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Austin, Texas, is undergoing an identity crisis.

It’s the good kind — brought on by an abundance of riches —  but seismic all the same.

This story first appeared in the September 11, 2008 issue of WWD. Subscribe Today.

Two competing identities are battling it out — or perhaps negotiating to coexist — in Texas’ least “Texas city.” The “Keep Austin Weird” mantra, often emblazoned on T-shirts and bumper stickers, is alive and well in areas like SoCo (the retail-heavy stretch of funky South Congress Avenue) and downtown Austin, where apartment buildings are sprouting for the first time to create a more residential downtown, complete with a flagship of Whole Foods, the Austin-based supermarket chain.

But a new “Keep Austin Fabulous” echo is being heard since the city got its first full injection of luxury retail last year, when The Domain, an upscale, mixed-use complex, introduced the city to its first Neiman Marcus. Austin is home to the first Neiman Marcus Last Call outlet, but had otherwise been untouched by its Dallas-based retail neighbor. Tiffany & Co., Louis Vuitton, Intermix and Barneys Co-op are also at The Domain.

Construction will nearly double the already 631,000 square feet of stores surrounding the open-air center by 2011. Nordstrom will join the space with its second Austin door, and Saks Fifth Avenue will move from the Arboretum shopping center to The Domain. The next phase of real estate development hopes to include more Austin-specific retailers: Whole Foods has already committed, but planners hope to lure others that resisted developments to their city.

Wedged geographically between Dallas and Houston and psychographically between Cambridge and Palo Alto, Austin has long been Texas’ odd-ball city — the kind even non-Texans would dare to visit as they avoid the rest of George W. Bush territory. But the government and university town has grown rapidly in the last decade as it became home to tech companies, including Dell.

Great weather (300 days of sunshine annually, and an average year-round temp of about 70 degrees), a low cost of living (no state income taxes, an average household income of $63,000 and home prices of about $200,000) and its thriving arts scene (it’s called the “Live Music Capital of the World,” and is home to the Austin City Limits and SXSW music festivals) have brought flocks of East and West Coasters to the Texas capital, which now ranks as the 16th biggest city in the country with 1.3 million people. Those transplants brought an increased taste for the good life, threatening Austin’s quirky casual style, where even the fanciest restaurants host diners in shorts and flip-flops.

“A lot of retailers look at a market once it eclipses the million number,” said Kirk Rudy, managing principal at Endeavor Real Estate Group, which helped build The Domain. “Maybe 30 years ago, Austin was thought of as a government and university town, but now it’s so much more than that. You have this influx of East Coast and West Coast people who were accustomed to those goods, but who had to go to Dallas or Houston or even New York to get them. We were the largest city in Texas without a Neiman Marcus. Neiman’s knew exactly how much business they were doing in Austin without having a store in Austin. But still, retailers recognize that Austin is casual and merchandise accordingly.”

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