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Blurring Of The Lines: Houston Developers Say Property Types Are Less Distinct

If you are not ready to go full throttle into a mixed-use development, gently working in some other uses or design from other property types may be the way to go. 

“The lines are blurring of these uses," Hines Managing Director Kevin Batchelor said. "You see luxury hotels starting to look more like residential projects and residential looking more like hotels. You want to integrate retail for convenience.”

Winstead P.C. shareholder David Staas, Jordan & Skala Engineers principal Andrew Smith, Thor Equities Vice President David Rendon, Hines Managing Director Kevin Batchelor, Alliance Residential Director Luke Phillippi and Midway CEO Jonathan Brinsden at Bisnow’s Mixed-Use and Retail event in Houston.

With rising land costs, Phoenix-based Alliance Residential Co., which is primarily focused on multifamily developments, has found projects are more profitable, specifically in the short-term, with an infusion of multiple uses. 

"Our investor base and the type of capital we have doesn't allow for us to have as much patience as other [developers] have," Alliance Residential Director Luke Phillippi said. "For us, when we are going to look at mixed-use deals, it has to be extremely accretive to the return for us."

Alliance Residental is under contract for a 60-acre residential site that will merge multifamily, senior and single-family housing. 

"It is about being able to buy at a better basis and flip out and make my investment more profitable," Phillippi said.  

Phillippi told the crowd at Bisnow's Mixed-Use and Retail event in Houston that he is in talks with several coworking companies to activate some of the space inside the building for coworking during the day, an emerging national trend. He said he must find ways to energize a property without annoying its residents.

"We are working through how we segregate but feel connected within the project," he said.  

With the growth of ride-sharing platforms, he also wants to maximize the sharing economy. For properties in high-traffic areas, he wants to set aside 5% to 10% of the units for shorter-term leases similar to a hotel with daily or weekly opportunities to maximize revenues.

The challenge is operating those units without disturbing the experience for the long-term residents, Phillippi said.  

CityCentre, Houston

All of the real estate business is leaning toward hospitality and multifamily, Midway CEO Jonathan Brinsden said. Users across property types are demanding more flexibility and pushing for shorter lease terms. 

“I have real clarity about our business over the next five years, but beyond that, I am not sure I know what our needs will be," Brinsden said. He is looking to relocate Midway's offices but has the luxury of being able to work from its own properties. "The idea of signing a 10-year lease is not very attractive. We all have to come to grips with real shifts in the business.”

The mixing of retail customers and residents takes some design consideration such as controlled access for the ground level, Jordan & Skala Engineers principal Andrew Smith said. Developers should set aside parking designed for the retail customers.

“You don’t want them to cross paths,” Smith said. “Parking and how they are entering and exiting the property is key.”

Another concern is the lack of parking garages that support the future technological advances in mobility like more electric cars or driverless cars. Many experts, including Smith, don’t think current parking design is future-proof.

“If you don’t put it up front it can be very expensive later on,” he said. “We don’t know what the future of cars is going to be.”