Real estate leaders hear options for assisting Austin’s threatened creatives

Members of the Austin real estate and development community got a look Wednesday at how unstable many local arts and cultural organizations are – and how they are being threatened by the growth pressures in the city’s hot market for commercial space.

Urban Land Institute Austin’s monthly breakfast panel was focused on how to preserve the city’s cultural assets, which for more than a decade have been facing rent increases and development pressures that make it difficult to hold on to offices and performance spaces. Panelist Anne Gatling Haynes, chief transactions officer for Rally Austin, said that a recently concluded affordability survey of local creative organizations found that one-third of respondents have a lease that’s set to expire in 18 months or less. That short runway is seen as a threat for organizations’ long-term planning, especially with commercial real estate still costly throughout the area.

“Many of these organizations are also being sort of sidelined by property taxes increasing every year, and most leases pass that property tax burden on to the tenant,” said Haynes, whose economic development group has executed six deals using city funds to secure six music venue and other creative spaces around the city.

“Their insurance costs have also started to double, just things like property taxes, and none of the venues are selling enough beer anymore because people don’t drink (as much),” she said. “People aren’t coming back to shows after Covid. All of these types of microeconomics of the businesses make it just very, very difficult to sustain in place without some version of stabilization.”

The discussion included a look at the work Rally Austin has done, as well as what’s expected from the forthcoming implementation of a pair of new city programs that will offer incentives for developers that preserve or create new space for culture uses.

Approved by City Council last year, both programs use reimbursements from property tax revenues as an incentive. The Place-Based Enhancement Program offers financial incentives to developers and property owners who incorporate community benefits into their projects. The program is structured to encourage investment in areas where affordable commercial space is most needed, particularly for small businesses, nonprofits and creative industry organizations.

The second initiative, the Creative Space Density Bonus District, creates a zoning mechanism intended to protect and expand creative spaces across Austin. Under this program, designated districts, which must cover at least 3 acres in predominantly commercial areas, will be established in collaboration with property owners and creative space stakeholders.

In exchange for committing to affordable rents for at least a decade, property owners in the district can receive zoning benefits, including additional building height allowances and exemptions from certain density restrictions.

Donald Jackson, a business process consultant for the Economic Development Department, said the city’s tight budget and restrictions in state law have prevented the creation of more aggressive incentives for cultural uses.

“Some cities in Texas have a major dedicated funds created three different ways for economic incentives. We don’t have that fund. That’s something we’re talking about: maybe ways we could find or develop or get additional funding to support that kind of thing,” he said. “We’ve gotten questions about that from folks who are looking to move galleries or small museums and collective arts organizations into the downtown. It’s just that it’s that budgetary constraint. We’d love to talk more about how to get past that.”

Jenell Moffett, chief impact officer for Downtown Austin Alliance, said the economic data clearly shows the importance of the creative community to the city’s strength as a business center, with programs like DAA’s push to provide short-term leases to artists showing how business and property owners can do their part.

“If it’s an economic argument, the creative community drives the demand, so there is a function there,” she said. “There’s some algebra and a little bit of calculus happening and geometry, where if that creative community is not intentionally invested in, then there is going to be a decline in the demand for your city, your property, for your downtown, for your districts.”

Photo by Hogo agogo, CC BY-SA 4.0, via Wikimedia Commons.

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