Shell Gets Jump On Lease Renewal, Re-Ups its 1.2M SF

HOUSTON-After examining a variety of different locations and potentially even building for their purposes, Shell has opted, instead, to renew its 804,491-square-foot lease at One Shell Plaza and its 471,934-square-foot lease at Two Shell Plaza. This is the final agreement capping off a search project launched before the financial crisis.

Cushman & Wakefield vice chairman Tim Relyea, who represented Shell throughout the process, tells GlobeSt.com that he and partner executive vice president Joe Peddie got started on the process in 2008. In addition to reviewing Shell’s space in Houston, the project involved research and possible relocation for Shell’s operations in New Orleans and Calgary.

“Any company of that magnitude or size needs to be pretty far out in front of the curve,” Relyea tells GlobeSt.com. “Doing a new building of one million square feet – that’s a four-year process, and that’s very tight.”

It was for that reason, he continues, that Shell started as early as it did on basic building reviews, a variety of options and potential new building options. “We’ve gone through two major economy changes, the worst drought in Texas history and six government failings to get this project done,” says Relyea, with a laugh.

In New Orleans, Shell signed a renewal for 656,000 square feet at One Shell Square, where it had been since the early 1970s. The Houston lease, billed as the “largest in the world” in office space in 2011, is a 15-year one, commencing retroactively on Jan. 1, 2011 and expiring in 2025. Shell Canada, in the meantime, renewed its lease in late 2010.

In Houston, building owner Hines is spending $40 million on upgrades, including elevator modernization, new life-safety, asbestos removal and lobby upgrades. It was that agreement, plus the irreplaceable location, Relyea comments, that encouraged Shell to stay where it was. “That was a 100% bulls-eye location for downtown Houston,” he adds. “Any other location would have been a step back.”