The CRE Wish List For Houston's Innovation District

Houston's Innovation District will be different than the hubs funded by the University of Cambridge and MIT in Boston or similar ones in Chicago, Downtown Los Angeles or Brooklyn, New York.  

The 4-mile district, stretching from Downtown to the Texas Medical Center, will be built off the economic strengths of the city — the energy and healthcare sectors — Rice Management Co. Real Estate Investment Manager Ceci Arreola said. The Ion, the center point of the Innovation District, is funded by Rice University. 

"We are not going to be successful if we are building it like it is Silicon Valley," she said at Bisnow's Houston State of the Market event Wednesday. "The goal is to have clusters of density, where we can foster innovation and eventually link with one another. A place that can draw talent and keep talent."  

The CRE industry has a few ideas of what it wants to get there.

Property owners and innovation experts outlined a wish list of commercial real estate projects that will support the expansion of Houston's Innovation District. Target areas of development include bars, restaurants, flexible office space, furnished apartments and hotels, according to the panelists.  

Innovators want to get from the idea to commercialization as quickly as possible and need a centralized hub to find all the entrepreneurial resources, Station Houston CEO Gaby Rowe said.

Rowe points to examples in Beijing and Chengdu, China, that have entire towers dedicated to the process of innovation. Those buildings feature a trade office, a film studio, a design studio, a makerspace and other amenities and resources.    

"A neighborhood of knowledge, that is what we are trying to create," Midway CEO Jonathan Brinsden said on the Innovation District panel of the State of the Market event. 

Spaces, a coworking platform, and MassChallenge, a global network for zero-equity startup accelerators, are at Midway's GreenStreet, a mixed-use development in Downtown Houston in partnership with Lionstone Investments. 

Wish 1: Retail 

Midtown — a burgeoning neighborhood in the center of the Innovation District — has pockets of dilapidated buildings, vacant lots and homeless people ... and a few blocks away a new rooftop bar and restaurants. 

"Retail has been hit or miss," Sonder Head of Real Estate Chris Turney said. "We all have come to blocks of Midtown where ... there is dead empty space."   

Keeping a grocery store is a key point of the overall development plan, Turney said. In 2017, The Morgan Group broke ground on a mixed-use residential-grocery mid-rise in Midtown, according to the Houston Business Journal. The eight-story building features a 40K SF Whole Foods Market and 264 residential units. 

However, the future of The Fiesta, adjacent to the Ion, is unknown. 

Rice University owns the land, and the grocer had one year left on its lease, Swamplot reported in October. 

"There was no discussion about how the loss of the Fiesta would create a food desert — the next-nearest grocery stores are a mile and a half away," Sophie Asakura wrote in the Houston Chronicle earlier this year. "The Fiesta not only provides reliable access to affordable food, but it also serves as a center of cultural life — a social condenser (in the words of Rem Koolhaas) that brings together different demographics in a shared environment — even if it is one that is less aesthetically inspiring than some elites may like."

Wish 2: Housing 

As the development of The Ion continues and additional retail-centric concepts open, Midtown will need more hotel and apartment units, Turney said at Bisnow's event. Sonder, a short-term rentals marketplace, manages about 50 units and is the largest hospitality provider in that area, he said. 

Turney notes a growing demand for development in Midtown that can house the transient population, such as temporary workers, corporate and Texas Medical Center visitors. The city wants 50% more of these visitors in the next four to five years, according to Turney. 

Residential development could comprise up to about 30% of the 16-acre district, according to the HBJ. The ideal footprint for the district is live, work and play, walkable and has open spaces, Arreola said at the event. Talent goes where people want to live, she said. 

Flexibility is also critical to innovators and entrepreneurs, Rowe said. They want a furnished apartment but don't want to live in a hotel. They want dedicated bike lanes because they won't have a car. They want more bars than restaurants because they want to go with other people. 

Wish 3: Flexible Office 

Startups want flexible, short-term leases because they may grow exponentially, Rowe said. A company can be 10 times larger in six months. They don't want to be locked into a space that isn't appropriate, she said. 

Office space, from coworking to entire floors, is on an as-needed basis for the startup community, Brinsden said. The flexibility is a shift in the real estate industry to think of real estate as a service, he said. 

Downtown currently has at least three coworking facilities, including Spaces in GreenStreet.