Downtown Redevelopment Authority plans to launch a Commercial Real Estate Conversion Program

[Ross]

1 hour ago, j_cuevas713 said:

Yep I did some lead abatement on the roof back in 2010. That's when I found out about the notorious Petroleum Club at the very top. 

I never knew the Petroleum Club was notorious. I went there for a couple of weddings, and it seemed pretty nice, if more than a bit dated.

[j_cuevas713]

17 hours ago, Ross said:

I never knew the Petroleum Club was notorious. I went there for a couple of weddings, and it seemed pretty nice, if more than a bit dated.

Me either. There was a lady bartender there cleaning up who told me that was where all the oil execs would come to drink and socialize. I was only like 23 at the time and was kind of blown away by the era that place is stuck in. It's def dated for sure! 

[Houston19514]

3 hours ago, j_cuevas713 said:

Me either. There was a lady bartender there cleaning up who told me that was where all the oil execs would come to drink and socialize. I was only like 23 at the time and was kind of blown away by the era that place is stuck in. It's def dated for sure! 

Well, it moved about 7 years ago, into all new digs.  So, probably not so dated any more...

[hindesky]

https://www.rentcafe.com/blog/rental-market/market-snapshots/adaptive-reuse-apartments/

In the last two years, apartment conversions jumped by 25% compared to two years prior. More precisely, this increasingly popular real estate niche brought a total of 28,000 new rentals in 2020-2021, well above the pre-pandemic years of 2018-2019 when 22,300 apartments were brought to life through adaptive reuse. Amid an ever-growing need for housing, adaptive reuse picked up speed in America’s largest cities, according to the latest data from Yardi Matrix.

[hindesky]

https://kinder.rice.edu/urbanedge/hybrid-work-here-stay-downtown-houston-looking-office-conversion-candidates

"Central Houston and its board, the Downtown Redevelopment Authority, issued a request for proposal on Oct. 13, seeking bids from third-party consultants with expertise in office conversion to adaptive reuse who will conduct a series of feasibility studies. The deadline for proposals is Dec. 1."

[Big E]

Nobody mentioned this, but the new owners of the Marathon Oil Tower are moving to have most, if not all, of its vacant space (at least 21 stories) converted to residential, as stated in the tower's thread here. Not exactly downtown, but this is the largest residential conversion I see anyone talking about in Houston right now outside the one happening in 1801 Smith.

[editor]

On 12/3/2022 at 6:27 PM, Big E said:

Nobody mentioned this, but the new owners of the Marathon Oil Tower are moving to have most, if not all, of its vacant space (at least 21 stories) converted to residential, as stated in the tower's thread here. Not exactly downtown, but this is the largest residential conversion I see anyone talking about in Houston right now outside the one happening in 1801 Smith.

Because of its location, that one makes the most sense of all.

[mattyt36]

Going back to the last wave of the DLI, is there any consensus amongst people in the industry as to which projects have been the most and least successful?

Granted it’s a multi-faceted question, but seems like it would be determined by final product, GFR integration, contribution to the spaces around it, and occupancy, but at an attractive (i.e., not discounted) price point. Are there any properties downtown where it is difficult to “get into,” even if price weren’t an issue?

More germane to this discussion, have there been any historical conversions that have been successful? I mean the Rice is still around and I assume still a nice address, but the GFR has always seemed to struggle and I’m not sure how it compares with the new properties. The Commerce Towers seem to have been a dud. The Star doesn’t seem all that great, either. Are the multiple loft conversions desirable addresses? (The above is not based on anything specific, just my perception, which, admittedly, is probably not worth much on this particular topic.)
 

On 12/5/2022 at 3:25 PM, editor said:

Because of its location, that one makes the most sense of all.

I for one do not understand the idea of living in a high rise when one cannot walk to much around it, but, hey I realize that describes most of the City’s high rises, and it’s not like you can walk to a “real” grocery store downtown from the Brava. At least you have Market Square, the Theater District, MMP, the Toyota Center, and a decent amount of dining options.

Edited December 7, 2022 by mattyt36

[editor]

On 12/6/2022 at 8:57 PM, mattyt36 said:

More germane to this discussion, have there been any historical conversions that have been successful?

The Star seems pretty successful.  Successful enough that residential occupancy is always high, and the original owners have sold it on.  The main retail space is mostly the restaurant, which recently expanded.  The other retail space has been used by the city for a couple of pop-ups, but that's about it. 

 

On 12/6/2022 at 8:57 PM, mattyt36 said:

I for one do not understand the idea of living in a high rise when one cannot walk to much around it

I think it depends on what you're interested in walking to.  There are plenty of things to walk to downtown.  I know, because I do it all the time.  But perhaps the things that you are interested in walking to are not the same things that people who choose to live downtown are interested in walking to. 

[editor]

On 12/6/2022 at 8:57 PM, mattyt36 said:

it’s not like you can walk to a “real” grocery store downtown

You are correct.  And on the surface, that seems like a legitimate criticism.  But it falls apart very quickly.  Nobody ever says, "I could never live in Sugar Land if I can't walk to a grocery store."  How many people in Houston can walk to a real grocery store?  Maybe 0.001%?   And of those, how many actually do walk to a grocery store?  Nobody's carrying food for a family of four home in their arms.

I have lived in downtowns with real grocery stores, and they're great.  But people who live in downtowns don't do the same things that people in the suburbs do.  They don't load up on a bale of 200 rolls of toilet paper at CostCo, or buy an extra frozen turkey because it's on sale.  They don't have the storage space.  There aren't extra pantries, garages, or other places to store lots of the things that suburban people buy in bulk.  People who live in downtowns "do" a big grocery run either online, or by car every once in a long while, and then get a few items in between at the little shops.  In Houston, that's Phoenicia and District Market primarily.  But I'll also utilize the ghettomart on Main and the one on Fannin.  Milk is milk, no matter where you buy it.

Since Houston is still early in its development of downtown residential buildings, the vast majority of people still have cars, and drive them to the same grocery stores as everyone else.  And then they also get to enjoy the other things about living downtown that appeal to them.  They're not missing out on anything, except maybe paying $50 a week for gas, and losing five hours of their lives each week sitting in traffic. 

I've lived in downtowns, I've lived in suburbs, I've lived in rural areas.  Each has its own benefits and problems.  It's not possible to claim flatly that one is "right" or "better" than another, simply because each person has different needs and different lives.

[mattyt36]

1 hour ago, editor said:

You are correct.  And on the surface, that seems like a legitimate criticism.  But it falls apart very quickly.  Nobody ever says, "I could never live in Sugar Land if I can't walk to a grocery store."  How many people in Houston can walk to a real grocery store?  Maybe 0.001%?   And of those, how many actually do walk to a grocery store?  Nobody's carrying food for a family of four home in their arms.

I have lived in downtowns with real grocery stores, and they're great.  But people who live in downtowns don't do the same things that people in the suburbs do.  They don't load up on a bale of 200 rolls of toilet paper at CostCo, or buy an extra frozen turkey because it's on sale.  They don't have the storage space.  There aren't extra pantries, garages, or other places to store lots of the things that suburban people buy in bulk.  People who live in downtowns "do" a big grocery run either online, or by car every once in a long while, and then get a few items in between at the little shops.  In Houston, that's Phoenicia and District Market primarily.  But I'll also utilize the ghettomart on Main and the one on Fannin.  Milk is milk, no matter where you buy it.

Since Houston is still early in its development of downtown residential buildings, the vast majority of people still have cars, and drive them to the same grocery stores as everyone else.  And then they also get to enjoy the other things about living downtown that appeal to them.  They're not missing out on anything, except maybe paying $50 a week for gas, and losing five hours of their lives each week sitting in traffic. 

I've lived in downtowns, I've lived in suburbs, I've lived in rural areas.  Each has its own benefits and problems.  It's not possible to claim flatly that one is "right" or "better" than another, simply because each person has different needs and different lives.

In re the living in a high rise that doesn't have a lot of walking options, I am talking more about the high rises located outside of downtown.  Living in downtown Houston is of course nothing like living in River North, Chicago, but there are objectively a lot of things to walk to--certainly could be better, but one could spend the weekend, no issue, without a need to get into one's vehicle (assuming they grocery shop during the week, but even then there is at least a CVS and a Phoenicia).  But Marathon Tower and other residential high rises (I mean, even the Allen), not anywhere near the same level of options.

Edited December 8, 2022 by mattyt36

[editor]

38 minutes ago, mattyt36 said:

But Marathon Tower and other residential high rises (I mean, even the Allen), not anywhere near the same level of options

I think the sprawl of Houston illustrates that not everyone cares about walking to things.  But they may prioritize something else about high-rise living.  A well-staffed, well-run high rise reduces or eliminates a lot of the friction points of life.  Off the top of my head: maintenance, dry cleaning, pet walking/sitting, mail and packages.

When I set fire to a dishwasher in a house I lived in, I ended up having to pay not only for a new dishwasher, but for a plumber to install it because the fittings were non-standard/old.

When I set fire to a dishwasher in an apartment where I lived, I called someone on the phone and they replaced the entire machine in a few hours.

(Yes, I keep setting dishwashers on fire.  But it's only happened a few times.)

If you're someone who travels a lot for work, luxury high-rises are awesome because you'll have people who will collect your mail, clean your place, take care of your dry cleaning, water your plants, and lots of other little things so that you don't have to worry while you're away, and when you get home, everything is perfect even if you didn't leave it that way.

But I think in Houston, the big draw to high-rises for non-walkers is the same as it is for most real estate: Location, location, location.  If you can cut a commute from an hour to ten minutes, that's massive for some people.  Especially people who make a lot of money and charge other people by the hour. 

Back when Houston had a downtown heliport, people weren't commuting from The Woodlands by helicopter to show off.  They were doing it because time is money.

[mattyt36]

19 minutes ago, editor said:

I think the sprawl of Houston illustrates that not everyone cares about walking to things.  But they may prioritize something else about high-rise living.  A well-staffed, well-run high rise reduces or eliminates a lot of the friction points of life.  Off the top of my head: maintenance, dry cleaning, pet walking/sitting, mail and packages.

When I set fire to a dishwasher in a house I lived in, I ended up having to pay not only for a new dishwasher, but for a plumber to install it because the fittings were non-standard/old.

When I set fire to a dishwasher in an apartment where I lived, I called someone on the phone and they replaced the entire machine in a few hours.

(Yes, I keep setting dishwashers on fire.  But it's only happened a few times.)

If you're someone who travels a lot for work, luxury high-rises are awesome because you'll have people who will collect your mail, clean your place, take care of your dry cleaning, water your plants, and lots of other little things so that you don't have to worry while you're away, and when you get home, everything is perfect even if you didn't leave it that way.

But I think in Houston, the big draw to high-rises for non-walkers is the same as it is for most real estate: Location, location, location.  If you can cut a commute from an hour to ten minutes, that's massive for some people.  Especially people who make a lot of money and charge other people by the hour. 

Back when Houston had a downtown heliport, people weren't commuting from The Woodlands by helicopter to show off.  They were doing it because time is money.

Well, obviously it is a matter of preference and it's not like the high rises elsewhere are empty.  I just stated I don't know who would want to live in one as a primary residence (especially as a condo, not a rental as the high-rise condos definitely aren't cheap, and I'd think that whoever can afford one of those in a building with the amenities you describe probably doesn't have any problem getting a burning dishwasher repaired in a house) and still have to drive everywhere.  But that's ME and my personal opinion, and I'll be the first to tell you that I fully acknowledge not everyone is like me.  (For instance, I have never set fire to a single dishwasher.)

[BEES?!]

1) I did not know Downtown had a heliport! So they don’t anymore? (That’s the strange part to me, that it’d be gone)

2) How do you set fire to a dishwasher?!?? I am impressed and also a little terrified haha

[editor]

17 minutes ago, BEES?! said:

1) I did not know Downtown had a heliport! So they don’t anymore? (That’s the strange part to me, that it’d be gone)

2) How do you set fire to a dishwasher?!?? I am impressed and also a little terrified haha

1. It used to be where Minute Maid Park is.
2. Various ways.  The most recent one was when a Tupperware lid got loose and landed on the heating elements at the bottom.  Another time, the motor caught fire.  The first one was because of a combination of lack of maintenance and a crappy overseas landlord (who used to always address me in e-mail as "Fat American" as in "Fat American, you live in desert.  Not rain.  Roof hole no fix.") and a previous tenant who managed to pack the inaccessible parts of the dishwasher with rice, which dried out before I moved in and caught fire, again on the drying cycle.

I just don't use the drying feature anymore.

[editor]

@BEES?! If you have an interest in little-known Houston heliports, check out https://www.airnav.com

Click on Airport and punch in Houston you'll find things like:

• The now-demolished KHOU-TV helipad
• The Landry's warehouse heliport
• The Downtown Aquarium heliport

[Houston19514]

58 minutes ago, editor said:

1. It used to be where Minute Maid Park is.

Actually, it used to be where the Marriott Marquis is.  The property on which Minute Maid Park stands used to be railyards.

[mattyt36]

1 hour ago, Houston19514 said:

Actually, it used to be where the Marriott Marquis is.  The property on which Minute Maid Park stands used to be railyards.

And here I thought it was where Discovery Green was, in front of the GRB.  OH WELL.

I do know it was run by HAS, or at least was at one time, and was called the Houston CBD Heliport.

Google is of no help!

(Incidentally, was the MMP area still a railyard even in the 1980s?)

Edited December 8, 2022 by mattyt36

[Houston19514]

6 minutes ago, mattyt36 said:

And here I thought it was where Discovery Green was, in front of the GRB.  OH WELL.

I do know it was run by HAS, or at least was at one time, and was called the Houston CBD Heliport.

Google is of no help!

(Incidentally, was the MMP area still a railyard even in the 1980s?)

I had actually thought it was on some of the Discovery Green property as well, but I dug in to it recently and it was apparently on the Marriott Marquis property. (Unfortunately, I don't seem to have kept any notes.)

I don't know that the railyard was still active (I kinda doubt it), or if the rails were still there, but if not, it was just abandoned/unused.  Certainly not being used for anything like a heliport.

There are some good views of it starting at 0:35 in this YouTube video.  https://www.youtube.com/watch?v=I2o7nU3H6vg&t=9s

 

[editor]

19 hours ago, Houston19514 said:

Actually, it used to be where the Marriott Marquis is.  The property on which Minute Maid Park stands used to be railyards.

Thanks for that correction.

I ended up going from my faulty memory because I couldn't find anything in Google about it, since it didn't happen in the last three days and didn't involve Taylor Swift.

(Remember, Google doesn't make money from showing you what you're searching for.  It makes money from keeping you searching and searching.)

[texan]

Proceeding with selecting one property to perform a feasibility study for potential conversion to residential.

http://www.downtowntirz.com/downtownhouston/wp-content/uploads/2022/12/221209-DRA-TIRZ3-Board-Materials.pdf

[Big E]

Big news, coming from the "Holiday/Days/Heaven On Earth Inn At 801 St. Joseph Parkway" thread:

There's apparently a major residential conversion coming to downtown. To quote pg. 148 of the Downtown Redevelopment Authority Board Meeting:

Quote

Highlight: Within the month of December, CHI was approached by a local developer to help inform an investment & development group from NYC regarding the potential acquisition and conversion of a major Downtown Houston asset which has sat vacant for years. CHI's research lead and executive team spent approximately 20 hours responding to their research requests, including items such as the residential pipeline, historical population trends, and projected tax liabilities, and forecasts for potential development support tools. CHI management understands that the group closed on the property on Dec 31 and intends to advance the project.

At first, the speculation was that the old Holiday Inn was the building that was being talked about, but now, it appears that it may in fact be 800 Bell. Per @Ross,  Shorenstein has sold 800 Bell and the associated parking garage to Bell Business Investments, LLC. The warranty deed was recorded on January 3, 2023. Tax notices are to be sent to CMI Developers, LLC (Here's their website: https://www.cmidevelopers.com/). The timelines match up, so this appears to be the correct building. If so, this could be the largest residential conversion in the city.

[hindesky]

"With growing office vacancies and declining confidence in Class C buildings in multiple markets across North America, we’ve steadily been working to refine our dashboard. We’re now able to quickly review existing office buildings to determine if they would make good candidates for multifamily conversions, assessing a building in minutes instead of weeks.

Our analysis has grown to over 300 buildings in 25 cities across North America, and through that process we’ve made some interesting discoveries. Our data reveals that only 30% of the buildings scored make for suitable candidates for conversion. Context, building form, location, floor plate size and several other factors all play a crucial role in assessing a building’s aptness for conversion.

That analysis has also revealed something surprising; all the features that result in an unpleasant office, make for a superlative multifamily product. For example, a floor-to-floor height that’s typical of a Class C building is approximately 12 feet. Today, that’s considered oppressively low for an office, but a ceiling height above 9 feet in a residential building is considered luxurious.

While there’s no one size-fits-all solution for converting an under-performing office building into residential, the following examples show how we’ve been unlocking value in markets across North America."

https://www.bdcnetwork.com/blog/insights-over-300-potential-office-residential-conversions

[Brooklyn173]

I thought this is an interesting overall view...

https://apnews.com/article/cities-downtowns-vacant-offices-affordable-housing-pandemic-cc2cd895fd0f186229f69b74a133eddb

[j_cuevas713]

On 4/24/2023 at 6:04 AM, Brooklyn173 said:

I thought this is an interesting overall view...

https://apnews.com/article/cities-downtowns-vacant-offices-affordable-housing-pandemic-cc2cd895fd0f186229f69b74a133eddb

This means we need to move faster than those other cities because we’re already behind, but we won’t because we move at a snails pace with everything 

[Urbannizer]

https://www.bisnow.com/houston/news/office/houston-office-conversions-are-picking-up-but-not-as-much-as-they-could-be-119567

Central Houston, the organization that helps ensure the center city and Houston’s urban core remain vital and progressive, hopes to be part of the solution. It  commissioned AECOM to perform a downtown office-to-residential conversion feasibility study late last year. The results are expected this fall, Central Houston Chief Operating Officer Allen Douglas said.

"The kernel of information that we're really driving for here is, 'In the question of a conversion, what's the capital stack gap that a building that’s currently an office building needs to address when it moves from office to residential, or office to hospitality, or office to institutional?'" Douglas said.

The study is examining three specific office buildings downtown, which he declined to name. The aim is to understand the costs to convert a building, which differ depending on the building size, the floor plate and the aspirations of the lender and the building owner, he said.

"Any kind of program that helps to incentivize that has to take into account all of those different aspects in a way that is equitable and pays fidelity to the fact that public dollars are being used," Douglas said.

[hindesky]

"Despite having one of the highest office vacancies in the nation, Houston has a stubborn history of building new rather than repurposing aging buildings. Since 2017, CBRE has  tracked just 11 projects converting Houston office buildings to other uses, and the city led the nation in new real estate construction over the past decade.

Eight of those 11 projects were announced or started in the last four years, more than double the number started in the four years prior, per CBRE. But for building owners to jump on the adaptive reuse train in earnest, they will need incentives. And those have been slow in coming.

Central Houston, the organization that helps ensure the center city and Houston’s urban core remain vital and progressive, hopes to be part of the solution. It  commissioned AECOM to perform a downtown office-to-residential conversion feasibility study late last year. The results are expected this fall, Central Houston Chief Operating Officer Allen Douglas said."

https://www.bisnow.com/houston/news/office/houston-office-conversions-are-picking-up-but-not-as-much-as-they-could-be-119567

[BEES?!]

I'm guessing it's largely a cost thing. I don't think construction costs here are as inflated as some other cities (though, again. I'm a layman, so construction people, plz don't kill me), so repurposing an old building will likely require cash incentives in order to make it happen. Like the current conversion of 1801 Smith- I wonder what the cost comparison is for office-to-residential conversion vs building a new residential tower with similar specs downtown?

[004n063]

On 6/28/2023 at 12:17 PM, BEES?! said:

I'm guessing it's largely a cost thing. I don't think construction costs here are as inflated as some other cities (though, again. I'm a layman, so construction people, plz don't kill me), so repurposing an old building will likely require cash incentives in order to make it happen. Like the current conversion of 1801 Smith- I wonder what the cost comparison is for office-to-residential conversion vs building a new residential tower with similar specs downtown?

I also wonder whether the progress here is hampered somewhat by the expectations of what you might call "all-inclusive" housing. Could dormitory/boarding house-style conversions happen more quickly and inexpensively?

[editor]

3 hours ago, 004n063 said:

I also wonder whether the progress here is hampered somewhat by the expectations of what you might call "all-inclusive" housing. Could dormitory/boarding house-style conversions happen more quickly and inexpensively?

My observation of these types of conversions in other cities is that they take just as long, if not longer than condo/apartment conversion.

I don't know for a fact, but I suspect the reason has to do with more units = more work to do.  More walls to build.  More plumbing to run.  More fire suppression systems to install.  More elevators to rehab.  Things like that.