Real Estate Round-up
Skyscrapers buck the recession: Hines plans another new office tower fordowntown Houston
The Hines real estate organization, which has built 23 skyscrapers in downtown Houston, is planning another one.
The project, if it comes together as planned, would result in a major office building on Main Street, catty-cornered from the historic Rice Hotel building.
Hines would not proceed unless a major office tenant has been signed, but the developer has been in serious discussions with significant corporations looking for downtown space. Some people in the real estate community say this could be the real deal — a big tenant ready to make a commitment and kick off another Hines downtown project — and soon.
The development site is bounded by Main, Texas, Fannin and Capitol. Years ago, a McDonald’s outlet was located there, but it was torn down and another developer proposed to build a condo tower. Hines took control of the ownership of the block several years ago and it is mostly used as a surface parking lot today.
Mark Cover, chief executive officer of Hines’ southwest region, says an architect has been retained and a schematic design of the new building has been finished.
Hines is not prepared at this preliminary stage to name all of the parties involved or disclose details about the negotiations underway, of course. But after writing about Hines for a few decades, the project appears to me to have the earmarks of a very serious proposal.
Cover says that, yes, it is possible that groundbreaking could occur later this year. Skyscrapers take about two years to construct, so it would be 2013 before the new tower is completed.
The office vacancy rate has been rising in downtown. At year-end, Houston’s prime Class A buildings in downtown were 7.29 percent vacant, up from 6.1 percent vacancy rate a year earlier, according to the CB Richard Ellis real estate firm. Several energy firms, such as Shell and Devon Energy, are expected to vacate big chunks of downtown space.
But at the same time, other energy-related companies are looking to expand in downtown and one of those companies would likely be the lead tenant in the new Hines tower.
New buildings, designed with energy efficiency and sustainability in mind, are in high demand.
“We really believe that the marketplace is differentiating between new generation buildings and 35-year-old (plus or minus) buildings,” Cover says.
Hines has just completed the 46-story BG Group Place tower at 811 Main Street, just two blocks south of the site of the proposed new building. The BG Group Place, on top of other prior improvements, validated Main Street as a prime corporate address.
A few weeks ago, Hines President and CEO Jeff Hines told CultureMap that Main Street is the preferred location for new office projects today.
“If we do the next building, that’s where we would go,” Hines said.
With the new BG Group Place tower opening and the Hess Tower building nearing completion near Discovery Green, some were anticipating it could be many years before another new building was started in downtown Houston.
But Hines said the timetable for the next addition to Houston’s skyline could be fast-paced.
“I think it could be surprisingly quick,” Hines said in an exclusive interview. “We’re seeing a real upsurge in activity. We’ve talked to quite a few large tenants. It’s hard to say because we’ve just come through some hard times. But I think it could be surprisingly quick that we could we see a new building.”
The new Hines project is proposed for a block of land known as “Block 69.” Developing an office tower there would certainly be good news for the nearby Rice Lofts and the Magnolia Hotel at 1100 Texas Ave.
“Block 69” also would have great access to the Metro light rail, the Theater District and Minute Maid Park. Plus, for those who haven’t visited lately, Main Street is more pedestrian-friendly and feels safer at night.
“While we would certainly look at other sites, we believe that the change on Main Street brought about by 1000 Main, BG Group Place and public infrastructure, has made Block 69 one of the most logical and desirable locations downtown,” Cover says.
Ralph Bivins, former president of the National Association of Real Estate Editors, is editor-in-chief of RealtyNewsReport.com