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September 2009

by Tracey Lamphere

Cities Within Cities

“Lifestyle Centers” for Working, Shopping, Living

In north Austin, residents of the Domain can sip Darjeeling at a locally owned tearoom, browse bestselling books and enjoy an elegant dinner, all within yards of their front doors. Those who live in Houston’s CityCentre can hit the gym, meet friends for drinks and take in a movie — without getting into a car. In Dallas, Victory Park inhabitants can go to work in a high-rise office building, shop for cutting-edge fashion after work and cheer on the Mavericks in the evening, in a self-contained city within a city.

With a mix of office space, highend retail, apartments and condos and entertainment destinations, these “lifestyle centers” are a new wrinkle in urban living, providing Texans with the perks of city life while offering pedestrian-friendly convenience.

Lifestyle centers provide the perks of city life with pedestrian-friendly convenience.

“What we’re seeing in today’s market is 20-somethings and empty-nesters, who like living in condos and apartments, wanting to live right where the action is,” says Jim Gaines of Texas A&M University’s Real Estate Center. Although the center doesn’t have data specific to lifestyle centers, Gaines says these mixed-used developments are becoming a more attractive business model for developers as land prices rise.

“Texas has long been a low population density state, where land was available and cheap, hence the tendency to build outward,” he says. “But as land prices increase, the growing trend is to build greater density.”

City in the City

Dubbed by its developers as Austin’s “second downtown,” the $245 million, 304-acre Domain is located 11 miles north of downtown. Opened in March 2007, at this writing the Domain has 390 apartments, 56 retail stores and 15 food-related businesses. And it is far from finished.

“What’s out there today is about 10 to 15 percent of the total [expected] density,” says Ben Bufkin, development associate for Endeavor Real Estate, the Austin-based company that owns the Domain.

“As land prices increase, the tendency is to build greater density.”

— Jim Gaines,
Texas A&M Real Estate Center

In coming years, the center will become home to a new Whole Foods store, three hotels and up to 3.5 million square feet of office space. At its completion, the Domain will house an estimated 6,000 residents, while its businesses are expected to employ 15,000 to 20,000 people.

The lifestyle center concept — a place where residents can work, live, shop and play — is not a new one, but Texas has only recently begun to embrace the idea. Lifestyle centers are springing up in San Antonio, Dallas, Austin and Houston.

Midway Companies’ 37-acre CityCentre development in Houston, for instance, expects to have more than 800,000 square feet of offices and retail space, a 245-room hotel, a 30,000 square-foot convention center and 677 residential units at completion. So far, two of its three office towers are occupied, with a third’s construction on hold until an anchor tenant can be found, company officials say.

About half of CityCentre’s 400,000 square feet of retail is occupied at present, with more vendors scheduled to open this fall. So far, the complex boasts a 145,000 square-foot Lifetime Fitness center and an eight-screen Studio Movie Grill. A luxury hotel opened in late August.

Location, Location…

These lifestyle centers may eventually have thousands of people living and working in them, but they’re also positioned to attract regional traffic. The Domain’s specialty shops, abundant parking, special events and proximity to Austin’s major highways have made it a prime destination for shoppers and business owners.

Amy March and Emily Morrison, owners of Austin’s Steeping Room

When Emily Morrison and Amy March of Austin were looking for locations to open their business, they considered other shopping centers in the area, but the Domain met all of their needs, including plenty of parking and a good potential for foot traffic. They opened the Steeping Room, a teashop and restaurant, on the same day the Domain opened for business. Morrison estimates about 10 percent of the shop’s regular business comes from the Domain’s residents, but the bulk of their customers work in or near the Domain.

“Business has been good,” says Morrison. “Though sometimes I wonder what it would be like if not for this recession.” The shop began with 17 employees in 2007 and as of September 2009 had 30. It has doubled its revenues in the last year.

Location is perhaps the most important consideration in planning a lifestyle center. While employees and residents offer a “captive” customer base, outside visitors can determine the success of such projects.

CityCentre’s developers estimate 2 million Houston residents can reach the site within 20 minutes; about 280,000 cars traveling on I-10 and 175,000 cars on Beltway 8 pass the site each day. Midway Companies officials say its location is the new demographic center of Houston, which has shifted west from the city’s original downtown.

Dallas’ Victory Park strives for high visibility and is strategically located on the western fringe of downtown Dallas, between busy Interstate 35E and the Dallas Tollway. It also benefits from the continuing draw of the 20,000-seat American Airlines Arena, home base for the Dallas Mavericks basketball team and the Dallas Stars hockey team. The 75-acre development is also close to a Dallas Area Rapid Transit commuter rail station and the Trinity Railway Express, which connects Victory Park to downtown Fort Worth and DFW International Airport.

“Urban developments work better when there is a strong transportation element involved,” Gaines says.

Ups and Downs

While lifestyle centers generally aim to attract high-end retail and affluent residents, they are not immune to the economic downturn.

Austin’s economy has slowed the pace of the Domain’s development, Bufkin says. The development has been moving on a 10- to 25-year schedule, but the finish line could be farther than that.

“I don’t know how long it will take to complete,” he says.

The Domain isn’t the only lifestyle center feeling the economic pinch. In April, the Hillwood development company agreed to give up its ownership position in most of its Victory Park buildings, as part of a deal with German investors who provided equity for the project. Hillwood will continue to manage and operate the project. Earlier in the year, several of Victory Park’s high-end restaurants and retailers closed.

The best-laid plans don’t always work in the marketplace, Gaines says.

“Success depends on where market reality hits the financial cost,” he says. “Sometimes they meet up and sometimes they don’t.” FN

At Home in the City

Lifestyle centers are an increasingly common feature of Texas’ largest cities. Current projects include:

DevelopmentLocationResidentialRetail/OfficeNotable Amenities
BLVD PlaceHouston500 high-rise residences500,000/175,000 square feet225-room luxury hotel
Water Street
(Open 2010)
Las Colinas500 luxury apartments300,000/250,000 square feetHotel
éilan (Phase I opens Fall 2009)San Antonio 1,400 units97,500/180,000 square feetHotel, specialty grocer, chapel
LaCenterra at Cinco Ranch (Phase II complete 2011) Katy252 apartments282,000/90,000 square feetFarmer’s market every Saturday
Mockingbird Station (Opened 2001)Dallas211 loft-style apartments198,000/148,000 square feetDallas Area Rapid Transit light rail station
West VillageDallas337 apartments200,000 square feet of retail Five-screen movie theater
The TriangleAustin750 apartments120,000 square feet commercial Special events in adjacent park

Source: Texas Comptroller of Public Accounts

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