Reports Hines Selling 33-Story Office Tower in Downtown Houston

Story by Boyd Commercial Editor / July 18, 2022

The 20-year-old tower is 65% leased, with rents 45% lower than the new Hines tower next door.

Hines and Prime Asset Management are selling a 698K SF, 33-story Class A office tower in Downtown Houston that is 65% leased, with rents almost half the price of a new Hines office tower next door.

The building at 717 Texas Avenue, which opened about 20 years ago and underwent a $12M renovation in 2019, has been struggling to regain its footing since its largest occupier—McMoRan Oil & Gas, which had leased half the tower—moved out in 2017.

The partners are aiming for bids at $225M, or $322 per SF, and are pitching the property to value-add buyers by telling them they can achieve a stabilized yield of 8.5% within three years by capitalizing on the recent renovation and leasing up the vacant space, according to a report from Green Street.

Hines, which has new developments surrounding the 717 Texas tower, is touting the tower as a newer building than the prevailing inventory in Downtown Houston, most of which was built in the 1980s.

Hines is also leveraging the higher rents of the newest buildings in the neighborhood as a part of its pitch for 717 Texas, including the company’s most recent project: the 1M SF Texas Tower at 845 Texas Avenue, which was completed by Hines and Ivanhoe Cambridge in December.

The rents at 717 Texas are averaging about $26 per SF, while Texas Tower, which is 70% leased, is fetching triple-net rents of $45 per SF, according to Green Street.

Hines, in a partnership with Cresset Wealth Advisors and Levi Family Partners, also is in the midst of building a 46-story luxury residential tower on nearby Milam Street. When completed later this year, the apartment tower, named Brava, will have 377 units.

Houston, like many other large urban office markets, has seen a wave of office relocations as tenants move into newer, higher-quality space.

The flight to quality is making leasing of older office buildings much tougher as companies shifting to hybrid work patterns and downsize office footprints.

Office leasing activity has been steadily increasing in Houston in recent weeks, with Class A rents now averaging more than $36 per SF

According to Kastle’s weekly survey of office occupancy in 10 US cities, the office markets in Houston and Austin are leading US cities in their recoveries, with occupancy levels that have exceeded 55%.