So, What Does Developing Downtown Houston Require? Intensive Listening

Developing in Houston’s urban core is challenging — and in some cases, barely profitable.

But the payoff is well worth it when the developer collaborates with the local community and utilizes outside funding or support, panelists said at Bisnow’s Houston Urban Core: Downtown, Midtown and EaDo event at the Jones on Main on Thursday.

Despite hurdles that make it less appetizing to build in Houston’s urban core than its suburbs, developers and stakeholders downtown said what it lacks in ease of construction, it makes up for in buildings and communities with character. 

Developers typically factor construction costs of a project and consult with brokers to get an idea of leasing revenue, said Michael Pittman II, director of brokerage services at Cushman & Wakefield. 

“If you do all that math, and you're really working on pro forma, what you'll find maybe nine out of 10 times right now in this market is that the project doesn't pencil, traditionally,” Pittman said. “There has to be some kind of outside support that comes in.”

That could be through tax credits or philanthropic dollars, he said. Projects downtown may take more work in that aspect, and they also require substantial communication with the potentially impacted community, he said.

Ongoing projects aim to bring more residences, retail, walkability and vibrancy to Houston’s downtown. While 27.8% of its office space sits empty, according to an Avison Young report, it is consistently gaining more residents.

Downtown Houston had 1,232 apartment units under construction in Q4 2022, according to a Transwestern report. That was the highest of any submarket within the 610 Loop. 

Midway Vice President of Investment and Development Anna Deans feels much responsibility around developing East River, a formerly vacant 150-acre site a mile east of downtown, she said.

Two office buildings and one retail building in East River's first phase are completed so far. Phase 1 will have 300K SF of office space with 100K of retail on the ground floor and another three independent 10K SF office structures. It will also include a 360-unit multifamily complex called The Laura.

East River 9, a nine-hole, par-3 golf course with a restaurant, opened late last year.

“This is a 15- to 20-year project,” Deans said. “So with that, we recognize there's a lot of responsibility to the neighborhood, to the city of Houston to do this the right way.”

Fifth Ward Community is repurposing St. Elizabeth’s Hospital, a building in the historical Fifth Ward that treated Black people during segregation, to a multifamily complex with 50% of units designated as affordable, Chief Real Estate Officer Mayra Guevara Bontemps said.

That will include some “deeply affordable” units for residents who earn 30% of the area's average median income, she said.

Recognizing those needs came from meeting with local residents. It’s important to make that communication accessible to the community by holding meetings on the evenings and weekends when people are less likely to be at work and can more easily find childcare, she said.

“To be better listeners, that means that we have to get out of our comfort zones,” Guevara Bontemps said. 

Romulo Tim Cisneros is president of Cisneros Design Studio and partner at Romulus Development, which is redeveloping a 100-year-old grocery store in Eastwood. When he was involved with building some retail in the Heights, the developers engaged with civic clubs and neighborhood organizations during the design phase, he said.

Residents told the developers despite recent guidelines, they would prefer parking be built in front, so they would be adjacent to the buildings rather than parking lots, Cisneros said.

“So there was influence to the site planning, the parking arrangements, and then even to the approach that the leasing group made to potential tenants,” he said. “You just have to engage. And that happens one on one.”

While East River is a ground-up construction project, Midway is also considering the industrial history of the area, Deans said.

“Creating authenticity from scratch is very challenging,” she said. “Industrial buildings are a pure and true expression of the function within.”

Some early tenants for the waterfront office building gave input on what they need from it, Deans said.

“We had to add a lot of stairs and things to support their function,” she said. “Instead of trying to conceal that into a building to look a certain way, we just put it where it needed to be and let it be what it was. So it's really harkening back to that industrial history.”