[Owlhorn]

recent article on Uptown
partment construction is up in Uptown
Rents are going skyward, too, in Dallas' only booming area

08/01/2003

By STEVE BROWN / The Dallas Morning News

Blink and you'll likely miss the latest addition to Uptown's growing residential base.

On a tiny Allen Street lot surrounded by apartment and retail buildings, developers are constructing a seven-story neo-classical building that will have just 30 luxury apartments.

Units in the Drexel Montane will rent for almost twice as much as the average Dallas-area apartment.

That's not unusual in an area of town where land is selling for more than $50 per square foot and only a handful of development sites remain.

Even so, Uptown remains Dallas' only booming construction market.

Along with the Montane, a half dozen luxury residential projects in the area are just opening, under construction or planned.

"We did take a little bit of a break in construction, but now it has kicked back up again," said Greg Willett, an apartment market analyst with M/PF Research. "We are going to test the depth of demand in the next 18 to 24 months."

To counter high land costs, it's not just the height of the buildings that are going up – rents for new projects are also sky-high.

Average rents in the area are now close to $1,100 a month, compared with about $683 for the entire D-FW area. Most new projects now average much higher in cost.

"There has certainly been a trend to move more upmarket," Mr. Willett said. "And yes, to some degree it's been required because of what developers are paying for the land."

The newest apartment projects in Uptown, with elaborate architecture and interior amenities to go with their fancy price tags, appeal to renters.

At the just-opened Bryson at Cityplace complex on Lemmon Avenue, the smallest "studio" apartment (540 square feet) rents for about $735 a month. "We go up to about $2,700 for a two-bedroom with a den or office and a downtown view," said Twila Turner with developer Fairfield Properties.

The seven-story red brick and stucco building across from the popular West Village shopping complex won't be completed until September and is already close to 40 percent leased.

Going up

A block away, at the just-opened Marquis on McKinney building, rents start at $1,000 for a 690-square-foot unit.

Developed by Austin-based builder CWS Apartment Homes LLC, the 10-story contemporary-style building contains 144 luxury rental units. The largest of the apartments, which is more than 1,600 square feet, is offered at $2,465 a month.

These buildings are small compared to a handful of much bigger residential towers about to kick off in Uptown.

Florida-based apartment builder ZOM Inc. is scheduled to break ground soon on its 20-story Waverly at Cityplace apartments at McKinney Avenue and Blackburn Street. The 218-unit rental tower's units will average more than 1,400 square feet.

ZOM officials didn't return phone calls to provide details about pricing or completion of the units. But brokers who work in the area expect them to break ground in the next few weeks.

A Houston builder – Hanover Co. – has already begun construction on a similar project closer to downtown.

The 20-story Prado at Ashton Place high-rise will have 267 "upscale" units. Construction is scheduled to be finished in 2005.

Doubts

Market analysts said they question whether so many high-end rental units will glut the Uptown market.

"There is a significant block of product targeting a pretty narrow niche," Mr. Willett said.

Mike Puls, a rental market analyst with consultant Foley & Puls Inc., is more blunt in his assessment.

"Supply and demand tells us that it will be very hard to make all these deals work," he said. "All these large properties that are trying to achieve very high premiums for rent are ridiculous."

And they're not all just for rent. Several high-cost condominium projects are also in the works in Uptown.

At the Victory development next to American Airlines Center, developers recently announced plans for a 33-story combination W Hotel and condo tower. The 94 condominiums will range in price from less than $500,000 to more than $1.5 million.

Crescent Real Estate Equities Co. is working on a similar project next to its namesake Crescent complex on Pearl Street.

And Hotel ZaZa has announced plans for its own luxury condo development to augment the boutique hotel.

Of course not all of the contemplated projects are likely to be built.

"At this price premium, it's very hard to do a large number of projects," Mr. Puls predicted.