AUSTIN, Texas — In the early half of the 20th century, South Congress Avenue served as a main conduit in Austin, connecting the Texas Capitol building downtown to the city’s growing south side across the Colorado River.
But in the early 1960s, the opening of Interstate 35 redirected traffic and siphoned off commerce, and South Congress became a no-go zone for residents and visitors. Crime, prostitution and drugs flourished. The Tim Overton Gang, a ruthless mob of bank robbers, safecrackers and pimps, often roamed one end of the strip to the other.
Two decades later, enterprising shop owners took advantage of falling rents to open a new wave of restaurants, colorful shops, bars and music venues, an era that ushered in an eclectic vibe that reflected the city’s mantra to “Keep Austin Weird.”
Throughout those earlier incarnations, few could have predicted that South Congress Avenue, a onetime red light district, would become one of the trendiest retail streets in the country.
South Congress is often compared to Abbot Kinney Boulevard, a mile-long strip in Venice, Calif., that GQ magazine once described as “the Coolest Block in America.” Grand avenues are crucial to retail and hotel chains looking for cachet, real estate experts say. Other prime urban corridors that are drawing national retailers include the Meatpacking District in New York, Lincoln Road in Miami Beach, the Gold Coast in Chicago and the Marina in San Francisco, according to a December report by the real estate services firm JLL.
“It’s very important for their brand and their brand expression to be on one of these major urban retail streets, of which South Congress is a very important one,” said John Heffington, a vice president at CBRE, a commercial real estate services firm.
The tale of South Congress is emblematic of the gentrification that has steadily overtaken other fast-growing sections in cities around the country, with soaring rents and home prices pushing out the business owners and residents who were the first to take a chance on a untested neighborhood.
Austin’s South Congress Avenue, abbreviated locally as SoCo, has become one of the nation’s most desired locations for brands to plant their flag. Retail rents on the street easily reach $200 per square foot, roughly 40 to 50 percent higher than four or five years ago and among the top 10 rates in the United States, according to several real estate experts.
One of the newest developments is Music Lane, a mix of shops, offices and apartments that opened in 2020 at the outset of the pandemic. It features names such as Hermès, Lululemon and Soho House, while other national brands like Nike and Warby Parker are spread along blocks farther south.
Liz Lambert, a lawyer turned hotelier, helped pioneer the street’s turnaround with the transformation of the Hotel San José into an internationally acclaimed boutique. But she said she had never envisioned the pace and extent of the gentrification that engulfed South Congress.
“It happened so fast,” said Ms. Lambert, who is one of three partners at MML Hospitality, a company that develops and manages hotels and restaurants.
Other developers have found the same quick success. When Bart Knaggs was growing up in North Austin, South Congress was a place to avoid. Now chief executive and partner for New Waterloo, a hospitality development and design firm, he oversaw the development of the South Congress Hotel, a luxury resort that occupies a block that was previously a vacant lot.
“This is a really high-performing property,” Mr. Knaggs said.
Congress Avenue runs from the southern steps of the domed State Capitol, through downtown Austin and across Lady Bird Lake, an impounded reservoir on the Colorado River. The bridge across the waterway shelters the world’s biggest urban bat colony, a major tourist attraction.
The waterfront on the southern shore of Lady Bird Lake is heading toward a makeover after the City Council voted in December to redevelop 19 acres there. The development, called the 305 South Congress project, will occupy the former site of The Austin American-Statesman, a daily newspaper, and include high-rise buildings with apartments, office space and a 6.5-acre park. The first phase is expected to be completed within seven years, according to Endeavor Real Estate Group, the developer.
Real estate experts say South Congress has joined the upper echelon of urban retail districts that are recognized nationally as premier shopping destinations. Securing space in those locations is essential for retailers. “It’s almost a billboard for them,” said Jon Switzer, an executive vice president at JLL.
But some longtime SoCo boosters say high rents and rising property values are putting the squeeze on local merchants whose revenue can barely pay the bills. Steve Wiman, an antiques dealer, opened Uncommon Objects on South Congress in 1991, but after nearly three decades, he was forced to move three miles away when told that “our rent would go up 10 times.”
It’s often hard for shop owners to stay afloat against an incoming tide of big corporations, said Brandon Hodge, the president of the South Congress Merchants Association.
“The story is always the same,” said Mr. Hodge, who owns the Big Top Candy Shop and Monkey See Monkey Do novelty shop. “The scrappy locals go into a run-down area, they take it over, they rebuild it into a destination area that’s attractive.”
But the quirky ambience on the grand avenue doesn’t last long, he added: “It becomes the target for developers with big money.”
South Congress has emerged as one of the premier retail streets in the country, Amar Lalvani, executive chairman of Standard International, said in an email. Standard’s sister company, the Bunkhouse Group, operates four boutique hotels in the corridor.
“It’s where brands put shops because of the cachet Austin has and, in particular, South Congress itself,” he added.
Ms. Lambert founded Bunkhouse in 2006 after she opened Hotel San José. In 2015, Standard bought a majority stake, and Ms. Lambert left, later becoming a partner at MML. Today, MML and the Bunkhouse team are both heavily engaged in the Austin hospitality industry, working one floor apart in an office building on South Congress.
Developers push back on criticism that they are changing the nature of SoCo.
“I never set out with the intention of gentrifying South Congress, and I certainly didn’t set out of making it what it is today,” said Ms. Lambert, citing her concerns about absentee landlords, “sky-high rents” and national chains. On the other hand, she added, nobody wants a return to the South Congress of yesteryear, when business was stagnating and people “were scared to come down at night.”
Those lean days are long forgotten as retailers open for business on SoCo, drawn in large part by Austin’s booming economy.
Paul Hedrick, who grew up in Dallas, started his Tecovas boot brand online in 2015 before establishing his first store on South Congress in 2018. “We couldn’t handle really the demand that was there,” he said, so he moved the flagship store to a larger SoCo location in October.
Hermès, the Parisian luxury brand, where prices run into the thousands, suggested in a news release that it had chosen its Austin location at least in part because of Austin’s stature as “one of the fastest-growing cities in the U.S.” as well as the live music and tech festivals that “draw an international audience year-round.”
On a recent day, Bergan Casey, an Austin communications consultant, was heading to her car after a shopping run at Hermès. “I’ve seen the evolution of South Congress,” she said. “It used to be Austin shabby. Now it’s very urban chichi.”