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A Ritz-Carlton, Perhaps? – Simon Plans 30-Story Hotel/Condo Tower in The Galleria Complex

HOUSTON – Simon Property Group says it will move ahead with its plan to build a 30-story hotel and condo tower, probably similar to a Ritz-Carlton hotel/condo tower, in The Galleria in Houston.

The hotel will be built on the site of a former Macy’s, along Sage Road on the western side of Galleria, a massive mixed-use development conceived by Gerald Hines.

In 2013, when it launched a major development of the Galleria with a new Saks Fifth Avenue building, Simon announced that the tower would be constructed on the Sage Road frontage some day.

Now, the tower’s timetable is for 2017 groundbreaking and 2019 opening.

The tower’s configuration is projected to be over 200 hotel rooms and 100 condos for sale.

At this early stage, Simon has not affiliated the tower with a hotel brand, of course. But Ritz-Carlton, which is under-represented in Texas, and Four Seasons, have registered significant success with hotel/condo combination towers around the nation.

With its upscale demographics, The Galleria, has a tremendous draw with affluent shoppers from Mexico and other well-heeled tourists, so affiliating with the high-end hotel flags, such as Ritz-Carlton, creates a solid narrative for the proposed new tower.

However, the density of existing hotels around the Simon hotel site is significant with Westin, J.W. Marriott and Hyatt all within 1,000 feet.

Within the Galleria complex itself are two operating hotels – the 406-room Westin Oaks and the 487-room Westin Galleria. The Westins are directly tied into the Galleria as retail and hotel space merge under the Galleria roof.

Across the street from the Simon hotel site are two new Hyatt properties. The Hyatt Regency Houston Galleria, a 325-room, full-service hotel last October and the 12-story, 157-room, select-service Hyatt Place Houston Galleria next door opened in January.

The Hyatt Regency was the first full-service hotel to open in the Galleria area in 25 years.

“The attractiveness of the Galleria market is that during the week, it is a strong business demand generator because of the 35 million square feet of office space in the area. We have large groups of businesses — both domestic and international — that use our hotels,” said David Songy of Songy Highroads LLC, the developer of the Hyatts. “A couple of weeks ago, we had a big company from Mexico that filled up the Hyatt Regency for four nights. Our weekend traffic is driven by the retail components of the Galleria. We have a significant base of business from Mexico who visits for shopping and weekend attractions. A third element is the Texas Medical Center.  Although we are not in the TMC, a number of our customers choose to stay in Galleria area because of its amenities rather than the Medical Center.”

In a recent interview with Realty News Report, Songy expanded on his rationale for the Hyatt investment.

“Rates and occupancy in Houston peaked in the second half of 2014 and the first half of 2015. Occupancy will be off a few points this year, and rates will be probably off from that top. We think hotels will operate below that peak for a few years. Because Houston is so large, so diverse and has so much to offer, hotels are going to fair better than other real estate sectors. There is more concern for the office market, particularly in the Energy Corridor, than hotels,” Songy said. “For investors, hotels are a safer bet. That’s why we are in the Galleria with two new hotels.”

By Ralph Bivins, Editor, Realty News Report

April 7, 2016

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