Silver Star Properties plans to sell three Texas office buildings after outlining broader strategy Repurposed its 6.8 million square foot portfolio into self storage Asset Class.
The Houston-based REIT currently owns 44 low-to-mid-tier commercial properties in the Texas Triangle, with a focus on Greater Houston, where it has struggled financially and distressed. Assets include three industrial projects, 12 retailers and 29 office buildings.
Two of these office buildings totaling 330,000 square feet are coming up for sale in Houston:
- Westheimer Central Plaza, a 10-story building at 11200 Westheimer Road, due north of Westchase.
- Ashford Crossing II, South Dairy Ashford Road between Westchase and Energy Corridor.
- Westway One, 166,000 square feet at 1707 Market Square Drive in Irvine, 6 miles south of Valley Ranch.
Westheimer Central Plaza and Westway One are among the company’s most expensive properties, with estimated appraised values of $21 million and $23 million, respectively.
Like many mid-tier Houston office buildings, Westheimer Central Plaza has seen better days, with a 26 percent vacancy rate, according to SEC filings. The average vacancy rate of Silver Star Properties’ office assets hovers around 23%, laying the groundwork for an office transformation, especially in houstonkeep going down.
“Self storage is arguably the best asset by current metrics. In the past they called it recession-resistant,” said Justin Baker, managing director of commercial firm Whitebox Real Estate. “Houston is one of the stronger markets. In general, Texas is probably the best state for self storage. Usually, when you have buyers showing, they ask if we have Houston, DFW in Austin or San Antonio Or somewhere else. These major metros are where they want to put their money.”
The self storage industry has experienced a surge due to pandemic-induced migration and the rise of remote work.sales in Self storage market to grow 80% in 2021, reaching nearly $24 billion, according to Real Capital Analytics. Green Street market analyst Ryan Miller said self-storage slowed last year in part because of the impact of rising inflation and rising interest rates on home sales.
“In 2020 and 2021, the growth in self storage space has been absolutely phenomenal,” Miller said. “Right now, you’re in a situation that’s causing demand to slow, but overall revenue growth in the self-storage industry is still generally positive.”
Vacancy rates are expected to rise slightly in 2023 as demand cools. But average self-storage occupancy is expected to remain steady at around 92%.In Houston, self-storage fared better, with 94% occupancy rate, according to Marcus & Millichap. That’s slightly higher than last year, but below historical averages and well above Silver Star Properties’ average occupancy rate of 80%.
Texas has emerged as a leader in self storage, claiming Second highest total storage facility area, according to CXRE. Houston shines as the crown jewel of the Lone Star State, with 8 square feet of storage space per capita, nearly double that of its demographic rival Chicago, which has 4 square feet per capita. With approximately 1,035 self storage facilities, Houston ranks second in the nation. This landscape became the backdrop for Silver Star’s strategic business strategy.
“As we think about it from an investment perspective, what tends to drive people to self-storage in the first place, it’s looking at the underlying demographic trends and demographics in the market,” Miller said. “Overall, you might have areas with strong population growth trends because as people go through these life events, they tend to be more likely to use storage.”
Greater Houston Experienced Second largest population increase last year According to the US Census, it will add more than 124,000 residents between 2021 and 2022. Statewide, Texas had the most significant population growth in the nation, Added 9 million residents since 2000more than any other state, with 430,000 people moving in 2022 alone.
