Sales Activity Surges in Houston's East End

"I've been selling there for three years and haven't made a dime, but that has changed this year," Christopher S. Klein, vice president with Colliers Texas' Houston office, tells GlobeSt.com. "Some buildings aren't even making it to market." With building quality as the qualifier, properties are trading for $17 per sf to $23 per sf.

Klein's back-to-back sales of five industrial properties are just the tip of the iceberg as interest mounts in a close-in neighborhood, giving rise to townhouse development in one-off projects, both from the ground up and conversions. Meanwhile, a previously announced sale of the 156,000-sf shuttered Sara Lee bakery has closed, but the new owner's not discussing the plan--except to say that it won't be used for production.

"You're starting to see a lot of townhome development," says John Ferruzzo, principal and industrial division leader for NAI Houston, "and it's right around the corner (from the bakery at 4104 Leeland St.)." And the reason is simple: "It's close to the freeway system and has views of the downtown," says Ferruzzo, who sold a building just last week in the East End.

Klein says "the line of demarcation" is east of Scott Street, defining what is likely to stay industrial and what's emerging as a residential pocket. "It's an area of town that's completely gentrifying," he says, pointing to Perry Homes' shift from Midtown to the East End to develop close to 60 townhouses on a half dozen sites as the driver for change.

Joining in the rush to build are Wiese Properties, Omni Development and the latest to come in, Spire Realty, which just bought 3301 Polk St., a World War II blimp hangar carted in from Galveston Island. The 36,000-sf hangar on 1.4 acres, equal to a full city block, was sold by C&K Instruments of Houston, which also sold a 25,814-sf structure on about a half-acre at 3232 McKinney St. Klein's other sales were a 32,830-sf building, once used by York Casket Co., at 3719 Leeland St.; a 23,625-sf former ice cream factory at 1102 Sampson St.; and an 8,000-sf warehouse at 3119 Lamar St. Some will be used for manufacturing and others are being eyed for their infill value for residential development.

The bakery's new owner, Flowers Foods Inc. of Thomasville, GA, is mum about the long-term plan for the 10 acres and 35-year-old plant, but has acknowledged it bought the bakery to get access to the St. Louis-based Sara Lee's customer list in Houston. The immediate plan is to strip out the equipment and produce all baked goods at a recently opened, 200,000-sf bakery in Denton, north of Dallas.