Real estate values inside Loop 610 have surged in recent years as many key drivers of suburban growth have experienced a reversal. Changing demographic trends have overturned the decades trend of suburban growth at the expense of the urban core.
Houston as a city is changing and redeveloping in ways that reflect these demographic megatrends. Houstons less restrictive land-use policies have permitted the rapid introduction of more dense real estate developments, which have ­in turn, supported the increased land valuations. Given the tremendous growth predicted by respected demographers, the long-standing trend of suburban growth will continue, but unlike Houstons other booms and expansions since World War II, the inner city will garner a larger share of development and property appreciation.

Shifting demographics is a major factor. On the one hand, the younger generation entering the workforce and creating households is drawn to the inner city where they can live, work, and take full advantage of Houstons cultural amenities. Unlike their baby-boomer parents, they are not all heading for the suburbs. Meanwhile, the baby- boomers are now becoming empty nesters, and they are tired of the commute and are ready to come back into the city. Increasing fuel costs, commute times and traffic congestion are enhancing the appeal of a home in the urban core. In addition, many new Houstonians relocating to the Bayou City as corporate transplants are coming from less affordable cities and are comfortable in midrise rentals and condos.

The supply of inner loop properties is fixed while the demand for these properties is on the rise; this supply-and-demand ratio will continue to drive prices higher. Generally speaking, three years ago land values in the Washington Street corridor were in the $12-$15 per-square-foot range; prices now have increased to $35-45 per square foot. Midtown land has experienced even more dramatic increases, with prices now at $60 per square foot compared to $8-$12 per square foot eight years ago. The east side of Houston has also seen this escalation in pricing as land values and redevelopers push the industrial sector out of the inner city.

As land values continue to increase along with building costs, developers must build taller and denser to generate a positive return on their investment. The current crop of mixed-use developments, like Sonoma in the Rice Village exemplify this, where single project will include retail, office and residential.
Houstons lack of zoning has permitted market forces to quickly respond to the changing urban environment. Developers designed and built new projects that meet the needs of the changing demographic landscape. Suburban growth is still where affordability will be found for many residential, office and industrial developments. Suburban school districts will continue to be a draw for many families, but the lure of the urban core will have people willing and ready to pay a premium. And thanks to the responsive business climate in this region, this premium will still be affordable when compared to other major urban markets.