New York City Developer To Speed Up Condo Pipeline In Texas With Houston-Based Joint Venture
Houston’s condo market is heating up, and big-time investors are taking notice of the market.
Douglas Elliman Texas — a newly formed joint venture between New York-based residential brokerage firm Douglas Elliman and Houston-based condo developer Sudhoff Cos. — suggests the Bayou City condo market is starting to take hold and catch eyes around the country.
“We needed to be in Houston,” Douglas Elliman President Scott Durkin told Bisnow.
The condo development game in Houston has drastically changed over the last decade, expanding from a slow, locals-only market to one where national players take a swing. As new projects are announced, lease-up has been quick.
The lock-and-leave lifestyle afforded by high-rise living is taking off. Houstonians are selling their suburban homes for new urban digs and new residents relocating from coastal cities like New York, Chicago and Los Angeles are more accustomed to vertical development.
“If you are looking for a sign of acceptance for high-rise living in Houston, all you have to do is look at the numbers,” said Pelican Builders principal Robert Bland Sr., who has developed 11 condominium projects in Houston. “I think that pretty much says it all.”
Homes sales broke an all-time high record in July, according to HAR. This is a positive sign for the condo market, as more residents transition into a high-rise lifestyle, Sudhoff Cos. CEO Jacob Sudhoff said.
Sudhoff Cos. is developing a significant portion of the luxury condos in the pipeline. In 2018, the company sold over $493M, which was the highest sales volume for new construction in the Houston area.
However, the supply of available condos units is too low in Houston, experts say. Sudhoff expects to be out of units by Q1 2020. He said there is a three-year gap between the units nearly complete and the next wave of new deliveries.
“We are running out of available inventory,” said Sudhoff, who is speaking at Bisnow Annual Multifamily Conference on Oct. 3 in Houston.
With Pelican Builders, Sudhoff Cos. is developing two ground-up projects, The Hawthorne, a 17-story tower with 67 residences at San Felipe and Chimney Rock Road, and Westmore, a seven-story building with 33 residences at 2323 West Main St. The firm will soon be underway on a condo conversion, which will be completed in the interim of the new supply.
Caydon Property Group, an Australian condo powerhouse, plans to develop its first condominium project in the United States. Laneways, a 2.5M SF mixed-use project in Midtown, will feature multifamily developments, condominiums, a luxury hotel, restaurants and bars, Bisnow previously reported.
“Houston is remarkably becoming a high-rise city, and we’re seeing that evolution right before our eyes,” Bland said. “It is going to improve as time goes on and will ultimately rival Chicago, Miami and other cities where high-rise living has been a fact of life for much longer.”
The Westmore, a project in Upper Kirby announced earlier this month, is generating early buzz.
“In the old days, we would have built townhomes on that site, and in fact we almost did, but we switched gears because of increased demand for luxury vertical options in high-density neighborhoods like Upper Kirby,” Bland said.
With these strong fundamentals, Sudhoff realized 18 months ago he wanted to make a bigger play for Texas.
The slowness of the Texas condo expansion can be linked to the lack of capital, back-end support and strong technology infrastructure, he said. Partnering with Douglas Elliman will fill that void.
The new joint venture will expand Sudhoff's footprint in Texas, which to-date has only been in Houston. Douglas Elliman Texas has about $500M of new development underway and $1.4B in the pipeline coming to market over the next 12 months.
Sudhoff partners Catherine Lee and Sudhoff will continue to have integral roles within Douglas Elliman Texas.
Texas makes sense for Douglas Elliman, Durkin said. The Lone Star State is pro-development, which allows for projects to be completed quickly and without bureaucratic delays. Texas also has low taxes, which is better or comparable to Florida.
Houston is emerging as a feeder market for buyers looking to purchase their second and third homes, and Sudhoff Cos.' properties are attractive to that type of buyer, Durkin said. Even before the establishment of the joint venture, Sudhoff Cos. was already on the radar of Douglas Elliman agents, he said. A number of them requested to meet Sudhoff.
All of the Sudhoff properties will be integrated with the Douglas Elliman brand, an international platform translated into 22 different languages and marketed by over 7,500 agents. Douglas Elliman Texas will continue to develop in Houston and launch new projects in Austin and Dallas.
"This is putting Houston on the map," Durkin said. "They are not just local anymore, they are global."
Douglas Elliman Texas will offer an extended service line from residential brokerage to lease-up management services for multifamily developers.
“We were leaving a lot of money on the table by not providing the complete package of services to our clients,” Sudhoff said.