Real Estate Rumblings

Chevron delays downtown skyscraper but keeps tax incentives

Chevron delays downtown skyscraper but keeps tax incentives

Chevron USA new tower downtown Houston
This rendering shows the new tower, left, now put on hold by Chevron U.S.A. Courtesy of Business Wire

Chevron Corp. says it is delaying its plan to build a skyscraper in downtown Houston. The 50-story tower was slated to be located at 1600 Louisiana Street at Pease on the site of the old YMCA building, which was demolished.

Chevron planned to create a three-building urban campus in downtown, with its two existing buildings at 1500 Louisiana and 1400 Smith. The proposed new tower was designed by the HOK architecture firm.

On Thursday, Chevron said it would not make a decision about when to start the constructing the building until after 2014.

 Everybody ballyhooed the Chevron building like it was a sure thing that would be creating construction jobs next year – even state and local governmental officials who wanted to give economic incentives. 

Chevron has always been wishy-washy about the timetable for the skyscraper. When plans for the tower were announced with a press release in July, Chevron was ambiguous about the timing and its “final investment decision” to build or not to build.

The ambiguity is apparent if you carefully parse Chevron’s July press release: “Final investment decision for the project, designed by HOK, is expected in the second quarter of 2014. Groundbreaking will follow final investment decision, and occupancy is anticipated to begin in the fourth quarter of 2016.” 

But everybody ballyhooed the Chevron building like it was a sure thing that would be creating construction jobs next year – even the state and local governmental officials who wanted to give Chevron economic incentives.

The California-based energy firm had agreed to receive a $12 million economic development incentive package from the state’s Texas Enterprise Fund. As part of the plan, Chevron would bring 1,700 jobs to Houston.  In addition, the city of Houston agreed to support the package by granting a 10-year abatement on property taxes. If you read the fine print, though, the incentives are tied to job creation, not constructing the new tower.

Chevron spokesman Justin Higgs told the Houston Chronicle that construction has not been canceled, only delayed, and that the 1,700 new jobs will be created in Texas, as previously announced.

Earlier in December, Chevron said it is cutting capital spending next year and it was learned this week that the energy behemoth is delaying the downtown Houston skyscraper and some other projects around the country.

Elsewhere in downtown Houston, Hines is building a skyscraper at the corner of Main and Texas Avenue. Site preparation and demolition of an old building on that site is underway. Hines says the 47-story, 1 million square-foot building, 609 Main St., will be completed in 2017.

The downtown office market is healthy with high occupancy rates in its major towers. Finding large blocks of empty downtown office space is nearly impossible, so it made sense for Chevron to want to build a new tower. 

The Chevron scorecard at the end of the day: The historic YMCA building is gone. The city and state agreed to give financial help to Chevron and the massive energy company has already received some of it. The construction jobs for the skyscraper aren’t happening for a while. Chevron says it will still bring 1,700 jobs to Houston. Chevron says the tower will be built – someday. Now we can all sit back and watch the grass grow on the Chevron’s downtown dirt.

Ralph Bivins, former president of the National Association of Real Estate Editors, is founding editor of Realty News Report.