Published Jan 31, 2023 by A.J. Mistretta
As real estate in the nation’s downtown districts evolves, owners are eyeing new uses for aging office buildings. From San Francisco to Boston, numerous conversions of older office stock to multifamily units or hotels have been recently completed or are now underway. Here in Houston where tenants are flocking to the newest and most amenity-rich Class A space, a number of decades-old towers are getting a new life.
A new report from the real estate giant CBRE shows that pandemic-induced remote work has contributed to lower demand for office space in the U.S. The national office vacancy rate hit a nearly 30-year high of 17.1% in the latter half of last year. That coupled with newer office properties coming online, has prompted a surge in conversion activity. Forty-two office conversions were completed nationwide as of Q4 2022, with another 21 expected to have been completed by the end of last year. CBRE estimates nearly 100 such conversions are underway or planned this year.
And a number of them are in Houston. These projects have the capacity to help change the ecosystem of downtown Houston, bringing new residents and hotel guests as well as the foot traffic that will trigger additional retail and other uses. Today, there are nearly 11,000 residents in downtown proper, according to Central Houston. That’s an increase of several thousand from just a few years ago and attributable in part to a program designed to incentivize more residential development in the core.
A news article published earlier this month reported that a New York investment group plans to convert a long-vacant 45-story building on the south side of downtown into apartments. The iconic 1960s building at 800 Bell Street formerly served as the headquarters of ExxonMobil. The project would be one of the largest conversions of its kind in Houston. No timeline for the project was revealed.
Closer to the center of downtown, the classic 1927 Niels Esperson and Mellie Esperson buildings are being converted from traditional office to a mix of apartments, offices and co-workspaces. Houston-based Cameron Management is overseeing the $50 million renovation that will include up to 100 apartment units in time. The first units are expected to be completed in coming months.
A few blocks away at 1801 Smith Street, that 20-story, 1960s-era building will soon be transformed into more than 370 residential units, according to the team at ARC3 Architecture. The luxury project will feature an interior pool, fitness center, yoga and multipurpose meeting spaces as well as a basement speakeasy and gathering space for residents. That conversion is slated for completion later this year.
Multifamily isn’t the only conversion option for aging office buildings. CBRE has tracked 45 office-to-hotel conversions nationwide since 2016—almost all in downtown areas. In Houston, the century-old Great Southwest Building was converted to the Cambria Hotel Houston in late 2019. The 226-room hotel offers art deco style with modern amenities. A few years earlier, Pearl Hospitality completed the $80 million renovation of the 1910 Samuel Carter Building to a 328-room JW Marriott on Main Street.
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