I think the main reason I'm not bemoaning the loss of the bungalow businesses on Rainey is basically a compound of things that have already been mentioned here, but incorporating one more major point.
Yes, the architectural/historic merit of the homes is debatable and yes, they have, in some cases, been massively altered and gutted. Yes, the vibe of the street is more about the energy and feel created by those bars and restaurants coupled with the dense tree canopy. ..and yes, the strip is zoned for dense mixed-use and fairly close to downtown, and specifically Waller Creek, which is poised to explode in the near future.
My reason for not being perturbed by this loss is that, quite simply, it's not a loss at all.
Unlike irreplaceable historical architecture and infrastructure that is either unfeasible or impossible to replicate, businesses (like the ones that lend Rainey its character) are mobile. Building scheduled for demolition? Move down the street. Rents going up? Move to a nearby neighborhood. Few businesses as young as those on Rainey can argue that the character of their building is what brings in the bucks, and those that would...well good news! Austin is full of bungalow-esque homes! Which is my point.
They're in every older district in the city, and I've seen businesses in them popping up elsewhere already. East Austin has them, Old West, South Lamar, South Congress, Hyde Park, etc. And these aren't just a two-block stretch...but much larger swaths of neighborhood that it would take more than a few redevelopment projects to eradicate. Rainey is cool because it's so concentrated, but that saturation can be replicated elsewhere, and likely will. Let Rainey Street contribute to a dense downtown, we've got the whole city to settle in some cool bars and restaurants.
P.S. the Millennium project really is not all that bad IMO, it's got a restaurant space, uses a nice variety of materials, and is no worse than half the new apartment blocks rising on every major street in the city. I'm pulling for the block bounded by Cesar Chavez/Red River/Driskill/East to score a more landmark development anyway. A sort of MetLife Building to Rainey's Park Avenue, if you will.