Montrose’s Development Activity Is Off The Charts, Attracting National And International Interest

Montrose has a long-standing reputation for being a beacon for art, counterculture and the LGBTQ community in Houston. But like other Inner Loop neighborhoods, the area has begun to gentrify — and with that has come almost universal popularity.

A central location, quirky retail offerings, vibrant nightlife and high-quality restaurants helmed by top chefs have all fueled that popularity, prompting a wide cast of developers to zero in on Montrose over the past five years. 

The subsequent development boom has turned the combined Neartown/River Oaks submarket into one of the busiest in the city, with 5M SF under construction as of March, according to CoStar data.

Most of the mixed-use projects underway in Montrose have been in the works for years. Some are now reaching completion or will open later in 2021, while others were announced in the midst of the coronavirus pandemic, a sure sign that interest in the neighborhood hasn’t waned. 

Developments underway in the area include DC Partners’ The Allen, a $500M project overlooking Buffalo Bayou Park that will include a 34-story tower with 99 luxury condominiums and a 170-room hotel, along with a lifestyle pavilion for retail and restaurants.

There’s also Hanover Co. and Lionstone Investments’ Autry Park, a 14-acre mixed-use development at the corner of Allen Parkway and Shepherd Drive that is slated to be constructed in three phases. When built out, that project will include five towers, 1,450 residential units, 350K SF of Class-A office space and 100K SF of retail. 

Rounding out new development along Allen Parkway is GID’s Regent Square, a 24-acre project that consists of four construction phases. The first phase, the 290-unit multifamily complex The Sovereign, was completed in 2014. The second phase is under construction and includes another 590 apartments, as well as 50K SF of retail. Details on the third and fourth phases have not yet been released.

Deeper in the neighborhood is Radom Capital’s aptly named Montrose Collective, situated at the busy corner of Westheimer Road and Montrose Boulevard. The first phase is a six-story, 197K SF building that contains both office and retail, while the second phase is the construction of an adjacent building for the Freed-Montrose Neighborhood Library.

The party doesn’t end there. Skanska announced in August that it had purchased a 2.86-acre site at Westheimer Road and Montrose Boulevard, diagonal from Montrose Collective, for $27M. The details of that development are still in the process of being finalized, but Skanska Executive Vice President Matt Damborsky told Bisnow the property will definitely feature multifamily and retail. Other possibilities, such as a boutique hotel component, are also being considered.

It’s a big list for roughly a square mile of the city, and it doesn’t even account for Weingarten’s The Driscoll at River Oaks, a 30-story multifamily complex with ground-floor retail that has only just reached completion, or the renovation of the boutique La Colombe d’Or Hotel and Hines’ additional 34-story residential tower at the site, which have also just finished.

Even though multiple projects have now been completed, the flurry of ongoing development is so significant that the Neartown/River Oaks submarket still accounts for 10% of all construction activity in Houston, according to CoStar.

The deluge of mixed-use projects in Montrose is producing a wealth of fresh Class-A retail space. That’s attracting major interest from chefs and restaurateurs from all around the U.S., and even abroad.

“That area has been evolving for some time now. And it has really become kind of our food and culture capital of the city, I would say,” Transwestern Managing Director Crystal Allen said.

Allen oversees Transwestern’s retail team in Houston, and she noted that in the past, choosing Montrose for a restaurant location was pioneering. Now, brokers are inclined to show the neighborhood as a prime spot for a flagship location.

“When a tenant comes in to tour, if they're looking for a flagship, I think you can definitely consider [Montrose] a flagship market, where that would not have been the case probably even five years ago,” Allen said. “Now it's considered one of the hottest trade areas in the loop.”

JLL Senior Associate Chris Burns, who handles retail leasing for Regent Square, said that strong interest in the development has translated into doing more tours for out-of-state retailers. He noted that in the last 30 days, he had done at least six site tours for interested parties from outside Texas, including overseas. 

“The fact that we've got three free-standing buildings with rooftop patios and massive expansive patios that overlook a green space — there's not really anything else of that caliber currently within the loop and within the Montrose area,” Burns said. 

Famed Houston chef Chris Shepherd announced earlier this week that his company, Underbelly Hospitality, will open a 5K SF restaurant in one of the three stand-alone restaurant buildings overlooking green space within Regent Square. Burns noted that the stand-alone restaurants will have both ground-floor and rooftop patios to allow patrons to also enjoy the proximity to the Buffalo Bayou.

“I definitely feel like those are two of our strongest differentiators: the location, being where we are, so central again, along the Allen Parkway and the Buffalo Bayou. I definitely feel that the location of the project is a huge differentiating point,” Burns said. 

Allen said she has also noticed a major increase in out-of-state and international interest in Montrose, and she estimated that her team has done 25% more tours of retail spaces in the last few months than what they were doing prior to the pandemic.

The section of Allen Parkway that runs from Shepherd Drive to Downtown Houston, one of the most picturesque stretches in Houston, falls within the Neartown/River Oaks submarket. Many millions of dollars have transformed the area into a lush bayou-side park with walking and bike trails, a large dog park, fountains and sculpture art. Projects on Allen Parkway have views of both the bayou and Downtown Houston.

DC Partners Chief Operating Officer Acho Azuike said investment in Buffalo Bayou and the park system will help drive the success of all the mixed-use developments underway in the area, including his own project, The Allen. 

“The money that the Buffalo Bayou Partnership, the city and all the stakeholders involved spent on that is coming to fruition,” Azuike said.

So much new development will contribute to the growing density of Montrose, which is generally considered a win for walkability and public transportation. But like other popular areas of Houston, the neighborhood has been struggling with vehicle traffic and adequate parking for residents and visitors. 

Burns and Azuike noted that Regent Square and The Allen will have structured parking elements to cater to residents as well as visitors. Other developments, like Montrose Collective, have also taken pains to create parking solutions after consulting the local community.

Azuike said he believes demand for parking in Montrose could fall over time, as more people opt to walk to The Allen and other developments in the area or choose to use a ride-sharing service like Uber. Ideally, densification will result in fewer drivers in the area, leading to fewer parking allocation requirements for developers, he said. 

That line of thinking is what led Houston City Council in July 2019 to vote to expand the boundaries of the city’s market-based parking area, which previously only covered Downtown Houston. Now, new developments in Midtown, East Downtown and parts of Near Northside and Montrose will no longer be required to provide a set number of parking spaces.

Though Montrose has always been more walkable than other neighborhoods within Houston’s urban sprawl, Damborsky said that when consulting with local stakeholders about Skanska’s still-unnamed Montrose development, improving walkability has continued to be one of the biggest requests.

“We have heard from multiple stakeholders [about] the ability to make it more walkable and more pedestrian-friendly. And we agree, we think that's an important part of the project as well. So that will be an element that we certainly hope to achieve,” Damborsky said.

There is little doubt among Houston’s CRE professionals that the momentum created by so many high-quality developments in the space of roughly a square mile is going to have a powerful effect on Montrose. Thousands of Class-A multifamily apartments and an influx of world-class restaurants, boutique hotels and other retail is expected to drive even more people — and profit — to the neighborhood.

Gentrification typically follows such development, but Allen said that developers in the area are keenly aware of how crucial it is to maintain Montrose’s distinctive and slightly gritty personality. After all, it’s what has attracted people to the area for decades.

“I think the developers that are going into this whole area, for the most part, understand that that's what gives it its charm,” Allen said.

Azuike said that developers looking at Montrose, including his own firm, are aiming to bring projects that add value to the area and make people happy, but without the intention of gentrifying the area.

“There's always a danger of it, but I think all the developers that are working on projects are considering that,” Azuike said.