In late June, the local arm of Sweden-based development and construction group Skanska announced it was breaking ground on a new, 750,000-square-foot, 35-story office tower downtown, on the block bounded by Capitol, Rusk, Milam and Travis streets, where the Houston Club used to be. Given the current state of commercial real estate in Houston, the news was a bit surprising. We set out to find answers to our many questions:
Seems like kind of weird timing to build a new office tower downtown, right?
There’s really no debating that. The city’s coming off a bruising couple of years, during which time oil prices tanked, bringing employment down with them. When jobs go, so does the need for office space—there’s 2 million square feet downtown that tenants have put back on the market. Then there’s the fact that the new building will arrive hot on the heels of Houston-based real estate giant Hines’s new tower, 609 Main, which finished construction last May, adding over a million square feet downtown, 40 percent of which is still up for grabs. That’s a lot of space to fill in an economy that still isn’t back up to speed.
So why raise the building now?
“We bought the site of the former Houston Club back in 2012, and we started designing the project, built a garage, and poured foundation two years ago now,” explains Matt Damborsky, the executive vice president of Skanska’s Houston division. After the oil bust, though, the company decided to sit on the property, waiting for a tenant. One arrived earlier than they’d expected when, in June, Bank of America signed on for 210,000 square feet on six floors, plus naming rights. The project was again a go. “Once Bank of America came onboard, it made the decision pretty easy,” Damborsky says.
But … isn’t there already a tower named for Bank of America?
Yep, the iconic, Philip Johnson–designed Bank of America Center, which has been a star in Houston’s skyline since it was built in 1983. BofA is moving out of the 165,000 square feet it occupies in that tower, as well as 122,000 square feet worth of office space its corporate and investment-banking arm, BofA Merrill Lynch, previously filled in other downtown buildings. There’s no word on the exact name of the new Bank of America building … and it’s also unclear how we’ll refer to the extant Bank of America Center, after the switch is made.
So confusing! Why would BofA go through the hassle?
Everybody likes shiny new things! “As companies need to recruit and retain talent, the space they go into is very important to them,” Damborsky says. The building touts a super-duper LEED rating, meaning it’ll be much more energy-efficient than a structure built in the ’80s. The Gensler-designed Skanska building is also slated to have a tunnel-level lobby whose 40-foot ceilings rise all the way to street level, a seriously snazzy setup featuring a wide array of retail options.
With all that free space in the market, this building should be the last one for a while, right?
Well, no. Tim Relyea, executive vice president of Cushman & Wakefield, predicts that by 2019, when Skanska’s building is complete, an even newer tower will be underway downtown. The next building, he asserts, wouldn’t be ready until 2021, by which time more than 75 percent of Houston’s downtown office space will be around four decades old. “It will be needed,” he says of this yet-to-be-named next building, “not due to demand and supply reasons, but due to the new infrastructure and design changes that will be included in a new generation of buildings.” And of course, this is Houston, land of eternal optimism. Every bust is just a stop on the way to our next boom.