Shell’s Downtown Operations To Shed Offices, Scurry Over To Larger West Houston Campuses

SHELL’S DOWNTOWN OPERATIONS TO SHED OFFICES, SCURRY OVER TO LARGER WEST HOUSTON CAMPUSES One Shell Plaza Office Tower, 910 Louisiana St., Downtown HoustonMore than half a decade after the local fretting about it started, Shell has announced that it will leave One Shell Plaza, writes Cara Smith this morning. Moreover, the company will drop nearly all of its other Downtown holdings as well, including the previously announced removal of recently-ish acquired BG Group from BG Group Place. Smith writes that the only announced exception to the pullout is Shell’s trading group at 1000 Main; the rest of the company’s downtown workers will move by early 2017 into either the Technology Center at Hwy. 6 south of Richmond Ave. or into the company’s Woodcreek campus along I-10 (south of the Addicks reservoir). [HBJ; previously on SwamplotPhoto of One Shell Plaza: Antonio Foster-Azcunaga

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  • Interesting. I wonder if Baker Botts will take over naming rights.

  • This is so the opposite of what giant companies in Shell’s peer group are doing. General Electric is moving from the suburbs to downtown Boston and McDonalds is leaving its suburban Illinois campus for a new building in downtown Chicago.

  • I hear much complaining from friends who work for Shell, Exxon, etc, when the learned they’ll soon be forced to drive to the burbs. Curious how the old timers, many nearing retirement, expect their companies to be able to recruit the next generation of talent, when they’re moving their companies to the sticks.

  • Has anyone seen Shell release a number of how many employees this will affect? Is this like 700 or 2,000?

  • Highway 6 will not handle that traffic well

  • @ Walker,
    It’s in the article link posted.
    “Shell Oil, the U.S. arm of the Netherlands-based Royal Dutch Shell PLC (NYSE: RDS-A, RDS-B), announced Sept. 20 it will vacate One Shell Plaza and move those employees to the company’s campuses in west Houston. Roughly 3,400 employees will move from the Central Business District to Shell’s Woodcreek campus and its Shell Technology Center, the spokesperson said. The employees will move in the first quarter 2017.”

  • Hasn’t this trend becoming behind the times in other major cities? Oh I forgot how the local mentality likes to go against the grain, be a maverick. Very bad news for a downtown which can never seem to catch a break.

  • @ Eddie
    You nailed it. Downtown Houston is still controlled by tired old farts, rednecks and hillbillies in suits who go against the grain, and refuse to retire or accept how bad they suck…they’re so stupid and ignorant. The revived convention district, notwithstanding, Miami, Atlanta and Dallas are leaving Houston in the CBD dust, especially in terms of the major companies leaving for the suburbs and no world class retail. Those cities have talented progressive savvy players going after it and making it all happen for their CBD’s, while Houston has these same good ‘ole boys from 1812 calling the shots.

  • I bet like 4 or 5 of higher ups live out there and want a 5 to 7 min commute. Like 80% of the company does not want a 50 to 70 min commute they should have taken a vote asking people if they wanted to move way north most would have said hell no.

  • While a lot of folks are making pronouncements about the counter-trend nature of Shell’s decision and the unfortunate consequences for Downtown, let’s note that Shell has had its campus in the Energy Corridor (still in Houston, by the way, not the outer suburbs) for decades and just built two new large buildings there in the last few years. If you’re retrenching, why not retreat to space you already own and maybe get a little sublease rent out of the space you don’t?

  • Any other big city mayor would have been working overtime behind the scenes to persuade them to stay in the center city.

  • I thought this was announced like 6 months ago . . . .

  • In Dallas nothing moves to downtown and all large corporate moves are to the Plano/Frisco border near the North Dallas Tollway.

    As for new recruits, when you pay the amount these companies pay, working in the suburbs is doable. Also, reverse commuting will balance out traffic. How many people have drive. In the rush hour commute heading into the Woodlands or Sugar Land? Just add Katy.

  • Come on people. This is due to the oil crash. Office space is much cheaper in the burbs and Shell has shed thousands of people. They are doing EVERYTHING they can to save money. They are consolidating into cheaper space since they don’t need near as much now. My company did it too and this was the reason. If oil was still $120 a barrel this wouldn’t be happening. Shell doesn’t care about attracting new talent now. All they care about is lowering costs. If they could move all these jobs to India tomorrow they would and they soon will be able to. I should know, that’s what I do for my company. This downturn will cause lasting permanent damage to Houston. Right now in our business you either become the person sending the jobs overseas or you go work in another business.

  • They are moving from more expensive real estate to less expensive real estate and are consolidating operations; not sure how this is materially different from what any of the other companies are doing. I also wouldn’t exactly consider I-10 and Hwy 6 to be “the sticks”.

  • It seems to play into the “oil is never coming back” mindset. The idea that the widespread adoption of electric cars is going to so depress demand for oil that we will never again see the level of oil prices we saw in the last boom. Employees will feel lucky to simply still have their jobs and will accept working in a dullsville suburban campus.

  • This makes sense for Shell. The past couple of decades have been a non-stop series of attempts to bring order to an expansive portfolio of leased and subleased space. Just as they think that they’ve got it where they want it, market conditions change or corporate passes down an unexpected order to outsource a bunch of back-office jobs or to absorb some new business unit, and all their priorities get turned on their head. Shell is a big diverse company, doesn’t really need to be quite as nimble as other firms, and really ought to house the bulk of its space requirements in buildings that it owns (or net leases).
    Regarding the CBD-to-suburb move…although the energy industry has some looming problems in terms of attracting new talent as older baby boomers retire, that is going to be an intractable industry-wide problem that no one company can solve for itself by being an attractive place for young people to work. This is the 21st century and job-hopping is pretty much normal; also, this is the energy business and getting laid off ever so often is also pretty normal. Without any expectations of loyalty, coming or going, and given that a company’s foremost concern should be the recruitment and retention of more experienced and most highly specialized (usually older) personnel, proximity to the suburbs and to “good” schools should seem to be a priority. But moreover, consolidating in the Energy Corridor allows them to recruit from companies around which other workers have already structured their lives. Those workers have already self-selected that submarket as being an acceptable place to work. This doesn’t seem to be a big threat to tech companies headquartered in Silicon Valley, so I don’t know why it’d be a problem to energy companies in west Houston.

  • I’d rather work on the west side than downtown. Free parking, faster commute, no brainer. I had to work downtown for a year and while the tunnels were fun, the rest of it was a big pain.

  • @ShadyHeightster
    Agreed. Any other big city mayor and their team would not let this happen, and instead would be bringing new business to the city to offset job losses…like Dallas that recently won the Toyota Corporation relocation, and Atlanta that recently won the Mercedes Benz relocation. The dumbass Houston “leaders” are staring at the oil price meter hoping it goes back up, as other cities laugh at it. I’ll say it again, Houston’s problem is its shitty worthless “leaders.”

  • More will follow, at least the ones that don’t go bankrupt. Shell is a unique situation as they just completed their new buildings out here last year though.
    The energy corridor is awash in empty office space and zombie floors now and for the foreseeable future. It makes much more sense to be located in the energy corridor for these type of companies anyways. It’s far more centrally located to Houston’s engineering/creative class population than downtown will ever be.
    And yeah, the reverse commute is the way to go but I10 is still brutal in the evenings no matter which direction you head.

  • @HonestTruth: Shell isn’t leaving Houston. Why would the Mayor care if they are located downtown or the energy corridor? What is so special about downtown?

  • @ ShadyHeighster and Honest Truth
    I’ll respectfully disagree with your calls that city government should get involved in wooing them to stay downtown. The tax revenue isn’t impacted since the west campus tax revenue still flows to the city. And, the only alternative is for the City to provide tax abatements, which is the equivalent to corporate welfare.
    Simply put, Shell’s move is a logical one: they need to cut costs and they have ample capacity out in their Energy Corridor campus. Maximize that asset and ditch the overhead (and “prestige”) of being downtown.
    From a commuting perspective, I’m hoping that the majority of the 3,400 workers already live on the west side so that their aggregate commute is shortened. Net effect of reducing congestion.

  • To those citing Dallas, I have to agree with kjb: Downtown Dallas has lost most of its prestige and appeal for major corporations, except for a few law and accounting / finance firms – and even for them the Uptown area across Klyde Warren Park is more appealing. There’s no question that the heart of the region’s growth engine is the West Plano / Frisco border, oddly enough with only two limited-access highways, a couple new walkable town center projects, and nary a light rail in sight, but with plenty of corporate headquarters. Honestly, even with losing Shell Downtown Houston is far more relevant in the white collar professional world than Downtown Dallas.
    I do have to agree, though, that Houston should be examining Plano’s and Frisco’s economic development efforts which are the most spectacularly successful in Texas. Yes, I know proximity to new suburban housing and reputable school districts has a great deal to do with it, but still…I have to think there’s some lessons to be learned.

  • @Honest,
    The Shell TC on highway 6 is still technically in Houston, so it’s not like they’re moving to another city.

    In contrast, Toyota’s U.S. headquarters moved to Plano, not Dallas. Similarly, Mercedes US HQ are moving to Sandy Springs, GA, a suburb north of Atlanta and nowhere near downtown Atlanta. At least Houston will still benefit from having Shell remain within the city limits despite being far from the CBD.

  • @ Honest Truth: The following data are from Cushman & Wakefield’s second quarter 2016 market research division.
    The average Class A (gross) office rents in Houston’s CBD were $44.19 PSF per year and $36.12 in suburban markets; but that doesn’t include parking expenses. CBD vacancy was 15.2% and the amount of physically occupied office space was 30.8 million square feet.
    By comparison, downtown Dallas had $33.18 PSF Class A rents, 24.0% vacancy, and only 20.2 million square feet of physically occupied space. Yes, I would agree that Dallas is more attractive to corporate headquarters that aren’t especially tethered to a concentration of highly specialized technically-skilled labor.
    By comparison, downtown Atlanta had $24.24 PSF Class A rents, 22.5% vacancy, and only 11.7 million square feet of physically occupied space. Yes, I would agree that Atlanta is more attractive to corporate headquarters that aren’t especially tethered to a concentration of highly specialized technically-skilled labor.
    That is all.

  • Let’s face it, the prestige of downtown will have to now come from living and playing downtown.

  • I’m completely ok with this. Diversifying business locations around Houston can help traffic considerably.

    Yes, there are some people that live close that will now have to drive out to Katy, but this is going to take > 1000 cars off of I-10 in the morning and that’s a win.

  • @Memebag
    No it’s not leaving Houston, but it’s leaving the CBD: Downtown…the issue and the article are about another major CBD/Downtown loss, to wherever. What effective competent mayor/city leader wouldn’t care? What’s so special about downtown New York, Chicago or San Francisco? What do those downtown’s have that Downtown Houston does not?

  • Have to agree with joel, but calling them “creative class” is certainly creative in and of itself.
    These folks want a big ass house with a big ass garage to tinker in, while still having space for their big ass truck and located fifteen minutes closer to DKR or Kyle Field. Dense urban living isn’t going to be appealing to these particular employees past 28 or so, +-5 years. Houston’s a weird place, in that regard

  • @toasty
    That’s about right, but without world class retail (which the “leaders” suck at), the live/fun aspect is greatly hindered, and Downtown Houston will NEVER be more than a glorified office park.

  • Occupancy costs in downtown Houston have skyrocketed the last 5 years. Property taxes in class A buildings can account for as much as $10/SF and OPEX all in as much as $20/SF. Shell has at least 1.35 million SF under lease (800k SF in One Shell, 350k SF in BG Group Place & 200k SF in 1000 Main)so likely $27 million year just in operating expenses and that does not include the actual rent which probably averages close to $30/SF/YR over the term of the lease so another $40 million per year! Those are huge numbers especially when you’re talking about a 10 year lease term which the big ones usually are! It’s no wonder they’re relocating to significantly cheaper space in era where everyone is learning to operated leaner and meaner. The problem for Shell is the leases still have significant term remaining so they still have to pay the rent and there are very few large tenants in the market who will take a significant chunk of that sublease space.

  • I’m actually looking forward to what companies may replace Shell in that building and in other vacant space that’s opening up downtown. Shell still stays in the City, but more office space opens up for other companies that actually value places that offer their employees with multiple modes to get to work. In fact, it’s quite possible that the exodus of large companies might result in downtown Houston becoming more like Chicago’s (depending on the type of companies that decide to move in.) Long term, could be a very good thing.

  • Can’t say that I’m too surprised by this move, but imo it would’ve been better for Houston and Shell if they had left downstream and corporate in One Shell Plaza and moved deepwater production staff from New Orleans to the west Houston campuses. Synergies between deepwater production and deepwater exploration/development are much stronger than synergies between upstream and downstream. Plus, the NOLA office has been historically more difficult to staff, especially during the good times.

  • @HonestTruth:
    But why should the mayor prefer the downtown area over the energy corridor? He’s not the downtown mayor, he’s the Houston mayor. All of Houston.
    “What do those downtown’s have that Downtown Houston does not?” High cost of living. Those cities have wonderful downtowns. They are also much more expensive than Houston. There is no free lunch. We live in Houston because it is cheap. We have a crap downtown. If we make our downtown fabulous Houston will no longer be cheap, so you might as well move to San Francisco if that’s what you want. Let Houston be Houston.

  • @TMR Ha, ha, I think you mean employees 48 or so, +-5 years.

    But yeah, traffic-wise this is a nightmare scenaio for employees from Kingwood, The Woodlands, Baytown, League City, Pearland.

  • My comment was because I’ve seen the mayoral offices in Chicago, Seattle, Los Angeles, and Philadelphia use various tax abatement and other techniques to try to keep or lure corporate offices into their central downtown cores. I’m no expert on what means they have used, but in most of these places, you can see tangible results. The thinking about having corporate presence downtown has to do with the multiplier effect that each office worker will contribute to several other service jobs in restaurants, nail salons, retail, etc.. It also aids in making mass transit more effective at reducing congestion by having a large node to bring commuters to. But city leadership here seems more likely to focus on helping box stores and grocery stores develop properties.
    I wonder when Chevron will pull up stakes?

  • @Memebag
    Alas, we agree. In regards to the other big city CBD’s/downtowns that were named vs. Downtown Houston, we finally agree. In essence you said: other big city CBD’s = wonderful and fabulous vs. Downtown Houston = cheap and crappy. I totally agree, but that’s the problem. Also, see ShadyHeightster’s most recent post above…they truly nailed it.

  • @ShadyHeightster: There seems to be an assumption among many people here that downtown needs special treatment, that other parts of the city should suffer so that downtown can thrive. Why are jobs downtown better than jobs in the energy corridor? I don’t get it.

  • First Exxon now Shell moving many miles away from dt…wonder if some big wigs know something we don’t.

  • The complete move to west Houston was likely at least a decade in the making. Most big companies want campuses and those do not sprout up overnight. I see no loss of prestige from working in a big corporate campus rather than downtown. It’s not like west downtown has great amenities other than the theatre district which is not an everyday thing anyway. I’m sure there was virtually no opposition from the employees on this one except the folks living in kingwood or the woodlands. The reality is most oil company workers hate commuting to downtown. This way they get their big house AND they get an easy(er) commute. Most shell employees are not making enough money to have a big house and a yard and good schools in the heights or west inner loop where they would live if they were living in town. Those that want to live in-town will reverse commute. Those who want a really good commute will move to spring branch of the EC.

    The city of Houston will increase the appraisal of shell’s west Houston campus and keep one and two she’ll plaza the same. This is a win for a city that can’t pay its bills and won’t reform pensions.

  • I worked in Westchase at one point and the WDD said their projections were the business and population growth of Houston was west of Gessner. Our office left downtown because it got too expensive, parking was a hassle. Commutes for some folks to downtown were just total misery every day. What ever happens I wish everyone well at their new Shell offices and these folks stay employed.

  • In fairness, its easy for a long-time observer to discern a connection between the downtown office market and the inner-loop apartment market. Remember when that string of firecrackers went off, involving Enron, Dynegy, NRG, and Arthur Andersen? That was mostly a downtown phenomenon and the effects were disproportionately felt in the Inner Loop multifamily submarkets.
    It’s also a given that large employer that’s closer to Houston’s periphery will cause some degree of “leakage” of these indirect economic impacts outside of the municipality; but that’s a figure that’s very difficult to pin down. Part of the issue is that the gentrification of a central city has the effect of pushing people to its peripheries or beyond. You’re not simply adding people. The rising tide doesn’t lift all boats. Another part of it, and perhaps a more important part, is that a city must provide more services to people living there than to people working there. That’s one of the reasons that the City no longer aggressively annexes suburbs — only their commercial strips. It may be that the City government actually prefers for people who are predisposed to live in highly-regulated suburbs to not be voting in City elections or demanding City services, while still traveling into the City for many of their shopping trips.

  • so much fear of change. downtowns suck no matter what part of the world you live in. its a dated concept that worked 100 years ago. rumor has it a blog once existed when the Heights was established as a suburb of the city of houston…..

  • I can understand the desire to keep jobs downtown as our freeway infrastructure was always designed for funneling traffic to downtown, but not through it, which has definitely backfired on us in recent times. Same for those toy trains we’ve just spent a fortune on for the past decade. More jobs located downtown the better chance of seeing population gains and redevelopment in the surrounding areas as well.
    However, none of this is reason enough to double down on generation old infrastructure, but there are logistical gains for the city in keeping jobs downtown. Same for redevelopment. Better to let it happen organically than force it to happen with distorting the class A office market with tax incentives.
    But really, Shell’s offices are nowhere near the ‘burbs of Katy. It’s in one of the largest office markets in the entire city that has been around for a long time now. If there’s no mass transportation available then it’s not really Shell’s fault, it’s Houston’s.

  • Thriving, dense downtown cores tend to attract your creative types, as they prefer complexity, novelty and serendipity in their daily lives. However, you’re talking about large, mature corporations who want consistency, competency and conscientiousness from their employee base. These sorts of folks will prefer the space and regularity of suburban life.
    O&G cultural norms aren’t necessarily conducive to the urban life past one’s 20s. I wasn’t joking about the big house, truck and college football. It’s no surprise, then, that Shell thinks it’s a better idea to have your newly graduated Midtowners commute out to the Energy Corridor (they have more disposable income) while making it easier on your 30-60 year olds who are largely living out there anyway.

  • @TMR

    Serendipity is not downtown… Not at all. What are you smoking? Can I have some?
    Anyways, so much hate for the ‘burbs in this crowd. I’ve lived in multiple parts of Houston, and fact of the matter is, for those of us who are still middle class, the ‘burbs are awesome. You have the money to visit downtown and all its attractions, whilst still having a nice large house for the kids, good schools, garage space, parking space, better roads, etc., etc. Then, because you aren’t paying out the ass for rent/mortgage, and because you don’t have the daunting drive to get out of downtown, you also end up going to the lakehouse, mudding, hunting, all kinds of sports, etc.
    You know what attracts creative types? A region with a good quality of life, which Houston has, even if it is noticeably different than what the old mainstay cities have. Perhaps learn to love Houston for what it is and stop trying to change it to, in my opinion, the lesser cities of the east coast and midwest, all of which are losing their citizens to us.
    And please, we Millennials are not some monolithic force that all want the same thing. Some of us want Midtown and The Heights, others want a nice piece of land out in the ‘burbs. As a young professional myself, I look forward to returning to the not-at-all boring life that is suburban living. By the way, what a stupid f*cking concept that is the idea that suburban life is somehow more boring than urban life. All that tells me is that you’re a boring f*ck whose opinion means very little.

  • @YourLocalEnvironmentalist
    Yes, suburban life IS more boring that urban life, unless of course your idea of fun/excitement is a trip to a box store (not that there’s anything wrong with that). Yes you can visit the attractions in the loop but a 30-45 minute drive (assuming no traffic or freeway construction is going on) will make you think twice before doing it and it will end up being such a rare occurrence that you’ll soon forget that whatever you thought was interesting closer to town even exists. It happened to me.

  • @OldPostCommentor
    See my very last sentence. You. Are. Boring.

  • @YLE boring is in the eye of the beholder, which is something you’re clearly not picking up on. Spare the insults and try opening your eyes for a few seconds.
    And yes, you get more random, unique experiences (i.e. serendipity) where a lot of people are clustered and interacting on foot compared to where they don’t. Start with Jane Jacobs and expand from there.

  • @YourLocalEnvironmentalist
    You know what? You have convinced me. The suburbs are so f&^%ing interesting. Thanks for me turning me around. I am now no longer boring!