Downtown Waco is ripe for the kinds of development that bring more development, according to preliminary findings from a forthcoming market study.
The core of Waco needs a full-service hotel, a major arts attraction, high-end office developments and continued housing growth, consultants for the study told the Tax Increment Financing Zone board this week.
Officials with Denver-based Economic & Planning Systems will wrap up the first phase of the market study by March. The study is funded by the TIF board, which is seeking market information to help prioritize its incentives for downtown projects.
The study is looking at business trends in the urban core between Waco Drive and Interstate 35, and from 11th Street to Garrison Street in East Waco.
The TIF board this week asked for some tweaks and clarifications of the data, but city and downtown officials said the preliminary findings should bolster developers’ confidence in downtown’s potential.
“One thing that’s helpful to do is to put numbers behind things we have anecdotal evidence or gut feelings about,” said Megan Henderson, executive director of City Center Waco. “One question we get is, ‘There’s so much residential downtown — surely that’s over, maybe we have enough or too much.’ Enough and too much are feelings we get based on our own experience.”
The study calculates that 670 units of housing have been added in the study area in the last decade, or about 10 to 15 percent of the growth citywide. The consultants forecast that the downtown area could absorb 100 to 150 units per year over the next 15 years, or about 1,500 to 2,250 units for that period. Most of that projected demand is not student housing, he said.
“It seems to us to be a very active market, and we think there’s a lot of potential growth, starting from such a small base,” said Daniel Guiman, principal of Economic & Planning Systems. “You’re starting to see developer interest from Dallas and other markets.”
Melett Harrison, the city’s economic development director, said housing growth could drive other development.
“We’re keen for getting the additional retail that we can’t get without more rooftops,” Harrison said.
Two projects in the planning phase on the riverfront could take up much of the demand for the next few years. The Brazos Promenade project is supposed to have 465 multifamily units and 44 live-work units at build-out, while the Brazos Commons is eyeing 400 multifamily units.
The preliminary research shows that the vacancy rate in the study area’s rental market grew from 5.6 percent in 2010 to 11.6 percent in 2017. City leaders at the TIF meeting Wednesday said that finding needs a closer look, and it may reflect homes that were vacant before being demolished for new development.
“We hear all these apartments are full,” Mayor Kyle Deaver said.
Flat office growth
Meanwhile, growth in office space, downtown’s traditional forte, has been flat for the past decade, consultants said. Though the study area has 1.2 million square feet of office space, its average year of construction is 1948, and there are “no true class A multitenant buildings,” the consultants reported.
The average office rental rate has doubled over the last four years to about $19 per square foot, indicating demand for new construction, Guiman said.
Economic & Planning Systems vice president Matt Prosser said the consultants have some concerns that the 550,000 square feet of office space at the proposed development at Heritage Square, called “The Civic Center,” could be difficult to absorb, though he said it could be phased over several years.
City officials said they want more analysis of the potential for office space growth, taking into account that Civic Center officials are promoting the idea of recruiting tenants from outside the Waco market.
“That’s their whole pitch to us,” Deaver said.
The consultants said downtown has pent-up demand for hotels that won’t be completely met by the 375 hotel rooms in the works along Interstate 35. They said the convention center needs at least one full-service hotel to be able to book bigger conventions. Both the riverfront projects are expected to include hotels of that type.
Lack of arts facilities
The consultants also pointed to a lack of permanent arts facilities in downtown, representing a missed opportunity for performance and exhibitions and the cultural and economic benefits that come with the arts. They said downtown is attracting more arts events and took a step forward with the creation on an “arts district” in 2016, but the time is ripe to create more arts facilities.
Malcolm Duncan Jr., a TIF board member, said he would also like the study to look at the potential for entertainment.
“What would make people come downtown who are not coming to downtown now?” Duncan said.
Henderson, of City Center Waco, said the study, once complete, will help local leaders develop priorities for making downtown grow. But more is at stake than just downtown, she said.
“If you look at cities whose downtowns are attracting fantastic professional firms, the value to those cities is having those firms in town,” she said. “It’s not just a matter of putting together a plan to bring more business downtown. It’s about making downtown great so that we can make Waco great.”