When Marvy Finger decided to move forward with development of One Park Place — Houston’s first residential high-rise in 40 years built from the ground up — during the midst of the economic downturn, he was somehow sure it would be a home run.

Many didn’t share that confidence, but the success of One Park Place not only proved naysayers wrong, it seems to have given downtown a much-needed boost to spur more development.

Earlier this month, the former Texaco building at 1111 Rusk, between Fannin and San Jacinto streets, went under contract to a Dallas-based buyer who plans to redevelop it into apartments. This would represent the second major downtown complex to come online in the last couple of years.

EFO Residential Partners LP, a subsidiary of EFO Holdings LP, plans to create as many as 360 apartment units, along with a mix of commercial and retail space, in the vacant 13-story building. Construction is set to begin sometime next year, according to Craig D. “Kip” Platt, principal of EFO Residential Partners.

CB Richard Ellis Group Inc. broker Mike Hassler, who is representing building owner Kimberly-Clark Corp. in the sale, informed the Downtown Redevelopment Authority during an April meeting that EFO would likely ask for grant funding to supplement the project.

The scope of the grant request is not yet known, but Platt said he believes the project will come to fruition.

The company is bullish on downtown Houston.

“I am a huge fan of Houston, and I have a real affinity toward downtown Houston,” Platt said. “Downtown has some real momentum going right now.”

Units in the 410,000-square-foot project would be similar to One Park Place in terms of their high-end offerings, Platt said, but would appeal to renters who are drawn to the historical significance of the building.

“We think the rental market is about to go crazy, and we expect a lot of demand for apartments,” Platt said.

Indeed, Laura Van Ness, business development director at Central Houston Inc., said the downtown organization is hearing rumblings from two other developers considering the downtown market for apartment projects.

“Now that One Park Place is open and successful and the credit markets have started to loosen a little bit, I think we’ll see more developers starting to ride that wave,” Van Ness said. “We are seeing other serious developers coming back and looking at the market.”

Van Ness, who would not elaborate on the pair of potential new projects, said that before the credit crisis hit a few years ago, there were two other apartment projects under consideration downtown. Both of those deals later disappeared off the drawing board, essentially bringing activity to a grinding halt.

But with One Park Place reaching

90 percent-plus occupancy, Bruce McClenny, president of Houston-based Apartment Data Services Inc., which tracks apartment activity, said a new wave of downtown apartments would likely be met with strong demand.

“We definitely needed somebody to blaze the trail, especially going back into downtown,” McClenny said of One Park Place’s success. “Having a developer come out with a good product like that was the successful attempt we needed to get business going in downtown again.”

For his part, Finger said although he is pleased with the success of the 346-unit, 37-story One Park Place tower, which saw its first residents take occupancy in 2009, he is not surprised by it. He pointed to the completion of the nearby Discovery Park and the Discovery Tower — an 871,000-square-foot office building now completely leased by Hess Corp. and set to be renamed Hess Tower when the company takes occupancy later this year — as the catalysts for the quick lease-up of One Park Place.

“There was no doubt in my mind that it was going to be successful — I wouldn’t have engaged in it otherwise,” Finger said. “There had to be a start, and there was a lot of momentum going into that part of downtown.”

In fact, statistics compiled by Apartment Data Services indicate there is momentum in downtown’s housing market overall. The occupancy rate for all downtown rental communities combined was 91.3 percent in April, up 4.1 points from April 2010. And the annual growth trend in rental rates for those properties was up 3 percent.

McClenny said those statistics — when combined with a couple of other trends — make the downtown apartment development market ripe for activity.

He said that because there has been very little new apartment construction in recent years, especially in downtown, there is pent-up demand for apartment units. Also, it is still difficult to get home loans, so people are choosing to remain renters longer, McClenny said.

In addition to new projects, the owners of the 31-story Houston House apartment building at Fannin and Leeland, which was built in 1966, are spending $10 million on a restoration and renovation effort, slated to be complete by spring 2012.

The aging downtown landmark will be refurbished with a new lobby and a renovated amenities floor featuring a full-size basketball court, lounge, workout center and pool cabanas that overlook downtown.

All 396 units in Houston House are being updated with natural stone countertops, tile backsplashes, stainless steel appliances and hardwood floors. The building’s infrastructure is also being replaced.

“There was no doubt in my mind that it was going to be successful — I wouldn’t have engaged in it otherwise,” Finger said. “There had to be a start, and there was a lot of momentum going into that part of downtown.”

In fact, statistics compiled by Apartment Data Services indicate there is momentum in downtown’s housing market overall. The occupancy rate for all downtown rental communities combined was 91.3 percent in April, up 4.1 points from April 2010. And the annual growth trend in rental rates for those properties was up 3 percent.

McClenny said those statistics — when combined with a couple of other trends — make the downtown apartment development market ripe for activity.

He said that because there has been very little new apartment construction in recent years, especially in downtown, there is pent-up demand for apartment units. Also, it is still difficult to get home loans, so people are choosing to remain renters longer, McClenny said.

In addition to new projects, the owners of the 31-story Houston House apartment building at Fannin and Leeland, which was built in 1966, are spending $10 million on a restoration and renovation effort, slated to be complete by spring 2012.

The aging downtown landmark will be refurbished with a new lobby and a renovated amenities floor featuring a full-size basketball court, lounge, workout center and pool cabanas that overlook downtown.

All 396 units in Houston House are being updated with natural stone countertops, tile backsplashes, stainless steel appliances and hardwood floors. The building’s infrastructure is also being replaced.

Houston Business Journal – by G. Scott Thomas Special to Houston Business Journal

The Southwest has become the new frontier for young Americans.

According to a new Portfolio.com/

bizjournals study, men and women in their 20s and 30s say that part of the county offers the best sanctuary in a recessionary economy. And Houston figures prominently in that thinking.

The study of 67 metro areas nationwide shows that five Southwestern metropolitan areas, led by No. 1 Austin, rank among the nation’s eight best places for young adults (see accompanying chart).

Austin has two key qualities that make it stand out from the pack, the study shows.

Two-thirds of the nation’s major markets have fewer jobs now than five years ago, but Austin added 99,200 jobs during that span. Its annual employment-growth rate of 2.8 percent is the fastest in America.

What’s more, Austin has the strongest concentration of young people among the metros studied, with 28 percent of its residents between the ages of 18 and 34. The median for the study group is 23.1 percent.

Washington, Raleigh and Boston are the three runners-up in the study’s rankings of the best places for young adults. They’re followed by four Southwestern metros — Houston, Oklahoma City, Dallas-Fort Worth and Tulsa — that occupy fifth through eighth place.

Portfolio.com/bizjournals analyzed the 67 U.S. metros with populations above 750,000, searching for qualities that would appeal to workers in their 20s and early 30s. The study’s 10-part formula gave the highest marks to places with strong growth rates, moderate costs of living and substantial pools of young adults who are college-educated and employed.

Here’s a quick look at the Top 5 metros for young adults, as well as the other major Texas metros in the Top 10.

1. Austin: The Texas capital’s two dominant qualities were noted above. But its attractiveness to young adults is broadly based. Austin ranks among the 10 leading markets in five of 10 categories that were analyzed.

2. Washington, D.C.: Educated young adults flock to Washington, where 35.8 percent of all 18-34-year-olds hold bachelor’s degrees. The study group’s median is 23.2 percent. Per capita income ($56,510) is well above average.

3. Raleigh, N.C.: This is the fastest-growing major metro in the nation. The population of the Raleigh area is increasing by 3.9 percent per year. That’s more than triple the pace for the typical market, 1.2 percent.

4. Boston: Elite universities such as Harvard University and Massachusetts Institute of Technology give Boston its intellectual cachet. The local share of young adults with college degrees (37.6 percent) is the highest in the country.

5. Houston: Employment opportunities abound in Houston. Its job-growth rate (1.7 percent per year) ranks among the five best in the nation. And so does its annual upswing in per capita income (6.6 percent).

6. Oklahoma City: The unemployment rate for young adults is lower here than anywhere but Salt Lake City and Tulsa. Oklahoma City also enjoys the nation’s third-best pace for annual income growth, a rapid 7.2 percent.

7. Dallas-Fort Worth: The recession caused some backsliding in 2009, but Dallas-Fort Worth still has 206,000 more jobs than it did five years ago. Local population is zipping higher by 2.4 percent per year.

8. Tulsa, Okla.: Here’s an area that’s a true bargain. Median rent is $508 per month in Tulsa, the third-lowest figure in the study group. Compare that to such budget-breakers as San Jose (median rent of $1,334) or Honolulu ($1,227).

9. Seattle: This high-tech metro offers a wide range of good-paying jobs. Seattle ranks among the 10 markets with the largest per capita incomes ($50,471) and smallest unemployment rates for young adults.

10. Baton Rouge, La.: Louisiana is on its way back from the wrath of Hurricane Katrina, and this is one of its success stories. Baton Rouge boasts a high concentration of young adults (26.1 percent) and a strong rate of income growth.

The least desirable market for young adults, according to the Portfolio.com/bizjournals study, is Detroit, which shares the pain of the major automotive corporations based there.

Methodology for the study

Portfolio.com/bizjournals set out to find the U.S. markets that are best for young job-seekers.
The study’s objective was to identify markets that offer the best opportunities for workers in their 20s and early 30s. It gave the highest marks to communities that have strong growth rates, moderate costs of living and substantial pools of young adults with jobs and college degrees.
The study covered all 67 metropolitan areas with at least 750,000 residents as of mid-2008, using data from the U.S. Census Bureau’s American Community Survey; employment figures from the U.S. Bureau of Labor Statistics and income figures from the U.S. Bureau of Economic Analysis. Growth rates were calculated by bizjournals, based on data from all three agencies. All statistics were the latest available when the study was prepared.
A 10-part formula was used to rate each market’s receptivity to young job-seekers. The first five factors dealt with each area’s growth rate and potential. The next four categories assessed conditions for young adults. The final indicator focused on a key component of the cost of living.
Each area’s statistics were compared against the averages for the study group in all 10 categories. Above-average performances received positive scores, while below-average results were given negative scores. Each area’s 10 category scores were totaled to determine its overall rank. Opportunity scores ranged from 10.08 points for Austin to minus-12.53 points for Detroit. – G. Scott Thomas

Watching 30-year fixed-rate loans hovering between 4 percent and 5 percent and tax credits galore for first-time buyers, one might think it’s a good time to be in the market to buy a house.

But as the recession grinds on, statistics show buyers haven’t yet made a significant return to the housing market.

“With credit tightening, there are a lot of people who are not able to secure financing,” says Vicki Fullerton, chairwoman of Houston Association of Realtors. “They have either lost money in the stock market or are afraid of losing their job. Some others are just not willing to commit right now to applying for a mortgage loan.”

Increasingly, families are opting to lease until the recessionary clouds blow over. According to HAR’s recent study of Houston’s residential real estate market, demand for all rental properties has been on a steady rise. In Houston, single-family home leases are up more than 4 percent on a year-over-year basis, while leases for townhomes and condominiums are up more than 26 percent.

“We continue to see the leasing markets strong,” Fullerton says. “Until people’s confidence levels are back up and they can get back on their feet, rentals will remain in demand.”

Home leases popular

Demand in single-family home leasing leads the way, which is no surprise to Fullerton.

“It gets them close to what they really want, which is family ownership of a single-family home,” Fullerton says. “If they can only lease a piece of property in a school district where a child can get a good education, they are more inclined to do so.”

Still a rare occurrence even in this economy, some tenants are finding themselves back in the market after banks foreclose on landlords’ properties.

Eric Bradley, a Realtor at Houston-based In the Loop Properties, says the story he has heard from prospective tenants coming in to his office more and more has been one of involuntary entry into the leasing market.

“We are hearing from the other side,” Bradley says. “From people who were leasing because they have been forced out by owners who couldn’t pay their mortgage.”

Business has been steady at In the Loop, Bradley says. The summer months are their busy season and even in a sour economy, homes are still leasing.

“This last month has been insanely busy,” Bradley says.

Apartments flat

Demand for rental homes may be up, but Etan Mirwis, president of property management firm Rockwell Management, says demand for apartments has yet to rise, despite heavy competition between new construction and existing complexes.

While difficulty obtaining financing and an uncertain job market have sent potential homeowners into the single-family rental market, apartments have remained flat compared to last year, says Mirwis.

“If anything, Class A properties leasing has gone down,” Mirwis says. “A lot of the new Class A properties are under pressure from their bridge lenders to lease up their properties.”

But in the current climate that is difficult to do, he says. What’s more, due to triggers in their loans, some property owners must meet certain occupancy rates by a pre-set amount of time or the loan may be called. That has caused some new Class A complexes in Midtown, the Medical Center and other Inner-Loop neighborhoods to offer large concessions to potential tenants to get them in often in the form of several months free rent, Mirwis says.

“In the last 60 to 90 days, a lot of new complexes that have not offered significant specials are doing so,” Mirwis says.

Although Rockwell’s properties have not fallen under these occupancy requirements, Mirwis says he has reduced rates at some locations for the first time ever to compete with other complexes’ offerings.

Mirwis says he hasn’t yet seen an increase in demand for Rockwell’s Class B and Class C properties either, but as single-family home sales continue to slump, this is the category he suspects will have a rise in occupancy as a result.

“That’s because those once long-term renters were expected to become homeowners,” Mirwis says. “But if the faucet is being turned off, they will look for affordable, well-maintained apartment complexes.”

And so far, that faucet appears to remain closed off. According to the HAR report, single-family home sales continue to slide. In March 2009, single-family home sales were 4,355, down 13.4 percent from the same time last year and represented the 19th consecutive monthly drop. At an average sales price of $178,477, single-family home prices have slipped 5.5 percent over the same period as well.

Mirwis says within the next two to three years, well-maintained apartment properties within the Class B and C range will see an increase in demand from prospective renters. Those renters will also stay much longer.

“We are seeing fewer people move out than in the past,” Mirwis says. “Turnover for me has been down 10 percent.”

Fullerton says she is optimistic that conditions in the economy will right themselves and aspiring home buyers will return to the market. But that won’t happen until people feel comfortable with their job security, says Fullerton.

Until then, Fullerton says, “We will see a continual increase in people jumping into the leasing market.”

The Houston Association of Realtors described the first month of 2010 as “a mixed bag of readings.”

January sales of single-family homes in the Houston area slid 12.3 percent compared to the same month a year earlier, according to the latest monthly data compiled by HAR.

When broken out by segment, sales of single-family homes priced from $500,000 and above showed dramatic gains in January while sales of homes on the opposite end of the spectrum, those priced from $80,000 and below, fell.

At $144,500, the January single-family home median price — the figure at which half of the homes sold for more and half sold for less — rose 11.9 percent from one year earlier. That represents the ninth consecutive monthly increase in median price as well as the highest Houston median recorded in a January. The average price of a single-family home appreciated for the fourth straight month, reaching $194,154, up 18.4 percent versus January 2009. That figure also represents the highest for a January in Houston.

Foreclosure property sales reported in the Multiple Listing Service fell by 30.1 percent in January compared to one year earlier. The median price of January foreclosure sales rose 4.6 percent to $84,750 on a year-over-year basis.

Sales of all property types in Houston for January totaled 3,049, down 7.4 percent compared to January 2009. Total dollar volume for properties sold during the month was $565 million versus $535 million one year earlier, representing a 5.6 percent increase.

“Several overlapping factors influenced the Houston housing market as the new year began,” says Margie Dorrance, HAR chair and principal at Keller Williams Realty Metropolitan. “These include both the first-time homebuyer tax credit and the expanded credit for existing homeowners, which may have prompted more listing activity. Strong sales activity in the higher-end single-family home segment also contributed to an overall higher average sales price for the Houston market. We hope to see both sales and pricing continue to reflect a robust real estate market as the April 30 tax credit deadline approaches and we enter the traditionally busy spring home-buying season.”

January data

The number of available properties, or active listings, at the end of January edged up 2.3 percent from January 2009 to 45,210. That represents 2,025 more active listings than in December 2009, and is thought to reflect increased activity stemming from the homebuyer tax credit that expires on April 30.

January’s month-end pending sales — those listings expected to close within the next 30 days — totaled 2,783, down 13.5 percent from last year. That suggests there will likely be another sales decline when the February numbers are tallied. The months inventory of single-family homes for January inched upward to 6.1 months compared to 5.7 months one year earlier, but remains better than the national months inventory of single-family homes of 7.2 months, as reported by the National Association of Realtors.

January sales of all single-family homes in Houston totaled 2,514, down 12.3 percent from January 2009. This is the Houston market’s second consecutive monthly decline in sales. However, broken out by segment, sales of single-family homes priced between $250,000 and $500,000 jumped 21.6 percent in January while sales of luxury homes — those priced from $500,000 to the millions — surged 40 percent. By contrast, sales of homes in the below-$80,000 segment fell 28.9 percent and those priced between $80,000 and $150,000 slid 19.3 percent, HAR reports.

HAR also breaks out the sales performance of existing single-family homes throughout the Houston market. In January 2010, existing home sales totaled 2,071, an 11.9 percent drop from January 2009. The median sales price rose 13.7 percent to $133,000 compared to last year. The average sales price of $180,159 shot up 23 percent from its January 2009 level.

Condos and rentals

The number of townhouses and condominiums that sold in January rose 14.8 percent compared to one year earlier, HAR reports.

In the greater Houston area, 241 units were sold in January 2010 versus 210 properties in January 2009.

The median price of a townhouse/condominium fell 11.3 percent year-over-year to $111,500. The average price slipped 4.3 percent to $147,501 from January 2009 to January 2010.

Demand for single-family home rentals rose 4.7 percent in January compared to a year earlier. Year-over-year townhouse/condominium rentals climbed 5.1 percent.

More people made Houston their final destination in 2009, according to U-Haul International Inc.

As part of the Phoenix-based do-it-yourself moving company’s annual U-Haul National Migration Trend Report, titled “The 2009 Top 50 U.S. Destination Cities,” Houston moved up to No. 1 from No. 2.

The report was compiled from more than 1 million one-way U-Haul truck transactions occurring during a recent 12-month period.

Rounding out the Top 10 is Las Vegas; Chicago; San Antonio; Orlando, Fla.; Austin; Atlanta; Sacramento, Calif.; Kansas City, Mo.; and Denver.