Houston Architect Decides That If You Can't Beat Landlords, Join Them

Terry Smith is more used to designing buildings for others to occupy. But when he got tired of answering to a landlord, he decided to become one, taking the rare step as head of an architectural firm to construct and own his own office building despite a less-than-stellar Houston market.

Smith founded Smith & Company Architects 25 years ago and opened his first physical office in leased space in 2001. The firm grew and took on more projects, and about five years ago, Smith’s wife asked him a question that would shape his plans and lead him where he is today.

“My wife was like, ‘Hey, aren’t you kind of ready? You should own,’” Smith said.

Smith & Company Architects designed and developed a 6,800 SF building at 2535 North Freeway in the Houston Heights. The top floor will house the architecture firm, which has a staff of 21 and works on education, healthcare, housing and aviation projects. 

While Houston has dealt with elevated office vacancy since the start of the pandemic and its construction pipeline is subdued, Smith saw an opportunity for other small office users who want space in a modern, centrally located building. He hired JLL to lease the bottom floor, which offers about 2,700 SF.

The upstairs and downstairs will have separate entrances, and the future downstairs tenant will be the anchor for the building. 

Building and owning his own office was a lifelong investment decision, Smith said.

“It was a legacy, long-term retirement, family planning decision,” Smith said. “I probably won’t be around long enough to see major financial fruit coming from it, but hopefully my family can, my children can.” 

Smith previously leased a similar-sized office in Stafford. But developing this building meant the firm could design the office the way it wanted. In one example, it left the beams exposed to give the upstairs a loftlike feel.

The firm also fit in four more workstations compared to its former office, leaving some room to grow, he said. 

While this new office building doesn't substantially add to Houston’s office stock, it is notable, as there is only about 400K SF of office space under construction in Houston, according to Avison Young’s second-quarter office report.

That low total is largely credited to high borrowing and construction costs. Smith said financing wasn’t an issue for his project. Bank of America and Live Oak Bank were on board for financing, but Smith went with the latter, as it would allow more freedom to choose his contractor.

“We’re not talking about a 10-story office building. We’re not talking about a large influx of cash,” Smith said. “I did invest quite a bit of my own capital into the project, and I’m sure that helped us seal the deal.”  

Few professional services firms like law firms, accountants and architectural practices own their properties, preferring to lease to account for future growth or contraction and avoid the headache of day-to-day maintenance and other factors.

But for Smith, the reality of owning his own office building hit at the start of the month when he didn’t have to write a rent check to his landlord. Now he is paying a mortgage, but he sees that as paying rent to himself, and he plans to pay the building off early.