Dallas’ oldest hotel may find new life with the latest apartment living trend.
The 111-year-old Ambassador Hotel just south of downtown Dallas was bought last year by a partnership headed by local real estate developer and investor Jim Lake Jr.
Lake plans to convert the one-time luxury hotel overlooking the downtown skyline into about 100 apartments that range from 340 to 650 square feet in size. The average will be less than 500 square feet.
Developers across the country are building these micro units to provide more affordable options for tenants.
“We think there is demand for this type of apartment,” said Lake, giving a tour of the six-story building on South Ervay Street at Interstate 30. “The millennials that have the city to play in need basic living at a price they can afford.
“We can make a 450-square-foot unit as appealing to them as larger units,” Lake said.
The average new apartment being constructed in North Texas runs about 965 square feet, according to the latest numbers from analyst MPF Research.
And those new apartments have an average citywide rent of almost $1,450 a month.
Lake said his apartments in the Ambassador Hotel will start at less than $1,000.
“It’s a more affordable product than what you see in Uptown,” said architect David Farrell, who is working with Lake to redo the six-story hotel building.
Most of the apartments will fit inside the building’s original hotel rooms, with a few expansions for kitchens.
‘Wonderful old building’
The Ambassador opened in 1905 as the Majestic Hotel, and was touted as the city’s “first suburban luxury hotel.”
In 1955, it was converted into a retirement home. It continued to operate as a seniors apartment building through the late 1970s.
The Ambassador was owned for 20 years by a Christian organization, Institute in Basic Life Principles, which sold the property to Lake’s partnership in 2015.
After considering a combination of hotel rooms and traditional apartments, Lake zeroed in on the micro unit concept. “We’ll be under construction next year and open in 2018,” he said. “It’s a wonderful old building that we think has a lot of potential.”
Lake said part of the ground floor of the Ambassador — where many of the original lobby features survive — will be used for restaurant, retail and event space.
He’s looking at a rooftop deck and a swimming pool on the ground floor.
Small is in
Following the lead of developers on the East and West Coasts, other North Texas builders are shrinking the standard rental footprint.
Alamo Manhattan Corp., which has built apartments in Uptown, has had success renting small units in its Routh Street Flats community and other projects. “We have some 525-square-foot studio units there, and they fly out like hotcakes,” said Alamo Manhattan CEO Matt Segrest. “The appetite for them is voracious.
“It’s all about price point — it allows people to live in these popular projects.”
He said the smallest units in the Routh Street Flats building go for about $1,350 a month.
Alamo Manhattan is also planning micro units in its Bishop Arts rental community starting soon in Oak Cliff. “We are going to have some micro units over there that are less than 425 square feet,” Segrest said.
While Dallas developers are eyeing the bijou apartment homes, analysts aren’t convinced they will be a hit with most local renters.
“The people who end up renting these units are there because that is their only option for getting in that neighborhood and project,” said Greg Willett, vice president of MPF Research. “Experience so far has shown that the people who end up living in these units don’t actually like them.
“They get out as quickly as they can.”
Willett said the micro units are more accepted in more expensive cities where renters have fewer options. “It makes more sense in some of these coastal markets.”
But with average apartment rents in North Texas topping $1,000 a month for the first time, don’t be surprised if developers shrink apartment sizes to reduce costs.
“But I wouldn’t do too many micro units,” Dallas apartment analyst Mike Puls said. “It’s debatable how many you should do.”
Puls said turnover in the smaller units is high, and renters tend to move up to bigger apartments as soon as they can afford it.
In Dallas, renters like their square footage. “We are still in Texas,” Puls said.
By Steve Brown
Real Estate Editor