(By Dale King) The skylines of downtown Houston, Dallas and Austin will shortly be taking a definite upward look with an increasing number of new high-rise apartment buildings being planned and under construction, says the CBRE Group commercial real estate services firm.
“The demographic cohorts in this driver’s seat are swelling ranks of millennial renters and the oncoming senior tsunami – older people selling their homes and renting apartments,” says Robert Kramp, director of research & analysis for CBRE.
The young and not-so-young are alike in what they want, he said: Inner city living options without the hassle of ownership.
But this isn’t an obituary for the ‘burbs, Kramp says. “The suburban expansion is still ongoing, and is not going anywhere any time fast, especially given corporate relocations and office construction activity, as in North Dallas.”
CBRE says urban residents are increasingly focused on live/work/play environments and, even in the Texas heat, walkability. These three big Texas cities are either gearing up, or are already prepared, for the surge.
HOUSTON: As Houston’s urban multifamily construction cycle winds down, the face of downtown residential continues to change rapidly. “Once a submarket struggling to stay alive after five, Houston’s urban core is benefitting from the Downtown Living Initiative along with quality-of-life projects — such as the new, 12-acre park, Discovery Green — which have changed the way Houstonians utilize the Central Business District (CBD),” CBRE reports.
Houston’s Downtown Living Initiative granted apartment developers $15,000 per unit in tax abatements to facilitate residential construction.
As a result, more units are under construction in downtown Houston than there are existing units, meaning the market size will double by 2017. Market Square Tower, a 40-story, 463-unit high-rise apartment building, will be the tallest multifamily building in downtown when it is completed next year.
“Retail follows rooftops and occupied units,” says Kramp. “But the urban cores of Houston and Dallas are going to be underserved as these units come online in the next 12 to 18 months because the residential population density will increase quite quickly.” Food markets coming in will have to cater to residents wanting to “visit a neighbor-sized store stocked with organic fresh produce and healthy ready-made meals… several times a week. In Houston, Phoenicia Specialty Foods in Marvy Finger’s One Park Place was the area’s first such grocer. A growing restaurant/bar scene downtown is supported by new residents.”
Downtown Houston’s changing environment extends beyond residential and retail/restaurant growth, says CBRE. The new 1,000-key Marriott Marquis, which will open later this year, spurred other downtown hotel developments, and will enable the George R. Brown Convention Center to attract larger users. The High School for the Performing and Visual Arts has chosen a downtown site for its new campus, which “highlights the evolving demographics linked to Houston’s urban core.”
DALLAS: In the meantime, downtown Dallas “has changed dramatically over the past 10 years,” says Kramp. It has welcomed Klyde Warren Park, the Omni Hotel and Convention Center, AT&T Performing Arts Center, the Perot Museum of Nature and Science “and a strong showing of new retail, restaurants and bars, particularly uptown.”
Kramp says uptown Dallas “is increasingly walkable, so we have seen a great deal of new upscale infill retail to serve the immediate area.”
Infill development is important, he says, because it adapts under-utilized sites for higher and better uses. Not only does that boost tax revenue and property market values, “it unifies and adds density to established neighborhoods.”
Dallas is yet to be a high-rise market, but by 2019, Big-D will boast a much different skyline, offering prime, multifamily projects like the Brady, Jordan Uptown and Gables McKinney Avenue. Rents are sky-high, too, about $3 a square foot.
AUSTIN: Austin is fertile ground for millennials, with a projection that the percentage of young renters in the urban core will increase from 40 to 53 by 2020, Kramp says. “Austin has long been a city where the young want to be, with its universities, diverse music scene and now a growing tech industry that has solidified the area’s ability to attract millennials.”
Kramp says the entertainment was already in place before the apartment boom, “specifically, live music and brew-pubs along Lamar Boulevard, food truck parks in east downtown and accessibility to Lady Bird Lake from south downtown.”
Multifamily developers have doubled the number of rental units in Austin’s CBD in the last 11 years, with the most dramatic growth taking place since 2014.
Dale King is a regular contributor to Realty News Report, a Texas-based publication.
March 9, 2016