land, there is no need to double up on property use or type. It’s just as easy — if not easier — to build retail next door to residential. Plus, it may be cheaper to do so and it helps create more of a destination location. Houstonians are used to living in one building and shopping/working in another.

A second factor is that Houston does not have any zoning laws. In fact, Houston is one of the largest cities without zoning. While local deed restrictions can come into play, lack of zoning generally leads to a lack of prohibitions on land use in many cases. So, for example, residential can be next door to retail.

A third major factor is that traditionally there has been no major mass transit system in the area, leaving Houstonians still very much married to their cars. There’s an existing bus system that is widespread, but the commuter line only runs between Houston’s central business district (CBD) and the Texas Medical Center. The commuter system is currently in an expansion mode with several new routes being studied at the present time.

A Changing Landscape

However, Houston is changing — downtown Houston especially.

Most Houstonians who work downtown go home to the suburbs at the end of the day. But increasingly, thanks to a lively theater district, a new convention center and quality sporting venues, some stay for dinner and entertainment before heading home. And much like the rest of the country, young professionals and empty nesters are beginning to migrate downtown and, today, Houstonians are actually living in the city. This finally is leading to the development and leasing of retail space for grocery stores and other support businesses.

Houston’s office market is healthier than it’s been in years with more than 5,000 companies and a daytime population of 160,000. There are so many more employees in downtown than even a year ago. As a result, lofts and high-rise living spaces have been springing up in Houston’s CBD — downtown and Midtown — to try and capture some of that residential demand.

Within the past 10 years, several historic buildings, including such landmarks as Hogg Palace and the Rice Hotel, have been converted to residential lofts. In 2005, Developer Fretz construction completed the redevelopment of a three-story historic building to five luxury lofts on the second and third floors with ground-floor retail called Byrd’s Lofts.

A number of new apartment and townhouse complexes have been built too. There are currently 15 existing condominium projects in Houston’s CBD consisting of 1,013 units. These are all older rehabs situated on top of ground-floor retail.

There are also 11 existing apartment projects in Houston’s CBD consisting of 1,641 units. Some current apartment projects to note include The Edge, which will add 93 apartment units; The Herrin, which will consist of 52 apartment units; and Canal Place, which will have 200 new units. Seventy-five percent of the 200 units at Canal Place will be offered at below-market rates to low- and middle-income families, while the remaining 50 apartments will be priced at current market rates. Also, a new high-rise luxury apartment tower proposed by the Finger Companies — One Park Place — broke ground in January. The 37-story tower will consist of 347 units, six levels of parking and more than 20,000 square feet of retail space on the ground floor. The $100 million development is scheduled for completion in fall 2008.

One of the largest new proposed development projects is the Houston Pavilions — a $200-million mixed-use development project encompassing almost 500,000 square feet, which will span three city blocks in downtown Houston. The development proposal includes 350,000 square feet of retail space located on the first two levels, with entertainment venues situated on the third floor and approximately 200,000 square feet of loft office space as well. The original proposal included 200,000 square feet of residential space, but the developers have since cut the residential component from the project. The developers said the residential units would have required underground parking, which would have made rent too high.

There are some suburban business districts in Houston where mid- to high-rise residential buildings are also being developed; however, they are almost exclusively 100 percent residential buildings. Only in Houston’s CBD and periphery are you beginning to see mixed-use residential developments with ground-floor retail, largely because developers are taking old buildings and redeveloping them for residential use.

Looking Ahead

High- and mid-rise living in Houston may never be as prevalent as older cities on the East Coast where people have been living on top of stores for centuries, but Houston is a city that continues to grow and evolve. And for a city without zoning laws, Houston is surprisingly well-organized.

As more Houstonians decide that the live/work/play lifestyle is for them, more and more mid- to high-rise mixed-use developments with residential and retail components will appear.

But the truth of the matter is that today, the vast majority of Houstonians still love their cars and are going to stick to their suburban lifestyle for now. But thanks to a downtown that has become much more vibrant over the past decade with the addition of downtown living, restaurants and other entertainment venues, they will venture out more for a night on the town, adding to the demand for an active downtown.

Kenneth Levenson is principal with Integra Realty Resources’ Houston office.


©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.




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