| COVER STORY, MAY 2009
HOUSING HOLDS ON
The pipeline for multifamily projects in Texas is still flowing.
By Coleman Wood
While the multifamily sector received a temporary boost at the start of the recession — as many single-family homeowners flocked back to rental housing — things have slowed down much like the rest of commercial real estate. Financing is just as hard to come by for a new apartment community as it is for a shopping center or office building, and many projects across the nation are being put on hold or scrapped entirely. But in Texas, there is still activity. Developers, brokers and others in the industry have lauded the state’s resilience in the current downturn, and this good fortune has meant that quite a few multifamily projects have pushed on while projects elsewhere put on the brakes.
One such project is The Austonian, a 56-story high-rise condominium tower currently under construction in downtown Austin. The project is owned by Second Congress Ltd. and is being developed by Benchmark Development. At 683 feet, it is the tallest residential tower west of the Mississippi River and is already making its mark on the city’s skyline, even though vertical construction will not top out until the fall.
One unique feature is that the tower’s 178 condominium residences take up only one-third of a city block. This design choice reduces the footprint of the tower while increasing its density, which fits perfectly with the city’s goal of 25,000 new downtown residents by 2015. Units range in size from 1,221 square feet to 8,379 square feet for penthouses residences. Prices start at $573,000, which would spell disaster for residential projects in other markets, but Ziegler notes that five sales of more than $1 million occurred in January, a sign that the project is selling well.
“We feel it has the number one address for urban residential living in downtown, being at Second Street and Congress Avenue,” says Scott Ziegler, founding principal of Ziegler Cooper Architects, the Houston-based design firm that is serving as project architect.
This prominent location gives residents stunning views of the state capitol and Lady Bird Lake. Other building amenities include retail space on the bottom two levels. A 17,000-square-foot outdoor space located on the 10th floor includes a pool, a rooftop garden, a dog park and outdoor entertaining spaces. The project’s outdoor spaces, combined with its small footprint, are what will help it achieve a four-star rating from the city of Austin’s Green Building Rating System, a rating that holds the LEED equivalent of Gold-level certification.
Residents can take advantage of a catering kitchen, a billiard room and a 12-seat theater on the 10th floor. Moving up to the 55th floor, the tower features The Austonian Club, 6,000 feet of entertaining space available only to residents that also includes a 2,100-square-foot outdoor terrace. The 56th floor also contains a 6,000-square-foot fitness center. All of these features leave little reason for residents of The Austonian to have to leave.
“One of the strategies for the building was to complement this urban lifestyle that [people] moving into this tower would enjoy, which is having an urban village of micro-village of downtown Austin life right at your doorstep,” Ziegler says.
The Austonian comes off the heels of another condominium project designed by Ziegler Cooper, Sapphire, which is located on South Padre Island. The project’s owner, Randall Davis Company, already owns two additional properties in the Galveston area named Emerald and Diamond Beach, and Sapphire is its way of creating, as Ziegler says, “a string of jewels along the Gulf Coast.”
Sapphire consists of twin, connected 31-story towers that contain 219 residences. Each unit features two terraces, giving residents sunrise views of the Gulf of Mexico and sunset views of the Queen Isabella Causeway. Units range in size from 1,400 to 1,900 square feet, and they have been selling fast. The property was more than three-quarters pre-leased before construction was completed.
The resort community also provides an alternative living option to the towers: 14 townhouse-style bungalows. The two- to three-story units range in size from 1,800 to 2,400 square feet and each one includes a private yard, pool and garage. The bungalows also flank the community’s 300-foot long, resort-style pool.
Other amenities that add to the community’s resort feeling include a private movie theater, a spa, a fitness center, a game room and a private wine room. On an island without too many high-rise towers, Sapphire has set itself apart.
“Twin 30-story towers are quite a landmark on the island,” Ziegler says, adding that when driving over the bridge to South Padre, Sapphire is one of the first buildings seen.
The Dallas/Fort Worth Metroplex is also seeing its fair share of new multifamily projects. Two of those come from Atlanta-based Post Properties, which is a long-time developer in the market. The first, Post Eastside, is a 435-unit rental community located in the northern Dallas suburb of Richardson.
On top of containing ground-floor retail space, the community serves as the multifamily component of Eastside, a master-planned project that also features office and retail space, as well as a 1-acre park with an amphitheater. The last of Post Eastside’s four buildings was recently delivered and the one- and two-bedroom apartments are leasing from $835 to $1,900 per month.
Farther north in Frisco, the first move-ins have occurred at Post Sierra. This first round of completions has seen 60 of the property’s 269 luxury apartments open, with the remaining units being delivered between now and September. Post Sierra contains a mix of one- and two-bedroom units in a four-story building. Units range in size from 600 to 1,300 square feet and are priced between $750 and $1,550.
The first phase of openings also marks the completion of the community’s amenity package. Post Sierra contains a clubhouse with a demo kitchen and flat-screen televisions, a swimming pool, a fitness center, an Internet café, wine lockers and a gated parking garage. Like Post Eastside, this community also features ground floor retail space, this time totaling 30,000 square feet.
“The retail component [of both properties] is an amenity to help drive the value on the apartment side,” says David Ward, executive vice president and regional investment director, Southwest Region, for Post Properties.
Another similarity is that the two properties are both part of master-planned developments. Post Sierra is located within Sierra Frisco, a 36-acre, $250 million project that contains office, retail and hotel space in addition to this latest Post property. Ward is optimistic that even in the current climate, there are opportunities in Texas.
“Some markets are doing better than others and the Texas markets, frankly, held out pretty well until the end of last year, which was the first time we really started seeing a slowdown on the rental side,” he adds.
This confidence in the market is demonstrated by Post’s approximately 4,000 units located in the D/FW Metroplex alone. When looking at Richardson and Frisco, Ward sees two suburban markets that are both expanding and evolving. Both got their start in the telecomm boom, but in recent years have been filled in by a variety of healthcare and hi-tech companies. Frisco specifically witnessed the relocation of several corporate headquarters to the Far North suburb. This gives Post a large office pool from which to draw renters, and the millions of square feet of retail located in both markets produces another draw.
“We see good opportunity for long-term growth and stability in those markets,” Ward says.
The construction pipeline may not be as full as it was 3 to 4 years ago, but these projects prove that Texas is still completing new multifamily projects. Once the economy recovers and demand for housing increases again, the Lone Star State will be prepared with a variety of projects for both renters and buyers alike.
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