Real Estate Round-up

Skyscrapers buck the recession: Hines plans another new office tower fordowntown Houston

Hines plans to construct a high rise office building in downtown on the blockbounded by Main, Texas, Fannin and Capitol.
Photo by Clifford Pugh
The proposed new skyscraper is only a couple of blocks from Hines' newest officetower.
Photo by Ralph Bivins
The 811 Main Building has been renamed the BG Group Place and is open now.
Photo by Ralph Bivins

The Hines real estate organization, which has built 23 skyscrapers in downtown Houston, is planning another one.

The project, if it comes together as planned, would result in a major office building on Main Street, catty-cornered from the historic Rice Hotel building.

Hines would not proceed unless a major office tenant has been signed, but the developer has been in serious discussions with significant corporations looking for downtown space. Some people in the real estate community say this could be the real deal — a big tenant ready to make a commitment and kick off another Hines downtown project — and soon.

The development site is bounded by Main, Texas, Fannin and Capitol. Years ago, a McDonald’s outlet was located there, but it was torn down and another developer proposed to build a condo tower. Hines took control of the ownership of the block several years ago and it is mostly used as a surface parking lot today.

Architect Retained

Mark Cover, chief executive officer of Hines’ southwest region, says an architect has been retained and a schematic design of the new building has been finished.

Hines is not prepared at this preliminary stage to name all of the parties involved or disclose details about the negotiations underway, of course. But after writing about Hines for a few decades, the project appears to me to have the earmarks of a very serious proposal.

Cover says that, yes, it is possible that groundbreaking could occur later this year. Skyscrapers take about two years to construct, so it would be 2013 before the new tower is completed.

The office vacancy rate has been rising in downtown. At year-end, Houston’s prime Class A buildings in downtown were 7.29 percent vacant, up from 6.1 percent vacancy rate a year earlier, according to the CB Richard Ellis real estate firm. Several energy firms, such as Shell and Devon Energy, are expected to vacate big chunks of downtown space.

But at the same time, other energy-related companies are looking to expand in downtown and one of those companies would likely be the lead tenant in the new Hines tower.

New buildings, designed with energy efficiency and sustainability in mind, are in high demand.

“We really believe that the marketplace is differentiating between new generation buildings and 35-year-old (plus or minus) buildings,” Cover says.

Block 69

Hines has just completed the 46-story BG Group Place tower at 811 Main Street, just two blocks south of the site of the proposed new building. The BG Group Place, on top of other prior improvements, validated Main Street as a prime corporate address.

A few weeks ago, Hines President and CEO Jeff Hines told CultureMap that Main Street is the preferred location for new office projects today.

“If we do the next building, that’s where we would go,” Hines said.

With the new BG Group Place tower opening and the Hess Tower building nearing completion near Discovery Green, some were anticipating it could be many years before another new building was started in downtown Houston.

But Hines said the timetable for the next addition to Houston’s skyline could be fast-paced.

“I think it could be surprisingly quick,” Hines said in an exclusive interview. “We’re seeing a real upsurge in activity. We’ve talked to quite a few large tenants. It’s hard to say because we’ve just come through some hard times. But I think it could be surprisingly quick that we could we see a new building.”

The new Hines project is proposed for a block of land known as “Block 69.” Developing an office tower there would certainly be good news for the nearby Rice Lofts and the Magnolia Hotel at 1100 Texas Ave.

“Block 69” also would have great access to the Metro light rail, the Theater District and Minute Maid Park. Plus, for those who haven’t visited lately, Main Street is more pedestrian-friendly and feels safer at night.

“While we would certainly look at other sites, we believe that the change on Main Street brought about by 1000 Main, BG Group Place and public infrastructure, has made Block 69 one of the most logical and desirable locations downtown,” Cover says.

Ralph Bivins, former president of the National Association of Real Estate Editors, is editor-in-chief of RealtyNewsReport.com

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out of reach

This is how long it takes to save for a starter home in Houston right now

Photo courtesy of Tri Pointe Homes

It now takes over a decade to save for your first home.

A new national housing affordability report has confirmed something many renters already know: the possibility of owning a home is moving further out of reach for many renters across America.

Becoming a new homeowner is especially challenging for households in several major U.S. metros — including Houston — where it now takes over a decade to save enough money for a down payment on a starter home.

These findings were unveiled in a new study from The Julian Bond Institute for Financial Equity Research (JBI), a nonprofit research branch of the Center for Responsible Lending (CRL). The report comes as a result of its Project 2050 Survey that analyzed "Americans' financial aspirations across generations and racial groups and the obstacles they encounter in achieving them."

JBI said Americans of all generations, racial backgrounds, and ethnicities haven't given up on "this aspect of the American dream," but the journey towards becoming a homeowner is "grow[ing] exceedingly challenging." In addition to saving for a down payment and closing costs, renters must also navigate high mortgage rates and high home prices. All of these combined factors have pushed monthly payments out of reach for most families.

"There has been much coverage of the difficulty aspiring homeowners face in being able to afford the monthly payments on a home loan," the report said. "But less attention has been given to an equally important part of the housing affordability squeeze: The impact that higher home prices and the affordability crisis are having on the ability of families to save enough money to afford the upfront costs of homeownership."

Using the results from a previous 2019 survey and the most recent survey results, JBI examined how many years it would take a typical renter family to save enough money to cover a down payment and closing costs for a starter home in the U.S. and in its 10 biggest metros.

The report found that it now takes the typical Houston renter household 11 years to save for a starter home in 2026, up from 8 years in 2019. And Houston technically appears at the bottom of the list out of the 10 biggest U.S. metros.

"At the opposite end of the spectrum, in Los Angeles, it would take 24 years [to save enough to buy a home]," the report said. "And in all these areas, there has been a sizable increase in the number of years required to save since 2019."

For the typical American household, it now takes 16 years to save for a starter home, a figure that has doubled since 2019. That's based on an American median renter household income of $57,991, and an estimated saving rate of 2.63 percent. The report defines the saving rate as the percentage of a family’s income that can be set aside for the purchase of a home after expenditures, assuming that aspiring homeowner families can devote 75 percent of their savings toward a home purchase.

"[This] translates to annual savings of roughly $1,525," the report found. "For such a family, it would take 16 years to accumulate enough savings to purchase a starter home [at the median price of $335,574]."

Renter households that made $42,750 in income at a 3.96 saving rate would result in $1,693 saved for the purchase of a home in 2019. By those metrics, it would take the typical renter household eight years to save for a starter home at the 2019 median price of $217,520.

This is how many years it takes to save for a starter home in the 10 biggest U.S. metros compared to 2019, from longest to shortest:

Los Angeles: 24 years, up from 14 years in 2019
New York City: 23 years, up from 10 years
Miami: 22 years, up from 10 years
Washington, D.C.: 16 years, up from 8 years
Chicago: 15 years, up from 8 years
Philadelphia: 15 years, up from 8 years
Phoenix: 15 years, up from 8 years
Atlanta: 13 years, up from 7 years
Dallas: 12 years, up from 7 years
Houston: 11 years, up from 8 years

real estate housing affordability housing market real estate report houston anderson