Houston is still in its infancy as a luxury condominium market, but a wave of branded, high-end condo projects is looking to mature it.
Despite challenges presented by tariffs, elevated construction costs and apprehensive equity providers, this burgeoning market is expected to grow and support returns for the substantial capital it requires to build.
Bisnow/Maddy McCarty
The Hanover Co.’s Brandt Bowden, DC Partners’ Acho Azuike, Deiso Moss’ Taylor Moss, Define Living’s Henry Richardson, Harvey Cleary’s Guy Cook and Forthea’s Greg Cox.
The city’s lack of an established luxury condo market leaves a long runway for developers, foreign investors and others to benefit, panelists said at the Houston Bisnow Multifamily Annual Conference on Tuesday.
Deiso Moss, which is developing a Ritz-Carlton Hotel & Residences at 2120 Post Oak Blvd., is bullish on branded, for-sale product in Houston, founder Taylor Moss said at the Hyatt Regency Houston West event.
“We are a very wealthy city, almost as wealthy as some of those other primary markets,” Moss said. “We have no supply of those products and an immense, immense amount of demand. I think if you’re able to meet that demand, you’ll be very successful.”
The average size of the Ritz-Carlton units will be 2,800 SF, fitting the needs of buyers coming from Tanglewood and River Oaks mansions, he said.
Other top-dollar condos under development in Houston include The St. Regis Residences on Asbury Street near Buffalo Bayou, The Ritz-Carlton Residences in The Woodlands and an Auberge Resorts Collection hotel that will have 44 condo units in The RO mixed-use development.
Branded products are opening the door to more capital solutions.
“In the past week, we’ve seen unsolicited offers of large institutions [saying], ‘Look, we love branded,’” Moss said. “‘We like to be in markets where branded isn’t super saturated, like Miami. We understand the story.’”
DC Partners is eyeing more luxury deals like The Allen, which built luxury residences in the area near Buffalo Bayou Park, Chief Operating Officer Acho Azuike said.
Other high-end projects followed along Allen Parkway and Buffalo Bayou, including the Hanover Co.’s two multifamily complexes in its Autry Park mixed-use development.
“It brought more projects, and the more the merrier,” Azuike said. “It’s going to continue to attract more investment in that area and attract more EB-5 investment as well.”
Bisnow/Maddy McCarty
Anchor Construction’s Brandon Simpson, 3L Real Estate’s Joseph Slezak, Mirador Group’s Krystyn Haecker, TBG Partners’ Drew Mengwasser and Radom Capital’s Evan Peterson.
EB-5, an immigrant investor program that grants permanent residence for investing in a commercial enterprise in the U.S., has seen rising interest in recent months. EB-5 capital is a rare source of funding available for luxury condo development while traditional capital providers hyperfocus on basis, Hanover Co. CEO Brandt Bowden said.
“If you’re going to go break ground on luxury, you are not focused on basis. You’re focused on delivering value,” Bowden said. “I just don’t think that there’s a lot of room in the capital environment today, other than maybe EB-5, to jump in and say, ‘Let’s go do something unprecedented.’”
The Ritz-Carlton Residences, The Woodlands is selling quickly at prices north of $1,500 per SF, but Harvey Cleary is keeping an eye on costs as it builds it, Executive Vice President Guy Cook said. Tariffs on kitchen cabinets and bathroom vanities are expected to increase to 50% in January.
“In the condo world, Italian cabinets are one of the key terms that everybody wants to use,” Cook said. “So we’re going to be watching that very carefully and monitoring that, as well as possibly looking at more local, domestic options for the design teams to review.”
Developers of luxury residences have to examine each detail closely to deliver a compelling story and great value to the buyers or renters. Hanover sees this at the 13.5-acre Autry Park, which cost $100M just for the real estate, Bowden said.
“To build in the urban infill environment, you have to build luxury because you need rents to substantiate today’s costs,” he said.