Chevron, Trizec Bed Down 465,000-SF, Class AA Office Lease

Chevron will begin to move into Continental Center I at 1600 Smith St. in the third quarter and is expected to wrap up the relocation in early 2007 from leased space in Sugar Land in the far southwest market. "This is the largest corporate relocation in 7.5 years since we did the Continental Airlines' lease," says Paul Layne, executive vice president for Trizec Properties Inc.'s Southwestern region. In one fell swoop, the deal pushes the 1.1-million-sf high rise to 99% occupancy from 76%.

Chevron, like Continental, has dibs on expansion room. The airlines' headquarters team occupies 500,000 sf in Continental Center I and another 225,000 sf in Trizec's Continental Center II at 600 Jefferson St.

Layne believes one reason that Continental Center I had the upper hand over a nearby vacant building is its parking, a critical selling point because Chevron is bringing in an initial 700 employees to fill space that ultimately could hold 1,300 workers. He tells GlobeSt.com that Chevron's headquarters at 1500 Smith St. is connected by a sky bridge to an empty 1.2-million-sf high rise at 1400 Smith St., but its now-deceased owner canceled the parking agreement with Trizec about 18 months ago when the former Enron building changed hands. "The only obvious thing is parking wasn't available," he says.

To pull together the needed blocks in Continental Center I, Layne says some tenants will be relocated inside the high rise and to other nearby Trizec-owned office buildings. The Chicago-based Trizec is the Downtown's largest property owner with 6.2 million sf.

The deal backfills space vacated about two years ago by Shell Oil Corp. The building's quoted rent averages $22 per sf gross.

Layne says Chevron did its homework in investigating the available stock in the CBD, which is where the search was concentrated and offered plenty of options as the city struggles to recover from the Enron debacle. But, he credits the swift- and smooth-moving talks to 25 years of doing deals with Tim Relyea, vice chairman of Cushman & Wakefield of Texas Inc. "We were able to streamline the negotiations and go from principal to principal with Tim refereeing," explains Layne, who teamed with Trizec vice president Paul Frazier to nail down the deal. "It worked extremely well."

Houston's office vacancy was 14.9% before the Chevron signing. "We're moving up toward lower vacancy. It's a real shift in the market with a huge transaction like this," Layne stresses. "Houston is famous for this. It's a big-deal Downtown."

Chevron will maintain offices in Houston's Bellaire, Briarpark and Wilcrest office submarkets. Sources around town say Chevron's Sugar Land location will hit the sublease market because there's still some term left on that pact.