WSJ on the old Enron building and the downtown real estate marketA lot of interesting facts in this one, which I've tried to highlight. I thought it was curious Chevron didn't sign in the old Enron building so they could use the nifty circular pedestrian skybridge. This article doesn't explain why (Chevron is staying tight-lipped), but it at least discusses the situation.
Chevron Passes Up Old Enron Building in Houston
By Jennifer S. Forsyth
The Wall Street Journal, March 1, 2006
Enron's former headquarters will remain a dark spot on the Houston skyline for the indefinite future.
Last week, Chevron USA Inc., a potential tenant for the building at 1400 Smith St., surprised the Houston real-estate community when the Chevron Corp. unit announced that it would take space elsewhere. "It was widely anticipated that they would take that building," said Steve Biegel, a Houston-based senior vice president for Studley Inc., a real-estate firm that represents tenants.
"We're disappointed, of course, that we didn't get it," said Bill Donovan, senior vice president of Towanda Development I Ltd., the group that owns 1400 Smith.
Towanda, which bought the 50-story tower in 2003 for $55.5 million following Enron's bankruptcy, faces a challenge in luring other tenants because the building doesn't offer parking -- an essential amenity in car-dependent Houston. Towanda was led by cardiologist Antonio Pacifico, who died in a plane crash in November, but Mr. Donovan said Towanda's other investors are well-funded and can be patient.
The former Enron headquarters -- no longer sporting the tilted "E" out front that was the subject of much news footage -- has 1.27 million square feet available, making it by far the largest existing empty office building in the U.S., according to real-estate information company CoStar Group Inc. of Bethesda, Md. (This doesn't include large skyscrapers which are under construction in several markets, including the 1.7 million square feet in 7 World Trade Center in New York.) Though the market is improving, the Houston central business district had a vacancy rate of 19.4% in the fourth quarter of 2005, according to Property & Portfolio Research Inc. of Boston.
The Enron building is the largest of several options for tenants looking for space in the district. "As long as there are multiple large blocks of space available on the market, it will make it difficult for any landlord to raise rates significantly," Mr. Biegel said.
Chevron already owns and occupies 1500 Louisiana St., a skyscraper next to 1400 Smith that Enron was constructing as the company started to crumble. The two Enron towers were to work in tandem and are linked by a pedestrian walk, to which Chevron bought the rights when it acquired 1500 Louisiana. When the oil company announced it was looking for more space in central Houston, as it consolidated its work force after the acquisition of Unocal Corp., 1400 Smith was seen as a logical choice. Chevron wouldn't have faced a parking dilemma because it owns a parking garage nearby.
However, Chevron announced Friday that it had agreed to take 465,000 square feet in Continental Center I, at 1600 Smith, a building adjacent to 1500 Louisiana on the northwest side. Continental Center I is owned by Chicago-based Trizec Properties Inc., a real-estate investment trust with 6.1 million square feet in Houston's central business district. Chevron spokesman Mickey Driver said "1600 Smith was the best deal for Chevron." He wouldn't confirm whether the company had considered 1400 Smith.
Towanda had drawn plans to convert the bottom floors of 1400 Smith into parking, but those efforts were put on hold during the Chevron discussions. Now, the investors are considering that option again, Mr. Donovan said.
Write to Jennifer S. Forsyth at firstname.lastname@example.org