In search of Inner Loop dirt: Nothing's sacred in Houston apartment development fever

The Inner Loop is the Holy Grail of Houston apartment developers these days.

But finding Inner Loop land that can be used for apartment development can be difficult. You don’t find many vacant lots on Kirby Drive, Westheimer or Buffalo Speedway.

The old pros of Houston apartment development are sniffing out Inner Loop locations that aren’t so obvious — the old warehouse, abandoned church or two-story office building that can be torn down to yield a few acres.

Finding apartment development sites in the suburbs is easy. There are scads of vacant fields with “For Sale” signs.

But land close to the center of Houston has been picked over — to put it mildly — in the last 50 or 60 years. Good sites are rare.

 The old pros of Houston apartment development are sniffing out Inner Loop locations that aren’t so obvious — the old warehouse, abandoned church or two-story office building that can be torn down to yield a few acres. 

So you have local developers who know Houston well, commercial real estate brokers and national multi-family firms all combing over the Houston landscape looking for deals.

Martin Fein Interests, a Houston developer founded in 1989, recently bought the aging Willowick Townhomes on Las Palmas Street, near the intersection of Weslayan and Richmond Avenue. The townhomes sit on 10.3 acres of the oak-lined Las Palmas Street, which has one of the most complete oak canopies in Houston. Fein will rent the townhomes for a while, but they will be torn down and be replaced with more dense residential development — several hundred apartment units — in the near future.

Industrial land around Washington Avenue has attracted interest from a lot of apartment developers. Land around the Galleria is also hot. Dinerstein Companies is developing a new apartment project where some old apartments stood on McCue Road. And Archstone is developing on the site of the former Arabian Shrine Temple on North Braeswood.

The Pain of Demolition

Houston-based Morgan Group is going to build a 340-unit apartment complex on the site of the Central Presbyterian Church on Richmond Avenue, just east of Weslayan.

Of course, there is a human side to the demolition process.

Houstonian Randy White was shooting photos and video as the church was flattened on a Saturday in late September. White was baptized at the church in the 1960s when it was a new congregation, and he attended the church while he was a youth. And when his mother and father died a few years ago, Central Presbyterian was the venue for his parents’ memorial services.

White said it hurt to see the church building go down.

“It’s very painful,” White said as the demolition equipment pulled down another steel girder that supported the sanctuary roof. “It’s sad and painful.”

Over the years, Central Presbyterian had declined in membership, White said, and it eventually merged with St. Philip Presbyterian on San Felipe. That meant that Central’s property, over four acres, was ready to be sold for redevelopment.

Driven By Institutions

What has been driving all of the activity is the appetites of the major investors who are turned on by the Houston story. Houston has been gaining a significant amount of new jobs — more than 60,000 over the last year, unlike most markets in the nation. And job creation means more demand for apartments.

 Unlike the past, Houston is now one of the most preferred locations in the nation for apartment investment. 

Investors are aware that the Inner Loop of Houston is a hot apartment market and they usually prefer to invest in properties near downtown, rather than take more of a chance on a suburban property, says Stacy Hunt, executive director of Greystar Real Estate Partners.

Unlike the past, Houston is now one of the most preferred locations in the nation for apartment investment.

“The really good news is the investment community, the pension fund advisors, the institutional money — they all want to be in Houston,” Hunt says.

So all the apartment developers have to do is: Locate an Inner Loop site, build an apartment complex, lease it up and — bam! —  it will be purchased by one of the institutions that love the Houston investment narrative.

Sounds so easy, doesn’t it?

Ralph Bivins, former president of the National Association of Real Estate Editors, is founding editor of RealtyNewsReport.com.