The Making of Downtown North

These two design plans show the Domain project in its current state and what's envisioned 10 years down the road, assuming this multiphase centerpiece of "Downtown North" stays on course. Under the development and retail aegis of Endeavor Real Estate Group and Simon Property Group (with a Phase I start-up carrot from the city), this onetime IBM campus is being transformed into a mix of shops, residences, offices, and hotels. The first retail phase of the project – the upscale Domain I shopping district – opened this year with anchors Neiman Marcus and Macy's. Simon and Endeavor are working separately on adjacent developments – both named Domain II, for now.

It's been derided as a shopper's Disneyland and pre-emptively dismissed by many Central Austinites as a strange, upmarket interloper, more suited for the tonier districts of Dallas or Houston. But if the developers and the city planners manage to deliver what they say they have in mind, the still-sprouting Domain shopping and residential complex on what is now the near north side will start to look a lot more like Austin. And – what may strike greater fear in the hearts of the Faithfully Weird – Austin may begin to look a lot more like the Domain.

At the moment, the development itself doesn't look like much, at least on the long approach. Driving in from Braker Lane, visitors progress along the uninvitingly named Domain Drive, where the only visible green is the cloth barrier that hides the demolition work. Beyond that is what looks like an industrial wasteland, accompanied in the distance by the gentle sound of backhoes and wrecking balls. A dusty expanse of concrete pad and gravel is interrupted by a forest of electrical pylons and mounds of rubble.

Then, suddenly, there's a brand-new Macy's. Park, and walk around it, and there's what appears to be a recently refurbished, meandering European town street – three- and four-story buildings with apartments above street-front stores, broken up by small plazas and shaded by well-established trees. Except – most small European streets don't have a Neiman Marcus. Nor a Tiffany's. Nor a Louis Vuitton. But then, neither do most Austin streets.

Welcome to the Domain, where it's not like most of Austin. Yet.

What's in a Name?

When it comes to urban development, it's hard to hear the word "domain" without sticking "eminent" in front of it. But for all its recent negative associations of diminishing private-property rights, the place name for this project actually dates back to the heady days of the dot-com boom – and shortly thereafter, which tells the whole tale. In 1999, the newly formed Endeavor Real Estate Group, in partnership with private equity investors the Blackstone Group and JER Partners, acquired the 304-acre former IBM campus on North MoPac. With its shift away from manufacturing to support at the site, the computer behemoth needed less of a construction footprint for its 6,200 employees. At that point, according to Endeavor principal Kirk Rudy, "the plan was to demolish the buildings and put up offices for the dot-com industry. Literally, within a matter of months, that strategy was proven to be a failure. Then we thought, 'We've got a significant power and fiber infrastructure, so let's build a 2-million-square-foot telecom hotel.' And then the telecom market collapsed. So we were really scrambling to get some value from the land."

The Domain development is just one component of a much more expansive vision city and neighborhood planners have laid out in a draft master plan of the North Burnet/Gateway area, which City Council is scheduled to consider Oct. 18. The entire planning area, including a segment west of MoPac, is about the size of Downtown and the UT campus combined.

So while the planning ground shifted, the cyberspace name persisted – for a "domain" that turned back to its future as a commercial and residential fiefdom. A 55-acre slice of the site, adjoining MoPac, was basically free of tenants and ripe for quick redevelopment. Realizing that its high tech plans were dead, Endeavor took the project in a completely new direction: a mixed-usage or "new urbanist" community, combining retail and residential in a neatly defined neighborhood. One problem: The old partners weren't interested in this new kind of development. So Endeavor refinanced with RREEF Alternative Investments and started looking for partners. They settled on Illinois-based Simon Property Group Inc., experts in mall development who already ran several sites around Austin including the Arboretum and Highland Mall.

But this project would be as different from those malls as it was from Endeavor's original plan. It would be what urban planners, and increasingly the city of Austin's neighborhood gurus, call "vertical mixed use": stores below, residences above. More importantly, the shopping demographic would be far removed from the traditional low-key Austin approach. The developers would court A-list commercial tenants like Barneys New York Co-op and Sur la Table and thereby create a "regional shopping destination" – a commercial venture that in recent decades had been confined by definition to the suburbs, not the new urban core.

The immediate appeal for the city to rezone this light industrial property to attract a bunch of tony stores, in turn dragging in the big-city swells and high-end shoppers, was simple: sales tax. According to Fred Evins, redevelopment project manager for the city's Economic Growth and Redevelopment Services Office, "We'd seen more retail sales go to Round Rock and San Marcos and surrounding areas. The city's share of sales-tax dollars in the region was shrinking, and it was hoped this would turn that tide by providing a unique destination."

It wasn't just about getting out-of-town shoppers spending their tax dollars within city limits; it was also about keeping the city's own affluent shoppers here. "One of the things I always appreciated about Austin was the laid-back, comfortable approach," said Evins, "But there's more than one facet to Austin, and there are more black-tie events, more fashion, and more money coming in with the tech companies. This is meeting the market demand. It may not be the traditional Austin, but it's appealing to a market sector."

For Endeavor and Simon, the obvious downside was the upfront cost. This wasn't going to be a bolt-together strip mall, nor even a high-end strip mall but an "integrated retail environment" meant to attract demanding tenants with a world-class reputation. Increased residential density means more people, which means more parking, but the initial point of the project had been to get better use from IBM's massive areas of old surface parking. The new direction meant costly structured parking. The city was also looking for improved public amenities, like wide, pedestrian-friendly sidewalks, public art, and trees. To facilitate these goals and to help underwrite them, Endeavor and the city struck a deal: $25 million (notably, in 2003 dollars), paid out over 20 years to the developers, and based on sales- and property-tax receipts.

The incentive cash was in part intended to allow the developers to spend extra money on finishings to attract high-end retailers like Neiman Marcus. However, it was also an incentive package to get small local businesses and affordable housing into the development. "Simon told me that, if they'd approached this, they'd only have worked with national retailers," said Evins. But with a million dollars in promised incentives, seven local businesses either opened or moved on-site. (That still accounts for only around 10% of the stores currently planning to open along the Domain's main shopping street.)

The Steeping Room owners Emily Morrison (l) and Amy March are among a few locally based shopkeepers at the Domain. (Photo by John Anderson)

According to Amy March, co-owner of teahouse the Steeping Room, not only would her firm probably never have moved to the Domain without those incentives, but it might never have opened at all. March had helped set up Central Market's specialty tea program at the north store and had been looking to open a gourmet tearoom that would also serve food. She and her business partner, Emily Morrison, had been looking in South and Central Austin for a site for their new business. But finding somewhere affordable where they could serve the menu they wanted to the clientele they needed seemed impossible. "All these places were interested in us," said March, "but we were an upstart start-up, and they'd whittle us down into a space that wouldn't give us any business." In December 2005, they saw the plans for the Domain and found the developers were already negotiating with a national tea chain. The incentive package helped get them through the door instead. It still wasn't going to be cheap, but as March noted, "Real estate is expensive everywhere. For a more established business, they might have said, 'that's expensive.' But for us, as the first teahouse in Austin, we needed somewhere that was going to get big attention and support us."

Even though the number of local vendors is relatively small, they have always felt well-served by the Domain, said Craig Staley, owner of fellow tenant Bettysport. "We add something different to what the chains bring," Staley said. "They make it like every other shopping center, and we're making it unique." With the first branch of their women's sportswear store already open Downtown just off Lamar, he and co-owner Stephanie Terrell were looking to expand, and like the city planners, they had their eyes on out-of-town customers. "We were looking to Georgetown and Round Rock," said Staley, "population centers that, with Austin's growth, are now so far from Downtown. For the people out there, getting into Downtown is such a headache, with the travel and the parking. So for us, this was just about gaining access to a segment of the population that we weren't touching." They were keen to avoid getting stuck in a low-density strip mall, so the Domain's combination of mixed-usage and high-end retail neighbors with national profiles was part of the appeal. "We're a destination shop," said Staley, "so for us to be in the middle of that, it puts us in with our direct market – females 35 to 55, with the means and the time to be going to yoga, gyms, and Pilates."

Of course there are also the nationally recognized names. Among the first tenants Simon attracted was McCormick & Schmick's, and the seafood restaurant held a grand opening of its second Austin site in August. If the Domain seemed like a change from the chain's normal locations, near to office and after-work dining, it was. "I've been doing this for 36 years, and when we go into a new community, our preference is always to move into downtown," said Doug Schmick, CEO and co-founder of the chain. Yet with the planned mix of office and residential, the Domain felt like a downtown. "What we've found over the last five or six years is that there are a lot of quasi-lifestyle centers that start to create a sense of community and destination within the suburban environment," said Schmick.

Which is exactly what the city would like to hear.

If You Build It, They Will Stay

Big as it is, the Domain is only a small portion of a much bigger plan being formulated by the city of Austin. Technically, it's called the North Burnet/Gateway area. But there's a simpler name for it: Downtown North.

"A second downtown was inevitable," says Council Member Brewster McCracken. "It's just that if you didn't plan for it, it would be like Las Colinas or the three satellite downtowns in Houston, where it's an office park next to a regional power center next to several gated apartment complexes – and they're a failure. So, if this is going to happen anyway, let's get ahead of the curve and plan it so it functions like a true urban core."

McCormick & Schmick's recently opened its second Austin restaurant at the Domain with a ceremonial fish toss. (Photo by John Anderson)

The North Burnet/Gateway area is the end result of a 10-year series of studies and consultation exercises by the city. Currently, it only exists as a draft master plan, but its scope – and its potential impact on North Austin – could be enormous. An unevenly shaped zone, it covers 2,300 acres between MoPac, Metric, and Research (plus a bulge west of MoPac, including the Gateway shopping center). That's roughly equal to Downtown plus the UT campus. It's what is now officially known as a transit-oriented development – in the new-urban newspeak, a "TOD." The idea is that people will be able to take either highways or mass transit, such as Capital Metro's new Capital MetroRail, to the area. Once there, the integrated nature of the larger neighborhood, with its mixed-usage, pedestrian-friendly design, and broad selection of entertainment and employment opportunities, will mean they'll be able to walk, cycle, or (still at least in theory) use public transport to get where they want to be.

The city is not going to be doing the developing itself: Nor is it likely to create another subsidy sweetener like the one accorded the Domain. There has been a sharp and continuing public outcry against these particular incentives (see "Giving Incentives a Bad Name"), and city officials themselves now argue that the Domain deal was a product of a particular economic time and place. In a Finance Commission's Audit Committee meeting on Aug. 28, the council made it clear that such economic incentive packages will probably remain restricted to industrial and not retail developers. Instead, said Molly Scarbrough, senior planner with the urban design division of the Neighborhood Planning and Zoning Department, "We'd change the zoning and design standards in the area to encourage the kind of developments we're looking for. But in our plan, we think that by doing these changes, the area could accommodate up to 40,000 new units: 80,000 people. That's probably aggressive, but the city's regulations would allow for that level of development."

There are, of course, technical issues, and by formulating a master plan now, rather than responding to developments piecemeal as they go in, the city hopes to avoid simple but damaging problems like mismatched-water-pipe bores or moving electric cables from out of the way of one development and straight into another. But that will take policy changes. "Our infrastructure policy is traditionally big on rewarding ex urbis [i.e., suburban] developers," said McCracken, "so that's an example where our infrastructure policy is 180 degrees from our land-use policies. People who develop density will have to be rewarded equally to subdivision builders."

I, II ... Many Domains

So how do a bunch of swanky stores and condos fit into this grand urban vision? Technically, what is open now is not "the Domain," but "Domain I," the first stage of a much larger plan. The site breaks down into four sections. After selling the campus to Endeavor, IBM leased back five buildings, totaling a million square feet of real estate. Simon has already opened Domain I, and now both Simon and Endeavor are working on their own separate second-stage developments (both called, confusingly, "Domain II").

The plans are elaborate and large-scale. Domain I is a compact and self-contained development; attempting to fill the remaining acreage with something the same but almost five times the size was a nonstarter. "If you overlay the boundaries of the Domain over Downtown, it would stretch from Town Lake to north of the Capitol and four blocks either side of Congress," said Rudy. "It has the potential to become something significant."

The current plan is not to extend Domain I but to turn it into the shopping district for a new, larger community. There will be more vertical mixed use, with residential over retail, but there will also be separate apartment buildings, as well as offices and hotels. On Endeavor's 170-acre second stage, there's already a commitment to a 10-acre park with a small lake at its heart. A mile-and-a-half jogging track will roam through the area, and there's even a proposal for a 7,000-seat outdoor amphitheatre. In total, Endeavor is looking at 6,000 new residents and 17,500 employees on-site. "The first area was exclusive, and this will be much more diverse," said Rudy. "Our tagline is, 'Austin Continued.'"

Endeavor's Kirk Rudy stands at ground zero of the second development phase of the Domain. An old warehouse in the background is on its way out to make room for a new structure. (Photo by John Anderson)

Transferring over to mixed- and vertical-mixed-usage would allow space for this big population, but then there's the ever-persistent question of where they all will park their inevitable (two?) cars. A large part of why the IBM campus looked so sparsely populated and underutilized were the large tracts of open-air parking. "Our consultants found that you could take the existing parking lots, put in some structured parking garages, and start infilling that surface," said Scarbrough. "Then you could keep some existing retail and then infill with residential over time." For Endeavor, structured parking wasn't simply helpful, but essential in order to cram everything in. "If we were to replicate this in the suburbs with surface parking lots," said Rudy, "it would require 700 acres, not 170."

A core part of this plan is dependent on something Austinites do not do very much but at least measurably more than most other urban Texans – they walk. Domain I was always intended to be foot-friendly and walkably sized. Domain II will require even more design to support those purposes, including retention and replanting of mature trees to provide cover and shade. For the area plan to work will take some major re-engineering. "We're looking at a redesign of Burnet to make it a little more pedestrian-friendly," said Scarbrough, "because it's got pretty fast-moving traffic that could be quite scary if you were a pedestrian or on a bike."

According to Evins, this transfer to foot may take some effort and a culture shift. "Texans, for the last generation or two, haven't been big on walking." However, lessons are being learned from other projects around town. "2nd Street is a prime example of how we've taken an 80-foot right-of-way and reapportioned it. We've taken away from the car and given it to the pedestrians, without restricting vehicular access," he added.

A Sense of Place

For McCracken, the fact that Austin is already very pedestrian-friendly makes the proposed plan more likely to work here than most other cities and a lot more "Austin" than the early and voluble detractors consider Domain I. Few southern or Texas cities have large, walkable areas like the Drag, South Congress, or Town Lake, or so many of them. "I was driving around with my family in Corpus Christi this weekend," McCracken said, "and I realized the enormous progress we have made and the futility of trying to do in Corpus what we've done here. There's no way."

So a pivotal part of the plan is that the entire development remains integrated rather than isolated bubbles that become virtually gated communities. "We talk with Simon often," said Rudy, "and we agree that when someone comes to the Domain, they feel like it's 'the Domain.' Not Simon's Domain, not Endeavor's Domain; so it will all be connected." The city and the developers are hoping for a cascade effect: If Domain I succeeds, that will help make Domain II successful. If the Domain works out, it will attract the other developers the North Burnet/Gateway area needs.

But being a test bed for a much bigger development has its risks. If the hope is that Domain I will trigger further construction, then Domain I is also dependent on that new growth for long-term success, especially if, as this first stage is situated, it's currently an oasis of consumerism in the middle of an industrial wasteland. Doug Schmick in fact describes that uniqueness as part of the early appeal. "In my business, we've always felt that coming in a little earlier has its advantages, and we have long-term faith in the viability of the project. To be one of the first ones in, some people may perceive you as taking a risk, but you're establishing a sense of place, and you become known and deeply entrenched in the overall development."

For Schmick, using regional destinations like Domain I is a way to kick-start a sense of community in an ailing city center or a new urbanist setting. "One of the issues of living in suburbia was that there wasn't any heartbeat or central core, and these kind of developments are an attempt to bring that into play. I think from a city-planning point of view it's pretty unique, and it began in Reston, Virginia, about 20 years ago."

However, Reston could also serve as a warning for the city and the developers. The unincorporated municipality was a model for new urbanism, and between 1970 and 2000 its population exploded from 5,700 to 57,000. But residents of surrounding, more suburban communities like Hunter Mill are now opposing what they see as high-density urban sprawl from their mixed-use neighbor. Many Fairfax County residents complain about Reston's skyline, now dominated by tall office towers. While the majority of buildings proposed at the Domain would be between four and eight stories, Endeavor has already closed a deal with Novare Group Holdings LLC (the firm behind 360 Towers in the "old" Downtown) to do a 28-story tower containing 145 hotel rooms and 360 condos on Domain II.

It's also worth keeping in mind that this is the third proposal for the land since the developers took over from IBM, only eight years ago. There is no definitive ground plan for the whole Domain; the city has not yet adopted the area master plan – and another economic downturn could again throw everything into disarray.

October will be a big month for both the Domain and the North Burnet/Gateway area. Endeavor breaks ground on the first significant new component of Domain II, a 137,000-square-foot office building. They'll also start the design process for a number of four- to eight-story residential blocks, totaling around 240 rental units averaging 900 square feet. On Oct. 18, the Neighborhood Planning and Zoning Department will present its master plan for the area to the City Council. But the full Domain project, and the greater area plan, will depend on that idealized walkability and whether even Austinites can be consistently separated from their cars. The Steeping Room's Amy March was optimistic, having already seen foot traffic in front of her tearoom. "A lot of people say, 'Oh, it's an outside mall in Texas; no one will come,' but they came. Yeah, we were lucky with the weather this summer, but it's Texas: You get used to the heat."