What were they doing there?

it was a strong enough blast to wake me up and set off a car alarm in the parking lot of our condos.

First suspicion is a leaking tank of propylene.
Having quite the experience in this science & the industry, I have a few suppositions:
1. The volume & velocity of the blast suggests a BLEVE if this were just a plastic plant, and not an explosives manufacturer. Hence, this first suspicion makes a lot of sense.
2. Nobody, but nobody, would store 1,000 gallons of pressurized liquid, without legally required safety systems, like delta P over time, flammable gas detection, or liquid sensing in the dike. Unless,...
3. This was a shoddy organization that was skirting every regulation, had no Process Safety Engineer (a legal requirement under OSHA).
a. This could be willful and criminal, or;
b. This crappy little company, stayed small enough to be under PSE volumes, suggesting they really didn't know
what the hell they were doing.
Either way, 2 people are now dead, and somebody is in BIG trouble.

My family owned some property down the street from them. they have been in business for over 40 years.

But, they clearly didn't have any of three common safety measures required by law and I question whether the met Class 1 Div 1 electrical codes, also mandated for handling BLEVE potential materials.
Again, I'm surmising based on limited information about propylene.
Your family's property damaged?

After Mom died, it was a requirement of the will. When we bought the property it was not in the city.

a manufacturing facility of that sort could be right in the middle of a residential area.

I visited friends in Houston back in the late 1980s. The land uses were crazy mixed up. They lived in a tiny 1960s subdivision behind a very large hospital complex. There were at least four large clusters of high rise buildings in different areas of the city, that I could see while driving on the interstate.

Since similar land uses weren’t grouped, my friends, who had just moved there, just had to randomly find and note where businesses and services were located. There could be a doughnut shop, an oil change place, a daycare center and liquor store in the middle of a residential area or an industrial area. The city is huge. It was confusing, to say the least.

This land was NOT in the city limits when we bought our land 50+ years ago. The street was ALL light manufacturing and auto shops. The homes were built around it. So blame the builders.

However, a main purpose of zoning codes is to separate incompatible uses.
My point is that, if there had been reasonable zoning on place, then, perhaps the destruction of residential property could have been avoided. The builders just took advantage of the lack of zoning.

It is fortunate that there were not more casualties. The destruction of homes and property is just terrible. I’m sure there will be much financial hardship for the affected residents and business owners.

And Harris County does not "zone" property?

Well folks, you can see what it used to look like here:

Watson Grinding and Manufacturing

Link: http://www.watsongrinding.com/

(snips)