HOUSTON – (Realty News Report) – McDermott International Inc. has signed a 524,323-SF lease for the entire Energy Center Five building, an 18-story property in the Energy Corridor.
The building will serve as the new corporate McDermott headquarters and will consolidate approximately 1,700 employees across five locations in the Houston area into the new building. The office tower was completed in 2016 and it has never been occupied.
CBRE’s Steve Rocher represents the building owner, TCH Energy Corridor Venture, LLC.
Steve Hesse, Brandon Clarke, Ryan Roth and Paul Penland of CBRE represented McDermott in the transaction, one of the largest office leases signed in Houston in recent years. McDermott leased the building, 915 North Eldridge Parkway near Interstate 10, for 16 years.
The Energy Corridor, located west of Houston along Interstate 10, became one of the weakest submarkets in the city in recent years as energy firms laid off workers and emptied office space. That was after West Texas Intermediate crude went from $107 a barrel in the summer of 2014 to almost $27 a barrel in early 2016. About that time, JLL, an international commercial real estate company, reported the Energy Corridor had more sublease office space than any other submarket in the nation. A partnership of Trammell Crow Co. and Principal Real Estate Advisors completed the building in 2016, but by then the energy business was in poor condition. It was a quick reversal from when the Energy Corridor had an extreme shortage of office space about five or six years ago, to having empty buildings with no tenants.
In recent months, the Energy Corridor market has been making significant strides in recovery, however.
“I think The Corridor is already recovering,” said Energy Corridor real estate expert David Hightower, executive vice president of development at the Midway company in a recent interview. *There have been several sizable leases announced in the (fall of 2018.) And Occidental (OXY) is purchasing the former ConocoPhillips campus at the northeast corner of I-10 and Eldridge. That is a major indication that the future of The Corridor is very positive.”
McDermott will begin operations in the tower in the third quarter of 2019 and will gradually relocate more employees into the building after that. McDermott has 44,000 employees working in 54 countries around the world. Providing engineering, technology and construction services to the energy industry, McDermott also has a fleet of vessels for marine construction projects around the world.
“The new, state-of-the-art building will enhance collaboration and productivity among our employees and drive efficiency and cost savings for the company,” said David Dickson, McDermott’s President and Chief Executive Officer. “We are also staying in Houston’s Energy Corridor, which is strategic for McDermott given the close proximity to many of our customers and partners.”
Many of the world’s energy firms have offices in Energy Corridor. The Energy Corridor’s third quarter office availability rate (including sublease space) was 27.3 percent, according to CBRE. That is a weak availability rate, but when McDermott’s deal and other transactions are accounted for in early 2019 statistics, the availability rate will be improved significantly.