Houston Mixed-Use, Urban Core Development Pace Is 'Off The Charts'

Houston’s urban core is ripe with opportunities for development.

But for projects to get funding and be successful, they should consider their walkability and include more than one use. 

Perkins & Will has sent out proposals nearly every week this year across all market sectors in Houston, and there isn’t a single project on the docket that is limited to a single use, Managing Principal Marc el-Khouri said at Bisnow’s Houston State of the Market at Shell Energy Stadium on Wednesday.

“Our sales this year and our proposals that we're sending out have been off the charts,” el-Khouri said. “I think we met our sales goal for the year at the end of Q1.”

The heightened activity spans asset classes, including science and technology, healthcare, and corporate and commercial interiors, he said. At the Perkins & Will office, they have started using the term “blended-use projects” instead of “mixed-use.”

“We want to blur the line between where one use stops and the other use begins. Everything's becoming a hybrid in some way,” el-Khouri said. “And it's not just office and retail or office and residential and retail. It's aviation and hospitality, it's cultural projects and entertainment. Everything is mixing.” 

The difficulty of “making economic sense of” projects is driving the mixed-use trend, NewQuest partner Dean Lane said. The cost of installing infrastructure at development sites has risen, but partnering with cities and adding uses that will increase traffic and revenue helps ease that financial burden. 

NewQuest plans to break ground on 1M SF of retail space this year, which is its bread and butter, but the tenant mix is diversifying. 

“I'll put a car wash in, I'll put a parking garage in. We've done it with Metro,” Lane said. “I'll put entertainment in. I'll put anything that really can drive the development in some form or fashion. We're doing a lot of medical.” 

There is plenty of capital available to fund new development, and it isn’t necessarily waiting on the sidelines anymore, Colliers Houston President Danny Rice said. 

“If you have the right project, the right location, the right incomes, you’ve got all the different pieces, capital is there to make it happen,” Rice said.

Taylor Moss saw that during the underwriting process for The Ritz-Carlton Residences, Houston, which his firm, Deiso Moss, is developing at 2120 Post Oak Blvd. The luxury-branded hotel and condo project will be the first to market, which comes with inherent risk, Moss said.

But Deiso Moss was comfortable taking on the risk that buyers would be present in the Houston market. It launched public sales for the project on March 5.

“We felt that the buyer was there and that they were going to buy at the price per foot that we were going to demand,” Moss said. “Really, that's the most important thing, because if you have sales and you have velocity, then the capital markets will be there for you.” 

Harvey-Cleary Builders hopes to get started on building The Ritz-Carlton project on Post Oak by the end of this year, maybe even the third quarter, Harvey-Cleary partner David Rasch said. Completion is slated for fall 2029.

There are “a couple of opportunities” planned to follow the Ritz-Carlton on Post Oak Boulevard, Moss said. These could help contribute to the status of the area that is also seeing the revitalization of Central Park Post Oak, a 17-acre campus with 1.2M SF of office space.

“We think that Post Oak should be our Billionaires’ Row in Houston, and we think it's in our infancy,” Moss said. “Midway is doing a fantastic job with Central Park [Post Oak], making it more walkable with a lot of amenities.” 

The Galleria and Uptown areas are successful mixed-use urban environments largely because of their walkability, said David Hightower, Midway executive vice president of investments and development. 

Parking requirements are one of the greatest challenges to developing a mixed-use environment in Houston, because no one wants to see surface parking in front of buildings as they walk, but it is costly to build parking garages behind buildings, Hightower said. 

East Downtown and parts of Midtown have benefited from Houston’s market-based parking exemptions, which were extended beyond Downtown in 2019. 

“EaDo is probably No. 3 in terms of up-and-coming environments here in the urban core,” Hightower said.

Midway is advocating for the city to extend market-based parking exemptions further, including to its East River development, he said.

“That is the key to making these new mixed-use walkable environments. It's getting the parking right,” Hightower said. “Structured parking is very expensive, so the economics become very challenging. But the tenants want to be there.” 

But compared to other markets, Houston has minimal zoning requirements, making things easier for developers, Rasch said. 

“There may be some requirements that logistically make projects a little bit of a challenge, but overall, Houston is a good place,” he said.

Permitting also happens at a reasonable pace in Houston, where five or six months is considered a long permitting timeline, he said. In other cities like Austin, Denver and Washington, D.C., Rasch said a year isn’t out of the norm. 

Another element driving big opportunities in Houston is large-footprint retailers, like Target and Home Depot, getting back into the game, NewQuest’s Lane said.  

“Over the last 12 months, our brokers are doing a tremendous amount of business, and I think that's across the board,” Lane said. “Houston is just in a great position. Everything is hitting on all cylinders right now.”