HOUSTON PROJECTS: WHERE THEY STAND
Office buildings continue to bustle with workers. New apartment complexes are still filling up with tenants. Multitudes of cranes hover over the city’s business and residential districts. But underneath all the activity, cracks are beginning to form in Houston’s commercial real estate market amid the collapsing price of oil.
On the surface, the change is hard to spot.
“At a local level, you go to the lunch counter, and it doesn’t feel like the sky is falling,” said developer Michael Mair of Skanska USA Commercial Development, which at some point plans to build a downtown office tower.
But while many Houston developers maintain their perpetually positive dispositions, professing commitments to building new office towers and upscale apartment complexes here, others are taking more of a wait-and-see approach, delaying projects that should have already broken ground, according to previous estimates when oil was at or near $100 a barrel. In a sample of 14 local projects, many of the start dates are uncertain.
“Last year, we were at the height of the market. We had 120,000 jobs or so, and everybody wanted to be in Houston,” said Tim Dosch, a prop- erty broker and principal with ARA Houston. “Institutional equity was really gung ho on Houston.”
Today, he said, some of those investors have lost their enthusiasm because of the plunging price of crude, leaving developers without the capital to start their projects.
“In a lot of cases, they’re dropping deals after they already have term sheets,” Dosch said.
Other are also raising red flags. Bill Gilmer, director of
the Bauer Institute for Regional Forecasting at the University of Houston, said his phone has been ringing with out-of-state investors trying to get a sense of where this real estate market is headed.
TRC Capital Partners, formerly the Redstone Cos., has been planning multiple Houston projects, but two of them won’t go forward immediately, including a mixed-use development “in an Inner Loop location” the company was in the early stages of planning.
“There’s very clearly going to be short-term dislocation,” said Steve Lerner, TRC’s president and CEO.
Early strains in commercial property are seen in the office and multifamily markets, Dosch said.
Retail hasn’t been affected much because of the area’s strong population growth and high incomes. The industrial market remains stable, too, he said, for now.
“But the longer this goes on,” he said, “you may start to see an impact.”
Still, other developers with strong ties to Houston, and who are familiar with its economic ups and downs, plan to push forward. They pin their dreams on Houston’s diversity and what they see as a solid, growing future.
“This is a huge marketplace, and we’re far more diversified than we were in the mid-’80s when a whole bunch of people took a bath,” said Matthew Morgan of Buckhead Investment Partners, the company planning a luxury residential project at Bissonnet and Ashby. “I don’t expect that same kind of impact this time around.”
Others agree. Houston’s 1980s economic collapse isn’t expected to repeat itself, Gilmer said.
The banking system, he said, is in good shape today compared to the 1980s when lenders were making bad bets on real estate.
What follows are updates on a sampling of major developments planned for the area.
Hanover Kirby
Location: Upper Kirby at Kirby near Steele Street Developer: Houstonbased Hanover Co. Original plan: In August, the developer said it was planning a tower potentially rising more than 30 stories and with more than 300 apartments. It was under contract on 1.65-acre site and was scheduled to close in early 2015. Construction would then begin in the summer. Status: The closing date for the land has been pushed back due to “economic uncertainty in Houston,” Hanover’s David Ott said.
West Memorial Place
Location: Energy Corridor, south of Memorial Drive adjacent to Terry Hershey Park Developer: New Yorkbased Skanska USA Commercial Development Original plan: After nearly completing the first half of a two-building office project, the developer started construction on the second in the fall, expecting to see strong demand from tenants in the energy sector. Status: The first building, nearly 60 percent preleased, is expected to open next month. Construction has started on the second building, which should be completed in the spring of 2016. There are no tenants yet.
Capitol Tower
Location: Downtown, 800 Capitol Developer: Skanska USA Original plan: The developer purchased the former Houston Club building more than three years ago and in 2013 announced plans to build a 35-story office tower in its place. The Houston Club building was imploded in October. Status: The office building will not break ground until a tenant has committed to occupy a substantial portion of it. The developer is still “actively and aggressively” marketing the office space, said Michael Mair, executive vice president and regional manager for Skanska. In the meantime, the company is developing a garage on the southern half of the block that will open later this summer.
Chevron building
Location: Downtown block bounded by Louisiana, Smith, Pease and Leeland Original plan: A new 50-story office tower for San Ramon, Calif.-based Chevron was announced in the summer of 2013, but the project was put on hold less than six months later, at which time the company said it would decide when to resume the project “after 2014.” Update: At this stage, “no update,” Cam Van Ast, media adviser for Chevron North America Exploration and Production, said in an email.
1717 Bissonnet
Location: 1717 Bissonnet at Ashby Developer: Houstonbased Buckhead Investment Partners Original plan: In 2007, the developer said it would build a high-rise residential tower in the neighborhood near Rice University. Later referred to as the “Ashby high-rise,” the project became poster child for Houston’s land-use tensions as neighbors fought for years to stop it. In May, a judge awarded $1.2 million in damages to area residents who had sued the developer. But the judge said he could not stop Buckhead from building the project. Status: “We are working to start as soon as possible,” Buckhead’s Matthew Morgan said. The lawsuit is in appeal, but “that’s not going to keep us from starting,” he said. The developer has found a new general contractor to build the project, and it has its foundation and core and shell permits.
Six Houston Center
Location: Downtown block bounded by Rusk, Caroline, Walker and San Jacinto Developer: Fort Worth- based Crescent Real Estate Holdings Original plan: In February, Crescent said it would break ground over the summer on a 30-story, $250 million office tower designed for the site. It was prepared to start construction without having a tenant lined up first. Completion on the 600,000-square-foot building was scheduled for the end of 2016. Status: An emailed statement from the company said: “Crescent is committed to Six Houston Center. We are in discussions with several large tenants, and the response to our location, design and amenities has been very favorable. We have our permits and financing in place, and we are targeting a 2017 completion — which coincides with many significant lease expirations in the market.”
Kirby Collection
Location: Upper Kirby, Kirby Drive between Colquitt and West Main Developer: New Yorkbased Thor Equities Original plan: A mixed-use development with 67,000 square feet of retail, a 13-story office building and a 25-story apartment tower. Seven townhomes will line Lake Street. Update: The company said it is seeking construction financing and will submit plans for a building permit in a couple weeks. “We really believe the Houston market is a strong one,” said Melissa Gliatta, Thor’s executive vice president. “We’re betting big.”
One Market Square
Location: Downtown block bounded by Prairie, Preston, Travis and Main Developer: Houstonbased Hines Original plan: For more than a year, the developer has been planning a 32-story luxury rental tower with 274 units at the site. Update: Construction started Jan. 12, and the building is scheduled for completion in the spring of 2016, the company said.
Axis apartments
Location: Northwest corner of West Dallas at Montrose Developer: Dallas-based JLB Partners Original plan: The 396unit luxury apartment complex was just a few months shy of opening when a five-alarm fire
Camden Superblock
Location: Midtown, on land bounded by Main, McGowen, Travis and Anita Developer: Houstonbased Camden Property Trust and the Midtown Redevelopment Authority Original plan: Camden has been involved in planning the site for more than a decade to include apartments, an underground garage and 3-acre park. Update: Construction on the Superblock project will start in the first quarter, and units will open in 2017, CEO Ric Campo said. “We don’t have to go get construction loans — we’re using Camden dollars,” he said.
Camden downtown
Location: Two downtown blocks bounded by LaBranch, Austin, Bell and Pease Developer: Camden Original plan: In May, Camden said it was planning a two-phased complex on 3 acres of downtown land. Update: Campo said the company is still designing the project and is not yet prepared to start it. “We’ll see how the markets unfold and what happens to construction and rents,” he said.
Hines Museum District
Location: Museum District block bounded by Southmore, Oakdale, San Jacinto and Caroline Developer: Hines Original plan: For more than a year, the company has been planning a 25-story, 225-unit apartment building, called the Southmore, on the site. Update: Construction started in November, and the building is scheduled to be completed by the end of 2016, according to Hines.
Hotel/residential tower
Location: South Main, north of Holcombe Developer: Houstonbased TRC Capital Partners and Houston-based Medistar Corp. Original plan: In April, developers said they would start construction later in the year on an HOK-designed 22-story hotel/residential building next to the Texas Medical Center. Update: “We’ve been working on refining the programming and putting together the financing package,” TRC president and CEO Steve Lerner said, adding that a start date has not been determined.
Hotel and office building
Location: Uptown on Post Oak Boulevard north of Westheimer and next to the BBVA Compass building at 2200 Post Oak Blvd. Developer: Houstonbased TRC Capital Partners Original plan: In 2011, a group affiliated with the Redstone Cos. — now TRC Capital Partners — said it was planning a hotel and office tower on the Uptown site. It said the project was contingent on financing and could be underway within a couple of years. Update: At the end of last year, the developer signed an agreement with a hotel brand and plans to break ground on a full-service hotel in the second or third quarter. The office building has been put on hold until a tenant can be found. nancy.sarnoff@chron.com twitter.com/nsarnoff