Shell Oil Leaving Downtown Houston

HOUSTON – Shell Oil Co., a stalwart anchor for downtown Houston since 1971, is vacating the 50-story One Shell Plaza and other downtown office space.

In the first quarter of 2017, Shell’s 3,400 downtown employees will transfer to suburban facilities — Shell’s Woodcreek Campus and the Shell Technology Center.

Shell is subleasing its 350,000 SF in One Shell Plaza and 300,000 SF in the BG Group Place. Both downtown buildings were developed by Hines.

In 2011, Shell renewed its lease for 804,000 square feet in One Shell Plaza and took 472,000 SF in Two 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.

A couple of years ago, the Shell vacated the Two Shell Plaza, which has undergone a major development and been renamed 811 Louisiana.

Since the 2011 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.

Shell’s departure from downtown is another example of what’s wrong with Houston’s office market today. Energy companies have downsized and are shedding huge amounts of space onto the sublease market. More than 11 million SF of sublease space is available and some 4 million square feet of new office space remains under construction. In recent years a number of new buildings were constructed in Houston for energy firms, such as Shell, but the rapid decline in oil prices reversed the market overnight and the new office space was no longer needed.

From a historical standpoint, the Shell Plaza buildings represent a major milestone in the career of master development Gerald D. Hines.

Hines Interests, founded in Houston 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, taking negotiations in his own hands, signed up Shell to occupy the proposed downtown project. Soon One Shell Plaza, 910 Louisiana was the tallest building in Houston.

Now Shell’s leaving and downtown Houston will have a big hole to fill.

The only thing left in downtown for Shell – the American arm of Royal Dutch Shell PLC – will be Shell Trading Co., which has facilities in the 1000 Main building.