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ZONING-FREE ZONES

Who needs land-use designation? Not Houston, say advocates, citing rampant orderly development there

BY DEBRA HAZEL

For a city without zoning laws, Houston’s real estate market seems surprisingly well ordered. New Urbanist master-planned communities and downtown mixed-use redevelopments are moving things along nicely, observers say.

This liberty from codes helps suburban community builders as much as it helps downtown in-fill developers, sources say. Both get relative freedom to place exactly what residents need, where they need it.

And those needs are rising: Houston’s population has grown 36 percent over the past decade. Less than 20 years after an oil industry collapse devastated local business, Houston has rebounded with a more diverse economy and a burgeoning residential development scene, says locally based broker-developer Edmund D. Wulfe, CSM, president of Wulfe & Co. “We’re getting a lot of activity,” Wulfe said.

Today less than half of Houston’s employment base is in the energy sector. The rest is distributed among the medical, biotechnical and other sectors.

The metro-area population grew to 4.5 million in 2003 from 3.3 million in 1990, according to the Real Estate Center of Texas A&M University. And these people are coming for a reason. “It’s very easy to live in Houston,” said Wulfe. “The cost of living is relatively low compared to other major markets.”

Take house prices. The median price of a home in the Houston area is just $134,000 — and this after a median spike of 70 percent between 1992 and 2002, according to Fidelity National Finance. Furthermore, that compares very favorably to prices in similar-size markets. In Atlanta, for example, the median price is about $150,000, and in Phoenix it is $155,000.

Sugar Land
People are flocking to such planned communities as Sugar Land, in the southwest part of the metro area, and The Woodlands, north of the city. With regional malls already in place at these developments, the builders are also putting in open-air lifestyle and Main Street centers to create downtowns.

Sugar Land Town Square, a Main Street development, has been opening in phases since October 2003. When it is completed in January, Sugar Land Town Square will contain 220,000 square feet of retailers and restaurants, including P.F. Chang’s and Sharper Image. Office space is going up above the retail and also in separate buildings. A 1.4-acre town green just in front of the new City Hall provides a gathering place. An office tower is to cap off the project sometime in 2007.

The town of Sugar Land was incorporated in 1959. Imperial Sugar, a sugar manufacturer, acquired 7,500 acres in 1973, to develop homes for its employees, and a master plan was adopted in 1981. That same year, the town’s first shopping center opened, anchored by a Randall’s supermarket. A regional mall has opened since, and Planned Community Developers, the town’s developer, decided that enough of a housing critical mass had been built to justify a downtown center.

“I’ve been here since 1981 and have seen it grow from a small town,” said Steve Ewbank, executive vice president of Planned Community Developers. The population within three miles of the project is projected to grow to 91,000 by 2008, from about 77,000 in 2003. Average household income in Sugar Land is expected to exceed $136,000 a year by 2008, the firm says.

The Woodlands
A master-planned community about 35 miles north of downtown Houston called The Woodlands seems to be thriving too. This 27,000-acre development, which was founded in 1974 and now has 75,000 residents, has become the hub of the market’s northern section. It is already home to General Growth Properties’ Woodlands Mall and several neighborhood centers. Its retail component, called Market Street — The Woodlands, functions as a town center.

The area has also become a satellite central business district of Houston.

“This is so much more than a bedroom community,” said B. Thomas Miller Jr., a principal and executive vice president of Trademark Property Co., the developer of Market Street.

Master developer The Woodlands Corp. brought Trademark Property on board in 2002 specifically to develop a lifestyle property on the site with 400,000 square feet of retail and 100,000 square feet of office space. “We sensed this huge pent-up demand for quality retail, quality restaurants, in a quality environment,” Miller said.

Tenants include Borders Books, Chipotle and HEB. A children’s museum has space there on a temporary basis. The first phase opened in November, with construction continuing through this year. “Woodlands planned their community so not too much retail would be delivered at the same time,” Miller said.

Kings Harbor Place
Houston-based Midway Cos. is building Kings Harbor Place, at Kingwood, Texas, a community 30 miles northeast of Houston.

The mixed-use project will contain 85,000 square feet of retail, 25,000 square feet of restaurants and brownstone-style residences and 30,000 square feet of offices. The first phase, consisting of the restaurants and the residences, is scheduled to open next January. Here, too, the developers are going for a sense of community.

“Were trying to create a true destination in terms of public plazas,” said Jonathan H. Brinsden, Midway’s executive vice president. “Public space is like an anchor.”

Bridgelands
Yet another Houston-area master-planned town coming off the drawing board is the 10,000-acre Bridgelands, 25 miles northwest of downtown. General Growth acquired the project through its 2004 purchase of the original developer, The Rouse Co. The development will contain 1,000 acres of retail space and 10 neighborhoods encompassing 21,000 single-family homes.

As with the Woodlands, residential development will come first, says Joseph H. Necker Jr., a General Growth senior vice president and director of development. “We’re calling Bridgelands a town,” Necker said.

Work began on the residential portion last year, and the project as a whole will be 20 years in development, the builders say. The retail will include a 900-acre town center, but that will probably not happen until a critical mass of residential exists, they say, perhaps sometime in 2008 or 2009.

This plethora of suburban developments does not mean Houston itself is being neglected. “Downtown Houston is vibrant compared to other Texas cities,” said Trademark’s Miller.

Town and Country Place
Re-use is the order of the day in Houston, with older centers being torn down to accommodate mixed-use lifestyle projects. Midway acquired the Town & Country Mall, for instance, at the Sam Houston Tollway and Interstate 10, to remake as the open-air Town and Country Place containing 500,000 square feet of high-end retail and a full-service hotel. Anchor Neiman Marcus will stay.

“The mall had never really worked,” said Brinsden. “The only things that had worked was Neiman’s and a handful of tenants. But it’s a great piece of property.” Joining Neiman will be a specialty grocer, a movie theater and some lifestyle retail shops. (At press time the firm had not set a time for construction to begin, but completion is scheduled for sometime in 2007.)

The Pavilions
The existing Pavilions mixed-use complex and the Fashion Square buildings at San Felipe Street and Post Oak Boulevard, both of which Wulfe acquired last year, will be redeveloped as one 21-acre multiuse center called The Pavilions. “The critical mass of having 21 acres is significant,” Wulfe said only three weeks after acquiring the properties. Plans call (tentatively) for between 350,000 and 400,000 square feet of retail and some 600 to 700 residential units. A hotel may go up too. Some existing retail tenants, including Hermès, will stay.

The building of a light-rail line called METRORail is helping spur development in Houston. So far the line, which was proposed in 1997 as part of the Houston METRO 2020 Regional Transit Plan and carried its first passengers in January of last year, runs 7.5 miles between downtown and Reliant Park. Officials projected that annual ridership would reach 33,000 annually by 2010, but the line reported that many in its first year, so they now plan an extension.

“Houston continues to grow,” said Brinsden. Occupancy edged up to 86 percent in the fourth quarter, from 85.7 percent the year-ago quarter, says Richard Zigler, director of research at O’Connor & Associates, a Houston-based real estate services firm. Not that there are not a few holes here and there. Some former Kmart and Albertson’s units remain empty, for example.

And there are signs that development is slowing from its peak two years ago. Wulfe says about 3 million square feet of new retail space will open this year, down from 4.4 million square feet in 2003. It seems, then, that even when local authorities do not check development, the market will.