In a vote of confidence for downtown Houston, a Shell Oil Co. subsidiary renewed its lease early for about 259,000 square feet in a market that continues to battle high vacancy rates during the pandemic and tenant flight to newer buildings.
Building investment: Shell's lease for eight floors at the 36-story 1000 Main was set to expire in 2025, and the company's early renewal came after building owner Union Investment, based in Germany, invested in an amenity center that transformed the 23rd floor. A separate gaming area features two Top Golf simulators, a pool table, shuffleboard and multiple TVs. Additional on-site amenities include a fitness center and training studio with automated spin and yoga classes.
Going deeper: The 1000 Main building, constructed in 2003, serves as the primary office for Shell’s trading and supply division in North America and represents Shell's last remaining presence in downtown Houston, which used to be home to Royal Dutch Shell's U.S. headquarters — and the energy company was one of the market's largest office tenants. Shell has been moving thousands of employees from downtown into its company-owned campus in Houston's Energy Corridor, about 16 miles west of downtown Houston, over the past few years.
Brokers: Tim Relyea and Joseph Peddie with Cushman & Wakefield represented the tenant. Wade Bowlin with Madison Marquette represented the landlord.
Why it matters: Houston's central business district had some of the highest vacancy rates in the nation before the pandemic, and work-from-home trends and new skyscrapers being built over the past few years have not helped that situation. Shell committed to the downtown lease at a time when Houston’s central business district endured a vacancy rate of 23%, according to CoStar data. Office vacancy steadily increased for eight straight quarters across all of Houston through the end of 2021, according to a JLL report published earlier this year.
Fun fact: The high-rise at 1000 Main St. was once home to the Lamar Hotel, which was shuttered in 1983 and demolished in 1985 to make way for the office tower that now houses Shell’s corporate operations. Corporate executives and civic leaders often met at Lamar Hotel, which, according to Houstonia Magazine, was bought by developer Gerald Hines in the 1970s.
What they're saying: “Shell’s lease extension illustrates a rising trend among tenants for amenity-rich office space as they continue to respond to the COVID-19 pandemic,” Wade Bowlin, central regional president for Madison Marquette, said in a statement after the lease was signed.
CoStar's Impact Awards highlight the commercial real estate transactions and projects that have transformed their markets over the past year. The winners are chosen by independent panels of industry professionals who work in the markets they judge. A list of judges can be found here and the criteria for selecting winners can be found here.