Feb 13

Houston Developers: Not All Adaptive Reuse Projects Created Equal

Adaptive reuse, or the restoration of a historic property into usable real estate, has grown in popularity among Houston developers looking for space in an increasingly dense inner Loop. But not all of these projects are created equal, and there’s more nuance to a successful renovation project than simply stumbling upon a a unique building and turning it into a bar, Houston developers and brokers said.

Unsurprisingly, Houston’s most popular areas for adaptive reuse projects – East Downtown, the Heights, Midtown – also contain a majority of the city’s historic buildings. Houston’s Baker Katz and Braun Enterprises recently scooped up a historic 17,000-square-foot building at 1919 Washington Ave. Interestingly, though, many Heights and in Washington Avenue corridor properties that become adaptive reuse projects lack critical characteristics that define successful real estate: adequate parking, visibility, street traffic and more, said Kenneth Katz of Baker Katz.

“But they succeed despite that,” Katz said. “It’s very hard to imagine having those levels of success with projects in the suburbs in an adaptive reuse.”

One of the most prominent outer Loop adaptive reuse projects is Dallas-based StreetLevel Investments’ proposed renovation of Texas Instruments’ 200-acre former campus in Stafford. The campus is located right off Interstate 59 and Beltway 8 near Sugar Land, where another adaptive reuse projects is being planned – Geoff Jones and James Murnane‘s 855,000-square-foot Imperial Market mixed-use development.

No leases have been announced for either project, but it’s significant that two of the city’s biggest adaptive reuse projects are happening not only outside the Loop, but within a few miles of one another. There are certain tenants that are more inclined toward moving into adaptive reuse projects. David Littwitz, a retail tenant rep broker in Houston, said established restaurants with deep workforces can afford the added work that comes with moving into a renovated building.

In terms of road access, though, the Imperial Market development is at a disadvantage to the Texas Instruments project, experts said. The old Imperial Sugar buildings are located at 198 Kempner Road and aren’t as accessible from nearby freeways.

“I think (Imperial Market) is going to be a huge success, to be honest,” said David Denenburg, a local preservationist currently restoring the former U.S. headquarters of Schlumberger Ltd. (NYSE: SLB) in east downtown. Denenburg hopes to bring a medical-facing tenant to the building, he said, as well as a small retail user such as a coffee shop or bakery.

Denenburg takes the contrarian’s approach to adaptive reuse, though. Rather than searching for a property in a specific part of town, he looks first and foremost for a striking building irrespective of its location.

“If there’s a population that’s growing and can support an adaptive reuse in the area, it could definitely work,” Denenburg said. “If (the building) has good design and good bones, you can make it work.”

Denenburg also is working on restoring the Cheek-Neal Coffee building at 2017 Preston St., also in EaDo.

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