Downtown Huntsville needs an additional 500 to 600 apartment units by 2020 or it may miss a critical opportunity to achieve the live/work/play environment it desires.

Chad Emerson, CEO of Downtown Huntsville Inc. (File photo)

That's according to a new study commissioned by nonprofit Downtown Huntsville, Inc., which hired ValueTech Realty Services of Lutz, Fla., to "tell us not what we wanted to hear, but what the truth was" about downtown livability, CEO Chad Emerson said.

ValueTech analyzed residential demand in the city compared to demand for people looking to live an urban environment. The consultant also did a comparative analysis of demand in peer cities, including Chattanooga, Tenn. and Raleigh, N.C.

"The result was that we have many fewer urban lofts than most of our peer cities, which makes it clear why there's this unmet demand," Emerson said.

The Avenue, CityCentre

The hundreds of apartments needed to position downtown as a "vibrant urban center" are in addition to The Avenue and CityCentre at Big Spring, two projects that will create just shy of 470 units when completed.

Emerson said Huntsville developer Scott McLain is discussing the possibility of new lofts at Constellation at the Memorial Parkway-Clinton Avenue junction. When McLain announced the project in April 2014, he said the mixed-use project would include a luxury hotel, new restaurants and retailers, 150 apartments, 280,000 square feet office space and two parking decks.

ValueTech said competitive supply will not "remain static waiting for additional downtown Huntsville units to be approved and delivered." Each new housing option in the surrounding region will detract from Huntsville's ability to reach the downtown housing mass it wants, the study added.

"From my perspective, the most striking conclusion was that the quantity of multi-family development planned and currently under construction will be insufficient to establish and sustain a vibrant, walkable, live/work/play city center," said William Stroud, principal of Triad Properties Corporation and chair of DHI's Development and Governmental Relations committee.

Empty nesters

While millennials are an obvious target group for urban living, Emerson said Huntsville needs more downtown rental options for 35- to 55-year-old renters and empty nesters, who often have more disposable income and want more diverse entertainment options.

ValueTech said this group is "the key demographic that will support the retail aspects of the downtown sector."

"What was really significant is that this unmet demand is not just young professionals, but also mid-life professionals and retirees, which have quite a bit of spending power," Emerson said. "That's good for a downtown to have them living in it."

The study is already serving as a tool for prospective developers and lenders. It's still early, but Emerson said the reaction so far has been positive.

Challenges

City Director of Urban Development Shane Davis said the biggest challenge Huntsville faces regarding loft development is finding the right sites, which are becoming limited. To remedy this problem, he said he could see downtown grow along Clinton Avenue to the west toward Campus No. 805 and stretch across Meridian Street in the Oakwood area.

"As some of the downtown continues to evolve and change, I don't think those 500 or 600 units will be four blocks off the Courthouse Square like we've seen," he said.

Emerson said overpricing of land is also an issue.

"What happens sometimes is things get to be popular and people overprice their land and so a good parcel such as the Coke site, which is a very good location, is frankly overpriced in the market," he said. "That's one of the dangers. If you have all the key sites overpriced, then you get into basically a gridlock where you have developers that want to develop and landowners that want to sell but they can't make the market."

ValueTech said renting has jumped among all age groups, household types and income brackets. A decline in homeownership either by choice or necessity has also increased the number of middle-aged renters, and single persons or married couples without dependent children.

Condo development

Davis believes there will be a mix of single- and multi-family housing options over the next decade for the aging population looking to downsize and millennials under 35. He said his office has received several calls about the prospect of new condos in downtown Huntsville.

"I know those have been tried a couple of times with limited success but I think it shows where the city is today," he said. "When the condo units were built here several years ago, they were a little ahead of our time, but now I get a couple of calls a month wanting to know if there are any future condo projects coming forward where they can have ownership.

"I think we'll see some of that mixed in with the 500 to 600 units."

Without addressing the housing issue, the study said Huntsville may face a competitive disadvantage competing for new companies and workforce.

"If we do not capture or offer this product that the market is demanding, it's not that we'll lose them to suburban settings or to other parts of the city, they may leave the Huntsville area altogether and go to a city that is offering the type of lifestyle they want," Emerson said. "For us, a strong downtown that gets redeveloped is a powerful workforce retention and recruitment tool for our entire region."