New Destination Library May be Incorporated into Seaholm Plan

Over the last year, a task force has been working on a plan to create an ambitious new destination library for downtown Austin, This flagship facility would incorporate world class architecture and a prime downtown location to create a dramatic new public space that will be a prime asset for downtown denizens.

The big question has revolved around location -- what is the best available spot to realize this vision? A new consensus seems to be emerging around a prime lake-front lot between Seaholm and the current site of the Green Water Treatment Plant. The location -- currently an electrical substation -- is adjacent to the beautiful art deco Seaholm power plant structure which is set for mixed use redevelopment over the next few years, The facility is currently being decommissioned in preparation for redevelopment. On the other side, the Green water treatment parcel is in the earliest stages of development -- initial plans have not even been drafted.


Graphic Source: Austin Chronicle

Here is a summary from the Chronicle:

"So many parcels, so many plans! For the new central library, the site now proposed and favored by library advocates and the city is the current site of the Seaholm substation, an Austin Ener­gy facility that fronts on Cesar Chavez, between West Avenue and Shoal Creek. Library advocates are excited about the location, where a stand-alone destination library (envisioned as world-class architecture) would overlook Lady Bird Lake. That signature structure would be flanked to the west by the redeveloped Seaholm Power Plant site and to the east by a four-block, high-rise redevelopment on the Green Water Treatment Plant site. Shifting the library from the Green site proper, said Council Member Brewster McCracken, will accelerate the project's schedule – with a design competition now slated for 2008. "They're a huge winner on this," he said of the library, which also gains parking and site preparation in the deal."

The Beginning of a Congress Avenue Comeback

Prior to 1960, Congress avenue was the center of retail and commerce for the City of Austin. Over the last 5 decades, Congress Avenue has been in a steady state of decline as city residents increasingly looked to suburbs for shopping and commerce. Today, there are only 13 retail business on the prime central stretch between the Capital and the lake.

Historic Congress Avenue 1940s
IMAGE: Congress Avenue was the heart of commerce in the 1940s

With the creation of the thriving second street district and the arrival of a new breed of downtown condo residents, Congress avenue may be on the upswing. Over the next few years, the Austonian and a sprawling multi-Marriott complex will link Congress Avenue to the Second street district and the convention center dining district.

Today, a first step towards the revitalization of Congress avenue was announced. After 9 years of closure, the historic Yaring's department store on Congress between 5th and 6th is being redeveloped into retail and commercial space -- bringing new life to a shuttered eye sore on a key downtown block.

Here is the summary from the Statesman:

The historic Yaring's department store on Congress Avenue, which has sat empty for nine years, is getting a dramatic redo.The building at 506 Congress Ave., which was constructed in the late 1880s, is best known for the store Jacob Schmidt opened in 1936. Yaring's, once a pillar of downtown commerce, closed in 1998. A forlorn "For Lease" sign has hung across its pink stucco facade for years.Now, the plan is to renovate it for retail or restaurant use on the first floor and offices on the second and third floors, said Kevin Kimbrough, vice president of Oxford Commercial, which oversees leasing of the building for owner Walter Penn.



Yaring's Department Store Congress Avenue Austin
IMAGE: Yaring's Department Store on Congress Ave to be Redeveloped

Seaholm Rezoning Under Way

Over the next decade, the redevelopment of the Seaholm power plant and Green Sewage Treatment Plant will forever transform Austin's downtown. By reclaiming a dozen blocks in the core of downtown between Lamar and San Antonio, 1st and 3rd streets, these projects will provide a multi-use urban district that connects the second street district to Whole Foods.

With the development of retail, cultural institutions, office, hotels, and condo units, these developments are likely to shift the center of gravity for downtown Austin further to the West. In fact, the Seaholm development, with the redeveloped shell of the mammoth art deco power plant at its core, may become the new heart of downtown. The Second Street district, which now forms the Western edge of the downtown core, will be much more central once development reclaims the blocks to the West.

Downtown Austin Map Seaholm Green Condo Development

Here is a summary from the Statesman:

The city is taking the first steps toward redeveloping two of its high-profile downtown properties by rezoning them.The City Council will vote tonight on rezoning the Seaholm Power Plant site in preparation for a mixed-use project that will include 80 condos, a 160-room hotel, 100,000 square feet of office space and up to 60,000 square feet of retail.The city wants to rezone the property to allow building heights of up to 393 feet. The height is now capped at 120 feet.The City Council could also approve a resolution to begin the process of rezoning the site of the Green Water Treatment Plant.No plans for that site have been formed, but the city intends to release requests for proposals from developers early next year.

For Austin Condo Investors, the Math Doesn't Add Up

It is a fact: there has not been much investment activity in the downtown Austin condo market. Most of the buyers plan to occupy their units. As we reported last week, this is one of the reasons why Austin is less likely to see a Miami-style bubble explosion anytime soon.

There are lots of reasons why investors have stayed away: anti-flip provisions in contracts, credit issues in the mortgage markets, special deed requirements for renting, etc. One likely reason that has not received much attention is that investors may not stand to earn much money in the current condo market.

Let's say that you purchase a 1,200 square foot unit in a new building for $400 per square foot. Your unit would cost $480,000 and you would likely need to put up at least 10% -- $48,000 -- early in the construction process. If you are like many real estate investors, you would likely finance 80% of the purchase price to take advantage of cheap real estate financing. By taking loans, you can increase your total return by buy speading your cash across multiple properties .

Since restrictions would likely prevent you from flipping the unit until after construction is complete, you would have two choices: either trying to earn money by flipping the unit once no-flip provisions have expired, or by holding the unit for a longer period of time. By holding the unit, an investor would hope to capture rental income during the short term and capital appreciation over the long term.

Here is the problem, downtown Austin rental rates won't cover the costs of the unit. Let's review the math:

Monthly Revenue Received From Renter
$2,700 (Rent @ $2.25 / SF)
- $ 540 (20% Allowance for unrented months / leasing costs)
$2,160 Total Income

Monthly Costs Paid by Owner:
$1,920 (Interest-Only Mortgage @ 6%)
$ 504 (Condo Association Fee @ $0.42 / SF)
$ 878 (Monthly Property Taxes @ $2.20 / $100 Assessed Value)
$3,302 Total Costs

Monthly Loss from Renting: - $1,142

So, on a $480,000 unit, an invest-and-rent strategy would likely loose $13,704 per year on a $96,000 (plus fees) cash investment: a rate of return of (-)14.3%. In order to break-even on paper, a unit would need to appreciate at 2.5% per year. While this is possible, that just gets the investor to break-even, which is not a very exciting return. One important thing to note is that the economics change over time for investors that plan to hold for a decade or more. While mortgage payments stay level, and may even go down if the owner refinances, rents will likely continue to rise over time. Although property taxes and condo association fees also rise, they are only 40% of the cost equation in the first year.

But that's not all! If you are buying a unit in a new project, you will likely have to put money down --$48,000 in this case -- at least a year before project completion and sometimes even earlier. This money doesn't begin earning a return until a renter occupies the unit, adding to the start-up costs required to invest in a downtown condo.

Finally, one more issue for investors is that the Austin condo market is new. Nobody knows what the demand will be for the planned supply of units. It is a market that doesn't exist today, and there is always a risk of under or over-building. For investors, returns must be weighed against the risks of the individual investment. Since market uncertainty raises the perceived risk, investors will only put money on the table if they believe that they can achieve an appropriately high return.

These economics explain why there has not been much of an investor market for downtown condos. At this time, it is important to note that these economics don't really apply to buyer who plan to live in their units. For one, the economics of buying are very different as mortgage interest and property taxes are fully tax deductible. In addition, buyers get value out of their owner-occupied unit every month that they live there without the costs of finding and keeping renters.

These economics are not permanent, three variables can change the math at any time. If prices go down, rental rates go up, or interest rates go down, the economics can look very different. In the current market, rental rates are going up as interest rates continue to drop, making investor returns more attractive everyday. While construction costs are unlikely to drop significantly, oversupply could possibly lead to a drop in purchase prices. More likely, new unit costs will continue to inch upward. So if you are thinking of investing and can get the right deal, it may be possible to make the numbers work.

The Scary "B" Word: Will Investors Create a Downtown Austin Condo Bubble?

Much has been written about the condo bubble in southern Florida, especially the dramatic rise and fall of the Miami condo market. Between 2004 and 2006, condos were being snapped up by investors and quickly flipped for a profit long before buildings were completed. As more and more investors joined the fun, condo units would often change hands like pork bellies -- and other dangerously volatile commodities -- many times before construction was complete. For a couple of years, condo investments seemed to have no where to go but up.

In the 10-years prior to the Miami condo boom, 7,000 condo units were built. At the peak of the boom, a total of 55,000 new units were announced. This is a LOT of units: enough apartments to fill 275 separate buildings with 200 units each for a city about twice the size of Austin. When the bubble burst, 22,000 were still under construction. The bubble ended badly with steep price declines, a lack of market liquidity for condo owners, and bankruptcy for some large-scale projects.

Will the same thing happen in Austin? The answer is that it is very unlikely. While future condo demand, prices, and appreciation (or depreciation) remain an absolute mystery, the market forces in Austin are very different from the market forces that drove the Miami condo bubble.

The problem in Miami was that prices were driven up by speculators who had no intent to live in the units they owned. Their hope was to sell the contract for a profit as soon as possible to another buyer. With too many investors and not enough real buyers, the cycle eventually ended. As investors pulled out and prices started to drop, speculators stopped investing in condos, significantly lowering demand. With a large supply of units and relatively few real buyers, prices continue to drop today. Like all declining real estate markets, many real buyers wait out the fall, waiting for the bottom to buy again.

So why won't the same thing happen in Austin? Developers have learned from the Miami example and put significant protections in place to protect themselves from speculators. When someone buys multiple units and goes bankrupt, developers are often left to pay the price -- as a result, they have a strong incentive to carefully screen investors.

For example, most major projects in Austin include the following investor safeguards:

- No flip provisions that prohibit owners from selling their contracts or units until after construction is completed. At projects like 360, some contracts limit owners from selling until 6 months after closing.

- Limitations on leasing units: Many projects require special deeds for investors who plan to rent their units to others. In some projects, these deeds are limited to 25% of the buildings units.

- Most projects that offer special deeds for investors that permit renting also require higher deposit requirements. Often, initial deposits are twice as high for investors as they are for owner occupants.

Together, these requirements make it less attractive for investors to speculatively invest on downtown Austin condo units in the same way that they did during the southern Florida condo bubble. In addition, the condo financing market has also changed significantly in the last 6 months, making it much harder for investors to borrow money for speculative units that they do not intend to occupy. Finally, while the rate of condo development in Austin is unprecedented by historical standards, it is far below the rate of development in Miami. During he Miami boom, 24.4 units were planned per 1,000 population. In Austin, the equivalent rate is 5.6 per 1,000 population, including thousands of units in projects that may never be built.

While nobody knows if Austin condo units will be a good or a bad investment, it's a healthy fact that many of the larger projects have protections in place to protect against Miami-style speculation.

The Evolving Riverside Condo District

The shores of Riverside drive on the south side of Ladybird lake are about to undergo a dramatic transformation. Starting next year, four separate developers will begin construction on as many as 3,000 luxury condo and apartment units. With close access to downtown, the South Congress entertainment district, the lake, and the hike and bike trails, the location is highly desirable yet less expensive than the city core.

As we have reported, some of these projects have requested zoning variances to allow them to build closer to the lake than the 200 feet that the current rules allow. As a result of the zoning opposition, one developer has decided to redevelop the existing structures, some as close as 20-feet to the lake, as opposed to building new structures with a 150 foot set back. As part of the development, an extension of the hike and bike trails between Congress and I-35 and beyond is likely on the south shore of the lake.

The scope of the combined Riverside-area development is incredible: 3,000 units are now planned - more units than currently exist in all of downtown. While it will take many years for the projects to reach fruition, construction of the first projects will begin next spring.

Here is a summary from the Statesman:

The transformation of East Riverside Drive from a sprawling, well-worn, affordable enclave into a dense and upscale urban village will begin in earnest in the spring, when the first planned condo project is expected to break ground.Australian developer Constellation Property Group plans to begin work in March on its 225-unit project at the northeast corner of Interstate 35 and Riverside Drive. The Star Riverside condos, which will sell for between $400,000 and $1.2 million, will be broken into four buildings ranging from 60 to 110 feet high.The first owners are expected to move in in April 2009.Constellation faces competition from numerous condo projects planned in the vicinity.AMLI Residential hopes to break ground by the middle of next year on 375 luxury apartments on 11 acres at the northwest corner of East Riverside Drive and South Lakeshore Boulevard. In addition, Sutton Co. will build at least 45 condos. Construction could take up to two years.Cypress Real Estate Advisors also hopes to break ground next summer on a mixed-use development that will replace 800 aging apartments with as many as 2,500 apartments, condominiums and townhomes, as well as commercial, retail and live-work space on a 50-acre site on South Lakeshore Boulevard.



Introducing Austin's Municipal Parking Authority

As downtown Austin continues to grow and thrive, it gets harder and harder to find a parking spot. For city planners, there are two ways to view this phenomena: either as a problem or an opportunity.

It is clear that parking is becoming a problem: the easier it is to park downtown, the more people will come downtown to shop, eat, live, work, and entertain themselves. High parking costs are already an obstacle to businesses thinking of moving into the city center. Many companies who can afford the rent are put off by the $150-$200 / month cost of providing parking for each and every employee. As parking costs continue to rise, it becomes a tax on every Austinite who wants to enjoy downtown, and it lowers the value of business and buildings who don't see as many visitors as they might if parking were cheap and plentiful.The result hurts the city by reducing sales tax and property tax revenues.

Other cities with emerging downtowns have overcome similar obstacles by building -- or providing incentives to build -- abundant free parking. In Fort Worth, for example. the Bass family which controls much of the land in the heart of downtown, built a successful pedestrian downtown by combining rapid multi-use pedestrian-friendly development with abundant free parking (and a private downtown security force). The combination worked and downtown Fort Worth has gone from an abandoned urban core to a vibrant 24x7 downtown in a little more than a decade.

Austin has a different plan. The City has proposed a Municipal Parking Authority which would build garages throughout downtown in partnership with developers in a joint venture that would bring in millions of dollars of parking revenue to the city. At $19,000 a space, parking is expensive to build. While the City clearly sees the parking shortage as a opportunity to add capacity and earn money for the city, this perspective may be short-sited. By focusing more on low cost parking and less on profits, the city could likely generate more revenue through sales and property taxes as well as hie prices for city owned land sold in the future.

Huge Downtown Site Slated for Development

Over the last few years, much of Austin's downtown has been redeveloped -- or planned for redevelopment.

Whole Foods has transformed an area of car dealers and auto body shops. The second street district transformed a region of old warehouse and industrial buildings. Seaholm power plant has been decommissioned and is now slated for mixed use development. Congress avenue is set to be transformed with a new hotel megaplex and the Austonian tower.

Nestled between all of these projects is the City's oldest sewage treatment plant - the Thomas C. Green Water Treatment Plant - which began purifying water from Ladybird lake in 1925. The plant covers 6 acres across 4 city blocks. In addition to using a key tract of land to process water using 1920's technology, the plant also serves to disrupt the natural grid of the city -- it stops second street at its west end and blocks Nueces and Rio Grande from reaching Cesar Chavez.



The plant, which is located between Cesar Chavez and Third streets between Seaholm and San Antonio is about to be decommissioned to make way for a new development. On November 29, the city will begin the process of soliciting proposals for redevelopment of the site. Once complete, the new development will likely add retail, housing, and office space while filling in the missing streets on the city grid.

The Green site offers an incredible development opportunity. With four downtown blocks, it is a huge chunk of land. The location is perfect -- it is on the lake and adjacent to both the hot second street district and the future Seaholm multi-use development. The site is free of Capital View Corridor restrictions, although portions of the site close to the lake are limited to 45 feet in height.

Over the next year, the City will seek and review proposals from developers interested in the site. Once a developer is selected, construction is expected to begin in 2010. Full build out of the site could take as many as 10 years. The land, which is currently owned by the city, is expected to sell for as much as $65 million (half of the proceeds will then be used for site improvements including reforming the street grid throughout the site). At that price, developers will need to build some tall buildings -- condo, rental, or commercial -- in order to profitably develop the site.

Austin Real Estate Market Forcecast

Fortune and Economy.com just released 5-year real estate appreciation predictions for 54 major metropolitan areas. For the analysis, they looked at the likely price increase or decrease for a luxury home that would ell today for twice the local median price.

Here is a summary of the results:

1
Cleveland

9.6%

2

Indianapolis

7.4%

3

Detroit

7.0%

4

Cincinnati

6.0%

5

Greater Kansas City

1.6%

15

Austin

-4.4%

Average

National Average

-14.7%

50

Baltimore

-27.8%

51

Tampa

-27.9%

52

East Bay, Calif.

-31.0%

53

Miami

-32.3%

54

Orlando

-34.3%


The good news is that Austin is ranked higher than 72% of metropolitan areas with a projected value decrease of 4.4% over 5 years. This is substantially better than the 14.7% average projected for the average metropolitan area. The bad news is that prices are expected to decrease. Obviously, this data does not really say anything about the condo local market.

While reports like these always sound authoritative, it's useful to look closely at the methodology. This survey is based on a historical home price-to-typical rent ratio and assumes a return to historical averages. It doesn't look at any other market fundamentals: growth rates, employment, desirability, etc. In fact, the markets with the highest inbound migration are rated as the weakest markets while those where people are fleeing in droves -- detroit --are rated very high. For Austin, the bottom line is that the market was never caught in the boom that was experiences throughout the country, and the fundamentals are strong: for example, people are coming to town and employment growth is strong. That said, no one really know whether the local market will in fact go up or down over the next 5-years.

After 3 Months, Monarch Converts Back to Apartments

In an embarrassing reversal, the Monarch Condominiums has decided to convert from a 100% condo project to a 100% rental project. This follows the projects switch from rental to condo just 3 months ago.

At the time of the switch, the condo market was very strong and and the downtown rental market appeared unable to support a 305 unit high-end downtown project. As construction costs continued to escalate, the Monarch sought greener pastures in the condo market. With construction costs rising and rents determined by the market, the Monarch likely had no good options. With the building only months away from completion, they made a big bet that they could sell enough condo units quickly enough to make the bet pay off. With experience in the crazy Florida condo market where projects would sell out in days, they were optimistic that the Austin market could support quick sales.

It didn't work out the way they expected. The Monarch was likely hurt by three factors:

- It takes a long time to sell 305 condo units in Austin, even in good times. With just 150 single family sales in central Austin each month, the strongest projects sell 5-10 units per week. With limited time before completion, the Monarch didn't have enough time to sell enough units before completion. When the competition has beautiful sales centers and expensive virtual reality presentations, it can be hard for new projects to quickly catch-up.

- Projects designed for the rental market do not fare well in the condo market. Condo owners expect perfection -- buyers are always pickier than renters. Even with a discount, buyers tend to hold out for the perfect project.

- The project was a victim of bad timing. The credit markets imploded just weeks after they announced their intention to convert from rental to condo. While condo sales continue, the rate of sales was certainly much slower than they expected.

Together, these factors likely forced the developers of the Monarch into a very difficult position. With reports of strong pre-leasing at the new AMLI project on second street at rates of as much as $2.75 per square foot per month -- that's $2,750 / month for 1,000 SF -- Monarch must have concluded that the best shot of success was back in the rental market.

Here is the summary from the Austin Business Journal:

Burns says the decision to switch strategy wasn't at all a reflection of lack of demand for condo units downtown. "For us to have sold as many units as we did in the slowest selling season, I think says a lot," Burns says. "We simply didn't have the luxury of time on sales."The Monarch's units will range in size from 681 square feet to 3,530 square feet with lease rates starting at $1,650. The development will also feature more than 9,500 square feet of ground-floor retail space.Burns says taking Monarch out of the sales picture will likely make the downtown condo market rather tight in the near term. Developments that are near completion like The Shore and 360 are virtually sold out. And while a slew of new projects have been announced, and a few have broken ground, it will be late 2009 before the first of those comes to market.


While converting to rental is probably the best strategy given the market and their short time horizon, it was likely a very difficult decision. With approximately 60 units sold, they must now walk away from all of those contracts. While the rental market may be stronger by comparison, the project is likely looking for rents ranging from $1,650 to $7,000 or more per month. It will be hard to rent the high-end units as very few people are willing to pay those kind of dollars for downtown rental units.

While we've talked about overcapacity in the Austin condo market, the removal of 305 units in the Monarch from the market will have a dramatic effect. With the Monarch out of the picture, there will be very few new units hitting the market in the next year. With less competition, we should see strong sales at the remaining projects whose delivery will be staggered over the next three years -- at least they have plenty of time to sell out before their projects are completed.

New Project: "Zilker Place Condos"

John Wooley, the founder of Schlotsky's, this week announced plans for Zilker Place Condominiums, a new 74-unit condo development on a prime lot on Barton Springs road adjacent to Zilker Park. With quick access to the park and the hike and bike trail, three 5-story buildings will be constructed on a 2 acre lot that currently houses the restaurant Wanfu Too. Prices for the units will start at $300,000 for 900 square feet and will top out at $1.3 million for a 3,030 SF unit. The project will feature a central courtyard and pool, screened porches on many units, and protected views of Zilker Park.

Here is a rendering published by the Statesman:

Zilker Place Condominiums on Barton Springs

When combined with Barton Place, a 270 unit project just a few doors down, it is clear that the area on Barton Springs between the park and Lamar is now in store for a radical transformation. With two large projects on the way, tax increases will certainly put pressure on the remaining restaurants and mobile home parks that form this prime area of the city. As the blocks develop, one of the most important elements -- one that is missing from current plans -- may be a requirement for ground-floor retail up and down the street. It would certainly be detrimental to Austin to lose a full district of iconic restaurants for a few mid-rise condo buildings.

Although Wooley originally hoped to build a much taller tower, he intelligently reformed the project as a 5-story venture that fits just within local zoning requirements. The local neighborhood association has provided vocal opposition to other projects. Given Zilker Place's location adjacent to the park, it would have been very difficult to secure political support for variances.

Density Bonuses: A New Urban Planning Model for Austin?

A movement is developing in Austin to link downtown zoning variances to "voluntary" contributions to community programs. While a density bonus sounds like a special gift to developers who meet the city's stated goal of a dense vertical downtown, in reality, it is the opposite. Density bonuses essentially charge developers for variances -- if they want to build taller, they need to pay for the privilege.

Here is a summary from the Austin Chronicle:

The incentives are the "bonus." For a developer, adding density is gaining additional project entitlements and additional value – more square feet, building floors (height), condo units, retail or office space to lease or sell. Zoning code limits the size of buildings; for example, in the Central Business District, entitlements are limited to an 8-1 floor-to-area ratio, or FAR. To reward developers whose projects advance urban planning and community goals, the city would grant them bonus entitlements in exchange for voluntary developer-funded community benefits – say, funding for affordable housing, parks, walkable streetscapes, and space for small, local businesses.



The thing that makes this a tough issue is the value judgment that it places on density: it assumes that high density projects are bad, and that developers should pay for the right to build bigger projects. The problem is that the Mayor and City Council's actions suggest that they believe the opposite to be true: they have worked hard to encourage high density projects for downtown.

The problem with density bonuses is that they don't seem to be supported by logic. The bonuses penalize dense projects, but do not prohibit them. If you believe that density is good, as much of our local elected officials seem to, then it doesn't make sense to put obstacles in place that will limit density. If you believe density is bad and that the current zoning rules are good, then it might make more sense to simply enforce the zoning rules and limit variances as opposed to allowing developers to pay for something which may not make sense for the city.

As we recently reported, Austin is not a dense city. While people disagree on whether they want tall buildings in Austin, density does have measurable benefits. For example, increased density is better for the environment, it enables mass transportation, and it provides for a vibrant downtown core with more residents and workers per square block. The alternative to density is suburban sprawl which has significant social costs. Additionally, dense projects provide significant tax revenue that can be used to fund important services. A large downtown condo project might contribute $50 million per year in property taxes which can pay for a wide variety of services. That revenue stream seems much more valuable than the hundreds of thousands of dollars in density bonuses currently being proposed by planners. (For more on the benefits of density, read this article).

In fact, the push for density bonuses is not really about density as much as it is about affordable housing. With rapid downtown condo development targeted toward high-end buyers and East Austin development replacing more affordable options, there is a growing consensus that action needs to be taken to ensure a diverse city center. The City wants to make sure that there will be affordable options for central Austin living. Unfortunately, the City's past efforts to achive this goal have not really worked. It's important to note that density is not the challenge to affordability. It makes perfect sense for the city to encourage bith density and affordable housing as important social goals.

When it comes to affordable housing, the big issue is cost. It is expensive to develop affordable housing when land and construction costs are skyrocketing. What the City likes about density bonuses is that they allow the city to tax large-scale projects to fund affordable housing. As reported by the Chronicle, this quid-pro-quo has not been a secret:

Last year, the City Council directed the Design Commission to recommend density bonus options. In the past several years, Downtown high-rise developers had been negotiating ad hoc exchanges of community benefits for neighborhood, commission, and council support of the variances needed to exceed existing entitlements. One early adopter was Constructive Ventures. On its Spring condominiums, the developer pledged to give $250,000 total for an affordable-housing fund and for park improvements along nearby Shoal Creek. This effectively countered Old West Aus­tin Neighborhood Association opposition; Spring received variances at council to build a slender 400-foot tower on land zoned Downtown mixed use (which sets a 120-foot height limit). That $250,000 was also the magic figure for the variance-seeking CLB Partners condo tower, T. Stacy & Associates condo tower, and Gables Park Plaza; the Novare/Andrew Urban Downtown post office projects got additional height for $200,000. (Austin has probably been leaving money on the table; by contrast, the density models suggested at right would generate millions in value for the community.)But everyone involved in all that one-off deal-making – including City Council – found the negotiations exhausting, time-consuming, random, and potentially inequitable. So council members began to push for a standard density-bonus policy.



As this debate evolves into policy, stakeholders will have to decide what is truly important for the downtown Austin. The recent report from the City's density bonus task force has expanded the debate by encouraging not just requirements for variances but also incentives for meeting other urban planning goals. If projects hide the parking garage or include a cultural institution or non-profit, they would be eligible for incentives. Certainly, it makes sense for the city to use every tool that they have to achieve their urban planning objectives. But the risk of density bonuses is clear: blocking variances is one of the city's only sticks, making it tempting for officials to penalize projects that would bring beneficial density in order to achieve other important objectives. If developers opt for lower density projects because the required concessions are too expensive, everybody will lose.

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Major Downtown Condo Project On Hold?

Rumors have been circling for months that AquaTerra, a 163 unit 20-story project planned for Barton Springs road between Congress Avenue and south First street, has been having trouble getting off the ground. In fact, the building was supposed to be complete by 2008 -- yet construction hasn't even broken ground.

While we have not received any confirmation from the developers, we have heard from other sources that the project is in fact on hold and is unlikely to ever be completed. If true, this represents the first major cancellation of a downtown condo project. While it is easy to blame the project's demise on the credit liquidity crisis, AquaTerra has been in trouble for many months due to weak demand. Competition is intense to market units to downtown buyers --- projects that are not attractively positioned and aggressively marketed will have trouble getting noticed.

Here is what the project would have looked like:

City Approves Plan for Second Downtown

The Austin City Council today approved the first phase of a plan to create a second "downtown" urban center in the region of north Austin near Braker and Mopac -- essentially the area surrounding the domain. As we have reported in the past, between now and 2015, one developer alone plans to build 50 new buildings with heights ranging from 2-26 stories (as tall as 310 feet). When complete, The Domain will form a second Austin "downtown" with as many as 82,000 residents and 50,000 daytime workers. To put these numbers in context, Mayor Will Wynn has working hard towards a big goal: getting 25,000 people to live in the real downtown by 2015, the same timeframe.

Here is the summary from the Austin Business Journal:

Austin's City Council gave final approval of phase 1 of the North Burnet/Gateway master land use plan, which will create a so-called second downtown in the area around the Domain luxury shopping center by 2035.The North Burnet/Gateway plan's vision is to ultimately create clusters of dense, mixed-use, pedestrian-friendly neighborhoods in the 2,300-acre area north of U.S. 183 bounded by Walnut Creek, Metric Boulevard, Braker Lane and MoPac Expressway.The final plan will allow developers to build denser than anywhere outside of downtown, as high as 15 stories or 180 feet, and up to 30 stories or 360 feet in areas closest to planned commuter rail stops.Phase 1 immediately designates a zoning overlay district in the area to allow vertical mixed uses and other urban design elements, and to preclude interim development not in concert with the plan.A draft plan of Phase 2 -- outlining ordinances implementing the plan -- is expected in six months, says Molly Scarbrough, a city senior planner. Final approval for the entire plan is expected in a year.

Austin's Low Population Density

Population density, the number of people per square mile, is an indicator of suburban sprawl. A large city with a low population density will be spread across a broader geographic area than an equally sized city with a higher level of density. The lower the density, the more land it takes to fit all of a city's residents. The more land, the longer people must drive for work or to get groceries, the more lawn there is too water, the more the natural environment is reclaimed for malls and yards and roads.

There are many benefits to having a higher density city. The environmental impact is minimized, public transportation is easier, sprawl is reduced. Today, Austin is not a high density city: even the central downtown area is relatively low density compared to the core of other major cities. Of the top 25 cities, Austin is the 20th most dense city. In Texas, Houston, Dallas, and San Antonio all have higher levels of density than Austin. If you you think Houston is sprawling, than you probably won't like Austin in a few decades if current growth rates persist. El Paso is the only large Texas city with a lower level of density than Austin.

While many people question whether downtown development is good or bad, there is no better way to improve population density. A dense urban core is vibrant, ecologically-friendly, and traffic-friendly. It is the best antidote to sprawl. Downtown development won't stop sprawl in Austin: the number of building permits for single family homes in Austin is nearly the highest per capita of any city in the country, it is the first step in the right direction. It provide people who want to bike to work or walk to dinner with an alternative that hasn't previously existed in Austin.

Here is the raw data from Demographia. The data is from 2000 and just looks at the city of Austin --- it excludes many of the suburbs with the lowest population density.


Rank
Pop / SQ Mile
City

1

26,401

New York city

2

16,633

San Francisco city

3

12,749

Chicago city

4

12,165

Boston city

5

11,233

Philadelphia city

6

9,316

Washington city

7

8,058

Baltimore city

8

7,876

Los Angeles city

9

6,855

Detroit city

10

6,717

Seattle city

11

6,214

Milwaukee city

12

5,118

San Jose city

13

3,772

San Diego city

14

3,617

Denver city

15

3,470

Dallas city

16

3,383

Columbus city OH

17

3,372

Houston city

18

2,808

San Antonio city

19

2,782

Phoenix city

20

2,610

Austin city

21

2,327

Memphis city

22

2,263

El Paso city

23

2,163

Indianapolis city

24

1,152

Nashville-Davidson

25

971

Jacksonville city FL

New: Four Seasons Residences Listings

Since many of the large new condo projects are being privately marketed through in-house sales agents, the only way to get unit details and pricing is to schedule a meeting and visit the sales center. Recently, however, the Four Seasons Residences has added a number of units to the Austin MLS -- making the details publicly available for the first time.

Currently, there are 8 units listed ranging from a 1,060 SF one bedroom unit for $580,000 to a 2,692 SF three bedroom, three bath unit for $1,918,000. One interesting note is the wide variance in price-per-square-foot which ranges from $459 to $764 -- it's highest for the largest units.

The listings, as well as new listings for Sabine on 5th, are available Here: AustinTowers Downtown Condo Listings

BartonPlace Sells 61 units, Lines Up Financing

There has been lots of mixed news on the national and local real estate front over the last few months -- so it is a relief to see good news from BartonPlace Condominiums.

According to the developers, the project has taken $30 million in deposits on 61 of their 270 units. With strong pre-sales, the project has been able to secure financing for the project from IBC Bank in Austin -- clearing the biggest hurdle to a new project and setting them up to begin construction in the first quarter of 2008. The project is being developed behind Austin Java on Barton Springs road.

BartonPlace Barton Place Condos in Austin

Here is the summary from the Statesman:

The BartonPlace announcement Friday comes amid a dramatically changed lending and credit environment nationwide, with experts predicting that some Austin condo developers who don't already have financing might find it much tougher to get, meaning some projects might not get built.But the credit crunch hasn't hurt the BartonPlace project. It is expected to break ground in March at 1600 Barton Springs Road, replacing the Shady Grove RV Park.Unit prices will range from $259,000 to about $700,000.Warshaw said BartonPlace sales are the strongest he and Constructive Venture principal Perry Lorenz have seen in any of their projects, which include four in East Austin. Austin Java co-owner Rick Engel also is a partner in BartonPlace, which will incorporate the Austin Java restaurant at the front of the 4.3 acre site.



Austonian Condo Fees Set a New Record!

The Austonian is going to be nice. At 56-stories, it will be the tallest building in Austin. In fact, it would be the tallest residential building in San Francisco. It has a beautiful pool and a dog park with a special doggie toilet.

These luxury features, however, are not free. Units in the Austonian start at $500K and top out at more than $7 million -- more than the selling price of almost any apartment or single family home in the history of Austin. On top of this, residents will pay the highest condo fees of any project in the city -- an amazing $0.64 per square foot per month which equates to almost $1,300 per month for a 2,000 square foot unit.

Condo fees fund the daily operations and maintenance of most condo buildings. They cover security, landscaping, cleaning of common area, common area energy use, maintenance, and other key building functions. Prior to the introduction of the W and Four Seasons Residences, the highest condo fees in Austin were $0.40 per square foot and the average was a low $0.34. At $0.64, the fees at the Austonian are the highest in the city. According the sources, the $0.64 fee is actually a reduction from the $0.67 per square foot which was originally offered to buyers.

Here is our updated list of condo fees by project:

Fee by Building - - - - - $ / SF / Month
Avenue Lofts
.................$0.28
Milago
.......................$0.31
The Sabine
...................$0.33
360
..........................$0.33
Plaza Lofts
..................$0.33
The Shore
....................$0.36
Five Fifty Five Condos
.......$0.40
W Hotel & Residences
.........$0.61
Four Seasons Residences
......$0.61
Austonian
.... . . . . . . . .$0.64
Average......................$0.42

Second Austin Downtown at Domain by 2035

As we have reported in the past, developers and the city have announced ambitious plans for the second phase of the Domain: the new mini-city rising off Mopac just north of 183. Between now and 2015, one developer alone plans to build 50, yes FIFTY, new buildings with heights ranging from 2-26 stories (as tall as 310 feet). When complete, The Domain will form a second Austin "downtown" with as many as 82,000 residents and 50,000 daytime workers. To put these numbers in context, Mayor Will Wynn has working hard towards a big goal: getting 25,000 people to live in the real downtown by 2015, the same timeframe.

The Domain capitalizes on a an ongoing trend in large scale development: Pleaseantville-like mini-cities that blend ground-floor retail with rental, condo and commercial properties on the upper floors. The goal is to create a disneyesque main street development that becomes a destination for retail and entertainment while making the development an attractive place to live and work. Envision multiple city blocks with street-side parking (and plenty of garages).

Today, the City of Austin took a step forward by approving phase 1 of a master plan for the area which will officially strive to create a second downtown on a 2,300 acre parcel adjacent to the domain by 2035.

Domain Future Development Austin

Here is the summary from the Austin Business Journal:

City Council preliminarily approved phase 1 of the North Burnet/Gateway master landuse plan, which will create a so-called second downtown in the area around the Domain luxury shopping center by 2035.Final approval by City Council for Phase 1 is expected on Nov. 1.The North Burnet/Gateway plan's vision is to ultimately create clusters of dense, mixed-use, pedestrian-friendly neighborhoods in the 2,300-acre area north of U.S. 183 bounded by Walnut Creek, Metric Boulevard, Braker Lane and MoPac Expressway.The final plan will allow developers to build denser than anywhere outside of downtown and as high as 15 stories or 180 feet, and up to 30 stories or 360 feet in areas closest to planned commuter rail stops.Phase 1 immediately designates a zoning overlay district in the area to allow vertical mixed uses and other urban design elements, and to preclude interim development not in concert with the plan.



The initial Domain site consists of 57 acres and stands on the former site of Century Oaks Park, a multi-purpose recreational facility for IBM employees and their families. The park was so named for the century-old trees contained within. The land was purchased from IBM, and demolition of the park began in 2004.

Additional land for The Domain is being reclaimed from vacant IBM manufacturing and administrative buildings, as well as driveways and parking lots that were once part of the original IBM campus.

The developers were granted tax subsidies in 2003 from the City of Austin and Travis County. Total developer compensation from taxpayer money over the life of the agreement could reach $60 million. The developer keeps 80 percent of the city's sales tax for the first five years and 50 percent for the next 15 years. Plus, 25 percent of the property tax is rebated back to the developer for the entire 20-year period. The city of Austin expects to take in about $40 million in sales and property taxes over the 20 years of the incentive agreement.

Monarch Profile Added

We've added a full profile for the Monarch -- the 305 unit rental-turned-condo project at 5th and West, just East of Whole Foods. The project is named for the Butterfly-like structure on the roof and is scheduled for completion in early 2008. The building features units from 681 square feet to 3,530 square feet and priced from the low $200,000s to $1.75 million.

The Monarch Condo Austin Downtown

The full profile is here.

W Hotel & Residences Breaks Ground

Another Austin project -- the W Hotel & Residences -- took an important step forward yesterday with a lavish ground-breaking ceremony. Not unlike the Austonian which created a pile of dirt to be shoveled for the ceremony, the Block 21 development team and a world-famous basketball player and investor (Magic Johnson) used unusual guitar-shovels for the ground-breaking. The theme of the event, as far as I can tell, was "Keep Austin Weird."



Block 21, a former vacant lot in the heart of Austin’s Second Street District, is moving from planning to reality. Upon completion in early 2010, the new home of Austin City Limits, a 2,200 seat, state-of-the-art theater and music venue, will also incorporate the W Austin Hotel & Residences, a 35-story tower designed by Arthur Andersson with 196 condos, 250 guestrooms, spa and restaurant; plus approximately 47,000 square feet of ground and second floor retail. Unfortunately, the project will no longer contain the Austin Children's Museum which pulled out of the project -- an unfortunate loss for an otherwise great project. Supposedly, the developers made it very difficult for the Dell Children's Museum to affordably create the sort of space they needed for the facility.

The $260-million project is seeking Platinum LEED Certification for its implementation of green building techniques, materials and operational standards under the guidance of Gail Vittori, Co-director of the Austin-based Center for Maximum Potential Building Systems. There are only a handful of mixed-use projects and hotels in the world that have achieved LEED Platinum Certification.

Here is the latest rendering of the project which will clearly have a huge, positive impact on the second-street district:

W Hotel & Residences Block 21 Austin Condos

Riverside Condo Proposal Rejected by Planning Commission

When it comes to Austin condo zoning, there is one holy grail: there will be no exceptions to the current zoning rules which prohibit new construction within 200 feet of the shore of Lady Bird Lake. This simple rule, however, made for a difficult decision for the Planning Commission and the City Council.

CWS Capital Partners has purchased a plot of land with existing buildings that sit as close as 20 feet from the lake. Under current rules, they can redevelop these buildings, but they can not build new structures within the 200 foot easement. So, CWS asked the city for what seemed like a fair compromise: they would demolish the buildings close to the lake and extend the hike and bike trail by 1/3 of a mile in exchange for permission to build their towers 150 feet from the lake. Virtually political forces agreed that it was bad idea to allow any exception to the 200 foot rule -- the likely fear being that it would set a precedent for other developers.

Here is the summary from the Austin Business Journal:

The city's planning commission unanimously rejected California-based CWS Capital Partners' plans to build three highrise condo buildings as close as 150 feet from the shore of Lady Bird Lake.CWS had requested a variance to the Waterfront Overlay Ordinance that prohibits CWS from building within 200 feet of the lakeshore. In exchange for being granted the variance, CWS proposed to donate nearly 2 acres of waterfront parkland and extend the hike-and-bike trail by one-third of a mile along Riverside Drive.CWS can appeal the decision to the City Council, but CWS attorney Richard Suttle says the company will likely not appeal, given that four council members have already publicly expressed their opposition to the variance.If the variance request remains denied, CWS plans to build two highrises -- one 200 feet, the other 120 feet -- and redevelop dozens of apartments that sit as close as 20 feet from the lake shore to sell them as townhomes. Those apartments pre-date the 200-foot rule.





Another New Project: Hyatt "Andaz" Condos

In April, Hyatt introduced a new boutique-style luxury hotel brand called Andaz. The first hotels, they announced, would be placed in world's most important "international cross-road" cities. And so far, three such locations have been announced. First was London. Second was midtown Manhattan. And the third location to be announced is— believe it or not — Austin, Texas.

The 210-room hotel is slated to open in 2010 as part of a $750M development on 32 acres formerly occupied by Concordia University. The site is located between I-35 and Red River near 32nd street. On top of the hotel will also sit 150 condo units ranging in size from 800 to 2,700 square feet. The building will be 182 feet tall and condo units will start at around $400,000 or a whopping $500 / SF for a non-downtown location.

hyatt andaz austin hotel condo project concordia tower

Here is a summary from the Statesman:

The hotel, which is expected to open in 2010, will offer amenities such as a spa and fitness center and a 20,000-square-foot park-like roof that includes a cocktail lounge and restaurant.It will have appeal in Austin for its high-quality amenities but also will reflect the city's casual atmosphere, Sarwal said."The Andaz concept will integrate well with this prime location and Austin's cosmopolitan energy," Steve Haggerty, global head of real estate and development for Global Hyatt, said in a statement. "Together, we intend to attract customers looking for fresh, uncomplicated luxury."The hotel will be energy-efficient and will use ecologically friendly building materials. It will also offer organic food.


This is the second major project announced in the last 10 days after a multi-month lull in major announcements. While it's not downtown, it represents another major investment in central Austin and likely signals the creation of a promising new district.

Downtown Condo Tour This Sunday

The Downtown Austin Neighborhood Association (DANA) is holding its 4th Annual Downtown Living Tour Sunday, September 30th, from noon to 5 pm.  The event, which typically attracts more than 1,000 visitors, showcases homes and the benefits of living in downtown Austin. This year's tour will feature a combination of existing residences, units in new buildings, and sales models of upcoming developments. More than fifteen sites will be represented on the tour, including:

* 360 Condominiums
* Austonian
* Four Seasons Residences
* Spring Condominiums
* The 5 Fifty Five
* Sabine on 5th
* The Monarch
* 2nd Street Retail District
* Posada Del Rey
* Bridges on the Park
* Plaza Lofts
* Burk/Henricks House

The tour will start at noon at the lobby of the Carr-America building located at 300 West 6th Street (across from The Belmont). After the tour, enjoy happy hour (5 - 7 pm) prices on refreshments and food at Rio Grande Restaurant. VIP ticket holders will finish out the day with complimentary music, food, and drinks at the new Mexican-American Cultural Center from 7 - 9 pm.

Tickets are available through DANA's web site at www.downtownaustin.org/DLT.html.  Prices range from $15 for DANA members to $40 for non-members who attend the VIP party.

Austin in 2010: The Tallest Buildings

Today, The Frost Bank Tower looms across the Austin skyline with a singular presence. While it may look like the world's largest nose hair trimmer, it stands 120 feet taller than any other building in the city of Austin. Of the top ten tallest buildings in Austin, only three -- Frost, 300 W 6th, and the Hilton -- were built in the last decade. One of today's ten tallest buildings – the Texas State Capital — was completed nearly 120 years ago in 1888. Speaking of the Capital, Austin must be one of the largest cities in the U.S. to have a four-story building in it's top ten!

Between the Capital (#10), the Dobie (#5), and the UT Tower (#12), many of the tallest buildings have been around for a long-time:

Ten Tallest Buildings in Austin - 2007
1. 515 Feet - Frost Bank Tower
2. 395 Feet - One American Center
3. 391 Feet - One Congress Plaza
4. 377 Feet - Austin Hilton Convention Center Hotel
5. 367 Feet - Dobie Center
6. 329 Feet - Bank of America Center
7. 325 Feet - 300 West Sixth Street
8. 325 Feet - Chase Bank Tower
9. 320 Feet - 100 Congress
10. 311 Feet - Texas State Capitol

Over the next three years, the Austin skyline will change dramatically. If all proposed buildings are built, only one current building - the Frost Tower - will be in the top ten. In fact, 5 new buildings will be taller than any building currently occupied in the city. Of the future top-ten, four are already under construction and five are still in the planning stage.

Here is the full list:

Ten Tallest Buildings in Austin - 2010*
*(If all proposed buildings are completed)
1. 705 Feet - 501 Congress
2. 683 Feet - The Austonian
3. 580 Feet - 21C Austin
4. 563 Feet - 360 Condominiums
5. 550 Feet - 401-499 West 6th Street
6. 515 Feet - Frost Bank Tower
7. 450 Feet - 501-599 West 6th Street
8. 433 Feet - W Hotel & Residences
9. 432 Feet - Spring
10. 416 Feet - Altavida

New Project: 8th & West Tower

Between the credit crisis, skyrocketing construction costs, and the slowing real estate market, we didn't expect to see anymore downtown condo projects for a while. Today, however, we were surprised to learn of another downtown condo project announcement.

Austin's Fortis development today announced a new 20-story 200-unit condo tower to be developed on West avenue between 8th and 9th. While virtually no other details have been announced, the public details are enough to generate public opposition to the project. As the project is in a low rise area just north of sixth street, the project pushes the frontier of high-rise development.

fortis development west 8th 9th condo

The issue is that the location is zoned for buildings as tall as 60 feet -- far less than the 250 foot height of the proposed condo tower. This decision may be a tough one for the city council: they need to decide on the boundaries of Austin's high-rise downtown. In the projects favor, it is within two blocks of the Nokonah at 9th and Lamar, CLB's proposed 33-story super tower on 7th and Rio Grande, and another project on 6th and West. As the developer points out, it is one of very few downtown blocks free of capital view corridor restrictions.

Here is the summary from the Statesman:

A new condo high-rise is being proposed on West Avenue between Eighth and Ninth streets, but residents in the neighborhood on the western edge of downtown have registered their opposition.David Cox, president of Austin-based Fortis Development, is seeking a zoning change to build a tower of up to 250 feet, or about 20 stories, in an area where office zoning now caps height at 60 feet. The project would have about 200 condominiums plus retail space.The zoning request is scheduled to go before the city's Planning Commission on Tuesday, and the City Council would have the final say.If all goes as planned, the project would break ground in the fourth quarter of 2008, said Cox, who also is a vice president with Cypress Real Estate Advisors Inc., which has provided some financing for Fortis, his new development venture.



We'll post additional details and a full profile when we receive them!

Condo Sales: How Firm are They?

While the mortgage lending crisis seems to be easing, jumbo mortgage rates remain significantly higher than they were just two months ago. During this period, many projects have announced stellar sales and reservations of new units brought on the market during this awkward period.

So what's the deal? Is the Austin market so strong that people keep on buying as rates go up? Is everyone in town paying in cash? Is there really demand for another 136 buildings? The answer is no. In reality, some of the buildings have made the reservation process so painless that with $5,000 or $10,000 and a dream you can reserve a unit. If interest rates rise, contractual provisions may allow you out of the contract. If you can't get financing, you get your money back. In fact, at some buildings, the deposit is fully refundable. Go ahead, reserve a unit and then decide if you want to live downtown. If not, just ask for your money back.

For example, the W Hotel and Residences has a $10,000 fully refundable deposit policy. While they report that they have "sold" 150 of their 196 units, this number will certainly drop when the hard earnest money is due at ground-breaking in October, or when some occupants find out that they will not qualify for a jumbo loan.

This isn't true for every project: once a building commences construction the deposit requirements typically become much more strict with as much as 10% of purchase price due to the developer. It's the buildings still in pre-construction sales whose "sales" are the hardest to gauge.

The Monthly Cost of Luxury Living

Condo fees fund the daily operations and maintenance of most condo buildings. They cover security, landscaping, cleaning of common area, common area energy use, maintenance, and other key building functions.

With this posting, we are publishing the condo fees of two new ultra-luxury projects, The W Hotel & Residences and the Four Seasons Residences, for the first time. Our previous analysis has noted that he prices in the new buildings that we have looked at are surprisingly constant -- they have varied from $0.28 / SF / Month to $0.40 / month -- an amazingly tight range. With these two new projects, this is no longer the case. According to our research, the condo or home owner association fees at both buildings are set at $0.61 per month -- 50% higher than any other building we have reported on and 85% higher than middle-of-the-road projects like 360. While it should be no surprise that the Four Seasons and W are more expensive than the Hilton, it's sets a new and unprecedented price for luxury condo living in Austin.

Almost universally, Austin condo fees are calculated on a dollar-per-square foot basis. The rate typically remains relatively constant on all units throughout each building. So, condo fees are not higher for more expensive units, or units with more bedrooms, or units on higher floors compared to less desirable units of the same size in the same building. The only thing that matters is the number of interior square feet. If anyone has numbers for other buildings, send them to us and we will add them to the list.

Here are the updated building-by-building statistics:

Fee by Building - - - - - $ / SF / Month
Avenue Lofts
.................$0.28
Milago
.......................$0.31
The Sabine
...................$0.33
360
..........................$0.33
Plaza Lofts
..................$0.33
The Shore
....................$0.36
Five Fifty Five Condos
.......$0.40
W Hotel & Residences
.........$0.61
Four Seasons Residences
......$0.61
Average......................$0.40

The Shrinking Downtown Austin Rental Market

The Austin residential rental market -- the whole thing, not just downtown -- has been very strong throughout 2007. Throughout the first half of the year, both rents and occupancies increased significantly. For example the mid-year citywide occupancy rate was 96.8 percent, up 2 percentage points from December.

Despite the strong rental market, plans for hundreds of planned downtown rental units have recently been abandoned to make way for condos. At the both the Four Seasons Residences and the Monarch, no rental units remain even though hundreds were originally planned. The Monarch, in fact, was originally proposed as an all-rental project before switching to an all-condo design during construction.

What is driving the change? The answer is simple: cost. The downtown condo boom has driven up both land costs and construction costs for downtown projects. As the cost of building downtown goes up, property taxes have also risen at a rapid rate. As these costs go up, developers are forced to pass on the increases to renters or buyers to maintain the viability of the project. So far, the condo market has shown strong resilience --- units continue to sell well even as prices increase. The rental market, however, is very different.

Today, there is only a small high end rental market in Austin. For rentals in the $2,000 - $5,000 / month range, the market is relatively limited. Today, the downtown premium for rentals is very steep -- downtown rents are as much as twice the rents for comparable luxury units in other parts of the city.
Unlike other cities, affluent Austin buyers prefer to buy houses or condos, they do not seem as inclined to rent big dollar downtown rental units. As costs have driven the required rental rates higher, developers have become concerned that they will not be able to rent all of their units at a high enough rate to make their projects financially viable.

While many units have been redirected from rentals to condos, there are still a few projects such as the new AMLI tower that are still slated to be 100% rental projects. As future downtown rentals do come to market, developers will likely focus on smaller unit sizes in order to keep rates competitve in the face of rising construction costs.

Fight over Riverside Lakefront Towers Continues

While zoning variances seem easy to come by for most downtown condo projects looking for increased density or height, there is one request that remains sacred: building in the protected zone around Lady Bird Lake. Long-standing rules prohibit construction within 200 feet of the former Town Lake.

This is a problem for CWS Capital Partners which is trying to build three 17-story apartment and condo towers with 715 units on the south bank of Lady Bird Lake between Congress Avenue and I-35. The project has requested a variance to build 50 feet closer to the lake than current rules allow. The project has faced significant opposition and lost a crucial vote last week.

Here is the summary from the Statesman:

A developer seeking city approval to build three high-rises 50 feet closer to the shores of Lady Bird Lake than city rules allow struck out at the city’s Parks and Recreation Board meeting last night when board members recommended that the city should deny its request.Board members voted 5-4 against CWS Capital Partners’ request for a variance that would allow it to build 150 feet from the shore. The board’s vote will serve as a recommendation to the Planning Commission, which could hear the case as soon as September.More than 70 people attended Tuesday night’s meeting including many nearby neighbors and lake enthusiasts lobbying against the variance for the property located at 222 and 300 E. Riverside Drive.Board chair Linda Guerrero was one of the members who voted to deny the request.“There was an overwhelming concern regarding the project, and the citizens seemed to want to preserve the waterfront overlay (the current rules) overwhelmingly,” she said.


While CWS had been requesting a 150 foot variance, this was a major concession as their original plans called for an 80-foot setback. The project is built on land currently occupied by long-standing apartments built much closer to the lake. Prior to the release of the current rules in the 1980s (they were revised in 1999), buildings could legally be built much much closer to the shore (as close as 25 feet). If CWS does not receive approval for the current variance request, they have proposed building two 17-story towers with the legal setbacks and simply remodeling the existing apartments into town homes -- a legitimate exception to the setback requirements.

While it might make sense to replace old townhouses that are close to the lake with new buildings 150 feet from the lake, the political debate has focused on the integrity of the regulations. The lake is the crown jewel of Austin and the council has taken a "no exceptions" approach to preserve the integrity of the green space surrounding the lake. While it is easy to focus on the setback, an equally important goal of many residents is to extend the hike and bike trails to the east. In fact, one public interest group endorsed the 150 foot version of the CWS proposal.

While the zoning issues are settled for now, it does not seem like the city will get everything it wants: a 200 foot setback, demolition of the old apartments, and an extension of the hike and bike trails to the east. Hopefully CWS will take up the slack, striking the right balance between their development needs and the public interest.

BartonPlace Shows Condo Demand is Still Strong

BartonPlace, a planned 270-unit condo project behind Austin Java on Barton Springs Road, announced today that despite recent media attention and public speculation about whether the Austin condo market is being overbuilt, 300 people have already made reservations for a chance to buy a condo in their 270-unit project. They also announced that they will end the reservation project after tomorrow. After that, the only way to reserve a unit will be with a sales contract on any that do not sell in the pre-sales period. The project is expected to begin construction later this year.

The project includes one, two, and three bedroom units starting at $263,000 for 683 feet. With a prime location close to downtown and next to Barton Springs pool and park, the project will is in a great location and well priced. As we have seen with many of the downtown projects, the lower the price, the higher the demand. Projects like 360 with many units under $400K have sold very quickly.

The full profile is included here.

Project Rendering:

BartonPlace Barton Place Condo Project Austin Barton Springs

Approximate top floor view:


21c Museum & Condos Takes a Step Forward

The 21c Museum & Condos moved a step closer to reality this week. The project, a 44-story tower which will combine a museum, hotel, and condos in a very attractive structure on Third and Brazos, received approval from the Austin Design Commission. Next, the Austin Planning Commission will review the project on September 11 before it's final review by the City Council. Given the buildings strong support, it seems to be well positioned for approval.

Here is the summary from the Statesman:

"The 21c museum, hotel and condo development slated for Third and Brazos streets will reach 44 stories into the Austin skyline, making it a dominant presence in the area of downtown east of Congress Avenue. The $200 million project will include 209 condos along with an upscale, 230-room hotel and contemporary art museum. The Design Commission voted unanimously on Monday to support the project, which has already garnered the approval of the city's Downtown Commission and support from the Downtown Austin Alliance."



The building is expected to begin construction in January and to be completed in 2010. The sales center is expected to open later this month.

Austonian (sort of) Breaks Ground

The Austonian, a 56-story tower at 2nd and Congress that would become the tallest building in the city, staged an elaborate "ground-breaking" ceremony today to signify the beginning of construction. While the ground-breaking does hold real symbolic value, it did not involve much in the way of construction equipment. For the ceremony, a pile of dirt was constructed in the middle of the lot and then symbolically dismantled by a large crowd of well-dressed dignitaries in business clothing and matching white hard hats!

While the ground-breaking does not truly commit them to completing the project, it is a step in the right direction. The project team announced that they have lined up full financing for the project from Spanish sources. With the financing complete, they are now commencing construction. When the cranes go up, it will be a good sign that the building will truly be a reality.

The Austonian is an exciting project that is one of the most bold developments in Austin. At 56-stories and with 188 units starting at $500,000, the project is exclusively focused on the high end of the market. This is the segment that remains the most unproven downtown. The commencement of construction is a good sign for the Austin condo market, especially in the middle of the current credit crunch and ongoing subprime lending crisis.

Austonian Austin Condo Ground Breaking Ceremony

AustinTowers.net Featured on Fox News!

Fox News ran a story tonight on the Austonian ground-breaking and the state of the downtown Austin condo market. AustinTowers.net editor Paul D'Arcy was asked to provide analysis on the current downtown condo market.

Update: Downtown Condo Sales

We have lots of updates today on the state of sales at the leading downtown projects:

- The W Austin Hotel & Residences, which is currently building a sales center at Block 21 in downtown Austin, reports that about three-fourths of the 196 condo units have been reserved with a deposit. Construction of the building will begin in October.

- At Spring Condominiums just south of Whole Foods, 40% of the units are under contract. They report that they have sold out of all of the lower priced units. The building broke ground last month.

- At 360, the 44-story tower next to Austin Music Hall, 90% of the 430 units are under contract. The building has been very desirable because it is tall, well-located, and reasonably priced with virtually all of the units priced under $500K. The building has been under construction for a while, it is already approximately 30-stories tall.

- The 305-unit Monarch, also just a block from Whole Foods, is cryptically reporting that "there are prospective buyers for at least half of the units" although it remains clear whether these buyers have signed contracts.

- The Four Seasons Residences reported a month ago that 80% of the on floors 14-32 had already been reserved after just 6 weeks on the market. As a result, they have now opened the lower floors - floors 6 to 13 -- for reservations. They expect to begin construction later this fall

Forecasting Downtown Condo Sales

The Statesman ran a comprehensive analysis of the current condo building boom -- it was the lead story in today's paper. As part of the article, they interviewed many experts on the downtown condo market.

With the ongoing mortgage crisis, the billion dollar question is how the Austin condo market will fare. The answer: while the Austin market is one of the strongest in the country and condo demand remains strong, nobody really knows. The issue is that this is a new market: there is really no good parallel in the history of the city. According to the Statesman:

Forecasting demand for luxury condos is difficult, partly because there is little historical data for the fairly new phenomenon in Austin, said Eldon Rude, director for the Austin market of Metrostudy, which tracks the housing market.The next 12 months will be telling, Rude said. "We won't know how strong this market is until we see some of these projects get completed and begin to close units and move residents in."Their performance will depend on the economy, he said, "and it's impossible to forecast the state of our economy 12 months from now. "



As we have discussed, thousands of units are being planned for downtown Austin -- more than 1,000 are currently under construction. In fact, hundreds of units have been reserved in the last two months alone. For comparison, only 15 downtown condo units have sold on the resale market in this same time period. The difficult thing is that it is dozens of new projects which are being simultaneously introduced to the market. While demand has been strong for the prime projects, it can't be bottomless and nobody knows where the market ends.

One thing which is clear is that the market is stronger on the low end than the high end. The lowest priced units are moving very quickly while it remains to be seen how the high end units will fare. Like many other markets, it will likely be years before we know how many people want to live in a downtown condo and have the resources to afford it!

July Sales: Central Austin Demand & Appreciation Remain Strong

July sales numbers are out and the news is very positive for central Austin. While the number of sales in July decreased for the city as a whole by 2% (even as prices increased 7% citywide) when compared to last year, the story is truly a tale of two cities: inventory is growing in the outskirts of Austin while demand remains very hot for central Austin. In central Austin, sales volumes are increasing, prices are going up, and inventory has been shrinking, It is a very strong market.

The best analysis of the market comes from Ki Gray and his blog:

If we look at the numbers, we saw a total increase in inventory of 1083 homes. If we break this down, we saw an increase of 1050 in outer Austin and an increase in inventory of 33 homes in central Austin. So this is an increase of inventory in the suburbs of 15 percent compared to an increase of 2 percent for central Austin.Another way to look at this is to look at months of inventory on the market:

All.........Outer Austin.......Inner Austin
3.57......3.91..................2.48

So in summary, the numbers for the Austin market are better than what we see in an average market (6 months of inventory) but we have slowed down a bit from the fasted pasted market that we saw last year. Also we are seeing central Austin again outperform the suburbs.



When analyzing these numbers, there are a few things to note. First, prices are increasing sharply in downtown neighborhoods: as much as 20-30% in the prime neighborhoods over the last year. Second, these statistics do not include the strong sales of downtown condos which are not listed in MLS. In fact, when these units are considered, it is possible that citywide sales actually grew in July. Finally, it is very important to note that these numbers do not reflect the dramatic changes in mortgage lending which occurred in mid- August. While iy will will take a few months to see the full effect of the current lending environment, it will be strong and negative. The good news is that Austin is better prepared than almost any other metro area: with a strong market and low inventories, Austin should ride the down market quite well.

Spring Condo Update: Construction Begins, Sales are Strong

The Spring condos, an attractive 42-story green-colored building just south of Whole Foods, is under construction and selling quickly. According to the marketing center, construction began on July 24th and completion is expected Spring of 2009. As of today, 40% of units have already been sold.

We have learned of additional details of the planned project:

- 75’ lap pool on the 5th floor with an outdoor kitchen
- Private dining for rent with a full kitchen 
- Gas cooking 
- All 2 and 3 bedroom residences are corner units with 180 degree views
- 2 and 3 bedroom units come with 2 reserved parking spaces
- There is a rentable guest suite available to building residents
- Bosch appliances are standard
- Pets allowed
- Designed as a Green building

The latest renderings or shown below -- and we've updated the full AustinTowers profile on on the project.

Spring Condo Tower in Austin Skyline

Spring Condo Project Bathroom Austin

Spring Condo Project Kitchen Austin

Spring Condo Project Interior Austin

Spring Condo Tower Pool Austin

Austin Housing Prices Increase 5.6%

In the midst of a rough week in the mortgage industry, it is worth taking a break from the doom and gloom to report that the Austin housing market has been relatively strong over the last year even as prices have decreased in other markets. Whatever does happen in the national economy, the strength of the Austin housing market means that we will fare better than most areas of the country where the housing market is much more tenuous.

According to the Austin Business Journal:

The cost of Austin-area homes has increased 5.6 percent in the last 12 months as prices on the national stage dropped 1.5 percent, a report released Wednesday shows.The median price for a home in the Austin-Round Rock metropolitan market stood at $186,600 at the end of the second quarter, up from $176,700 in the second quarter of 2006, according to the National Association of Realtors' quarterly housing report.


While this growth does not reflect what has happened over the last couple of weeks, and provides no guidance as to what will happen in the next couple of months, it is better to enter a difficult period from a position of strength.

Seaholm Construction Begins

Construction has officially commenced on a five-year project to transform the Seaholm power plant and surrounding site near Cesar Chavez Street and Lamar into a large mixed-use project. The initial phase of construction, as expected, include mostly infrastructure enhancements and site preparation.



Seaholm is a 7.8 acre site, the main feature of which is the 136,000 historic art deco decommissioned power plant. The redevelopment project will add a 22-story hotel and condo project featuring 80 condo units atop a 160 room hotel. While the initial phase of the project will open in 2008, the Seaholm Plaza Hotel is not expected to open until 2010.

The project will also include offices, extensive retail, and more than 3 acres of open space. However, the most exciting part of the project is the redevelopment of the Seaholm facility itself. When complete, the art deco structure will include nearly 100,000 square feet of retail and restaurants.

More than anything else, Seaholm will further shift the heart of downtown to the west. While downtown life used to center around 6th street between Congress and red river, the warehouse district, 2nd street district, and Whole Foods have shifted the balance. With Seaholm, the downtown action will increasingly be centered between Congress, Lamar, 5th, and Town Lake.

Jumbo Mortgage Rates Spike

The mortgage crisis is now front page news all across the United States. While conforming loans remain okay -- primary loans with values below $417K and full income documentation for buyers with solid credit - the investor market for everything else is in trouble. The result is a rapid rise in rates. As for the condo market, there will be very little effect for buyers of units that are less than $500K. For the high-end market, however, the market change is dramatic.

First, many buyers who qualified for loans a couple of weeks ago will not be able to get financing at all today. For those who can still get financing, rates have risen dramatically and are currently hovering between 7.5% and 8.0% for jumbo 30-year mortgages.

Bankrate.com reported today that:

Buyers of pricey houses are finding that money has suddenly become more expensive to borrow. Ditto for loan applicants who don't want to prove that they told the truth about their incomes.Rates on jumbo and Alt-A mortgages have zoomed upward since the last week of July, even as rates on conforming, fixed-rate mortgages slipped downward.The development is bad news for people who want to borrow more than $417,000 to buy a house or refinance a loan, or who can't or don't want to document their income. Rising jumbo rates make it more difficult to sell a house costing half a million dollars or more.



Over the last few months, hundreds of Austin buyers have put units under contract in new condo projects such as 360, the Four Seasons Residences, and the W Hotel & Residences. many of the buyers may no longer qualify for mortgages, or, may not be comfortable with the higher monthly payments now required. While every building is different, some projects do allow buyers to get 100% of their deposit back if rates climb over a certain threshold, one of the major buildings set this rate at 8%, or if buyers are unable to secure financing. With rates spiking, some buyers will be able to take advantage of these provisions.

For the majority of downtown units priced under $500K, including most of the units I buildings like 360, the current mortgage crisis is not catastrophic. While lending standards have tightened this week, most buyers with solid credit and documented income will still be able to qualify for the same traditional mortgage, just at a slightly higher rate.

For buyers who can afford the higher rates or our planning to pay cash, now might be a great time to negotiate with developers. If this crisis continues, it will be very difficult to sell many of the high-end units currently planned for downtown Austin.

Mortgage Crisis Hits Austin

Over the last two days, the Austin lending market has changed dramatically for the worse.

As the subprime lending crisis has evolved into a global problem—the bankruptcy of two large lenders seems to have tipped the scales — the market spotlight has turned a negative eye on every participant in the residential mortgage market. As the bad news has spread, lenders are dramatically cutting back on loans -- and rapidly raising rates at the same time.

The market changes in Austin over the last 48 hours are dramatic:

- A number of lenders, especially brand name lenders such as Wells Fargo and Bank of America have hiked jumbo (>$417K) mortgage rates from 6.8% to over 8.0%. Many other lenders seem to be following.

- Specialty loans -- especially loans that do not require income verification or documentation -- have quickly disappeared. These loans, which were commonplace a week ago, are now very difficult to come by. The same is true for loans that do not require a full 20% down payment.

- It has been reported that large loans (>$1.5M) are now very difficult to obtain, even for people in a very strong financial position.

These changes are bad news for buyers -- especially buyers who have placed deposits, are stretching their budget, and haven't locked in their final loan. We'll see how the marker evolves over the next few weeks. While anything could happen, most experts believe that the mortgage lending environment will get worse before it gets better.

New Austin Four Seasons Residences Renderings

The Four Seasons Residences, the new condo project adjacent to the hotel, has released new renderings which provide a great feel for what the building will look like when it is completed. The renderings also show a slightly modified exterior design: more upper floors have been added with full glass walls. These replace the lower floors with smaller windows. The change is the result of the elimination of rental apartments which were initially planned but since have been replaced by additional condo units. The building is designed by Michael Graves, a world-famous architect.

The pictures show sample units as well as the rooftop amenities: a pool, yoga deck, and sun deck more than 30 floors above town lake. The pictures complement a very impressive "walk-through" video rendering of the project which can be viewed in the Four Seasons Residences appointment-only sales office.

As previously reported, the project recently opened the lower floors to prospective buyers after more than 80% of the units on the upper floors were reserved in the initial sales phase. The project seems to be on track to sell out by ground-breaking sometime this fall.




Read More...

Economic Analysis: 2008 Job Growth to Drive Austin Housing Price Appreciation

If there is one rule in predicting what will happen in the housing market, it's that strong job growth drives strong real estate demand. This is why the Austin market was red hot during the tech boom and why the market was stagnant during the tech bust -- even as real estate prices soared in the rest of the country. And it is one of the main reasons that the Austin market has stayed so strong in 2007, even as national prices decline, interest rates continue to spike, and the sub-prime crisis unfolds.

The good news is that job growth in Austin is expected to remain strong. According to Mark Dotzour, chief economist and director of research at the prestigious Texas A&M Real Estate Center, 2008 should be a great year for the Austin housing market.

The Statesman reported that:

Dotzour said national job growth will be only about 1 percent but that Texas' rate probably will be double that. And he predicted that Central Texas will outperform both the nation and the state with 3.5 percent job growth. "Austin is blowing the doors off the state of Texas," Dotzour told a crowd of more than 1,000 people. On the housing front, Dotzour said, the Austin metro area should see healthy sales and price appreciation. . . Home sales were at near-record levels at mid-2007 with a low, four-month supply, Dotzour said. . . It's no surprise, he said, that Central Texas home prices appreciated 11 percent in early 2007 compared with a year earlier, according to federal housing data. That outpaced rates of 6.87 percent in Texas, 4.34 percent in Florida and 1.19 percent in California. "I would expect at the current low levels of inventory, home prices are likely to continue to appreciate substantially in the next 12 months, possibly rising in the 8 to 10 percent range," Dotzour said in an interview.



For condo shoppers, market appreciation and rapid increases in construction and land prices are clearly putting upward pressure on condo prices. As long as demand remains strong, condo prices will likely continue to slowly rise.

Austin Crane Shortage

Austin's KXAN is reporting tonight that an acute shortage of cranes and crane operators is complicating high-rise construction in Austin. We've heard numerous reports from developers that a scarcity of construction labor -- and skilled general contractors and sub-contractors — is leading to escalating constructions costs, and higher condo prices in the end.

According to the story:

"There's no available operators in Austin right now," said construction worker Sam Buchanan. "They're all working." With a nationwide shortage, construction managers are paying more to keep cranes moving in Texas.



Over the last two decades, only a handful of tall buildings have been built downtown. As a result, local construction companies are only staffed to build a couple of major projects at one time. With more than 20 projects currently under construction or being planned, it is getting very difficult to find labor and equipment to build new projects. The result is simple: construction prices are going up and condo prices will likely follow.

AustinTowers.net Featured on NBC!

AustinTowers was featured on the 10PM news tonight on NBC station KXAN! The story looked at the changes to the Austin skyline and the potential impact of construction equipment shortages on existing projects and condo costs.

Watch the story here!




Reserving a Condo: Up-front Payment Requirements

In July, more than 100 Austin condo buyers reserved units in projects such as the Austonian, the Four Seasons, and the W Hotel & Residences. All three of these projects have one thing in common: they are currently empty lots. Actually, in the case of the Four Seasons Residences, the building site is currently a very busy hotel parking lot.

In the current hot condo market, top projects will sell out before the first ceremonial shovel of dirt is removed from the lot. In these circumstances, buyers will be required to pay deposits years before they will be able to occupy their newly selected home. The deposit requirements vary widely among projects. Typically, buyers will be required to pay between 3% and 10% of the purchase price of the unit in order to execute a sales contract. The projects that are super-upscale or in high demand are the ones most likely to have high condo fees.

A typical payment scheme would be an initial payment of $5,000 or $10,000 to be paid at contract signing. This payment reserves the unit. The balance of the deposit would be paid over 90 or 120-days (or with some projects all money is due by ground-breaking). In addition, most buyers are required to pay 50-100% of upgrades such as wood floors, premium appliances, and sound system packages.

One comment we have heard from buyers is that it is currently a seller's market: prices are non-negotiable, deposit requirements are steep, reservations require a sales contract, and there are very few good deals or incentives to be had. While the 360 supposedly provided a 3% down incentive for a limited time to move some remaining units, these sorts of incentives are hard to come by and almost never available on the prime units that tend to sell first.

While the current market for condos may be a sellers market, this won't be true for every project that comes along over the next couple of years. The name brand projects such as the Four Seasons, the W Hotel & Residences will see high demand from people who value the brand. Other projects, like the tall and reasonably-priced 360, will also sell well. For the other downtown projects, competition for buyers will be fierce. It is inevitable that some buyers will be able to negotiate better deals, free upgrades, or reduced deposit requirements by shopping around and playing projects against each other.

Add AustinTowers to Your Google Search Page

AustinTowers posts news and analysis on the downtown condo market 3-5 times every week. If you use Google for search, we've made it easy to add our news feed to your google home page. Simply click on the "Add to Google" button on the right and you will be directed to Google to create an iGoogle search page like the one below, to add AustinTowers to an existing iGoogle page, or to add AustinTowers to Google Reader. Once added, you'll see our latest headlines whenever you visit your iGoogle page to conduct a web search. If you later change your mind, it's easy to remove the AustinTowers feed or to revert to a basic search page.



As many of you know, you can also subscribe to the AustinTowers feed on this site by simply clicking the Orange RSS feed buttobn on the sidebar or by following this link: AustinTowers RSS Feed

SoCo Lofts Near Completion on South Congress


While dozens of high rise condo projects rise from the ground in downtown Austin, interesting condo developments are also nearing completion in other parts of the city. One notable project is the SoCo Lofts which is nearing completion in the red hot South Congress district. This 69-unit condo development with ground-floor retail is located near Saint Edwards University. By building outside the core of downtown, the project has been able to hit a price point that is much lower than any current downtown project. With 616 SF units starting at $169,900 and 2-bedroom units starting at $289,900, the project is at least 25% less expensive than the new downtown projects.

SoCo Lofts

The SoCo Lofts are not alone: a number of interesting projects are currently under development on South Congress, South Lamar, and on the East side across I-35 from downtown.

Here is a full profile of the project: Read More...

W Austin Condo Update

The W Hotel & Residences continues to make progress. They are now actively selling units ad have completed nearly 200 meetings for the 206 planned units in the 36 story tower. Supposedly, they have taken firm reservations for somewhere between 20-35% of the units.

The W is offering 19 different floor plans ranging in size from 644 to 3,779 square feet. They have launched a new website which includes all of the floor plans: http://www.block21residences.com/plans.asp. The project is located in the heart of the second street district directly behind city hall. The modern W brand is popular and should fare well with a young, affluent audience.

Here is a new image of a model of the planned building:


Future Downtown Austin Skyline

Every now and then, someone takes all of the fancy models of new condo projects, shrinks them to their proportional size, and lines them up in there approximate position in the sky. While not perfect, this latest attempt is up-to-date with most of the recently announced projects. When shown this way, it is amazing to think that the skyline in 2010 will essentially be all new.

Here is the image:

Future Downtown Austin Skyline

Monarch Switches to Condos

As predicted, Monarch has officially announced that they are switching their project from all-rental to all-condo. This is big news, It's indicative of both the hot condo market and the weakness of the high-end downtown rental market. The 29-story building at 805 West fifth street, is located just a block from Whole Foods. The buidling, which is less than a year away from completion, will feature 305 units from 681 square feet to 3,530 square feet and priced from the low $200,000s to $1.65 million.



Here is the sumary from the Statesman:

Developers of the Monarch, a 305 unit residential tower under construction on West Fifth Street, have decided to switch the project from apartments to condominiums . . . Officials with ZOM Texas Inc. said their investors this week approved the decision to sell rather than rent the units in the 29-story building, based on what they say is continued strong demand for downtown condominium living. . .Some observers said the change renews questions about whether Austin's downtown residential market might be at risk of being overbuilt. But Charles Heimsath, whose consulting firm does research for many developers about demand for their proposed projects, says healthy sales and reservations at various projects are prompting him to raise his estimates on how many units the market can absorb annually, and he said he expects demand to remain strong for the next two to five years.



And the developer and broker seem very optimistic about the projects sales potential:

Kevin Burns, principal broker of Urbanspace Realtors LLP, the Monarch's exclusive listing agent, said that, without any marketing efforts until now, there already are prospective buyers for at least half the building. From the start, the Monarch's units were built to condominium standards and specifications — larger units with features such as hardwood floors, granite counters and wood cabinetry, for example, with the long-term goal being to sell them, said John Faulk, development manager for ZOM Texas Inc., a subsidiary of Orlando-based ZOM Inc.



The Monarch has a great advantage which is that they will beat many of the other planned projects to the market. With dozens of projects in the early phases of construction or still in the pre-construction planning phases, Monarch will have the advantage of marketing units that are very close to completion, and to target the pent-up demand for new projects.

Strong Pre-Sales for Austin Four Seasons Condos

This just in: we confirmed today with the developers that 80% of the Four Seasons Residences on floors 14-32 have already been reserved after just 6 weeks on the market. As a result, they have now opened the lower floors - floors 6 to 13 -- for reservations. Prices for the 166 unit-project start at $400K and top out at more than $4 million.

Four Seasons Condos Austin

This is great news for the downtown condo market. One of the big mysteries has been how strong the demand would be for super-luxury projects such as the Four Seasons and the Austonian. While they are only reservations, the high level of interest is very encouraging. This is especially amazing given that the project has not even broken ground!

As for the lower floor units, the sizes range from 806 to 1,815 square feet with prices starting in the $400s. Amenities include a roof-top pool and terrace, concierge service, and room service provided by the hotel. The project is designed by legendary architect Michael Graves. The full profile can be found here.

Updated: Condo Fees by Building

As we have written before, one of most common questions asked by first time condo buyers -- especially in Austin where the popularity of condos is rapidly on the rise -- is how much individual buildings charge in monthly condo fees.

Condo fees fund the daily operations and maintenance of most condo buildings. They cover security, landscaping, cleaning of common area, common area energy use, maintenance, and other key building functions. On average, our research shows, condo unit owners can expect to pay $0.34 / SF / per month or $340 in monthly condo fees for a 1,000 SF unit. For more information on total condo costs, check out our detailed posting on condo cost of ownership.

Looking at detailed MLS records on more than 30 units on the market today, we recently calculated the rough fees for the major downtown condo buildings that currently have units on the market. Since then, we have received updated numbers from some of the projects and some additional data on two new projects. Almost universally, the fees seem to be calculated on a dollar-per-square foot basis that seems to remain relatively constant on all units throughout each building. So, condo fees are not higher for more expensive units, or units with more bedrooms, or units on higher floors compared to less desirable units of the same size in the same building.

In addition, the prices in the six new buildings that we have looked at our surprisingly constant -- they vary from $0.28 / SF / Month to $0.40 / month -- an amazingly tight range. If anyone has numbers for other buildings, send them to us and we will add them to the list.

Here are the building-by-building statistics:

Fee by Building - - - - - $ / SF / Month
Avenue Lofts
.................$0.28
Milago
.......................$0.31
The Sabine
...................$0.33
360
..........................$0.33
Plaza Lofts
..................$0.33
The Shore
....................$0.36
Five Fifty Five Condos.......$0.40
All..........................$0.34

As we get more information on additional building fees, we'll keep updating this posting!

Update: Further Analysis of June Sales

On July 20, June MLS numbers were released, showing the first drop in June sales in five years, even as prices rose by more than 7%. As the strength of the Austin market has defied national trends over the last year, it's natural to worry whether this might signal the beginning of the end.

In our first posting on this subject, we concluded that the negative statistics do not really effect the downtown condo market which does not include units below $130K where the most dramatic market changes seem to be taking place. Today, thanks to Ki Gray, we have much more detailed statistics to analyze.

These statistics allow us to look more closely at neighborhood-by-neighborhood sales details for the high end area closest to downtown. Here is what this new data shows:

In June:
- Price per square foot increased in June in 20 of 23 central austin neighborhoods analyzed by Ki

- In the 20 most central areas in the first Half of 2007 (v. the period one year earlier):
- Prices increased by 12%
- Sales volumes decreased by 15%
- Days on Market increased from 49 to 52

So what does this data add to the picture? As we stated previously, the culprit is clear when it comes to the change in the broader Austin market: the current sub-prime lending crisis means that many first-time buyers with borderline credit can no longer qualify for mortgages. This is resulting in a decrease in sales of low priced sales -- i.e. houses priced under $130k in Austin.

To our surprise, It does look like similar market forces are effecting the prime central areas. While there may not be many units priced under $130k, the same trend is occurring: sales volumes are dropping while prices are rising. The most likely interpretation is a strong broad market with weakness at the low end. The high end seems to be strong while sales of lower priced houses -- and not just units priced under $130K — suffering.

Will this effect the downtown condo market? The data suggests that it will: buyers with borderline financing qualifications will be excluded from the market. However, with strong price appreciation and low inventory, the numbers still look good for developers and buyers alike. But the thing to note is that the June statistics do show a change in the market which should be closely monitored in the upcoming months.


The most interesting downtown housing: Population 3 (including a dog!)

While lots has been written about the many large-scale downtown high rise condo projects under way, there i another downtown living trend worthy of note. Over the last five years, a number of the older, historic buildings on Congress avenue have been converted into very large single family residences. At least four buildings have been - or are in the process of being - converted.

Here are pictures of one of the projects - a roughly 6,500 square foot "house" between 8th and ninth on the East side of Congress Ave. I have toured one of these projects and the amazing thing is the complexity of the engineering. To build these -- and to support the weight of a pool on the roof -- requires the construction of a complex steel structure to support the loads of the house.

Here are a few pictures of the project:




Click the link below to see many more great pictures!


Read More...

June Home Sales

June sales were announced today by the Austin Board of Realtors and the news is interesting: volumes were down 6% from June of 2006 while prices were up by 7%. This was the first June drop in volume in the Austin market in 5 years.

What is going on? Does this mark an end to Austin's defiance of national trends? How will this effect downtown condo sales?

According to the Austin Board of Realtors, the biggest volume change occurred with sales of single family homes priced below $130,000. This explains both the volume drop and the decrease in the median price. The culprit is also clear: the current sub-prime lending crisis means that many first-time buyers with borderline credit can no longer qualify for mortgages. This is resulting in a decrease in sales of low priced sales -- i.e. houses priced under $130k in Austin.

When low priced sales are taken out of the equation, it does seem that sales remain strong. One important thing to note is that MLS statistics do not include the many new condo units that have been sold directly by the developers without ever listing the units on the MLS. Since these numbers are not included in the Austin Board of Realtors' statistics, it is hard to know exactly what is happening in the market at large. The only thing we know is that the volumes and median prices would both be higher if all downtown condo sales were included.

In summary, today's negative statistics do not really effect the downtown condo market which does not include units below $130K where the most dramatic market changes seem to be taking place. But that said, any Austin real estate deceleration is reason for concern, especially after 5 consecutive years of sales increases.

AustinTowers Featured on News 8 Austin!

We were very surprised to find that AustinTowers was featured today on News 8 Austin - our first television appearance!

NEW: Downtown Austin Condo FAQ

AustinTowers is very excited to launch a comprehensive Downtown Austin Condo FAQ (Frequently Asked Questions) as a new permanent section of the site. The FAQ will provide a comprehensive overview of the emerging downtown Austin high-rise condo market by answering the most common questions facing condo buyers.

Here are the questions that are answered in the initial version of the FAQ:

  • How much does it really cost to own a downtown condo?
  • How much do condo fees vary?
  • Why are condos more expensive than single family homes near downtown?
  • What units make the best investment?
  • How big is the high-end condo market?
  • How easy is it to sell a downtown condo unit?
  • Who actually lives downtown today?
  • Do downtown residents actually work downtown?
  • How many downtown condo units are bought by investors?
  • Do MLS statistics accurately capture the current state of the downtown condo market?
  • What is being done downtown to promote affordable housing?
  • It looks like there is a ton of vacant sites downtown, will that effect values?
  • What is a good source for downtown condo listings?

If you have questions that are not included, please let us know! Just register and leave comments or send us an email here! To visit the FAQ, simply click here!

Update: The Million Dollar Austin Housing Market


The big Austin downtown condo question remains: how big is the market for million $ condo units in downtown Austin?Some new market stats from Ki Gray of Escapeso Austin Real Estate provide some context on the high-end downtown market and it's performance so far in 2007.

Here are the number of houses that sold for $1 million or more by year and that were recorded in MLS in the Austin metropolitan area:

2004 - 152 houses
2005 - 213 houses
2006 - 341 houses
2007 - 181 houses (1st Half of 2007 Only)

The amazing thing is that the size of the market has more than doubled in just 3 years. As one of the fastest growing segments of the market, high-end inventory and demand have been rapidly expanding.

It remains to be seen how many high end condo units can be absorbed by the Austin market. In the Austonian alone, there will likely be more than 100 units priced over $1 million -- that is a lot of inventory in one building. The project's construction budget alone is greater than $1 million per unit which should provide an indication of the average unit selling price.

The good news for the high-end projects are that they are adding much needed downtown inventory in the fastest growing segment of the market. The bad news is that nobody knows how deep this market is -- or how many units can reasonably be sold in any given year,

Monarch Condos?


The Monarch — billed as the city's first luxury rental high rise tower — is now very far along in the construction process. Developer ZOM Austin is constructing what was supposed to be a 27 story rental project on 5th just East of Lamar with 297 rental apartments and 8,500 square feet of ground floor retail.



The confusing part of the project is it's website which now bills the project as the Monarch Condominiums and refers to the upcoming opening of the project's "sales center". It's hard to find any interpretation other than that the project will be largely, if not entirely, converted from a rental to a condo project. There is not currently any websites promoting rentals at the Monarch.

Current sales of downtown Austin condo units are reported to be quite strong. While rental rates are rising, the market for very expensive downtown rental units is very very small. Given hat the Monarch will beat many of the other planned projects to the market, the switch is probably a smart decision. What remains to be seen, is what percentage of the building will be rental and which units will be condos. If anyone has additional information, send us a note!

How easy is it to sell a downtown condo?


The market for downtown condos is very active but quite different from the single family home market in two key facets.

First, downtown condo owners who want to sell are currently competing with new units entering the market. If too many units come on at once, downward pricing pressure may ensue. That said, developers are very good at controlling prices and surprisingly patient. However, it's important to note that condo projects are more commodity-like than single family houses in established downtown neighborhoods.

Second, units for sale within a building compete directly, and brutally, with other units within the same building. As we have written before, If you buy a house in central Austin, the odds are that it is different -- in one way or another -- from every other house in central Austin. When it comes time to sell your unique house, you may get lucky and sell for more than it's worth, or you may be unlucky and have it sit on the market for a long time. Setting a price is a key variable, but pricing a unique house is as much art as science.

The issue is that the value of unique single family homes is subjective and highly personal. Every house, every street, and every aesthetic is valued differently. The single family home market, as one would expect, is very different from the downtown austin condo market.

Every high-rise condo project has a large number -- sometimes hundreds -- of interchangeable commodity-like units. Unit 16B is essentially identical to unit 17B. The result is a much more efficient resale market. When it comes time to sell a downtown condo, there will likely be similar units on the market. If they are cheaper, they will sell faster. If they are more expensive, the may never sell at all.

While the floor (the higher the better, stay away from the ground floor) matters and in some buildings the view can vary greatly from side to side, the effect on value is not as dramatic as one might think. Our ongoing analysis of Nokonah values and appreciation confirms this: units on floor 11, the top floor, are valued at just 11% more than units on the second floor. Buyers seem to pick a building first, and then look for the right unit weighing size and price. This approach leaves very little room for creative pricing.

Yet, it's amazing how differently sellers price similar units. The AustinTowers listings pages provide a few great examples of this. For example, there are two units currently for sale in the Nokonah: a 670 SF 1/1 for $450K and a 1,225 SF 2/2 for $550K -- the smaller unit is almost certainly overpriced.

Because it so easy to compare prices, downtown condo values will be efficiently set by the market. The building will make a huge difference, but actual prices will be set by your neighbors. This has some benefits and drawbacks. On the positive side, accurate comparables make it easy to set the right price and correctly priced units should sell quickly. On the downside, pricing may fluctuate more widely with supply and demand: when there are lots of people selling at the same time, it's likely that prices will drop. And there is very little chance to get lucky and sell your unit for above market value --- if a unit doesn't sell, the most likely reason is that it is overpriced.

New York Times Article: Protecting the Hill Country


The New York Times published an interesting analysis of the development pressures on the hill country surrounding Austin. The hill country is one of Austin's greatest assets and has historically been protected from development by the difficulty of providing a reliable water supply across the rural region. Recently, however, new water infrastructure has changed the equation, adding to development pressures in the hill country.

Thousands of new people will come to Austin this year. One of the nice benefits of downtown development is that it takes pressure off development west of the city. A single large downtown building can provide enough housing to displace a 400 acre suburban development. Plus, as downtown residents either work downtown or drive in a reverse commute, they reduce the traffic pressure on highly congested roads.

Here is a quote from the article:

The Hill Country, an area that extends about 150 miles west of Austin, is quickly becoming suburban. With its rolling hills, lakes and rivers, it is attracting Texans eager to escape city life, and out-of-state buyers who can buy more acreage for less, real estate agents say, than they might pay in other states.“People want to live out in the country,” said Charles Gilliland, a research economist at the Real Estate Center at Texas A&M University in College Station.Water, once so difficult to find, is, at least for now, not a problem because of new water lines. Thousands of new homes are planned, and last year the Real Estate Center reported that land prices had reached as high as $25,000 an acre. In certain areas, the prices have ballooned even further.Ranchers and farmers, enticed by multimillion-dollar payouts, retirement or the lack of heirs, are selling thousands of acres of their large properties to developers eager to put up homes and strip malls. Other landowners, threatened with rising property taxes, see no option but to sell some of the land they have held in their families for many decades.The beauty of the Hill Country may also be its undoing. The crush of new people is likely to put more cars on county roads, pollute creeks and streams and eventually drain underground water supplies, according to the Save Our Springs Alliance in Austin.In an environmentally sensitive area like the Hill Country, which sends water downstream to Austin, the stakes are particularly high. And the concerns have led to efforts — like those of the Lowenthals’ group — to curb development.


360 Sales Update


According to a source who recently visited the 360 sales center, the 44-story 430 unit is selling well and should sell out soon -- many months ahead of its scheduled completion date. With 430 units, 360 is the largest of the current crop of developments, so a sell out would be a strong sign for the market.

The news is that 360 has sold approximately 378 of the planned 430 units. With 52 units remaining, 88% of units have been sold. Supposedly, most of the remaining units face East with the cheapest remaining 1 bedroom selling for $283K and the cheapest remaining 2 bedroom listed at $406,000. There are still 14 floor plans to choose from.

While sales are strong, the other side of the coin is that the first 75% of units supposedly sold in the first three weeks in he market in March. In the following 3.5 month, they have sold just another 13%. But, there is lots of time left to sell the remaining 52 units.

360 is unique in that it is well positioned, very tall, early to market, and attractively priced. It still remains to be seen how well the more expensive downtown projects will fare.

The NEW Austin Luxury Condo Market


When 21c Musuem & Condos, the latest downtown luxury condo project, was announced on June 11, many interesting questions were once again raised about the downtown luxury condo market. While the market remains strong for units priced below $400K -- such as many of those in 360 and Milago -- the market for high end units is not yet proven. With a bunch of high-end developments in the works including the Austonian and the new Four Seasons Residences, we should find out soon whether a real market exists for hundreds of units priced over $500K, and dozens priced over $1M as these projects come to fruition. As none of these projects have broken ground, it's hard to know where they really stand.

When the 21c project was announced, some interesting speculation on the Austin luxury market made it into the news coverage. Here is an excerpt from the Statesman:


Some observers question whether downtown might end up with a glut of high-end condos, as has happened in some other major cities. But Poe and some local real estate developers and consultants insist demand remains strong locally as baby boomers, young professionals, empty-nesters and others seek an urban lifestyle."I think your market is pretty deep," Poe said. He noted that developers would have three years to sell units before the building opens, adding that selling 65 units a year is "not an unreasonable goal."Charles Heimsath, president of an Austin-based real estate consulting firm that advised developers on the project, said strong pre-sales and reservations at both the Austonian and the Four Seasons suggest a solid demand.



The information from Charles Heimsath, an independent consultant, is very encouraging if true. It makes sense that the 21c developers did their research before deciding to proceed. We'll keep our eyes open to see if we can uncover any additional information on the state of presales at the current set of high end projects.

Spring Breaks Ground


Another downtown Austin condo building has begun it's unstoppable climb to the sky. Over the last few weeks, construction has begun on the Spring condo development in the Austin Market District, just south of Whole Foods. The $70 million project will be 42-stories high. The 260-unit project at 3rd & Bowie will have units starting in the low $200s.

Here are some new notes on the project from the staff:

Spring is designed by Foad Rafii, a Vancouver architect, using design principles that maximize the amount of usable space on each floor. Panoramic views of the city, wall-to-wall glass and concrete "point towers," so called because a plate - the footprint of one floor - is limited to 6,800 square feet. Compare this to Austin, where many of our recent residential buildings are thick and squat and use land inefficiently. Plans call for ground-level retail and 248 units, priced from $235,000 (600 SF) to $950,000 (1,720 SF), with only four to eight units per floor. This will be a stunning piece of architecture, and it will help accommodate the need for urban living space in the heart of Austin.Larry Warshaw, who is developing the project along with Perry Lorenz, Robert Barnstone and Diana Zuniga. Lorenz and Barnstone were partners in the Nokonah condominiums on North Lamar Boulevard and West Ninth Street. Robert Barnstone also served on the Austin City Council from 1988 to 1990. Warshaw and Lorenz co-developed the Pedernales Lofts condominiums on East Sixth Street. Zuniga, a well-known broker, also is a principal in the partnership that sold the land.



And of course, AT has a full profile. And here is a picture:

Dpring Condos Downtown Austin

Site Update: 3 New Profiles Added!


As new downtown Austin condo projects are announced, we add them to AustinTowers. Over the last week we've added three full new profiles for recently announced projects. This brings the total number of projects covered by AustinTowers to 36!

The new profiles are:

1155 Barton Springs
21c Austin
Sabine on 5th

And of course, they can all be found in either the New Condo Project Gallery or the Completed Condo Project Gallery. Please contact us to let us know if we have missed anything!

Waller Creek Project: An Important Investment in Downtown Infrastructure


In 1981, massive amounts of rain caused deadly and damaging flooding on Shoal Creek. According to experts, a similar flood could occur today on Waller Creek which passes through downtown just West of I-35. If this were to happen, there could be significant damage across more than 1 million square feet of prime downtown real estate bordering the waller creek flood plain. As recently as January, heavy rains have led to dangerous flooding on Waller Creek.



Recognizing this risk, developers and other downtown factions have been advocating for an elaborate downtown tunnel that would carry floodwaters 60-feet under the current creek banks, essentially eliminating the risk of a downtown flood on Waller Creek. In addition to lowering the risk of development on some prime lots, the City hopes that the tunnel will pen the way to the development of a San Antonio sytle Riverwalk with gondolas, restaurants, stores, and lots of free-spending tourists. Today, the City Council took the first step to make this happen.

Here is the summary from News 8 Austin:

Plans for the Waller Creek tunnel project are moving along. The Austin City Council unanimously approved the creation of the Waller Creek Tax-Increment Financing District at Thursday night's meeting.The decision allows for the redrawing of district lines so that political entities can fund the project. In this case, it allows for the city of Austin and Travis County to finance the project.The Waller Creek tunnel would carry water from the creek starting at Waterloo Park down to Town Lake and take out more than 1 million square feet of prime downtown land from the floodplain.Development plans also include beautification projects for Waterloo and Palm parks.Thursday's city council decision makes way to appoint the tax-increment financing district board, which will ultimately approve the final financing plan. The cost is now pushing $125 million.



While expensive, this project makes sense. The city wants developers to spend billions of dollars investing in downtown. For this to happen, the city needs to invest in infrastructure to support development and remove the risk of downtown flooding. The idea of a pedestrian-friendly riverwalk is a nice idea that would dramatically improve the somewhat dreary corridor on the west end of downtown. While this project will take years to complete, today's council decision is a step in the right direction.

Downtown Marriott: 31 floors, 1,000+ Rooms


New plans were announced today for the most controversial project in downtown Austin: the 1,000+ room $250 million Marriott superplex on 2nd and Congress. The project, best known for displacing La Manitas, has been reconfigured to include higher-end brand hotels and fewer, taller "buildings". As far as we can tell, the 31-story project still does not include any ground floor retail. While the project has an opportunity to extend the thriving 2nd street district towards the convention center and the new 21c Austin Condos and Museum, Marriott seems more interested in developing another large, generic, building on a prime downtown lot.

Here's a summary from today's Statesman:

White Lodging, which would develop, own and operate the hotels under a long-term agreement with Marriott International, still plans a 1,000-room project, but the new plans have two towers instead of three.New plans call for a 31-story tower along Brazos Street with 850 guest rooms and an 11-story hotel along Congress Avenue with 150 rooms.The larger Marriott will be a convention center hotel, and the smaller one will be a J.W. Marriott, the chain's upscale brand. White Lodging hopes to break ground in early 2008 and open the hotels in 2010. . . Initial plans called for a 26-story Marriott convention center hotel with 650 rooms; an 11-story upscale Renaissance Hotel with 200 rooms; and a 15-story Springhill Suites with 150 rooms.



If this project had an interesting architect, ground floor retail, and a way to incorporate Las Manitas it might be a positive addition to downtown. While the 1,000 rooms will provide an important boost to the convention center and the Austin economy, the planned project is uninspiring and potentially disruptive to a prime pedestrian corridor on one of the most important downtown blocks.

The Strong Austin Home Market


Interest rates keep going up. Sub-prime lending has been cut back. The rest of the country is watching housing values drop. In Austin, however, it's a very different story.

May real estate statistics were released today and the numbers show a surprisingly strong market. According to the Office of Federal Housing Enterprise Oversight, housing prices in Austin are up 10% so far this year. According to MLS statistics released by the Austin Board of Realtors, the average number of days on market in May was just 55 days and the median sales price was $183K.

As we've mentioned before, these numbers provide a context for looking at the Austin condo market without providing the complete picture: many condo projects are privately marketed so that the units never hit the MLS and aren't included in the monthly statistics.

The Million Dollar Austin Condo Market


How big is the market for million dollar condos in downtown Austin? Developers are betting that hundreds of buyers are willing to invest $1 million or more on high end units in projects like the Austonian, 21c, the Four Seasons Residences, and in the condos at the W hotel.

To get a sense for the competition for million dollar homes and condos in the Austin market, I scoured current MLS listings for homes and condos currently on the market with asking prices above $1 million.

Surprisingly, there is an amazing amount of single family home inventory priced over $1 million:

Current MLS Inventory by Listing Price
$1M + -- 572 Homes
$2M+ -- 171 Homes
$3M + -- 70 Homes
$4M+ -- 29 Homes
$5M+ -- 12 Homes
$10M + -- 1 Home

And how about the Austin condo market? Currently, there are just 9 condos priced over $1 million in all of Austin. While the MLS numbers include projects that are being marketed directly without an MLS listing, the number is still amazingly low. While the number of houses in Austin with a Tax appraisal over $1 million has grown from 1,602 to 2,981 between 2005 and 2007, the million dollar market is the fastest growing segment of the Austin real estate market. While it remains to be seen if downtown Austin demand grows proportionally, it seems quite likely.

Strong Job Growth = Price Appreciation


It's no secret that housing prices are strongly correlated with employment growth. Demand for homes increases when jobs are created and this demand pushes housing prices up. It's no the only factor -- interest rates are very important as well. But, all things created equal, when new jobs come to town, housing prices go up.

Today, the Texas Workforce Employment released the latest unemployment statistics for the state. The news: unemployment dropped to 4.1%. This is very low. In fact, it's lower than the peak of the dot com boom. It's also lower than the peak of the wall street boom of the early 90's. It's even lower than the peak of the Texas oil boom of the 1980s. Believe it or not, the current rate of Texas unemployment is the lowest reading since 1976. And in Austin, the unemployment rate is 3.2%: nearly a full point lower than the rest of the state.

Over the last year, 240,000 new jobs were created in Texas. If interest rates were lower, price appreciation would likely be very strong. With the uncertainty around rates and weak appreciation around the rest of the country, the strong Texas job numbers should help support continued market appreciation throughout the rest of the year.


East Avenue: $750M Development Near Downtown


A lot of money is being spent on downtown development -- more than $2 billion in condo projects alone at last count. And while it is technically outside of downtown, it seems another $750 million mixed use development is about to break ground. The project will develop 2.75 million square feet across 22 prime central acres near downtown Austin.

The project, East Avenue, will be on the former campus of Concordia University just North of the University of Texas on the West side of I-35. The goal is a new mixed-use "downtown" with residential, commercial, retail, parks, and a hotel. Here is the summary from the Austin Business Journal:

With a three to five-year build-out timeframe, the project will eventually include 1,450 residential units, 600,000 square feet of office space, 325,000 square feet of retail and a 250-room luxury hotel. Pocket parks, public spaces and an interconnected network of walkways will also be included in the layout of East Avenue, which developer Andy Sarwal hopes will become an entertainment and shopping hub, providing a dense, urban-living alternative to downtown.



As we have asked before, how many downtowns does one city need? It's hard to tell what is happening: the optimistic view is that responsible developers are working hard to create model mini-communities that represent a new sort of urbanism. I hope this is true -- and that Austin is becoming a leader in a new sort of urban or quasi-urban growth. Clearly, it's too early to know how these projects will fare --- my sense with all of these (the Domain, The Triangle, etc.) is that they don't really become interesting until after a few phases of development when they reach a scale that provides a critical mass for people to live, work, shop, and have fun. So far, only the Domain seems on track to reach this objective.

The following images, courtesy of East Avenue, show the site and renderings of the new neighborhood:






21C Museum-Hotel-Condo: Major New Downtown Project Announced

A Kentucky-based developer announced plans for a unique 44-story tower on a prime downtown lot today. The $200M project, "21c Austin" will combine a private contemporary art museum, condos, and a boutique hotel run under the 21c brand. The project is based on the 21c Louisville, which is the top-rated hotel in the city of Louisville, Kentucky.

Here are some of the details from today's Statesman:

Another dramatic change could be on the horizon for Austin's skyline, as plans take shape for a 44-story tower that would combine luxury condos and a hotel that doubles as a modern art museum.Developers today will announce a $200 million project at Third and Brazos streets that is to include a 21c Museum Hotel, the second such project following the successful opening of one last year in Louisville, Ky. The project would have 209 guest rooms and 200 condos as well as a world-class contemporary art museum that would offer free admission year-round to allow the public to experience original art in a nontraditional setting.



The investment in the project is truly staggering: $200 million for 779,000 square feet. It's nice that the developers are investing first for underground parking, an expensive rarity in Austin, as well as for the museum which will add another cultural destination downtown while providing the project a creative identity. The project is being constructed at 3rd and Brazos on the current site of the Whitley printing company -- a windowless black stucco one floor industrial building that has had "future condo site" written all over it. The project will require variances for the large size and is expected to break ground in 2008 with a planned completion in 2010.

The project architects include Deborah Berke & Partners, a very well respected boutique, modern New York firm as well as Goody Clancy Architecture, a national firm based in Boston. Susman Tisdale Gayle, a local firm retained to assist with many of the large Austin projects, will also be involved.

The renderings show a very attractive project:






What's the bottom line? First, it's nice to see developers who could choose any city in the world choose Austin for such a unique $200 million project. This concept, more than most, will make a significant positive contribution to the downtown Austin environment. It will also be a key project in an important part of the city: the area between Congress and the Convention Center, between Sixth and the lake. While the Second Street District and the contiguous Warehouse District are becoming the heart of downtown, this area is the prime connective tissue to historic Sixth Street, the important Convention Center District, and the rest of downtown. The area is threatened by the terrible Marriott block between second and third, congress and Brazos where a huge retail-less hotel monolith will break the westward pedestrian traffic flow from the 2nd Street district. This project will help balance the area, providing a hub for new restaurants, bars, and shops and hopefully creating a bridge between these important downtown neighborhoods.

While pricing has not been revealed, the developers have implied that the project will compete on the upper-end of the market with the Austonian and the Four Seasons condo project. As this market for high-end condos has not previously existed in Austin, it's too early to tell how the project will fare financially. However, the unique boutique hotel will certainly be a welcome addition just a block from the convention center.

As always, the full AustinTowers profile can be found here!

The Efficient Condo Market


If you buy a house in central Austin, the odds are that it is different -- in one way or another -- from every other house in central Austin. When it comes time to sell your unique house, you may get lucky and sell for more than it's worth, or you may be unlucky and have it sit on the market for a long time. Setting a price is a key variable, but pricing a unique house is as much art as science.

The issue is that the value of unique single family homes is subjective and highly personal. Every house, every street, and every aesthetic is valued differently. The single family home market, as one would expect, is very different from the downtown austin condo market.

Every high-rise condo project has a large number -- sometimes hundreds -- of interchangeable commodity-like units. Unit 16B is essentially identical to unit 17B. The result is a much more efficient resale market. When it comes time to sell a downtown condo, there will likely be similar units on the market. If they are cheaper, they will sell faster. If they are more expensive, the may never sell at all.

While the floor (the higher the better, stay away from the ground floor) matters and in some buildings the view can vary greatly from side to side, the effect on value is not as dramatic as one might think. Our ongoing analysis of Nokonah values and appreciation confirms this: units on floor 11, the top floor, are valued at just 11% more than units on the second floor. Buyers seem to pick a building first, and then look for the right unit weighing size and price. This approach leaves very little room for creative pricing.

Yet, it's amazing how differently sellers price similar units. The AustinTowers listings pages provide a few great examples of this. For example, there are two units currently for sale in the Nokonah: a 670 SF 1/1 for $450K and a 1,225 SF 2/2 for $550K -- the smaller unit is almost certainly overpriced.

Because it so easy to compare prices, downtown condo values will be efficiently set by the market. The building will make a huge difference, but actual prices will be set by your neighbors. This has some benefits and drawbacks. On the positive side, accurate comparables make it easy to set the right price and correctly priced units should sell quickly. On the downside, pricing may fluctuate more widely with supply and demand: when there are lots of people selling at the same time, it's likely that prices will drop. And there is very little chance to get lucky and sell your unit for above market value --- if a unit doesn't sell, the most likely reason is that it is overpriced.

Condo Fees by Building

One of the most common questions asked by first time condo buyers -- especially in Austin where the popularity of condos is rapidly on the rise -- is how much individual buildings charge in monthly condo fees.

Condo fees fund the daily operations and maintenance of most condo buildings. They cover security, landscaping, cleaning of common area, common area energy use, maintenance, and other key building functions. On average, our research shows, condo unit owners can expect to pay $0.34 / SF / per month or $340 in monthly condo fees for a 1,000 SF unit. For more information on total condo costs, check out our detailed posting on condo cost of ownership.

Looking at detailed MLS records on more than 30 units on the market today, we've calculated the rough fees for the major downtown condo buildings that currently have units on the market. Almost universally, the fees seem to be calculated on a dollar-per-square foot basis that seems to remain relatively constant on all units throughout each building. So, condo fees are not higher for more expensive units, or units with more bedrooms, or units on higher floors compared to less desirable units of the same size in the same building.

In addition, the prices in the six new buildings that we have looked at our surprisingly constant -- they vary from $0.28 / SF / Month to $0.40 / month -- an amazingly tight range. If anyone has numbers for other buildings, send them to us and we will add them to the list.

Here are the building-by-building statistics:

Fee by Building
$ / SF / Month
Avenue Lofts

$0.28

Milago

$0.31

The Sabine

$0.33

Plaza Lofts

$0.33

The Shore

$0.36

Five Fifty Five Condos

$0.40

All

$0.34

Thanks for all of your ideas and feedback!


May was a great third month for AustinTowers -- with more than 1,200 visitors in just 31-days, it has been very exciting to see interest in the site grow so quickly. I am particularly thankful to the large number of readers who have completed the survey or sent thoughts, ideas, and feedback via email. It is this data and feedback which has led to many of the changes in the site. If you have thoughts that you haven't shared, we hope that you will send us a note!

Thank you for reading the site and sharing your thoughts and ideas!

New 31-Story Rental Tower Breaks Ground

While this site focuses on condo development, today's announcement of a new rental project demonstrates the breadth of downtown development. The project -- Legacy@Town Lake -- is a 31-story, 187 unit rental project in the Rainey Street district near the Milago off Town Lake.

According to the developer, rents are expected to range from $1,330 to $6,930 (average rent will be $2,298) for units that range in size from 659 square feet to 2,876 square feet. I'm not sure how many people are looking for a $7K / month for a 2,900SF rental unit, but I am very curious to find out.

Here is the summary from the Statesman:

Construction has started on Legacy@Town Lake, a 31-story luxury apartment tower that is the latest high-rise to break ground amid downtown Austin's residential building boom. . . Legacy Partners Residential Development Inc., based in Foster City, Calif., is building the 187-unit project at Rainey and Cummings streets. . . Construction has started on Legacy@Town Lake, a 31-story luxury apartment tower that is the latest high-rise to break ground amid downtown Austin's residential building boom. Legacy Partners Residential Development Inc., based in Foster City, Calif., is building the 187-unit project at Rainey and Cummings streets. . . Legacy@Town Lake is due to open in September 2008, said Spencer Stuart Jr., a senior vice president and partner. . . The project will include a 265-car garage. . . Other apartment projects under construction downtown include AMLI Residential Properties Trust's 18-story, 232-unit complex on Second Street between Guadalupe and San Antonio streets, and Phoenix Property Co.'s complex at the former Goodwill site near West Fifth Street and North Lamar Boulevard. In addition, several condominium towers are under way, with scores more planned in and around downtown.



How does it look? Needless to say, the rental projects in Austin are rarely as architecturally interesting as the major condo projects. This project is no exception. In fact, it almost looks as if the garage is falling over.

Town Lake Condo Projects Fuel Opposition


A new group, "savetownlake.org" has been formed and has initiated legal action against the city to fight variances for a variety of condo projects on the banks of Town Lake. Essentially, they want to make sure that the city does not grant variances to allow new projects to build closer to the lake than current ordinances allow. Here is the summary from the Statesman:

An Austin citizens group has asked a judge to temporarily stop the city from granting exceptions to an ordinance that limits development along Town Lake in the latest battle over dense development in and near downtown. The outcome could have ramifications for future development along the lake, where developers have proposed more than 1 million square feet of residential projects. Some of those projects are seeking exceptions to an ordinance that restricts how close developers can build to the shore and how tall the buildings can be. SaveTownLake.org contends that a 1999 rewrite of the city's waterfront development rules omitted key provisions, including height limits and the right of citizens to appeal when variances are granted. . . .SaveTownLake's specific target is a proposed three-tower condominium project that CWS Capital Partners LLC plans on Riverside Drive east of Congress. The developers want a variance to build part of the project closer to the lake than the existing ordinance allows.


It's hard to argue against protecting the banks of the lake . . . .as downtown becomes more and more dense, the urban experience will be greatly enhanced by the park-like experience of Town Lake. The issue, however, is more complex. A number of projects -- especially those East of I-35 on the south shore, have proposed trading variances for extension of the hike and bike trail and permanent easements providing public access to the shore. For example, Star Riverside. This is clearly in the city's best interest.

Maintaining a Quirky Yet Vibrant Downtown


There has been lots of talk about gentrification of central neighborhoods such as south and east austin over the last few years. It seems that central living is in high demand -- prices are going up, developers are moving in, and whole swaths of central austin are being gentrified. But no area is being gentrified faster than downtown where warehouses, parking lots, and office buildings are being replaced by large condo projects.

With this wave of development, downtown Austin should gain a much more vibrant downtown. At the same time, the city is losing some landmarks. Las Manitas is being displaced by a hotel, Austin Music Hall is being razed and rebuilt. And now, the bright pink Railyard condos are being painted a much more neutral palette.

The Railyard of Today: Bright Pink



The Railyard of Tomorrow: Cream, Tan & Red



Here is the summary of the change from the Statesman:

For decades, Austin's Railyard Condominiums on East Fourth Street downtown have been a blast of Pepto-Bismol pink stucco amid the drabber hues of nearby commercial and public buildings. But faced with a more competitive downtown real estate market, with hundreds of new condominiums coming online this year and next, the Railyard is trying to update its look. The board of the Railyard Condominiums Owners' Association Inc. has voted to pitch the pink for more muted colors of brown, cream and dark red. "The (directors are) working hard toward the changing of the pink to multiple wonderful colors to continue to raise property values for the association as well as the downtown area," said David Wang, community association manager for the Railyard.


As downtown becomes a hotbed for residential development with rapidly increasing condo prices, it seems the Railyard community association has decided to ride the wave by trading the development's quirky allure for a much tamer palette.

For Austin, the challenge will be to balance preservation of the fun downtown landmarks with the benefits and vibrancy that come with the current downtown development boom. It is the balance of density and quirkiness that will give downtown Austin a lasting allure.

Nokonah Analysis: Part II


Two months ago, Austin Towers initiated a comprehensive unit-by-unit analysis of appreciation in the Nokonah. The Nokonah, A luxury high-rise project completed in 2002, was one of the first successful projects that helped to ignite the current condo boom in downtown Austin. The 11-story project is located at 9th and Lamar just north of Whole Foods and on the western border of downtown. When the Nokonah was built, the real estate market in Austin was stalling as the regional economy slowed. It was not clear how well the new project would do. Five years later we know the answer: the project sold out and the buyers have seen significant appreciation in the value of their units.



As we mentioned in Part I of our analysis, In order to better understand condo values in the downtown market, we've begun a comprensive analysis of public tax records (tax records are available online through the Travis Central Appraisal District) to better understand downtown condo market values and how they have changed over the last five years. This analysis, which tracks every unit in the Nokonah, shows appraisal value and $ / SF by floor, apartment size, # of bedrooms, and year. The data is fascinating and will be a useful tool for anyone looking to purchase a downtown condo (Register for the full report).

In part two, we've further examined the tax data and have come up with some interesting results: Read More...

Flipping in Austin?


Now that it is open and available for occupancy, the 240 unit Milago is completely sold out. Despite the fact that all units have been purchased, it is curious to see 30 units -- 1 / 8th of the building -- currently listed on MLS. While some could be from people whose plans have changed between when they signed the contract and now, the most likely option is condo flippers.

It will be interesting to see what happens. While the Austin market increased by 5% last year, this is hardly the sort of growth that gets flippers excited. Now, with 30 units competing for buyers, it will be interesting to see how fast they turn and whether prices increase as the market strengthens.

Changes to the Capital View Corridor


The Capital View Corridor is a unique Austin phenomenon. As part of the downtown master plan, the city has set aside a number of corridors where development is severely restricted. The corridor essentially requires all buildings to be short so that they don't block views of the capital from a number of predetermined angles. With 30 such corridors, the result severely limits downtown growth (read our previous posting on this)

In order to increase downtown density, a city council advisory board is recommending changes to the corridors. Here is the summary of today's news from the Statesman:

Of the 30 city views of the Capitol evaluated by an Austin City Council advisory board, a dozen are being recommended for change.The Downtown Commission characterizes the changes as mostly technical in nature, accommodating the reality of already restricted views because of development or other obstructions. . . In fact, enacting any recommendations in the report would require approval by the City Council or the Legislature, depending on which corridor it is. . . Boyt noted that the commission is proposing to keep 18 view corridors intact and that of the dozen with recommended changes, only three are substantive: deleting or modifying a view corridor that includes Wooldridge Park to allow for redevelopment of nearby lots; adjusting the northern boundary of a view corridor from the MoPac Boulevard (Loop 1) bridge, a change that might allow taller developments along West Fifth and Sixth streets; and realigning the view from Interstate 35 between East Seventh and 10th streets, to remove three blocks where the view is obstructed by buildings and where the view is perpendicular to traffic on I-35.




Given the broad scope of the corridors and their effect on downtown development (do we really need 30 corridors to provide views of the capital), the significant changes proposed to two corridors seems quite reasonable. The challenges to getting these through the council and, if needed, the legislature, may be significant.

Question: What are condo buyers interested in? Answer: 360.


The growth of the site has been amazing over the last three months - we're now averaging nearly 1,000 visitors per month -- it's great to see so much interest in downtown high rise condo development.

On our home page, there is about 40 links. Interestingly enough, the link that gets the most click is not the blog or the project navigator or the condo project rankings. It's the link for the profile of Novare's 360 development. With 430 units across 44-floors, it's the biggest downtown project so far. With units starting at $190K, it's also the most reasonable. According to the developer, 75% of the units were under contract by the end of March, just 3 weeks after they went on the market.

The Austin condo market is so new that it is very hard to predict what will happen over the next few years. It's good to see that tall, well-designed, affordable projects in good locations are drawing so much interest and demand --- it bodes well for vibrant and dense urban core.


Now Available: Real-time Condo Listings!

The purpose of Austin Towers has always been to help downtown austin condo buyers to find the right project and unit. Today, Austin Towers launches a new listing section which will help make this a reality!

The way most people choose a condo is by figuring out which building or buildings they want to live in and then looking to see which units are available. Unfortunately, there has been no great way to do this. With Austin Towers listings, buyers can now view both MLS and developer listings on a building-by-building basis.

With this update, Austin Towers has also added 8 completed projects and a completed project navigator to the site. This will help buyers evaluate and search for units in existing buildings in addition to te many new developments that we have always covered.

Here are the links to the new capabilities:

- Condo Unit Listings
- Completed Project Navigator

And the following new profiles:

- 5 Fifty Five
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Austin City Lofts
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Avenue Lofts
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Brazos Lofts
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Brown Building
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Milago
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Nokonah
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Plaza Lofts

More on Downtown Living Costs


When you focus on price-per-square-foot in evaluating costs, downtown condos may seem expensive. But there is more to the cost:

- Energy costs in a condo are typically very low: it's not uncommon for average utilities in a 2,000 SF unit (Electric + Gas + Water) to be under $100 per month. A similar house with a lawn could have average monthly utilities in the $300 - $500 range.

- Maintenance costs are included so you won't have to spend $10K for a new HVAC unit, roof, or other potentially expensive repairs.

- Downtown living can enable a different life style. Some couples or families may be able to eliminate a car and the related gas, insurance, and financing payments that come with it.

- Many buildings include amenities such as swimming pools, shared "guest" bedrooms, etc. that allow tenants to live in smaller units that they might otherwise own. If the building has an extra bedroom that can be used when guests are in town, you may be able to live in a unit that is smaller than a comparable single family house.

- And there are many more economic benefits: you won't need a paid security system or service, your insurance premiums will likely be lower and you won't spend money on landscaping, exterior painting, or pool maintenance.

So while the price per square foot may seem high, think about the complete picture. There are some great economic benefits to life in a downtown condo.

Very Expensive Barton Springs Living


Developers just announced plans to proceed with a 4-story, 27 unit development on Barton Springs just east of Lamar. The project is a very odd combination of location and pricing that suggests a lack of experience in residential development.



Here is the summary from the Statesman:

Now called 1155 Barton Springs, the project will consist of a four-story condominium building atop three levels of parking. The building will replace the long-vacant Treehouse restaurant and nightclub at Dawson and Barton Springs roads, which is next to a railroad track.Developers Elisabeth and Steffen Waltz and their partners plan to sell 27 condos for $1 million to $6 million each, well above the price range of the most expensive downtown-area condo projects announced to date.Skeptics may question the prices because of the location. But the developers say several factors set the project apart: It will have large units, from 1,600 square feet to more than 6,200 square feet. The grounds will be designed by the renowned landscape architectural firm Peter Walker & Partners of Berkeley, Calif.The building's concrete and sound-proofing insulation will minimize noise from the railroad.And its location near cultural and arts venues, including the future Long Center for the Performing Arts, is expected to appeal to arts patrons.


This project does not sound viable as planned. With prices starting at $625 / SF, it is 25% more expensive than the next highest price proposed project - the beautiful Pelli designed 5th & Congress project. And with a location on the south side of busy Barton Springs adjacent to the railroad, McDonalds, and Peter Pan mini golf, it's not a top location. And with units priced as high as $6 million, it's clear they have not done their research. There are almost no residential sales over the last five years of houses above $5 million -- that is a price point that just does not exist in Austin. Maybe, the Austonian can sell a crazy penthouse for $6 million - but it is not going to happen on the fourth floor of this project.

The Austonian: Crazy Luxury?


Today's Statesman brought to light new details on the planned 55-story Austonian:

The Austonian, the swanky 55-story condo tower planned for Second Street and Congress Avenue, is pulling out the stops on amenities. The bathrooms will have marble walls; the kitchens will have Italian cabinets and built-in cappuccino machines, and 54th floor lounge will have a catering kitchen. A 10th floor "urban garden" will include a lap pool, billiard room and outdoor movie screen. It also will have a dog park with a scented, self-cleaning doggie toilet — just the thing for pampered high-rise pooches. Prices will range from $550,000 to $3.8 million and higher than that for buyers who create a custom unit on the three highest floors. "We knew what the standard was, and we wanted to blow it out of the water," said Laura Gottesman, whose firm, Gottesman Windham Real Estate, is marketing the units.


The market remains unproven for super-high-end projects -- it will be interesting to see whether there is enough demand to make the Austonian successful.

How much does it cost to own a condo?


The price of a condo is only one component of the final cost. In addition, you'll need to think about monthly condo fees, property taxes, utilities, etc. The good news is that the price is relatively fixed: unlike owning a single family house, you won't need to worry about surprise maintenance projects like a new roof or new AC that can cost thousands of dollars.

Here are cost estimates for three size condo units in a new downtown high-rise development:

Typical 1-Bedroom Unit
Square Feet: 750
Price: $281,250
Monthly Payments:
Mortgage: $1517
Condo Fees: $255
Taxes: $592
Total: $2,364 / Month

Typical 2-Bedroom Unit
Square Feet: 1500
Price: $562,500
Monthly Payments:
Mortgage: $2,995
Condo Fees: $510
Taxes: $1,184
Total: $4,689 / Month

Typical 3-Bedroom Unit
Square Feet: 2,200
Price: $825,000
Monthly Payments:
Mortgage: $4,392
Condo Fees: $748
Taxes: $1,736
Total: $6,876 / Month

All of these cases assume a standard 30-year mortgage with 10-percent down and the balance financed. The cost assumes an average purchase price of $375 / SF and the monthly condo fees are calculated at $0.34 / sf. What does it add up to? Plan on spending about $3.15 / month per square foot to live in a typical downtown condo building.

How many downtowns does one city need?


A very unusual $1.5 billion development was announced today -- it is a 681 acre multi-use development with a movie and music theme that is being proposed on empty land east of the city, near the new Texas 130 highway. The project includes a 50,000 SF soundstage and recording studio, a 70,000 seat outdoor amphitheater, and production facilities for movie, TV, and video game makers. It is being pitched as a master planned community for the creative class. The project will also include about 8,500 housing units -- mostly single family houses.

The developers claim they are trying to create an alternative downtown. But unlike the Domain, which may have as many as 85,000 residents in a dense multi-use neighborhood, this project seems to be very low density. It's more like Riverplace or Circle C than downtown with an average of just 4 households per acre. The amphitheater is a nice idea: Austin is lacking such a large scale venue. But it may be hard to fill 70,000 seats in a metropolitan area of just over a million for anything other than a UT football game. The bottom-line is that this is an ambitious project that seems unique. It's not a new downtown and it's not the focus of this site, but it will be interesting to see if it gets built. $1.5 billion is a big investment for any city, it's an amazing sum for East Austin.


1,000 visitors!


After 11 weeks, we had our 1,000th unique visitor today! If you have been visiting the site but haven't completed the survey, please do. We keep the data very private -- but we look forward to publishing the combined results in a future posting!

Do Downtown Residents Work Downtown?

One of the big questions has always been whether the people who live downtown also work downtown, making them less dependent on cars. If so, downtown residents may need fewer cars and may become a core constituency for the public transportation system. With traffic an increasing problem, the more people who are able to bike or walk to work, the better. The results look positive.

Demographic analysis reveals the following facts about downtown residents:

- Less dependent on cars (60% drive to work v. 92% across Texas)
- High utilization of public transportation compared to Texans (14% take public transportation to work v. 2% across Texas)
- Crazy high walking / biking (19% bike or walk to work v. 3% across Texas)
- More work at home (7% work at home v. 3% across Texas)
- A quicker commute (16.3 minutes v. 20.8 minutes across Texas)

Who lives downtown?

If you are thinking of living downtown, who will be your neighbors? This posting attempts to answer that question by looking at the most recent census data for 78701. 78701 is the predominant downtown zip code: it includes the area between the lake and MLK blvd and between Lamar and I-35. Virtually every project covered by AustinTowers is within these boundaries. The data is very interesting, but be warned, the downtown market is changing fast and their is always a lag with demographic information -- so next year's information will be very different as thousands of new residents continue to migrate downtown. In 8 years, the downtown population is expected to grow by a factor of 5.

So who lives downtown?

- 4,322 people
- Not that many people ( just 4,322 at last count)
- Mostly Men (65% men and 35% women)
- Well Educated (52% have college degree v. 26% across Texas)
- Racially Diverse (61% white, 21% Hispanic, 9% African American, 3% Asian)
- Single, No kids (94% of households do not have kids, 22% households are married couples)
- Age groups without Kids (Lots of people 20-40 and over 70, very few people under 20)
- High Income ($55K per capita v. $21K across Texas)

See the full demographic profile here.

Huge Downtown Plot Available for Development


Thirteen prime acres in the Rainey street neighborhood - the district between Red River and I-35 south of Cesar Chavez - are for sale in one of the largest downtown real estate offerings ever. The owners who assembled 20+ individual parcels including a large section along the lake are hoping that a master developer will purchase the land for dense multi-use development.

This would make sense as there are already multiple projects under way in the area including the Hotel Van Zandt. Shore Condos, the Mexican American Cultural Center, and the recently completed Milago condominiums. The area was recently rezoned for dense development and is a prime location for residential and hotel development. Additional retail, commercial, and entertainment projects would extend the traditional downtown boundaries and accelerate the shifting center of gravity further to the south.

The land is particularly attractive because the entire Rainey Street neighborhood is outside of existing Capital View Corridors that limit development. With the new zoning, it is a prime area for tall and dense new construction. However, a number of single family house owners continue to hold on to their parcels and may fight future requests for variances, which may add risk to the purchase and for any buyer who is looking to create a larger "master planned" district in the mold of the successful 2nd street district to the West.

Four Seasons Residences May Actually be Built

After seven years of proposed projects, the developer behind the Four Seasons Residences claims that the project will break ground this year. Apparently, the developer is self-financing the $100 million project -- eliminating the pre-sales hurdles which stall many projects before construction.


Read More...

75% of 360 Units Sold in 3-Weeks


An incredible 75% of the 430 units in Novare Groups' 44-story 360 project are now under contract after just 3 weeks on the market. The units, which are mostly priced between $190K and $550K, rank among the most affordable units in the current downtown condo boom. This demonstrates, once again, that there is tremendous pent-up demand for reasonably priced units in central Austin.

Today, there are only 9 listings in the Austin MLS (360 is being marketed privately and is not reflected in the MLS numbers) in all of central Austin — areas 1b. 1a, 2, 4, 6, 7. To find similarly priced homes, buyers need to look far outside the city center. In contrast to other options, central high-rise developments seem to be very attractive to buyers. As this sales rate shows, units priced under $400K will move very quickly -- there will likely be ongoing demand to fill quite a few projects like this one. Novare, in fact, is planning additional 35-story and 40-story tower on the central post office site and an adjacent lot for completion by 2010. These units will priced in a similar range to the 360 project.

AustinTowers ongoing reader survey (please take our survey if you haven't already!) has shown so far that more than 90-percent of potential downtown Austin condo buyers are looking for units priced under $400K with the median target price for buyers currently around $300K.


Why it is Hard to Track Downtown Condo Sales

One problem with analyzing the downtown austin condo market is the lack of good sales data on many of the projects currently on the market. When realtors sell traditional single family homes or resell condo units, they are listed on MLS and the actual sales price is recorded in MLS and available to any participating real estate agent. Unfortunately for buyers and sellers, many of the new downtown high-rise projects are being marketed by in-house sales teams without the assistance of realtors. As a result, these units never hit MLS, aren't included in market statistics, and the comparable sales data isn't available to realtors. The result: downtown condo buyers have very little information on sales prices and discounts in the major downtown projects.

The only upside is that the lack of transparancy may help buyers get better deals. When a large project is marketed on MLS, developers are very resistent to give discounts as every future buyer will ask for the same deal. They are much more likely to stick to list price or standard discounts to protect their margins. When the sale is non-public, the developer doesn't have to worry about providing a break on an uncontested unit as nobody else will know.

This trend towards in-house marketing is one of the reasons that the current MLS statistics show a 14% year-over-year drop in February of condos and townhomes in Austin. While sales volumes of single family homes are flat amid tightening supply and quicker sales, the condo and townhome data is useless because it does not include any of the in-house sales.

Austin Luxury Market


The market for high-end homes has been one of the fastest growing segements in the Austin market. According Sam Chapman, "there are [currently] over 400 homes priced for over one million dollars on the market in the Austin area. The average price of these Austin luxury homes is $1.8 million and the average size is over 5,000 square feet. The most expensive listing is an over 17,000 square foot home that is listed for $7.5 million. There are more than 40 homes on the market in Austin priced over $3 million."

When you look at actual sales over the last few years, exceptional high-end homes near the water, in Westlake, or downtown now sell for as much as $500 / SF or more. No matter how nice a smaller house is in a prime neighborhood, it's rare to see houses under 4,000SF sell for more than $300SF. The average for the Austin area is well under $150SF. So, the key is that the luxury market is a distinct market of large houses in select locations, on prime lots, with very high-end finishes. In December 2006, 28 houses and condos in Austin sold for more than $1 million. In the scheme of things, this is not a very large market.

Read more to see detailed statistics on high-end sales by MLS area . . . . Read More...

The Condo Conversion Wave


The Statesman reported today on three condo conversion projects currently under way in downtown Austin. All three projects will transform commercial space into new condos. As thousands of residential units are being built in Austin for new residents who want to live and work in downtown. Compared to the boom in condo development, there is relatively little new downtown office space being developed downtown. These conversions will take additional office space offline. All in all, the city seems headed for a healthy commercial-residential mix.

One of the projects is "Sabine on Fifth" - an 80 unit 10-story building on, go figure, Sabine & 5th just west of I-35. Units will start at $190K for a 700 SF one bedroom apartment. the most expensive unit is in the mid 500's for 1,461 SF. The second project is the Brazos Place Condominiums, which we've fully profiled. It's units are already on the market. The Third project is Capital Tower which would include just 25 "Ultra Luxury" units atop an office building at 9th & San Jacinto. The project is still in the early planning phase.

Here is a picture of Sabine on Fifth:

Nokonah Pricing Analysis: Part I


The Nokonah, A luxury high-rise project completed in 2002, was one of the first successful projects that helped to ignite the current condo boom in downtown Austin. The 11-story project is located at 9th and Lamar just north of Whole Foods and on the western border of downtown. When the Nokonah was built, the real estate market in Austin was stalling as the regional economy slowed. It was not clear how well the new project would do. Five years later we know the answer: the project sold out and the buyers have seen significant appreciation in the value of their units.



In order to better understand condo values in the downtown market, we've begun a comprensive analysis of public tax records (tax records are available online through the Travis Central Appraisal District) to better understand downtown condo market values and how they have changed over the last five years. This analysis, which tracks every unit in the Nokonah, shows appraisal value and $ / SF by floor, apartment size, # of bedrooms, and year. The data is fascinating and will be a useful tool for anyone looking to purchase a downtown condo (Register for the full report).

For example, the analysis shows that the average appraisal value of Nokonah units rose 61% from $233 in 2003 to $376 in 2006 - a growth rate of 17% per year. This is more than trible the 5% annual growth rate in sales prices for the Austin market during the same time period. Even as other projects have hit the market, Nokonah values have continued to increase in value.

While the average appraised value is $376 / SF today, there is incredible variance. If you're trying to figure out what the right price is to pay for a new unit, the Nokonah data is very interesting: current appraised values actually range from $230 / SF to $498 / SF depending on size, floor, bedrooms, etc. In future postings, I'll dive deeper into the factors that make a unit more or less valuable.

Over the next few weeks, I plan to post more information from the Nokonah analysis in this blog. In addition, I am going to provide all registered members with direct access to the spreadsheet with all of the data. This will be a great tool for anyone who is trying to ensure they don't overpay for an Austin condo or anyone who is interested in better understanding Austin condo market dynamics. Registration is absolutely free -- just click the link on the top of the page and complete our very brief survey. The summarized data will be published in a future post, and it will help AustinTowers better understand our readers. Please register -- you'll receive a link to the full Nokonah analysis later this month!


Barton Springs Project Proposed

While it's technically out of the downtown radius, Texas American Resources is proposing a 14-story mixed-use project on Barton Springs Rd. between 1st and Lamar and directly across from the Long Center. The building would include 24 condo units atop 86,000 feet of office space and a ground floor restaurant. The site is the former location of the iconic Filling Station restaurant which closed in 2004.

Read More...

Major Austin Towers Site Update

As promised, a new section launched tonight that lists all known "Early Stage" Projects. The new section will include projects that have been announced and do not have enough information for a full profile. Today, the section lists 8 new projects with 2,500 units and total proposed budgets in excess of $1 billion.

In addition, two new projects were added to the Project Navigator:

The Residences at the Hotel Van Zandt and Bridges on the Park. Bridges on the Park is well on it's way -- construction started last year on South Lamar and is expected to be completed in 2007.

Planning Commission Denies Riverside Variances

Ever since the Hyatt hotel was built on the south shore of Town Lake, neighborhood groups have mobilized to limit development south of the lake. This week, in a marathon planning commission that lasted until 2:30AM, the commission recommended that the city counsel deny variances for two high profile "South Lake" projects. Read More...

Affordable Housing Task Force

Over the last year, a city-sponsored Affordable Housing Incentives Task Force has been discussing ways to encourage the development of afordable housing units as part of large scale development projects. The city wants more affordable downtown units, but State law doesn't allow the city to place affordability requirements on new developments. The purpose of the task force is to create incentives that make it attractive for developers to include these units.

Last week, the Task Force delivered its recommendations to the Austin City Council, Planning Commission and the Community Development Commission. After seven months of work and twenty meetings, the task force reached consensus on incentive policies to encourage developers to provide affordable housing.

Like most policies, there is a carrot and a stick. The carrot provides for expedited review, fee waivers, and zoning variances that allow for greater height or density if affordable units are included. The stick is a fee -- as much as $10 per SF -- that applies to project area in excess of standard zoning density requirements when variances are granted for projects that do not include affordable units. As the City Council has already been applying similar rules in some zoning discussions, the incentives seem likely to be put into effect.
Read More...

A Second Downtown?

This week, Endeavor Real Estate announced ambitious plans for the second phase of the Domain: the new mini-city rising off Mopac just north of 183. Between now and 2015, Endeavor plans to build 50, yes FIFTY, new buildings with heights ranging from 2-26 stories (as tall as 310 feet). When complete, The Domain will form a second Austin "downtown" with as many as 82,000 residents and 50,000 daytime workers. To put these numbers in context, Mayor Will Wynn has working hard towards a big goal: getting 25,000 people to live in the real downtown by 2015, the same timeframe. Read More...

Austin Growth & Migration

The Statesman ran its annual analysis of migration in and out of Austin. The summary is that "More people [are] moving here but not as many as during the boom".

In the 1990's Austin grew by an incomprehensible 41% as it added more than 190,000 new residents. Growth comes from two source: net migration and organic growth. The net migration is the gain from people moving into the city while organic growth occurs when more people or born than die during the year. The Statesman stats focus only on migration. So what is the bottom line? A net gain of 8,079 households (approximately 19,400 people). Very solid growth but about 30% lower than the peak year, 2000. The counties that saw the most people coming to the region were overwhelmingly in California. Still, Austin population is growing at a very fast rate. Read More...

"Hyatt Towers" Approved

Today, the Austin City Council approved a project that will include two towers, each approximately 20 floors, adjacent to the Hyatt on the south shore of Town Lake. The project, to be developed by Fairfield Residential of Grand Prarie, shows how much the attitudes towards development has changed over the last few decades. Read More...

How many buildings fit downtown?

Last June, the Austin Chronicle published a fascinating analysis of potential downtown development. The main point is simple: it is getting very difficult to assemble a downtown parcel large enough for a major project. The number of viable sites is rapidly dwindling. The mayor has set a goal of 25,000 residents downtown by 2015 -- 20,000 more than exist downtown today. While their may be enough downtown parcels to get there with very dense development, downtown capacity is very limited by the following factors:



Read More...

Downtown Post Office Redevelopment

Not everybody is thrilled with the rate of development downtown. However, most Austinites would agree that the downtown post office at 6th & Guadalupe is one of the worst developed sites in the city. They took a prime downtown lot and built a small ugly 2-story post office that takes up less than 30% of the block. They surround it with a parking lot and a couple of mailboxes.

Last year, Mayor Wynn went to DC to lobby for redevelopment of the site. The fed agreed, proposals were submitted, and Novare Group Holdings of Atlanta---the firm behind the 360 project--was selected. Today, more details were announced. Read More...

Seaholm Details Revealed


More details emerged today on one of the most important downtown projects: the redevelopment of the Seaholm power plant site between Lamar and the second street district and just north of the river. Seaholm is a 7.8 acre site, the main feature of which is the 136,000 historic art deco decommissioned power plant. The redevelopment project will add a 22-story hotel and condo project featuring 80 condo units atop a 160 room hotel. While the initial phase of the project will open in 2008, the Seaholm Plaza Hotel is not expected to open until 2010.


Read More...

Beyond Residential: Other Downtown Projects

While the focus of AustinTowers is downtown high-rise residential development, there are a number of non-residential projects that will also help reshape downtown over the next few years. Here are a few:

W Hotel - The new W Hotel will anchor the $225 million "Block 21" project in the heart of the second street district. If it is like other W's, the upscale design-themed hotel's bar and lobby will likely prove to be a popular nightspot. Block 21 will also include 200 high-end condos, a Willie-Nelson owned nightclub, a new Austin Children's museum, new studios for the Austin City Limits TV program, and 50,000 square feet of street-level retail. The project is expected to be completed in 2009.

Read More...

Is this the Future Austin Skyline?


With more than a dozen high-rise projects currently in the planning or construction phases, Austin's skyline will change fast. This composite image (source unknown) provides a sense of the scale of the different projects. Note that the Congress Condos has been renamed the Austonian and is currently planned at 55 stories -- about the height of the Tom Stacy project at 5th and Congress. The Frost Bank Building, sometimes referred to as the world's largest nose hair trimmer, will no longer dominate the Austin skyline.

Future Austin Skyline

The Downtown Condo Market: 2003-2006

It's not easy to get a clear picture of downtown condo sales volumes. Real estate sales statistics are reported by MLS area, and the downtown area cuts across a few zones: Area 4 runs from Guadalupe to I-35. Area 1B runs from Scenic on the west to Guadalupe / Lamar. Both are bounded on the south by Town Lake and the north by 2222. There are also some projects south of town lake in Area 6. While most of the downtown units are captured in these statistics, there are also some units near the university, in Tarrytown, and in the other corners of central austin contained in area 1B and 4.

So what do the numbers show? Downtown condo sales grew from 2004-2006 by 33% while sales volumes in the larger Austin market grew by 27%. In fact, downtown condo sales as a % of all Austin condo sales actually shrunk from 31% to 25% during the same period. In 2006, a total of 619 condo units were sold in areas 1B and 4.

I draw three conclusions from the numbers: Read More...

Welcome to AustinTowers!

I've been closely following Austin downtown residential development for the last couple off years. It's been amazing. Developers are currently investing more than a billion dollars to build dozens of downtown residential projects. This will bring new life to downtown and the city, new tax revenues, while reducing growth in traffic and sprawl. Read More...