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Downtown Condominium Market


dbigtex56

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When I moved to Houston 20-some years ago, there was practically no residential units Downtown. The only major apartment buildings were Houston House and 2016 Main (if that's considered to be downtown).

So which of the new developments offer the best in downtown living? Consider accesss to transportation, parking, noise, quality of workmanship and materials, and "bang for the buck".

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  • 5 weeks later...

My theory is that Commerce Towers have blown a hole in the sustainability of more downmarket projects due to the fact that there has to be a substantial part of those buildings still unsold. Does anyone have any info regarding the project's status? Hard to believe they are going to make much money at this point.

The issue impacts the rest of downtown, since whenever the Commerce Towers owner decides to bail, a whole bunch of well-finished units may be competing for attention with the other proposed projects. :o

For this reason and the obvious delays in breaking ground, I have a hard time believing that the Shamrock is going to happen. Perhaps it will happen with fewer floors, but the delay doesn't make sense in the context of the upward curve of interest rates. Thoughts?

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I haven't heard that the Commerce Towers haven't been selling, but it does seem that the downtown residential market has had a hard time getting any traction. A number of projects, especially on the east side, have been postponed or cancelled. My guess is that it is probably due to the lingering poor economy after the huge job losses that followed Enron and others in the merchant energy sector. You make a good point that interest rates are going to make it even harder. Still, I think something like the Shamrock can be viable considering the number of other highrise condo projects going up around the city (Orion, etc).

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That is basically the same thing as saying demand doesn't exist--which may be true. The expense of the units is a function of land value, and if "demand" exists, it will support the values these units are typically marketed at of $250,000 - $500,000. It's really not a lot of money these days for real estate, especially given interest rates and the markets in other cities. The developers want to move the units and will position their offerings as best they can to do that--if the demand won't support these prices, I doubt that they will be able to finance new construction of anything cheaper, unless the market just wants a bunch of studio apartments.

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A bunch of studio apartments sounds like a pretty good idea to me.

Not everyone needs, wants, or can afford some fancy-schmancy 3000 square foot loft. I think there's a market for 20-somethings in entry level positions who like the idea of living downtown. There's a lot of cities where 400 square foot apartments are advertised as 'spacious'

A side benefit of small apartments is that people are forced to entertain elsewhere; who's going to cram four or five friends into a studio apartment? Instead, people tend to hang out in coffee shops or pubs, which become in effect their living rooms. Even if they don't spend much, this is good for business, especially if they're decorative or entertaining. People are attracted to people having a good time, and a resident population would help to reduce the amount of 'dead time' which seems so prevalent in downtown businesses.

It all comes down to number-crunching. Can small, bare-bones apartments be developed and sustained at low rental rates? If so, I think there's a market.

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I don't think it is work spending $225K plus an additional $400 a month in maintenance fees for 1200sq ft. Then add taxes on that.

Instead, people tend to hang out in coffee shops or pubs, which become in effect their living rooms.

I make an average income and lease at the Hogg Palace which is around 1000 sq. ft. Not too small for around $1000.00. A couple of my good friends live at St. Germain and basically our living room is Slainte and Flying Saucer. We bring our friends from the burbs....I think my friends and I have paid for the Main Street Fountain from all of our tax money going to those 2 bars.

If I wanted to buy something I would be in Midtown where I can get over 2000sq. ft. for a townhouse.

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There's probably a lot of factors working together to squeeze out residential development downtown. The owner base is smaller than in other neighborhoods - families keep away, and the wealthier folks head to newer towers on the west side or in better neighborhoods. On top of that, the owner base, being younger and more likely to be single, generally has less disposable income. Couple that with high land prices downtown, and you see the problem. Developers probably find it hard to make the numbers work. A bunch of small studio apartments might work, but then the problem is that all those renters will figure out that they can get more space for the same rent in neighborhoods like Midtown. Unless there's a compelling reason to live downtown there's little reason to pay a premium. There just seems to be a lot of hurdles to really seeing downtown residential take off.

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What Houston needs is a larger class of people who live downtown because it's "hip." Generally, TINKs who tend to have lots of extra money. The problem is, that downtown isn't hip enough yet to create this breed of real estate investor in Houston.

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Do you know something we don't? Actually, If I'm not mistaken some units at 2016 Main have gone that cheaply. But I think that if you are looking for new construction downtown condos for under $150,000, you will have to be patient indeed. Wouldn't land prices have to fall a good bit to let them sell in that range?

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I make an average income and lease at the Hogg Palace which is around 1000 sq. ft. Not too small for around $1000.00. A couple of my good friends live at St. Germain and basically our living room is Slainte and Flying Saucer.

First, Randall Davis owes you a check. :D

Some very good points made on this thread.

Commerce is not selling very quickly. However, remember, the owner of that project is very wealthy and it is not that important to him that they sell. In other words, this building will not go back to the bank if it takes another couple of years to sell.

I am a huge proponent of bringing affordable living to downtown. IMO, affordable means $400,000 or less. My guess is, you will see at least 100 units in this range on the market before the end of the calendar year. In fact, I know this to be the case.

In any event, we need much, much more. Unless and until we get sustainable retail in downtown, housing will suffer. Chicken and the egg I realize, but it needs to happen.

Despite rising interest rates, I think Downtown has tremendous pent-up demand for affordable housing. Where else in the US (major metropolitan) can you OWN for less than $300K?

It is a very risky play, but I think a mixed use project in downtown could make it. In development, no one wants to be a pioneer. All that you do in that case is pave the way for the next guy to make money. However, it needs to be done and hopefully will be in '05.

Fingers crossed everyone.

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Where else in the US (major metropolitan) can you OWN for less than $300K?

True, but the competition for downtown housing isn't in other metros, it's in the Galleria and Midtown areas. To keep potential downtown housing affordable, would it be cheaper to develop condos out of existing vacant buildings (eg Melrose, Sheraton, Holiday Inn) instead of new construction (eg Shamrock)?

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  • 2 weeks later...
True, but the competition for downtown housing isn't in other metros, it's in the Galleria and Midtown areas. To keep potential downtown housing affordable, would it be cheaper to develop condos out of existing vacant buildings (eg Melrose, Sheraton, Holiday Inn) instead of new construction (eg Shamrock)?

Couldn't agree with you more. The prices of steel and concrete have gone through the roof in recent months (and years) making new construction (at least high rise construction) even more expensive than usual. Providing a product that is less than $300,000 per unit, but bigger than 500 square feet, is almost impossible.

Hopefully, despite interest rates rising (if they in fact do), there will be a market for "affordable" housing. If there is, i think you will see movement.

The New Juniper

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Couldn't agree with you more.  The prices of steel and concrete have gone through the roof in recent months (and years) making new construction (at least high rise construction) even more expensive than usual.  Providing a product that is less than $300,000 per unit, but bigger than 500 square feet, is almost impossible. 

Hopefully, despite interest rates rising (if they in fact do), there will be a market for "affordable" housing.  If there is, i think you will see movement.

The New Juniper

We can thank the Chinese for them and there Booming (not to mention them rubbing it in our faces) economy.

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I know this topic has been discussed in the past, but I'd like to revive it one more time:

I have read reports, news stories, etc. wherein "experts" claim that there is demand for one thousand + permanent residences in downtown Houston. If condos could be sold for less than $300 - $350K, is it feasible to believe that a developer could sell 300 units?

Seems like a stretch to me. Although, I believe bringing at least that many permanent residences to downtown is what we lack to really push us over the edge to an actual "neighborhood" and not just a CBD.

Any and all thoughts/input is appreciated and welcomed.

TNJ

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I think that condos are very feasible.

But there has to be enough variety of the condos/apartment homes to suit every lifestyle and an acceptable income range as well.

You can have a building that aims for the high end market which could house singles and small families, but you could also incorporate the same thing for a medium income single/couple as well.

Ricco

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i read that there were more than 30k people considering a move downtown over the next several years and that speculators are betting on 10k new downtown residents in just a few years.

with that said, moderate income housing is a must. midrise residences with more floorspace and less "luxury amenities". ground floor retail (of course) and close proximity to the light rail line are also important.

moderate income housing needs to be more affordable than 150K.

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  • 2 months later...

I pass by these places all the time and wonder: Are they nice or are they ghetto? Does anyone know the history of these 2 buildings, the original living conditions versus current conditions, and the current cost to rent/lease/own a unit there?

Also, what other highrise slums exist downtown? Is the Montigue Hotel a slum? It looks like it from the street.

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One of our downtown security guards once told me to "stay away from the Montegue unless I was looking for pimps and ho's". That seems like a pretty clear indication that the place is a slum. The owners keep doing just enough (fire code) to keep the city from closing it down. There was a fire there several years ago and you can still see the char marks on the facade. It is a disgrace.

On a lighter note: I hear that the Texaco Building (across the street from the Montague) is going to be renovated into lofts. Anyone else hear anything to this effect?

TNJ

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2016 Main is occupied by owners and renters. Some units are nice, some are not. The lobby looks much better after Allision. A number of owners have bought the adjoining unit, and doubled their size. Nice pool, but its been a few years since I have been there. My friend lived on the downtown side with an excellent view of the abandoned Days Inn.

Don't know much about Houston House, but they did have a sign that said "cheapest rent in downtown' for a while. Someone once told me it was "gay". Who knows, who cares.

We saw a fire there on the 12th floor on 4th of July 2003. That was a trip!

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I looked at a couple of the units at 2016 Main last August. They were offering a 900sq foot place for $149,000. It wasn't too bad but needed A LOT OF UPDATES. Get rid of the shaggy 1970 blue carpet, the 1960's stove, and a few other things. The only thing that turns me off about buying one of these places (including Shamrock) are the maintenance fees. I think a $400 a month fee for 1000sq. feet is ridiculous....then add taxes.

Give me a townhome in Midtown.

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I had a friend that lived at Houston House for about 2 years (in 2002/2003). The place isn't that bad. Now, the interiors on the apartments are a bit dated and I don't think that units have washer/dryers in the units themselves. I think the units are only for rent. He had a corner unit on one of the top floors looking towards the north and east...really nice view.

Not a bad place. He could walk to work downtown which was nice. There is plenty of parking near the building (on street or lots) for guests.

I think a number students at South Texas Law School live there (I think). I think it is mainly a younger crowd with some others mixed in as well.

I don't think any particular "groups" of people dominate the building (as stated by some others in this thread).

Don't know about 2016 main.

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