November 10, 2016
Though the Houston economy and commercial real estate is bumpy due to the drop in oil prices, one bright spot has been the success of mixed-use properties in the area. During the “Making Mixed-Use Work” session at the recent Connect Houston conference, panelists discussed and dissected what makes mixed-use properties work.
The two specific assets under discussion were the two-million square-foot Hughes Landing, being developed by Howard Hughes Corp. in The Woodlands, TX; and Thor Equities’ one-million-square-foot Kirby Collection at 3200 Kirby Dr., in the River Oaks submarket.
Both developments offer residences, restaurants, retail and offices. Aside from that, the two developments are quite different. Kirby Collection is going north on 2.2 acres, and dubbed a vertical urban mixed-use project. Hughes Landing, in the meantime, is spread out on 66 acres on the shores of Lake Woodlands. As each project is different, the developers pointed out different challenges.
For Jack Bousquet with Thor Equities, one major challenge was funding, specifically finding one lender who knows office, residential and retail. “Sometimes, a lender only wanted to handle the residential side, sometimes, just the office side,” he said. “That was a complication”. On the other hand, he continued, “dealing with one architect and contractor streamlined efforts.”
In comparison, Hughes Landing has financing from five banks, according to Peter Doyle with the Howard Hughes Corp. Also on hand were five architects and five contractors. “That can make it easier, or more difficult,” Doyle said.
When asked by moderator Reid Wilson with Wilson Cribbs + Goren about the key to a successful mixed-use, Doyle said everything stemmed from Lake Woodlands. “That was the amenity we needed to take maximum value from,” he said, adding that Howard Hughes took a long time planning for the right mix of tenants.
Meanwhile, Bousquet was emphatic that the residences are what needs to come first in a mixed-use development. “Any kind of mixed use is a traditional village center, that starts with residences,” he explained. “Sometimes its apartments, sometimes it’s condos. But you have to set the site and create the place.”
Regardless of whether the mixed use is urban vertical, or spread out over vast amounts of acreage, CBRE’s Parker Duffie indicated that mixed use has been appealing to millennials. “From that perspective, you want a happy hour spot,” said Duffie, who is managing leasing for Kirby Collection. “If I can go downstairs during lunch, and get a bite to eat, that’s great.” Foreign nationals moving to Houston are used to close proximity between their residences, their entertainment, and their work, he continued. Additionally, “I have friends in New York who want to move to Houston, and don’t want to have to deal with a car,” Duffie added. “It’s what they’re used to.”
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