Why Downtown Houston's Making History
There’s never been a time like this in Downtown Houston. Central Houston prez Bob Eury didn't mince words for a mega crowd of 650 at Bisnow’s Future of Downtown summit last week. (Crowds that big don't have the time or attention span for word-mincing.)
We snapped some of the attendees at the Hilton Americas. Catching their attention: Maps showing some of the $4B in construction Downtown will receive in the next three years as it undergoes a major renaissance into a 24/7 environment.
Bob and SOR Real Estate Advisors’ Stewart Robinson had identical expressions of Downtown delight despite the early hour. Bob is particularly excited by the area’s hotel boom. In 2000, the submarket had four hotels totaling 1,800 keys. By 2017, it’ll reach 24 hotels totaling more than 7,700 rooms, nearly the amount in Uptown.
Keating Khang Architecture managing principal Rick Keating says Houston has no natural resources to be proud of (like San Francisco with its bay or Boston and the Charles River), but we’ve made up for it. Our architecture is our beauty and pride, and we’re perpetually elevating it. Colvill Office Properties prez Chip Colvill says we do have one natural resource—the Buffalo Bayou. He says the Buffalo Bayou Partnership has done an amazing job at beautifying and improving and turning into a real focal point.
And Avison Young principal Rob Neblett (who’s never been so bullish on Downtown as now) says we have one amazing “unnatural resource”—the tunnel system. But not everyone on our panel is enamored with it: PMRG director of leasing John Spafford says it’s a great amenity to office tenants but is also hindering growth by limiting street-level retail. Plus, it provides no perk to residential projects because it shuts down at night. Rick says we should integrate it better with the street, like Skanska’s doing at Capitol Tower, but he admits it’s hard to accomplish that thanks to Downtown’s block sizes.
John says rents are booming Downtown: We've leapt quickly from the mid-teens net to mid-30s net (the highest in the city), and he expects we’ll see another big jump over the next few years as some below-market 10-year leases roll. Brookfield Office Properties SVP Paul Frazier says new high-water rents are making amenities and infrastructure more important. He believes we can support much higher rents if we keep upping our game and making Downtown a better environment for tenants. Besides, John adds, we have a nice diversity in Downtown buildings, from the top-of-the-line to some older buildings a few tiers down. (Although the rental delta between them is narrowing!)
Griffin Partners co-chairman Fred Griffin (here with DE Harvey’s David Harvey) is heavily involved in Downtown these days, including being part of the $600M of development in the two-block area around the Convention Center. His firm is handling the $156M GRB renovations, including a new building with garage, office space for the Greater Houston Partnership and others (it’ll move in 2016), and maybe a 300- to 400-room hotel above that. Fred’s also busy at 1301 Fannin, where he’s invested $7M in the last seven years.
Our moderator Wilson & Franco CEO Michael Wilson says property values increased 72% (after appeals) Downtown in the last two years. That was much steeper than other submarkets, and every major Downtown building was hit. Michael started as a banker Downtown in 1972 and got involved in investment sales and land—he put together the site for 1301 Fannin.
Here’s our power panel—Wilson & Franco’s Michael Wilson, Brookfield’s Paul Frazier, PMRG’s John Spafford, Keating Khang’s Rick Keating, Avison Young’s Rob Neblett, Colvill’s Chip Colvill, and Cushman & Wakefield’s Tim Relyea. Michael says we should look at Downtown, Midtown, and the Buffalo Bayou as one big city center. Together, he thinks they form an amenity-rich area that can really compete with private campuses. (Bob Eury believes Chevron will go through with its Downtown development in the next year, and several of our panelists mentioned they think it’ll be amazing and easily compete with Exxon.)
We’ve got more coverage from our event coming your way tomorrow, including cautionary comments from Tim Relyea!