HOUSTON – Shell Oil is vacating a huge block of downtown office space in Two Shell Plaza, prompting the landlord to launch a major renovation of the 26-story building, managed by Hines.
At the end of 2014, Shell will move out of all but two floors in Two Shell, leaving behind some 400,000 square feet of vacancy – one of the biggest blocks of vacant prime office space available in Texas.
Two Shell Plaza will be renamed after its new address, 811 Louisiana. The main entrance for the tower will be moved onto Louisiana Street, replacing its current front door on Walker.
The 565,538-square-foot structure contains 17 office levels (two subterranean) and 12 parking levels.
The renovation work will begin in early April. The lobby will be expanded and improved. The exterior the first four floors of the building will be re-clad in Virginia Mist granite, a dark natural stone that contrasts with the existing travertine on the upper levels.
Balfour Beatty is the general contractor for the project, slated for completion in April 2015.
Two Shell is currently 93 percent leased, but that percentage will drop significantly when Shell leaves. Industry veteran Chip Colvill and Paula Bruns of Colvill Office Properties will handle leasing.
Re-leasing the empty space vacated by Shell, could provide an upgrade to rental revenue. Rents in downtown Houston have been skyrocketing over the last three years. Within the last year, downtown rates have jumped to $36 per SF, up from $34 at the end of 2012, says CBRE. Class A space in downtown has average asking rent of $42.12. Prime properties will be pushing $50 per sf, says CBRE’s Sanford Criner, an incredible number that was unthinkable only a few years ago.
About two years, Shell re-upped at Two Shell Plaza, signing a 15-lease for 471,934 square feet in the building. At the time Shell also renewed its lease for 804,000 square feet in the nearby sister tower, One Shell Plaza for a total of 1.3 million square feet – the largest office lease in the world during 2011. But since that time, Shell’s need for office space changed and Shell decided to downsize in downtown Houston.
Since the lease was signed, the buildings changed hands. In one of Houston’s biggest realty deals ever, Hines sold Shell Plaza One and Shell Plaza Two in 2012 to Busycon Properties LLC for $550 million. Hines continues to manage both buildings.
One Shell Plaza and Two Shell Plaza launched Gerald Hines toward his career as the premier developer of high-rise office buildings. Hines Interests, founded in 1957, was mostly developing warehouses and small office buildings (the tallest had been 16 stories) until the Shell Oil deal came along in 1967. That’s when Mr. Hines, himself, signed up Shell to occupy the proposed project. With Shell’s lease in-hand, Hines secured financing and started construction.
After the Shell buildings were opened, the downtown skyline of Houston became a canvas for some of Hines’ masterworks: including the 75-story JP Morgan Chase Tower, Pennzoil Place, and Bank of America Center.
One and Two Shell Plaza, designed by the legendary Bruce Graham of Skidmore, Owings & Merrill, opened in the early 1970s. One Shell Plaza was the tallest building in the city and importantly, the tower put the rest of the world on notice – Houston had become the Energy Capital of the World.
“We have been committed to downtown Houston since the founding of the firm more than five decades ago,” says Jon Cogdill, senior property manager for Hines. “Having managed 811 Louisiana since its inception, we are pleased to be on the team that ownership has assembled to re-launch the property into the upper tier of Class A buildings in the CBD.”
Two Shell Plaza sits on the block bounded by Louisiana, Milam, Rusk, and Walker streets. The name of One Shell Plaza will not be changed, Cogdill says. Two Shell, though, will be given a new name with a higher-toned address.
The 50-story One Shell Plaza was completed in 1971, at 910 Louisiana Street. The tower made Louisiana Street one of downtown’s preferred addresses. And other developers followed suit, building several significant buildings on that street.
Changing the address of Two Shell Plaza to 811 Louisiana Street, instead of having the Two Shell Plaza’s current address at 777 Walker St. will be an upgrade.
For passersby, the dark exterior granite on the lower part of the building will be the biggest change. Slot windows will complement the existing architecture, and the new exterior will be highlighted by a continuous band of LED light. A recessed glass wall at ground level will draw pedestrians into the newly renovated lobby. Metal louver canopies will provide shading for people on the sidewalk and signify the new corner entry to 811 Louisiana/Two Shell.
Hines provided this description to the interior of the building: “The expanded lobby space will include a lounge area for informal tenant meetings. Gray Aquasol quartzite will take the place of the white Travertine-clad walls, with accents of black Concordia to tie in the new exterior cladding and provide a backdrop for tenant identity signage. Wood veneer walls will distinguish the elevator lobbies, and backlit glass doors will brighten the space. The building’s 12 elevator cabs will get a fresh new look with fully updated interiors. The lobby’s trademark gold-leaf ceilings will revert to Skidmore’s original pure white concept and will feature LED lighting. Textured glass feature walls and a light installation above the escalators will draw traffic from the tunnels and mark the arrival to the ultra-modern 811 Louisiana.”
Underground, the Two Shell/811 Louisiana building is a vital multi-pronged intersection in Houston’s pedestrian tunnel system that connects most major buildings and hotels.
Times are changing in Houston. Hines no longer owns Shell Plaza. And Two Shell Plaza will have a new name.
— By Ralph Bivins, Real Estate Editor