WSJ on the surge of urban mixed-use projects in HoustonYesterday the Wall Street Journal had a fascinating piece (7-day nonsubscriber link) on the explosion of urban mixed-use projects coming to Houston. Some excerpts:
In Sprawling Houston, Urban Style Gains TractionMuch of the article has details on several of the projects, many of which are listed in this graphic (click on it to see a sharper version).
Slate of Mixed-Use Projects Shows City's New Embrace Of Live-Work-Play Notion
In recent years, as cities across the Sun Belt embraced urban-style projects featuring a mix of uses, this vast city sat quietly on the sidelines. Now Houston is making up for lost time.
More than a half-dozen high-profile developments mixing residential, retail and office space are either under way or planned here. The projects, which promise well over $1 billion in development, underscore a fundamental shift in the development patterns of a city that has long preferred sprawl to density. And they mark a significant breakthrough for the increasingly popular concept that developers pitch as "live, work, play."
"Houston is one of the last truly open markets for mixed-use development," ...
A desire to walk more and drive less is in part responsible for the proliferation of mixed-use projects, as is a broader national trend toward urban living. Houston's economy is also a factor. Buoyed by the oil and gas industry, job growth is up while office and retail vacancies are down. Meanwhile, the region's population grew at more than double the national rate in 2006 from a year earlier, to 5.5 million.
The development of so many projects at the same time has created a highly competitive environment in which there are likely to be winners and losers... Even some of the developers involved in the Houston projects wonder whether they can all survive. "The big question is whether there's enough demand out there," ...
Today's mixed-use developments are rooted in the rise of New Urbanism, a movement of architects and planners dating to the 1980s that calls for a return to traditional towns. Such developments are more challenging to create than shopping malls, especially in urban cores, where land can be difficult to assemble. But they have proved popular in cities such as Atlanta, Dallas and Denver.Now, with demand for mixed-use projects satiated in many cities, Houston's scarcity of such developments and its robust economy make it something of a prize. "There's sufficient pent-up demand," ...
While a number of projects are sprouting up around Houston, including in far-flung suburbs such as The Woodlands, the biggest impact is likely to be felt in the city's urban core. Four projects are planned or under way along about a six-mile stretch from downtown west to the city's inner loop ...
- A larger starting base of young professionals, although Houston has seen a strong surge in this population along with the recent oil boom. Now people are talking about the generation gap in energy companies: a lot of 45-and-overs + now a lot of fresh college grads, because few people went into the business in the 20 years from 1984 to 2004.
- Those tighter land-use controls in other cities helped limit competition, reduce risk, and improve profitability. Houston developers had to wait until the "pent-up demand" was strong enough on its own, without government help. In the long-run, we should get more of it, and at a lower price, than we would in a more tightly controlled environment.
- Go mega-big to be super high profile. That gives you lots of power with local politicians and regulators, getting you the land assembly and variances you need - maybe even tax breaks and public infrastructure.
- Knowing you can't fill everything in such a gigantic project immediately, plan to phase it out over many years, staying just ahead of demand.
- Being high-profile means the powers-that-be don't want to see you fail, because the bad PR will reflect badly on them and the city. They also want to see you fully built-out as soon as possible. They'll take subtle and maybe not-so-subtle actions to limit competitors, usually via zoning and permitting limits, channelling demand into your project.
- This protection allows you to price your stuff very profitably, but of course that keeps many potential buyers out of the market. Competition increases supply (and variety), lowers prices, and increases demand.