Southeast Austin on the brink of a development boom
Austin-American Statesman - 11/4/2018
Harriet Norwood Humphrey remembers the old Southeast Austin, long before it was home to Austin’s booming airport, a major racetrack, thousands of rooftops and a mushrooming number of businesses.
Humphrey, 89, one of six daughters of James Edward Norwood and Mabel Burch Norwood, recalls living on what was then Route 1 in Del Valle, on land that now houses Austin-Bergstrom International Airport, climbing trees with her cousins, eating homemade ice cream and playing under her grandmother’s house. What is now heavily traveled Texas 71 was just a one-lane paved road to Bastrop, and Del Valle was a farming community with cotton fields, along with a smattering of peach and pecan orchards, Humphrey said.
Humphrey, who now lives in Austin’s Allandale neighborhood, has watched as change has swept the Del Valle area.
“It’s getting to be more urban rather than farmland,” Humphrey said. “It’s progress — that’s the way it is.”
These days, the Del Valle area in Southeast Austin sits squarely in developers’ sights, primed to be Austin’s next hot spot for growth. Scores of projects are slated to bring thousands of new homes, along with additional commercial and retail development to a part of Travis County surrounding Texas 71 and the Texas 130 toll road.
‘Compelling place to live’
Several factors are accelerating growth in the area, experts say: its moderately priced housing, its proximity to downtown Austin and major transportation improvements that have been completed, under construction or planned.
New employers are expected to include H-E-B, which owns land for a potential future grocery store; Austin Community College, which plans to build a workforce-training campus; Chanel, which plans to build a plant to manufacture skin care products; and Zoho Corp., a California-based software firm that has purchased 100 acres off Texas 71 east of Kellam Road. Zoho has not yet revealed its plans for that property.
Local developers Doug Launius and Karl Koebel have a big stake in Southeast Austin’s future. Through their company, Marketplace Real Estate Group, Launius, Koebel and their investors own or control about 1,500 acres in the area. Their holdings include the 390-acre Velocity Crossing at FM 973 and Texas 71, where over time 5.5 million square feet of mixed-use development is planned, along with a 13-acre park along Onion Creek.
Velocity Crossing, Launius and Koebel say, will help spark additional development that will bring needed services to an area that historically has lacked employment centers and fundamental services — but that they say is one of Austin’s best-kept secrets.
“The community is close-knit, the residents are friendly, and it is aesthetically beautiful with rolling hills and gentle topography,” Launius said. “It’s a quick trip to downtown and has easy access to all parts of the metro. It is next to a fast-growing airport and is relatively affordable with lots of trails and outdoor access. ... It is a compelling place to live.”
Officials with the Del Valle school district say they are prepared for the growth. The district’s Career Technical and Education Innovation Space is regarded as a statewide model, one of the most progressive facilities to train the workforce of the future for jobs in the Del Valle area and beyond.
Delia Garza, the Austin City Council member whose district includes the Del Valle area, said she welcomes the changes, with the hope that that they will bring essential services to a long underserved area.
For the continuing influx of people moving to Austin, many of whom cannot afford homes in the city’s pricier central neighborhoods, “they have to go somewhere, and that has pushed a lot of the residential growth out to areas like Southeast Austin,” Garza said.
Developers Launius and Koebel have become key players in Southeast Austin’s development, having forged connections with city, county, Del Valle school district and Austin-Bergstrom International Airport officials.
Launius is a veteran of the real estate industry, with more than 36 years of experience that he said includes brokering more than $500 million in transactions.
Koebel is an eight-year Air Force veteran, and said his travels during extended military tours in Asia and Europe sparked his interest in real estate development by exposing him to “a rich history of culture and architecture.” Early in his real estate career, Koebel handled national site selection for the Fuddruckers restaurant chain, where he learned about city growth patterns.
Their biggest deal to date is Velocity Crossing, which they purchased in December 2014. The land had been owned by a family from Toronto that bought it before the last recession.
“The property had been on the market for a long time, and almost everyone assumed it was simply a bad location,” Launius said. “With our depth of knowledge of the area, we knew it was a prime piece of real estate in what we, for sure, knew would be an absolutely amazing location as growth moved quickly in the Southeast Austin direction.”
Launius said he, Koebel and other investors bought the land “at a pretty significant discount to the previous owner’s purchase price.” The next month, construction began on $190 million of improvements to Texas 71 and FM 973 — work (now completed) that Launius said he and Koebel confirmed was a sure thing before acquiring Velocity Crossing.
Launius and Koebel are asking Travis County to establish a public improvement district for Velocity Crossing. That’s a zoning tool that would allow them to be reimbursed upfront for key infrastructure for the project including new roads, drainage and other public improvements, through bonds issued by the Travis County Development Authority. The bonds would be secured by the land, so financially there is no risk for the county, said Diana Ramirez, Travis County’s director of economic development and strategic investment.
Eventually, Velocity Crossing could be home to several hundred apartments, a corporate campus and general office, hotel, retail and medical office space, along with entertainment uses.
Ramirez said Velocity Crossing’s developers hope to have the public improvement district created by the end of the year or early January, so they can begin construction on major roads early next year.
“Velocity Crossing has the potential to be Domain Southeast,” Ramirez said, referring to the mixed-use Domain project in North Austin. “This has the opportunity to provide a lot of great jobs and help with congestion, because people can work closer to where they live. And if they get medical services, or a hospital, that’s huge.”
Other large projects, both proposed and under construction, will bring additional employment opportunities and help build the area’s job base, Ramirez and others say.
One of them is Sun Chase, a large master-planned project along Pearce Lane where Lennar has sold 22 homes in the first phase priced from $202,000 and several more homes priced from $249,000. When completed over 12 to 15 years, Sun Chase could be home to more than 4,000 houses, townhomes, condominiums and apartments. Plans also call for 84 acres of retail space, two sites for future elementary schools and a fire station site.
Last month, an Austin-based development firm announced plans for Austin Green, a mixed-use project that developers are seeking approvals to build on 2,122 acres about one mile north of Texas 71 at Harold Green Road. The project would transform land that currently is used for sand and gravel operations into more than 12,000 homes and apartments and 2.25 million square feet of commercial space.
The community, to be built around a town center-like area, would bring moderately priced housing, job opportunities and recreational amenities, said the developer, GroundWork, an affiliate of MG Realty Investments and Momark Development.
The city’s Imagine Austin plan, a comprehensive blueprint to guide growth in the region, pegs the site for a town center. That means future development ideally would accommodate between 10,000 and 30,000 residents and a range of 5,000 to 20,000 jobs.
The project could take as many as 20 years to be completed, with development occurring in phases timed to market demand.
Momark’s Terry Mitchell, a longtime local developer, said new developments in Southeast Austin are selling well because they offer relatively inexpensive housing compared with other parts of the metro area and are close to the heavy concentration of jobs in Austin’s urban core.
By planning jobs in “density nodes” around the perimeter of Austin, as the Imagine Austin plan envisions, Mitchell said “mixed-use projects in these areas can be a big solution to our traffic congestion by dispersing employment around the city rather than having 29 percent of our jobs in the core, creating tremendous transportation congestion as folks try to get to work. This may well be one of the best traffic congestion mitigation tools we have as a region.”
Launius and Koebel said the $743 million U.S. 183 toll project will have a major impact on Del Valle and Southeast Austin.
“Once it’s completed, access from north to south Austin will be significantly improved and will open up the area to more people,” Launius said.
Eldon Rude, a local housing market consultant, said the road projects are one of the main drivers of increased development in Southeast Austin, along with “the natural migration of development further from Austin’s core.”
“Although this area has been experiencing both residential and commercial development for some time, the pace of activity has certainly picked up recently, and I expect will only accelerate in the coming years,” said Rude, principal of Austin-based 360° Real Estate Analytics. “The combination of increased roadway capacity in the area, as well as its proximity to emerging east side employers and downtown Austin, are making this area more attractive for home buyers.”
Like Koebel and Launius, a number of other developers also see opportunity in Southeast Travis County.
William Lyon Homes is building its Prado subdivision on the east side of FM 973, about a mile north of Texas 71. The development will have about 362 houses once completed. Buyers already have moved in to 110 homes, and about 35 homes are now under construction.
“Our pricing is in the low to mid-$200,000s, and we are selling at a pace of approximately eight homes per month,” said Bryan Havel, the company’s division president.
In 2020, William Lyon Homes plans to break ground on an even bigger community. Longview is slated to bring 1,500 homes to 430 acres along Kellam Road between Texas 71 and Pearce Lane. Like Prado, pricing for those houses is expected to start in the lower to mid-$200,000s, Havel said.
“We are excited about the growth in the southeast corridor, about the possible expansion plans to the airport and Circuit of the Americas, and the investments being made by the Del Valle school district,” Havel said.
Next year, KB Home plans to break ground next year on 193 homes in a new community called Sundance Crossing at Ross Road and Heine Farms Road. The first homes are expected to be ready next summer. It follows a sold-out project that KB built nearby called Trails at Stoney Ridge, with 141 homes priced from $198,995 to $238,995.
“This has been a highly desirable market for KB Home because it offers an affordable option for Austin homebuyers,” said Ken Langston, KB Home’s division president in Austin.
With few rental options in the area, Journeyman Group said it intends to break ground early next year on the Eastridge Apartments, a complex that will be on Ross Road just north of Pearce Lane.
On the retail front, H-E-B hasn’t given a projected time frame for when it might build a grocery store on the 17.2 acres it bought at Velocity Crossing. “We are glad to see the continued growth around the prospective site we own in Del Valle,” said H-E-B spokeswoman Leslie Sweet. “We purchased this site to show our interest and hasten retail and residential development in the area.”
Retail also is destined for Bowman Crossing, at Texas 71 and Kellam Road. Marshall Durrett and Charlie Hill with commercial real estate firm Cushman & Wakefield say they worked with William Archer and some of his family members in the sale last year of 12.3 acres to a developer who plans to build a travel plaza/convenience store with two quick-service restaurants and a hotel catering to Circuit of the Americas visitors.
Cushman & Wakefield later represented the same family members in selling 3 acres of Texas 71 frontage road to the Texas Department of Transportation for the highway’s planned expansion, which will include an overpass at Kellam Road and, according to Durrett, “establish the intersection as a major retail hub in Southeast Austin.”
‘Drive a significant amount of growth’
Last year, Congress gave Koebel and Launius another reason to be bullish on Southeast Austin.
As part of the federal Tax Cuts and Jobs Act, businesses and individuals are eligible for tax breaks on capital gains that are reinvested in 8,700 low-income U.S. communities designated as “opportunity zones.” The goal is to spur growth and create jobs in underserved areas by offering investors the chance to defer, discount or even eliminate their capital gains tax bills.
Under the law, about half of Del Valle’s 111,360-acre school district — 56,443 acres — is now within an opportunity zone, Launius and Koebel said. That will be a magnet to draw investors and employers to the area, giving Southeast Austin a competitive advantage, they said.
“It will drive a significant amount of growth out here,” Koebel said.
Garza, the Austin City Council member, said “a lot of controversy” surrounds opportunity zones. She recently sponsored a council resolution aimed at ensuring that the type of investments being made, including those eligible for city incentives, “align with what we think is good for this area.”
Ramirez, with Travis County, also is taking a proactive stance. While an opportunity zone offers “the potential for a lot of money to be flowing into Travis County,” Ramirez said, she wants to make sure local governments have a say in making sure any investments are in line with the county’s needs and goals.
In response to the growth coming its way — including development anticipated with the opportunity zone designation — the Del Valle school district is positioned with educational and workforce training for its 3,300 high-school students and the community, said J. Norris Sebastian III, the district’s career and technical education director.
The district has built its 66,000-square-foot Career and Technical Education Innovation Space, as well as remodeled 24,000 square feet of existing facilities, to prepare for additional growth as Southeast Austin “undergoes a renaissance of development,” Sebastian said.
The Career and Technical Innovation Space has 21 programs of study, including health care, engineering, accounting, biotechnology, data management, information technology, digital media, construction, entrepreneurship and cybersecurity. Sebastian said 60 percent of Del Valle’s high school students are in one of the programs.
An educated workforce, Launius and Koebel say, is essential in attracting jobs, and it will be increasingly important as Southeast Austin continues to grow its employment base.
“In five to 10 years,” Launius predicts, “you won’t recognize Southeast Austin. It’s going to explode — in a positive way.”