Red River Street cultural district in Austin, Texas. (Photo courtesy of City of Austin)
Live music clubs in fast-growing Austin — the home of the South By Southwest music festival and the self-proclaimed “live music capital of the world” — could soon receive some rent hike relief from a new $10 million public-private partnership intended to stave off development threats.
Austin was recently announced as one of the winners of a program from the financial startup Neighborly that will set up a municipal mini- bond for private investors to buy into, with the intent of purchasing the buildings that house clubs endangered by Austin’s rapid growth and development. Investors in the bond will make the decisions on what club properties to target, with the city having no decision-making role or taxpayer exposure.
Plans for how to execute the innovative program will become clearer in the next three to six months, but music advocates around the city hope it will help to stall rent increases or evictions carried out to make way for new condominium towers and mixed-use projects.
Citywide, the sale price of retail real estate in Austin has increased from $250 per square foot in 2014 to more than $350 per square foot in 2016, according to the tracking firm LoopNet.
There’s no uniform data on rent prices for the city’s clusters of small incubator-level clubs with capacities of 1,000 or less, but one standout example comes from the 2015 closure of the Red 7 punk and metal club. That venue, which had hosted Green Day, At The Drive-in and countless other eventual headliners over the years, closed because of a proposed $5,000 rent increase to $14,000 per month. A new rock bar named Barracuda opened in the space in 2015, but its rent is undisclosed.
Most small music clubs in Austin operate on single-digit margin and are an essential component for SXSW, which showcases more than 2,000 acts in dozens of clubs scattered throughout downtown each March.
Clubs along the Red River Street district are seen as the most important in terms of fostering new local talent and operate on less than $100,000 in liquor revenue per month, with some barely breaking five figures a month, according to sales data from the Texas Alcoholic Beverage Commission.
That stretch, which also includes the C3 Presents/Live Nation-booked 2,500-cap amphitheater Stubb’s, is expected to soon see massive changes and redevelopment because of the new Dell/University of Texas Medical School nearby and a massive $144-million flood water containment project that will make more than 1 million square feet of property available for development.
It’s not just the city’s small clubs that are being threatened by growth. In early September, demolition began on the Austin Music Hall, a 3,000-capacity general admission facility that hosted touring acts and private events to make way for a 28-story office tower.
While the city won’t be directly involved in the funding effort from an investment or decision-making standpoint, Austin Mayor Steve Adler said it’s possible he and other leaders will help shape the mission and some guidelines for the group that manages the bond’s activities.
Preservation of Austin’s music economy, which has lost 1,200 jobs since 2012, has joined affordable housing and transportation as the main issues Adler has focused on since his election in 2014. The announcement of the $10 million minibond sparked widespread discussion about how money could be used, both in terms of what club properties deserve priority consideration for purchase, and how purchase deals could be structured to stretch the bond as far as possible.
Adler said it’s too early for him to weigh in on what clubs he would prefer to see preserved, and sees some similarities between this effort and the residents of Green Bay, Wis., pitching in their own money for ownership of the city’s National Football League franchise, the Green Bay Packers.
“This kind of solution is not one that people invest in to become wealthy,” he said. “This is something you’d invest in to help save Austin. There would be great social value to an investor in something like this, and what makes it exciting is you can have a vehicle where someone can invest and actually get their money back and some measure of return.”
Graham Williams, a partner in the Sidewinder 300-cap club on Red River Street and a promoter at an assortment of clubs and theaters around Austin, said development pressures, noise complaints and assorted permitting issues have increased in recent years and present a constant obstacle for venue owners.
“When I see the challenges on Red River, it’s come because things have changed so much and downtown live music clubs are mostly a labor of love that no one is getting rich from,” he said. “The big question isn’t so much how can we get more (investment) money, but how can we operate with the constant new rules and restrictions being passed on businesses that are already struggling.”
Interviewed for this story: Steve Adler, (512) 978-2100; Graham Williams, (512) 762-5690