Most people of a certain age recall the refrain, “They paved paradise and put up a parking lot.” The song, Joni Mitchell’s (and Tracy Chapman’s cover) “Big Yellow Taxi,” is, among other things, a lament about tearing down trees and demolishing historic buildings in the name of progress. For nearly half a century, people could look at Downtown parking lots and garages across the country and say, “That’s where something else used to be.”
But if the parking lot was vilified for taking the place of beloved landmarks, there’s a new Downtown trend sweeping the U.S.: those surface lots are giving way to residential towers and mixed-use developments and changing the face of the city center along the way. A recent New York Times story cited research that indicated there were 200 surface lots sold for residential and mixed-use development in 2016; compare that to the fewer than 100 such transactions that happened between 2006 and 2014, according to numbers from the CoStar commercial real estate agency.
Houston certainly isn’t immune to that trend. Since 2010, 21 projects building on surface lots have been completed, creating spaces such as the Kinder High School for the Performing and Visual Arts, Partnership Tower, Marriott Marquis, Hampton Inn and Suites and Aris Market Square. Meanwhile, the Sunset Coffee Building at Allen’s Landing, the Hotel Alessandra and eight other developments were restored or repurposed. Together, the 32 residential, hotel and mixed-use projects account for 1,599,900 square feet of land.
“I think there’s a really positive momentum Downtown,” says Jim Casey, senior managing director at Trammell Crow, one of the largest development companies in the country, which oversaw the building of Downtown’s Hess Tower and the 18-story parking garage at Wells Fargo Plaza. “People are moving Downtown. There is a sector of the population that wants that Downtown living experience at points in their lives, or maybe they’re used to living other places and they look for it when they come to Houston. But it’s a cumulative effect.”
Casey points out that the trend in Downtown development is one that built upon itself, and many components needed to align to bring the city core to the population center it is now. Among those were the addition of sports stadiums like the Toyota Center and BBVA Compass Stadium. But there was also the Downtown Living Initiative that created incentives for developers to build residential units, and the addition of convention center hotels. With those came a steady stream of people, and those people needed restaurants and nightlife. As more and more of the varied pieces of what makes life in a city came together, Casey says, it created a critical mass.
“There’s a synergy to it,” he says. “There was this spurt of maybe 3,300 units delivered in about three years under the Downtown Living Initiative, where maybe there has been only about 1,000. Would those new units fill up, as you basically triple the supply? It turns out there was good absorption, and now occupancy is over 90 percent. That’s prompting additional development. The success of Downtown is really building on itself.”
That trend, says Casey, is very likely to continue. Need proof? Just look around Downtown.
How Adjacent Can Mean Amenities: SKANSKA COMMERCIAL DEVELOPMENT
Skanska Commercial owns the parcel of land that sits directly east of the Four Seasons Hotel, a full city block. It also owns two neighboring properties, a large portion of site to the hotel’s south, and the parcel that surrounds the Embassy Suites Hotel that fronts Discovery Green Park.
“We looked at those sites for a long time,” said Matt Damborsky, an executive vice president with the company.
From a development standpoint, Skanska loved that the pieces of land were in such an active part of the city. Since the completion of the park, Discovery Green has become a hub of city life, hosting everything from flea markets to concerts to the annual Ice at Discovery Green. And all of that made Damborsky and his colleagues see a lot of potential in their purchase.
“Currently, we’re just scratching the surface on what do there, but we’re discussing multi family, an office component and street level retail,” he says. “Retail is important to the city, and it offers a great experience for people walking around the building. It’s intriguing to control three adjacent sites and determine how they work together.”
Having spaces that complement each other is important to the development of the three lots, Damborsky says, because it means his company can develop concepts that not only build on the current energy in the city center, but also provide tenants and clients with engaging spaces.
“We can mix the uses of each site,“ he says. “And allow the adjacencies to actually benefit the other sites. For example, one might have a certain mix of retail that augments a different mix of retail in another site. We’re thinking of how all of these properties can interconnect.”
Geographically, the space is a sweet spot. Discovery Green is basically its front door. But so is Phoenicia, the upscale grocery store and café. Toyota Center and the George R. Brown Convention Center are within very short walking distance. Xochi, Brasserie du Parc, Grotto and The Grove offer places for business lunches, but also dinner dates, whether Skanska chooses to construct a high-rise residential tower or a new office space. The built-in amenities of that section of Downtown mean that Skanska can market its properties on many levels, pointing to the vibrancy of the area as proof it’s a place people want to be.
“Tenants want to be close to activities, retail and programs,” says Damborsky. “It’s really about the customer; that’s a huge part of our business.”
He says he expects the company to finish its master plans for the sites by April, after which it will determine which project to begin first, and how the concept should move forward. He’s also excited for the changes he says he’s seen in how Downtown has developed over the last decade.
“So much has changed in the past 15 years, compared to the 1980s and ‘90s where everyone left after 5:00. I love that in the summer I can walk over to a baseball game, or I can go to a basketball game in the fall. I love all the restaurants. I love the amount of energy we have now.”
Making History in Downtown: HINES
Reaching skyward and cutting a sleek figure on the Downtown landscape is 609 Main Street. The 48-story, glass-and-steel tower is one of the most recognizable in the city core. And before Hines built it, the spot on which it stands was a surface lot.
“I think there was even a McDonald’s on it at one point,” says John Mooz, senior managing director for the firm’s southwest division. Mooz works primarily with the firms commercial, institutional and medical acquisition and development projects. “We purchased that space in 2008, and began developing it seven years later, with the intention that it would be a roughly one-million-square-foot, next-generation office building. What we ultimately constructed was exactly that.”
And 609 Main was certainly a game changer. In addition to its modern footprint, it was the first building in Texas to incorporate an under floor air distribution system. Having the HVAC underfoot instead of having the air pushed entirely down from the ceiling was an innovative proposition.
“It’s a far more efficient way of distributing air,” explains Mooz. “And what it means for our clients is it make reconfiguring an office space much easier. In a more traditional setting, if you wanted to go from offices with walls to a more open workspace, you’re looking at tearing down walls, changing electrical distribution; it can take months. Because our HVAC is under the floor in 609 Main, reconfiguring an office can happen in a weekend, and look as good as anything that’s a new build.”
Having that design gave the developer an advantage, and Mooz said it’s what helped the company quickly lease the space through the soft real estate cycle that followed the dip in the energy economy of 2014 – 2017. The mighty building on the once humble parking lot was a success story.
So was another project, a short five-minute walk away located in the heart of the Historic District neighborhood. Hines Residential was responsible for Aris Market Square, known not only for its posh apartment homes, but also as the address for Bravery Chef Hall, which opened last fall to immediate acclaim.
“We were attracted to that area because the northwest quadrant was really meshed in the fabric of Downtown,” says Kevin Batchelor, senior managing director of Hines’ multifamily developments. “A large office population edges up to that area. The courts and legal system are on the north and east side of the area. So, there was a healthy supply of businesses to support future development.”
Batchelor notes that residential life in the Historic District had primarily focused on refurbishing historic properties. Aris is brand new. But for its massive glass corner soaring to sky above Preston and Travis Streets, its light-colored façade is a postmodern version of the warehouses and small businesses that once lined the streets around Historic Market Square.
“It really sits in the heart of the district,” he says. “And we wanted it to reflect its surroundings. Right now, it’s almost fully occupied.”
Bringing nearly 400 residences into the area has further enhanced what Batchelor believes is a neighborhood vibe. When Hines first targeted the location as one ripe for development, the company’s research showed there were only about 30 restaurants within walking distance of Market Square Park; today there are more than 90. Those restaurants have sprouted up in concert with other residential space, and all of the energy has added to the area.
“A project of this quality attracts others of quality,” says Batchelor about Aris. “And as more residents come into that Historic District, there will ultimately more restaurants and cafes, more retail, more security as those residents come to know each other. It really is like a little village.”
“There is a resurgence in Downtown’s across the country; that’s a trend that’s ongoing,” says Mooz. “And it’s because people are looking for a more authentic experience that touches every part of their lives, whether it’s the ability to live around people in a number of diverse professions, or they want to be able to leave their homes and walk to work. People are seeking a living experience that’s rich with amenities, and Downtown has that.”
It Started with a Park Built on a Parking Lot: Trammell Crow
While Trammell Crow had had its eye on Downtown for several years, Casey says the company likely wouldn’t have built the Hess Tower, which was built on the site of a former surface lot, without Discovery Green.
“That park was a game changer,” he says. “We bought the Hess site on speculation, and we leased it on speculation and were fortunate when Hess leased it. But if we hadn’t seen how well Discovery Green had done, the social center the park created, we wouldn’t have developed that space.”
Casey believes Downtown is fortunate to have several centers that serve as vibrant social scenes; in addition to Discovery Green, he points to the Theater District and Historic Market Square. He says having these environments mean that there’s increased walkability, there are places for businesspeople and residents to go when the office day is done, and all of it has meant the entire fabric of Downtown is more vibrant.
“There’s such a positive momentum to Downtown,” he says. “And we want to build something that people will want to be in.”