The Ralph Bivins Project – Podcast Guest: David Schwarz of Transwestern

HOUSTON – (Realty News Report) – The latest episode of The Ralph Bivins Project features Houston real estate veteran David Schwarz, a Transwestern vice president who has worked in the Texas real estate market for 50 years.

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RALPH BIVINS: Welcome to the Ralph Bivins Project. We’re here in 2023 and we’re waiting for the Federal Reserve to impose another rate hike or something horrible like that. I think we’ve had enough rate hikes. It’s time to take a break and see what the impact is.

In Houston, things are going fairly well. We are here today with a Houston real estate veteran, David Schwarz with Transwestern. He has been doing commercial real estate transactions for 53 years. He knows every nook and cranny of the market. He has worked in all facets of the industry – land, buildings corporate investments, historical property redevelopment, selling and leasing. Transwestern is a major firm in Texas, and it continues expanding rapidly around the nation. David, how would you describe the condition of the real estate market today?

DAVID SCHWARZ: I would use the word “challenging.” Over the last few years, favorable fed policy and cheap interest rates made it very easy to do deals. People from all walks of life, from major developers to newbies in the business, were getting deals done. Today, with the fed policies the way they are, with interest rates increasing, with supply chain issues creating inflation and construction costs and the Ukrainian war, it is getting a little more challenging to do deals.

Houston, I think is in a very good position. We are still the Energy Capital of the World. Oil prices are maintaining in the $80 range, which is a good level for fossil fuels. We do have some challenges with the federal government pushing its green initiative. I don’t know how this will impact the long-term viability of fossil fuels. But I think that in our lifetime, natural gas and fossil fuels will be the No. 1 generator of energy.

RALPH BIVINS: And the transition away from fossil fuels?

DAVID SCHWARZ: For every electric vehicle, the chargers need to have coal or natural gas to power them. I don’t know how an electric charger can work without fossil fuel behind it. But that’s not my field of expertise.

I think that with construction costs today and increasing interest rates, it’s very challenging for developers to make the economics work. Also, the equity investors behind the developers will demand more return on their capital, and this is also challenging.

The last three or four deals Carlos Bujosa and I have done have been user deals. Users can go to the bank and borrow at 7 percent interest or so, and it’s not a bother to them. We recently sold a tract to an Indian grocer who’s moving here from Dallas. It’s quite a substantial area in the Hillcroft area. We sold a couple of sites to C-stores, one in Southwest Houston, the other in the Energy Corridor. Regarding C-store operators, I think that every time we get a listing in the Energy Corridor, we get at least 50 calls. Most of them are independents, Southeast Asian or Middle Eastern, and they own a number of properties. It’s an interesting phenomenon to me how you can have two or 3 C-stores at an intersection and all of them make money, apparently. I don’t get it.

RALPH BIVINS: A while back you mentioned the Energy Corridor. That used to be a rough real estate market when oil prices were down. What is that submarket like today?

DAVID SCHWARZ: The office guys are having difficulty out there. You are seeing some energy and engineering firms downsizing from the West Belt area and are moving to the Energy Corridor but taking 30 to 50 percent less space that they had at their previous locations. I can tell you we had a corner tract at Cypress Run and Katy Freeway. There was tremendous activity; we got a lot of calls. We had a number of inquiries from medical users. We were asking $35 a square foot. They couldn’t quite come up to that figure, so we sold it for a (convenience store) for a little less than the asking price.

We have another site listed where the University of Houston is located in the NE quadrant to Grand Parkway. We get numerous calls for multifamily development, but that tract is restricted against multifamily. We are also getting a number of calls from industrial users and developers, but the price point is something they can’t afford.

David Schwarz biography

David is vice president in the Houston Office Division of Transwestern, specializing in the acquisition and disposition of land, free-standing and multi-tenant buildings and tenant representation. With more than 50 years of commercial real estate experience, he has been involved in more than 500 acquisition, disposition and leasing transactions with a volume in excess of $600,000,000.

Prior to joining Transwestern in 2010, he was a shareholder of McDade, Smith, a boutique land brokerage firm. He has also held positions with several small commercial brokerage firms, including serving as president of A. David Schwarz III, Inc., founded in 1977. He has represented numerous local and national clients.

David received his Bachelor of Business Administration degree in Accounting from the University of Texas, Austin.