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Austin’s Smart Growth Bet: Coping with Success

Feature Photo (above): Looking east, amateur photographer Jack McCauley captures Austin’s ever changing downtown skyline in this August 2016 photo taken from an upper story window at 360 Residential Condominiums. Courtesy: Google Streets.

Posted: 3-1-2019

by Adolfo Pesquera

Austin (Travis County) — Every quarter of the calendar year, some bit of data makes its way into the news and reminds the nation, yet again, that Austin is growing faster than just about anyplace else in the United States.

Skyscrapers pop up as fast as sow thistles in spring. That is a slight exaggeration, but this is Texas and we are prone toward embellishment, a fault that Austin Mayor Steve Adler shares.

When running for re-election last year, Adler bragged that Austin was “creating more jobs than any other city in the country. We have an economy that’s on fire.”

Politifact called him on that brag. As a percentage of growth, Austin employed people at a faster rate, 3.6 percent, than any other of the largest 50 metropolitan areas from March 2017 to March 2018. But in raw numbers, Dallas had more than double the number of hires, followed by Phoenix, Arizona; Seattle, Washington; Riverside, California; and Orlando, Florida.

It would, however, be accurate to claim that Austin is gaining on those larger cities. And there’s no reason to bet that Austin will run out of gas.

The town formerly known as Waterloo is built to run marathons. Adler was on point when he said the economy is on fire.

The state capital benefits from an embarrassment of economic riches, beginning with the fact it is home to the second largest state bureaucracy after California. It’s also home to the University of Texas System, the state’s largest public university system.

Austin’s partnership with UT-Austin afforded the city an enviable healthcare system and made it an early entry into the development of high tech companies. Long before Dell came to town, or Apple, which recently announced plans for a second Austin campus, there was IBM in the 1960s and Motorola in the 1970s.

Since 2012, Austin has ranked either ninth or tenth on Clean Edge’s list of Top 10 Metro Areas for the development of clean tech industries. The Clean Edge index surveys the 50 largest cities and considers more than 30 indicators in these categories: green buildings, advanced transportation, clean electricity and carbon management, and clean tech investment, innovation and workforce.

This four-legged economy, standing on government, higher education, medical and high-tech, has generated a construction boom to die for.

Downtown

A height comparison of certain existing and future skyscrapers in downtown Austin.

A height comparison of certain existing (in blue) and future (white and red) skyscrapers in downtown Austin. Courtesy: Hanover Co.

On Monday, Feb. 25, the city’s Design Commission was asked by representatives of Hanover Company to approve a density bonus for Hanover Republic Square, a 44-story luxury residential tower that is proposed for construction on the 300 block of West 5th Street.

Developers routinely request a density bonus on high-rise projects. The city caps the floor area ratio (FAR) at eight times the square footage of the site area. To exceed that on downtown residential projects, the design must include various street amenities and either some percentage of affordable housing or a donation based on a FAR calculation that goes into a city fund used for affordable housing.

In Hanover’s case, the developer is offering more than $3 million in order to exceed the standard FAR to achieve a total building area of 444,625 square feet.

The Hanover Republic will share the block where the ZaZa Hotel / Gables Residential was just erected. Courtesy: Hanover Co.

The Hanover Republic will share the block where the ZaZa Hotel / Gables Residential tower now under construction. Courtesy: Hanover Co.

For Austin, the Hanover Republic Square project is not unusual. In the downtown area alone, there are more than a dozen high-rises that are in the design phase and going through the city’s review process, or that have just recently broke ground. Downtown development in San Antonio, Austin’s southern neighbor and a  much larger metropolis by population and geographic area, pales in comparison.

The Austin CBD easily surpasses San Antonio in office, apartment and condominium development. Being more of a tourist city, San Antonio does have a lead in hotel construction.

Over the past six years, the Austin-Round Rock MSA produced more than triple the number of multifamily units (apartments & condos), compared to its larger neighbor San Antonio. Figures for 2018 excluded December due to the federal government shutdown. The Houston MSA performed poorly the last three years due to a series of severe storms that hampered development. Source: U.S. Census Bureau.

Over the past six years, the Austin-Round Rock MSA produced more than triple the number of multifamily units (apartments & condos), compared to its larger neighbor San Antonio. Figures for 2018 excluded December due to the federal government shutdown. The Houston MSA performed poorly the last three years due to a series of severe storms that hampered development. Source: U.S. Census Bureau.

The following is an incomplete list of Central Business District high-rise projects:

In Design

  • 1700 Guadalupe Street: Travis County Courthouse–a 12- and 14-story twin-tower project.
  • 1615 Guadalupe Street: a 27-story condominium tower by Reger Holdings.
  • West 17th and Lavaca Streets: an 18-story hotel by HRI Development.
  • 301-305 W. 5th Street: Hanover Republic Square, a 44-story half-block residential tower by Hanover Company.
  • 401 W. 4th Street: The Republic, a 46-story full block mixed use office/ground retail with garage by Lincoln Property Co. and Phoenix Property Co.
  • 300 Colorado Street: a 31-story office tower by Cousins Properties, Ironwood Real Estate, Riverside Resources.
  • 91-93 Red River Street: The Quincy, a 30-story apartment/office tower by Endeavor Real Estate Group.
  • 710 E. 3rd Street: Block 36, a four-story apartment tower by Transwestern.

In Construction

  • 601 W. 2nd Street: Block 185, a 35-story office tower by Trammell Crow Company.
  • 200 W. 6th Street: Block 71, a 36-story office tower by Trammell Crow Company.
  • West 18th Street @ San Antonio: 410 Uptown, a 16-tory officer/retail tower by Mid-City Development.
  • 1400 Lavaca Street: a 13-story office tower by and for SXSW.
  • 401 Guadalupe Street: Hotel ZaZa/Gables Republic Square, a 24-story mixed use hotel/apartment/restaurant tower

Another three residential towers were very recently completed, or are at last far enough along that they are accepting move-ins from the pre-leased list. These are Fifth & West, a 39-story tower at 5th Street and West Avenue; The Independent, a 62-story tower at 801 W. 5th St.; and Austin Proper, a 33-story hotel and condominium tower at 202 Nueces St.

In addition, the Texas Facilities Commission is hard at work on a major expansion of capitol infrastructure that includes a series of new office buildings and a monolithic underground parking system.

Then there is West Campus just north of downtown where various private developers that specialize in student housing are always adding new high density residences to the neighborhood that supports and is supported by UT-Austin.

The university campus itself is always expanding. There is a new multipurpose arena project and an expansion of the football stadium in progress and the university’s Dell Seton Medical Center is preparing for a $300 million redevelopment of the State Mental Hospital. Dell is also part of a massive mixed-use redevelopment project on Brackenridge Campus that is being shepherded by Central Health.

The Austin skyline has been changing at a pace that outperforms many Texas cities, although Dallas, Houston, and even a few suburbs–Frisco and Plano–are experiencing impressive growth spurts of their own. But some of Austin’s magic, it could be argued, is sleight of hand.

City leaders long ago adopted a Smart Growth development strategy that prioritized high-density, compact and walkable urban centers. The carrots and sticks developers had to live with incentivized building in or near the central business district, restricted the construction of parking lots/garages and emphasized the exploitation of land along the city’s budding light rail system–a concept known as transit-oriented development.

Crossing the River, Jumping the Interstate

Construction cranes have been seen recently on the east side of Interstate 35. Cap Metro's Red Line light rail attracted developers hoping to capitalize on high-density public transit-oriented commuters. Image: Google Streets.

Construction cranes have been seen recently on the east side of Interstate 35. Cap Metro’s Red Line light rail attracted developers hoping to capitalize on public transit-oriented commuters who prefer high-density, mixed-use urban centers. Image: Google Streets.

Austin’s leadership has also been reluctant about annexing territory, part of its anti-sprawl development philosophy. Despite being the fourth largest metropolis by population, Austin’s geographic area is dwarfed by that of the state’s other major cities. One result of this is there aren’t as many options for land development, so there’s more pressure on developers who want to stay in Austin to concentrate on downtown and a few other locations.

The city’s adherence to this model, over time, has exceeded the limits of what many developers can do downtown. Developable space is disappearing and high density development has been spreading south across the river into the Zilker, Bouldin and South River City neighborhoods.

Development following the light rail has jumped east across Interstate 35 into East Austin. Endeavor Real Estate Group’s public-private partnership with Capital Metro led the way east when they relied on the Plaza Saltillo Station to anchor transit-oriented development down the Red Line.

A consortium of developers even staked out hundreds of acres in far North Austin and created their own “second downtown.”

The Domain, a 303-acre planned development, was introduced in 2003 by Endeavor and Simon Property Group. A third developer, Stonelake Capital Group, joined the project later.

The Domain, sometimes referred to as downtown north, is a high-density office, retail and residential center located east if the MoPac Expressway between West Braker Lane and Walnut Creek. Since construction began, about 3 million square feet of commercial space has come out of the ground.

Stonelake Capital Group is in the process of completing Flatiron, an upscale residential mid-rise, and has plans in the near future to construct two office towers and another residential tower.

Stonelake Capital’s Flatiron luxury residence in The Domain is one of several high density projects the company has in the works. Image: Google Streets.

Austin’s affluence has given it a constant presence on best cities for job seekers rankings. Austin-based job search company Indeed ranked the city 12th in its 2018 report. Austin is only one of three Texas cities to make the Top 25; San Antonio ranked 17th and Houston ranked 25th.

The rankings consider job seeker comments in the categories of job market favorability, salary, work/life balance, and job security/advancement.

Affordable Housing Shortages

There are downsides to the city’s success. Gentrification has been a serious issue. According to Texas A&M Real Estate Center, homeowner mortgage costs are highest in Austin of the state’s major urban centers. Housing costs are lower in Austin than in the state’s 10 most affluent suburbs, but a well-functioning metropolis has to be able to house school teachers, government clerks and other civil and service industry workers.

Ten Texas suburbs exceed Austin in annual mortgage costs, but Austin exceeds all major Texas cities in the same category. Source: Texas A&M Real Estate Center.

Ten Texas suburbs exceed Austin in annual mortgage costs, but Austin exceeds all major Texas cities in the same category. Source: Texas A&M Real Estate Center.

Much of the growth in recent years of bedroom communities such as Buda, Bastrop, Pflugerville, Georgetown and Round Rock has been the result of Austinites being forced out of the city by rising housing costs.

The travails of lower income families aside, another major reason for the diaspora has been an inflexible and time-consuming city bureaucracy. Among developers, the Development Services Department review process has been among the most disparaged in the state.

Since 2013, City Council and staff have been working on solutions, primarily through an drastic overhaul of the city’s development regulations. The working document, known as CodeNEXT, caused so much confusion and opposition that Mayor Adler gave up and terminated the effort last August.

In its wake, the city focused on a major bond proposition that included $250 million for affordable housing programs. In order to best leverage the funds, a City Council committee drafted a resolution that would ease restrictions on affordable housing projects.

On Feb. 21, the entire council voted through the “Affordability Unlocked Resolution.” This gives staff direction to draft an ordinance that will come back to council in May for final consideration.

The resolution attracted strong support from developers of affordable housing.

Greg Anderson, Austin Habitat for Humanity's operations director speaks to City Council on the ... Courtesy: City of Austin video archives.

Greg Anderson, Austin Habitat for Humanity’s operations director speaks to City Council on the Affordability Unlocked Resolution. Courtesy: City of Austin video archives.

Greg Anderson, operations director at Austin Habitat for Humanity, enthusiastically endorsed the steps offered through the resolution, then but the issue in human terms.

“A host that I know (at) one of my favorite (restaurants) in town, I saw him working another job recently. I asked, ‘What are you doing? I thought you worked here.’ He said, ‘Well, I do. I have two jobs.

“Have you ever had that feeling where your heart just hurts when you talk to somebody. I hope that none of you are, right now, housing cost-burdened. It really distracts from everything that you guys have to do.

“But I hope at one point in your life you were housing cost burdened, because it makes everything so much different and it makes everything so much real.
“I was 18, a high school dropout earning $400 a week, and I was able to survive in Austin and end up in college, only because I was able to find affordable housing. Somebody in my same shoes today is going to have such issues, being pushed out of Austin, living 20 miles away, they’re working two jobs.

“They’re never going to make it to college, they’re never going to make those next steps. We make housing way too difficult and this is a great chance to stop that.”


adolfo@virtualbx.com

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By |2019-03-08T08:20:26-05:00March 1st, 2019|Feature Story, Industry News|

About the Author:

Adolfo Pesquera (Reporter/Editor) is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.

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