Without Workers, Conventions, Sports Or Events, Downtown Houston Is A Ghost Town

Over the past two decades, the city of Houston and a mix of private organizations have poured enormous effort into making Downtown Houston a vibrant, entertaining and attractive place for residents and visitors.

The coronavirus pandemic has thrown a wrench in the works. With most of the office workforce still at home, shuttered restaurants and retail, and an empty events calendar, Downtown Houston has been left mostly devoid of people.

“COVID has had a very, very dramatic impact on Downtown, as it has on the entire community. But I think in some ways, because of the unique nature of the way downtown works, it's been very profound,” Central Houston President Bob Eury told Bisnow.

The transformation of Downtown Houston has been underway since the early 2000s. One of the biggest catalysts for positive change was the completion of the George R. Brown Convention Center and the connected Hilton Americas-Houston Hotel in 2003.

With Discovery Green in front of the convention center and Minute Maid Park and the Toyota Center on either side, the southeast quadrant of Downtown Houston has become a vibrant hub that has increasingly attracted visitors. 

Houston usually plays host to hundreds of conventions and conferences every year, drawing hundreds of thousands of people into Downtown Houston. But since the onset of the pandemic, most have been canceled or postponed, dealing a major blow to other businesses that depend on those events.

About $251M of economic impact has already been lost through event cancellations, according to Houston First, the organization that manages the George R. Brown Convention Center and the Hilton Americas-Houston Hotel, as well as 10 other city-owned properties. As a result, nearly 402,000 hotel room bookings have been canceled, and as of mid-July, 14 hotels across Houston have closed.

The pandemic has devastated all 2020 major revenue streams for the organization, with a forecast reduction of 44% in annual hotel occupancy tax, and reductions in actual revenue categories collected through May 2020, Houston First told Bisnow.

Eury said hotel occupancy in Downtown Houston fell as low as 10% to 15% in April and May, at the height of the stay-at-home orders. Since then, occupancy has potentially doubled, but remains far lower than ideal.

“That's still not where you want to be if you're operating a hotel,” Eury said.

H-Town Restaurant Group owner Tracy Vaught told Bisnow that her Downtown Houston restaurant, Xochi, has been closed since mid-March, and has not reopened because there simply aren’t enough customers to justify the cost.

“Not enough people live in the Downtown area to support restaurants. It's more from conventions, hotel guests, sporting events, concerts, that kind of thing. And right now, there aren't any of those things,” Vaught said.

“We've just held back because that means hiring up a lot of people. And then if it doesn't work, laying them back off — and I just don't have the stomach for that.”

The lack of workers in Downtown Houston’s gleaming high-rise office towers has also affected the retail and restaurant sector. Vaught said that while dinner guests come Downtown for a wide mix of reasons, lunchtime sales at Xochi are usually driven by either office workers or hotel guests.

Eury said the office workforce in Downtown Houston is under 10% right now, as companies continue to assess the risk involved in returning to the workplace. The demand to come back is there, but it will take time for those workers to trickle back into Downtown.

“I think we've learned that we can work distance, but I think that there's pent-up demand getting greater every day to be able to come back to an office setting, even if you work there two days [a week],” Eury said.

“It will take longer for the ramifications of this to really play out in the office industry.”

The Grove reopened on June 2, but co-founder Lonnie Schiller told Bisnow business that the restaurant is at only a small fraction of what its previous sales were. The Grove is on the south end of Discovery Green, and the company also has a small fast-casual restaurant called The Lakehouse in the middle of the urban park.

“The Grove and most of the restaurants Downtown really rely on events and conferences and sporting events, and the Rockets, other kinds of entertainment,” Schiller said. “Our bread and butter of what we do every year, probably about 60% of our business, is events-related — conferences, events, weddings, that whole range of things where people come down there for a reason, not just to have dinner with a party.”

The problem facing many Downtown Houston restaurants is that unlike their counterparts in residential neighborhoods, the majority of people aren’t willing to drive Downtown to collect food, which has made it difficult to pivot to takeout.

For that reason, Xochi didn’t attempt to do takeout, but Vaught’s other restaurants, including Hugo’s and Backstreet Café, are offering to-go meals, including margarita kits. The Grove does offer takeout, but has found that uptake has been minimal, Schiller said.

Aside from the cancellation of conferences, sporting events and theater, Downtown Houston’s outdoor spaces have also canceled all their programming, leaving urban parks like Discovery Green and Market Square Park without their usual bustle of activity. 

“You could stand in the intersection for an hour and you [won't] get hit,” Eury said.

The residential population of Downtown Houston has grown, but remains small. In 2012, the city launched the Downtown Living Initiative Program to entice developers to build more multifamily buildings in the area. Prior to the program, Downtown Houston only had about 3,000 residents. Today, that number sits around 10,000.

“Residential's probably the bright spot in Downtown. We're right at 83% occupancy, something like that. That's not exactly where you want to be. But on the other hand, it's not bad, and I think the rents are generally on time and it would appear that the market is still basically functioning pretty flat,” Eury said.

Though the number of residents has tripled, it still isn’t enough to sustain all the restaurants and stores in the Downtown Houston area.

“Not enough people live down there to make a to-go business work. We would be knocking ourselves out to try to sell that, and deliver and all that, and we just don't feel like it would work,” Vaught said.

There’s no question that Downtown Houston is experiencing acute pain, and the reality is that some businesses will not survive the pandemic. But on a commercial level, real estate transactions are continuing, as developers focus on the long-term viability of the area.

Earlier this month, High Street Residential, the residential subsidiary of Trammell Crow, announced it had broken ground on a 43-story, 309-unit residential tower in Downtown Houston. That project is slated to deliver in late 2022.

The Downtown District is also working on Plan Downtown, a 20-year master plan that will take the city through to 2036 — Houston’s 200th birthday. With four pillars and 10 strategies, the goal is to continue Downtown Houston’s transformation into a thriving, vibrant urban environment.

Eury said the coronavirus pandemic has not disrupted any of the district’s master plans, and in some ways, has actually been helpful. He pointed to the Bagby Street Improvement Project, which involves wider pedestrian walkways, a bicycle lane, beautification elements, signature lighting and 79 new trees.

“It’s one thing that's being benefited by this because we're able to move the project much faster,” Eury said. “Because of this, we're moving toward breaking ground on a little park in [the] south part of Downtown, which will support the residential there.”

Vaught is aiming to reopen Xochi in October, to coincide with four conferences and events that are scheduled at the George R. Brown Convention Center. That is, if they don’t get canceled.

“There are conventions scheduled in October, so that's when we felt that it might be safer to do this,” Vaught said. “If everybody wears a mask, and everybody is very responsible about going out, and we can get the curve going down, then I think it's reasonable to think that some smaller groups might be able to meet.”

Contact Christie Moffat at christie.moffat@bisnow.com.