Downtown Office Market

[Montrose1100]

What's up with Heritage Plaza?

I walked by Friday and the entrance was boarded up.

Is it completely empty? I remember the day they removed the big "T".

Well there are 2 entrances. Renovation?

[Double L]

It must feel good to move from the Calpine Center to Pennzoil Place.

[jt16]

Chevron and Texaco merged in 2001. They've consolidated offices and moved to the Enron buildings. Your friend doesn't work for Texaco anymore, but may work for ChevronTexaco. The Heritage Plaza is undergoing some renovations, and was supposed to be adding parking (according to their leasing manager), but it most certainly isn't vacant. It was bought a couple of years back by an Atlanta firm making its way into the Houston market, and I recall EOG signing a big lease there recently.

[Montrose1100]

Chevron and Texaco merged in 2001. Your friend doesn't work for Texaco anymore, but may work for ChevronTexaco.

"On May 9, 2005, ChevronTexaco announced it would drop the Texaco moniker and return to the Chevron name. Texaco will remain as a brand under the Chevron Corporation."

[houstonfella]

It must feel good to move from the Calpine Center to Pennzoil Place.

Actually, I don't know. But .... Pennzoil is a famous building that was one of the first in the world to represent a twin-tower, sloped roof design in the trapezoidal shapes. At any rate, I hope they aren't moving to South Tower Pennzoil Place because I don't want to compete for elevators.

I don't think Heritage is at all vacant. Last count was they had over 700,000 sq. ft. leased. News on this would be great to hear.

Edited October 27, 2006 by houstonfella

[Montrose1100]

Actually, I don't know. But .... Pennzoil is a famous building that was one of the first in the world to represent a twin-tower, sloped roof design in the trapezoidal shapes.

What? It was the first to break from the 70's "box" design, and proved good architecture can be (financially) beneficial to developers.

[Double L]

Still must feel like the company's moving on up.

[houstonfella]

Gosh, what a good year of leasing has done for downtown.

Link

The article does state that expect new buildings in the not too distant future for downtown.

[MidtownCoog]

I belive it. The parking garages and tunnels have been packed lately.

The lunch rush now starts at 11:00.

[The Great Hizzy!]

12.5% vacancy!!

You know what that means!!

[MidtownCoog]

Now if we could only get rid of The New West Building!

[houstonfella]

Now if we could only get rid of The New West Building!

Good luck with that one, Coog. But, yeah, I've noticed Theater District Parking being FULL .... gotta squeeze in somewhere. It is about time we get a brand new 50+ story skyscraper downtown. I hope the developers overbuild and we get 2 or 3.

[The Great Hizzy!]

Now if we could only get rid of The New West Building!

I blame Subdude... getting my hopes like he did a couple of years back.

Edited February 9, 2007 by The Great Hizzy!

[Gary]

12.5% vacancy!!

You know what that means!!

If the 12.5% number is correct, that would mean that there is roughly 5 million square feet available in downtown. Certainly someone has taken notice of that, and has plans on the drawing board for another big commercial tower.

[houstonfella]

If the 12.5% number is correct, that would mean that there is roughly 5 million square feet available in downtown. Certainly someone has taken notice of that, and has plans on the drawing board for another big commercial tower.

Yeah, you would think. Of that 12.5%, a lot of the 5 m sq ft are Class B and C office spaces, which are totally unacceptable for big time law firms and energy giants. If four towers were built since 2000 with the vacancy rate at over 20 per cent, then surely we can get a few really tall ones in the not too distant future.

[Houston19514]

Yeah, you would think. Of that 12.5%, a lot of the 5 m sq ft are Class B and C office spaces, which are totally unacceptable for big time law firms and energy giants. If four towers were built since 2000 with the vacancy rate at over 20 per cent, then surely we can get a few really tall ones in the not too distant future.

I agree new construction may not be far off. But, when construction was started on the four towers (1500 Louisiana, 1000 Main, Calpine, and 5 Houston Center), the vacancy rate was nowhere near 20%. In fact, I'm pretty sure it was in the single digits, certainly for Class A space. Then 9/11 and Enron happened (mostly Enron).

[The Great Hizzy!]

^^ Exactly. The 20% figure was a result of several things happening, including the collapse of Enron, 9-11, the merging of oil companies, and so forth.

As a general rule, I've seen it written on a few commercial real estate sites, including C.B. Richard Ellis, that 12% and lower is typically a healthy enough rate for a submarket to take on new construction, thus my comment. This, however, doesn't mean that it's a foregone conclusion.

(BTW, CB Richard Ellis currently has a stream/banner on its website that says Hong Kong's Class A vacancy rate is just 3.8%... heh!)

[cwrm4]

Would someone please explain this quote from the above mentioned Chron article:

"The Gensler architecture firm is designing Deloitte's interior space in Heritage Plaza. Unlike its current space where partners are in window offices along the building's perimeter, the new space will have them in interior offices.

"It'll be a lot smarter space," Bennett said. "That's what we're doing in all the new offices we're building across the country."

Do Deloitte partners, who make an average of somewhere around $400k/yr, have some sort of ADD and the outside world is too much of a distraction for them? Does lack of sunlight make you smarter?

[dalparadise]

Would someone please explain this quote from the above mentioned Chron article:

"The Gensler architecture firm is designing Deloitte's interior space in Heritage Plaza. Unlike its current space where partners are in window offices along the building's perimeter, the new space will have them in interior offices.

"It'll be a lot smarter space," Bennett said. "That's what we're doing in all the new offices we're building across the country."

Do Deloitte partners, who make an average of somewhere around $400k/yr, have some sort of ADD and the outside world is too much of a distraction for them? Does lack of sunlight make you smarter?

Sounds like management theory BS to me. They put the big dogs in the center, so they are more accessible to the rank and file, then promote their "open-door" policy.

[houstonfella]

Well, guys, I have an "outside" office but do not make half a million bucks a year. Oh, well, cry me a river, boyz.... y'all will work inside and I'll see the rain pecking on my windows and make so much less.

[MidtownCoog]

Spend enough time working in these towers like I have over the years and the "smart space" comment makes perfect sense.

Considering how beautiful these building are on the outside, I have seen floors that looks like a garage on the inside.

And these are occupied floors. Not vacant.

[cwrm4]

Sounds like management theory BS to me. They put the big dogs in the center, so they are more accessible to the rank and file, then promote their "open-door" policy.

I suspect you are right, and, ironically, interior offices for partners will likely have the opposite effect. As a former Big 3/4/5 consulting executive myself, here's how it plays out in the real world. Partners are in the office at most 1 or 2 days a week. Any more than that, and they're on the way out, because very rarely can you generate revenue sitting in the firm's office. (fyi most firms use a "hoteling" arrangement such that there are no "permanent" offices).

You spend most of your time at a client, conference, or on an airplane. And you live in a state of deferred jet lag. Plus, nearly all execs have nicely outfitted home offices. The only reasons most partners go into is 1) a bigger partner is in the office, 2) look at the new "talent" fresh out of school, 3) take the new "talent", and anyone else you need a favour from, out to lunch on the company. So the best way for the rank-and-file to "network" with the big dogs is to be hanging around the office at lunchtime, looking hungry.

But let's say the partner, who has spent most of the week in an interior office/conference room/closet at the client site, and is jet-lagged to hell, and likely hungover, has to come in and fight off sleep sitting in a windowless office at "the office". Not likely. They'll stay at home, crack-berrying away. And the rank-and-file won't even see them. So much for generating an "open-door" environment. That's how the real world works.

[nmm]

Business

Feb. 9, 2007, 12:34AM

Occupancy downtown rises

Deloitte & Touche to take up a chunk of space in Heritage Plaza

By NANCY SARNOFF

Copyright 2007 Houston Chronicle

Print Subscribe NOW

Deloitte & Touche USA has leased 300,000 square feet of office space in Heritage Plaza, soaking up an increasingly limited supply of downtown space.

The 10-floor move will allow the company to consolidate two existing offices and add almost half as much space to accommodate an expansion from a recent uptick in business.

"The growth of the Houston economy is one of the main reasons for our growth," said Jerry Bennett, a Deloitte spokesman. "We mirror what goes on in the economy."

Like Deloitte, whose local tax, audit and consulting business is closely aligned with the energy industry, other downtown businesses benefiting from the sector are gobbling up office space at a rate that hasn't been seen since Enron's heyday.

The downtown office market had a banner year in 2006, with energy companies, law firms and architects leasing or expanding into space in the central business district.

More than half of the new leases were from energy companies, including BP, Cheniere Energy, Enbridge and Total Petrochemicals. The most notable move was by Chevron, which leased the 1.3 million-square-foot glass tower at 1400 Smith that housed Enron before its collapse in 2001. The deal pushed the oil giant's downtown office occupancy to 2.9 million square feet of space.

"Everyone's benefiting from the profitability in the energy industry right now," said Stewart Robinson, principal of commercial real estate firm Conine & Robinson.

In the fourth quarter of last year, the downtown market posted the most significant decrease in vacancy rates among the city's office submarkets with a 3.2 percent drop from the previous quarter to 12.5 percent, according to real estate firm CB Richard Ellis. For the area's best buildings, vacancies fell to 10 percent.

Rental rates have risen from the increased demand and rising operating expenses, the company said.

more:

http://www.chron.com/disp/story.mpl/headli...iz/4539237.html

[Montrose1100]

Good news! I wonder how long until someone rennovated the abandoned skyscrapers, to help with the growth?

[buildingunbuildingrebuilding]

Article indicates Class A vacancy downtown is still 10%. It was 3% in early 2001, pre-Enron, Allison, 9/11, and everything else. Most of the older buildings are really not viable as Class A space, even with renovations.

[2112]

How long does the vacancy rate have to be tight before someone starts thinking about a new tower!!!??? Man, I hope this lasts...how nice would it be to go through another boom-town ara, with tons of new skyscrapers being built!!

[TheNiche]

How long does the vacancy rate have to be tight before someone starts thinking about a new tower!!!??? Man, I hope this lasts...how nice would it be to go through another boom-town ara, with tons of new skyscrapers being built!!

The 70's/80's thing isn't going to repeat. We're much more economically-diversified this time around, which translates to slower more steady growth, as opposed to boom/bust, which is what tends to produce the skyscrapers.

Employment growth is also more spread out because medium-sized businesses don't really benefit all that much more from paying higher rents for a more central location when there is an adequate suburban labor force to meet their needs. They also don't need (or necessarily want) highrise buildings. So even when job growth by the numbers exceeds that of the boom years, the impact isn't as visually apparent.

It probably also doesn't help that the ratio of office square footage per employee has shrinked down to about 275sf per employee in the Central Business District. Companies are really packing them in these days.

Edited February 23, 2007 by TheNiche

[Trae]

I didn't think we would get a lot of skyscrapers like what happened decades ago. Sometimes it sucks to be diversified.

[Houston19514]

How long does the vacancy rate have to be tight before someone starts thinking about a new tower!!!??? Man, I hope this lasts...how nice would it be to go through another boom-town ara, with tons of new skyscrapers being built!!

I'm sure several developers are thinking about new towers right now. In fact, we know the people who bought Allen Center are thinking about one; they have said so. All it takes to get construction started is the signing of a large anchor tenant. I would expect we'll start seeing actual proposals and renderings later this year (presuming the downtown market keeps tightening).

[TheNiche]

I'm sure several developers are thinking about new towers right now. In fact, we know the people who bought Allen Center are thinking about one; they have said so. All it takes to get construction started is the signing of a large anchor tenant. I would expect we'll start seeing actual proposals and renderings later this year (presuming the downtown market keeps tightening).

Concur. It won't be an onslaught like in the 70's/80's, but I could envision a few buildings on the same scale as Calpine or 5 Houston Center.