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CLEAR LAKE, TX-The Boeing Co., exercising a right of first refusal, has paid $42 million for a 399,000-sf, class A office building to block serious talks between owner, Trizec Properties Inc., and an off-market buyer for a multi-tenant asset in the NASA submarket.

For Boeing, the purchase opens the opportunity to expand in a tight office submarket while the Chicago-based Trizec gets to eliminate a suburban straggler in a Houston portfolio with more than six million sf in seven CBD high rises. “We were regularly getting calls from interested parties,” a Trizec spokesman tells GlobeSt.com about the sale of 3700 Bay Area Blvd. in Clear Lake, adjacent to the Johnson Space Center. “We started listening seriously as we started to move the portfolio strategy … to markets and submarkets where we have a presence with multiple properties. We received a firm offer that we took to Boeing and they acted on their right.”

Boeing occupies about 640,000 sf of leased and owned space in five buildings in a four-mile radius surrounding the space center. The just-bought building and parking garage sit in the middle of 21 acres. The site could accommodate another 250,000-sf office building, says William Richard, Boeing’s facilities manager in Houston. For now, he says the plan is to take over 30,000 sf of empty space in the acquired structure, which has housed the headquarters of Boeing’s NASA Systems since its relocation from California in 2001.

The 3700 Bay Area Blvd. building will remain multi-tenant at least through the expiration of the in-place leases. Richard says a decision has not been made about any renewals since there is room to expand and build, if necessary. Computer Sciences Corp., Baytek International, Teleport Communications Houston Inc. and EduNeering Inc. occupy a combined 60,000 sf.

Richard says Boeing has made some upgrades to the six-story building, including retooling a floor for training and conference center to accommodate up to 250 participants. Still to come will be a new roof and cooling tower along with physical plant upgrades. The structure houses 1,500 of Boeing’s 3,200 employees and contractors in Clear Lake.

Richard and a corporate spokesman say there is no plan to vacate any of the company’s leased space in the submarket. Boeing leases 120,000 sf at 2100 Space Park Dr. for its shuttle program; 50,000 sf at 13150 Space Center Blvd. for a product support center; and 35,000 sf at 502 Gemini Dr., also for the shuttle team. The company owns a 131,000-sf structure at 13100 Space Center Blvd. NASA Systems is a key business unit in Boeing’s Integrated Defense Systems, headquartered in St. Louis, and a leading global supplier of reusable and human space systems and services, including the space shuttle and international space station.

Boeing’s corporate spokesman says the purchase price in the long run works out to be less than the lease cost. The structure was built in 1986 by IBM Corp.; Trizec bought it in 1998.

“The purchase is a good investment, reflects our strong commitment to this community, and will benefit our NASA and United Space Alliance customers,” Mike Mott, vice president and general manager for Boeing NASA Systems, says in a press release issued immediately after the final bell of the New York Stock Exchange. The official word is Boeing hopes to reduce costs with the acquisition and pass some savings onto its customers as part of existing contracts.

“While Houston continues to be a core market for us, we saw this as an opportunity to capitalize on the strong conditions that currently exist in the Clear Lake submarket,” says Tim Callahan, Trizec’s president and CEO. “With this sale, we will now be focused more on the downtown, where we have a substantial presence.” Trizec’s CBD block consists of three buildings in Allen Center and a quartet of high-rises in Cullen Center.

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