Next Hot 'hoods

[Sunstar]

The next hot 'hoods

Once, these neighborhoods weren't so nice after dark. But things change when districts gentrify.

By Deshundra Jefferson, CNN/Money staff writer

NEW YORK - A few years ago, that neighborhood was definitely on the wrong side of the tracks.

Now, it boasts three Starbucks, a yoga studio, and a really cool jazz bar. Yes Virginia, the yuppies have arrived.

The gentrification wave started -- or perhaps re-started -- in the 1970s, when places like Manhattan's Soho district began attracting residents to formerly decrepit industrial zones. Many years later, the trend continues, not just in New York, but across the country.

"Urban gentrification makes sense because [it is] taking areas close to the city center and making them better," said Paul F. Purcell, a partner in Braddock + Purcell, a real estate consulting firm.

Downtown San Diego, for example, had been a neglected commercial area. A handful of condos started popping up in the area in the mid-1980s, shortly after Horton Plaza, a retail shopping complex, opened. But a late-1980s recession put an end to that effort.

It wasn't until developers broke ground on Petco Park, the new home of the San Diego Padres, four years ago that the East Village began finally "to emerge as a desirable place to live," said Rich Gustafson, president of CityMark Development in San Diego.

Fast forward to today. Gustafson is working on two buildings in the area, the M2i and the Fahrenheit, both of which are scheduled to open next year. Amenities include gated underground parking, floor-to-ceiling windows, and 11 to 14 foot ceilings. Units range from $300,000 to roughly $700,000.

Los Angeles is undergoing a similar revitalization, as developers rush to build the area near the Staples Center. One firm, Gerding/Edlen, will break ground in September on the Elleven, the area's first new-construction condo development in more than 20 years. Prices are expected to range from a low of $300,000 to $1 million.

Meanwhile back East, Washingtonians are steadily snapping up property in Logan Circle, where condos are now going for $350,000 and up. In nearby Baltimore, houses are now selling for $300,000 to $400,000 in Canton versus $35,000 to $40,000 in the early 1990s.

Emerging markets

These urban areas are barely on the radar screen, but in a couple of years they may be seen as the next big thing.

Oregon Health & Science University is expanding its Portland campus, sparking greater interest for housing along the city's south waterfront district.

The $1.9 billion South Waterfront development, which is the area's most ambitious project, will include a 150 to 200 room hotel and conference facility, research and clinical facilities for the university, and more than 2,000 market-rate condos and apartments. Its first residential unit, the Meriwether, will open in spring 2006, amid heavy consumer demand.

"We don't have a sales office, we don't have a Web site, and we didn't advertise," said Homer Williams, a principal with developer Williams & Dame. "Yet we already have half the building reserved. It's going along much better than we anticipated."

Prices range from $249,000 for a one-bedroom in the west tower to $1.47 million for an east tower penthouse.

New projects in Miami

Miami is continuing to shake things up with several new projects going on in its downtown center. One such project, Metropolitan Miami, combines 1,500 residential units with a mix of commercial and retail space.

"You have to have people living in an area in order to really entice the development of the area and the services that people are looking for," said Tim Weller, vice president of development at MDM Development Group.

The first residential tower, Met 1, is scheduled to open next September yet approximately 85 percent of the units have already been sold. Prices range from $180,00 to $1 million plus with the average unit selling for about $350,000.

Not to be outdone, the area surrounding Dallas' old Union Pacific Railroad and power plant was once a contaminated, brownfield site. Soon, it will give way to a modern, mixed-used district.

The American Airlines Center, which opened in 2001, is the catalyst for the area's renewal.

Shortly after Dallas residents approved the Center's construction with a $125 million referendum in 1998, Hillwood bought roughly 77 acres of land around the area to develop Victory, a high-end residential, retail and commercial district.

They have successfully lured the upscale W hotel chain to the area, to develop a hotel/condo complex. Scheduled to open in spring 2006, it has pre-sold 91 percent of its residential units

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[Subdude]

So the obvious question, why not here? Say around Minute Maid Park or on the East Side. I guess it takes one developer with vision and the bucks to make it happen. Midtown doesn't seem to have the same kind of momentum.

[danes75]

I don't think Houston has reached that critical mass yet. Too much of its population would rather have a McMansion and drive 1+ hrs each day both ways than to have a smaller condo-type home 10 minutes from the office. In cities with at least 1 million residents, Houston has the largest influx of daytime population in the nation.

I think Midtown may have outpriced itself. When developers like Post say the property costs too much that is a problem. A month or so ago I spoke with someone from UrbanLofts who said they were actually pulling out of the Midtown area because property has gotten too expensive for the average buyer.

[uncertaintraveler]

A month or so ago I spoke with someone from UrbanLofts who said they were actually pulling out of the Midtown area because property has gotten too expensive for the average buyer.

Perhaps a reason property has gotten too expensive is because the developers are listing the properties for way too much? The correlation between product and price has come unglued---the developers are trying to cram as much of a product as possible in the smallest amount of space possible for the greatest economic return possible. And, usually, quality suffers as a result. I'm consistently amazed at the shoddy work people are (presumably) paying large sums for....

Or, alternatively, perhaps a reason property has become too expensive is because tax valuations are becoming stratospheric. If Houston (or any city, for that matter) wanted to redevelop and revitalize an area, why don't they lower tax assessments? I browsed around town yesterday and realized that there is no way I could afford a $6K annual tax bill on a tiny 1850 square foot house listed for $250K. I'm sure others are the same way: they'd love to live in-town, but can't afford it primarily because the tax man is too greedy.

[jm1fd]

Or, alternatively, perhaps a reason property has become too expensive is because tax valuations are becoming stratospheric. If Houston (or any city, for that matter) wanted to redevelop and revitalize an area, why don't they lower tax assessments? I browsed around town yesterday and realized that there is no way I could afford a $6K annual tax bill on a tiny 1850 square foot house listed for $250K. I'm sure others are the same way: they'd love to live in-town, but can't afford it primarily because the tax man is too greedy.

You still couldn't afford it if the tax man wasn't so greedy, because the market price of the property would rise up to maintain roughly the same monthly payment....

[RedScare]

Property valuations are not set by the city, but by the appraisal district. They are required by law to set the valuation correctly. They cannot artificially lower them to promote development.

The problem in Midtown is not so much the developers who buy the land, as much as the land owners who have jacked up their asking price. The downside of a free market is that the price rises to a level that the market will bear, or sometimes past it. In the '90s, midtown land sold for $2 per square foot. Now, some of it is at $40. You can't blame the land owner for wanting top dollar, but it does get frustrating when land prices stifle growth in an area as it is in danger of doing in Midtown.

[N Judah]

I guess we have our own little mini-bubble here in Houston...hope it pops soon.