The sale coincides with its largest tenant vacating nearly half of the space in the 1.15 million-square-foot property. That will leave it about 70 percent vacant by year's end.It's pretty amazing that a major tower looking at 70% vacancy would be able to sell. Obviously the purchaser, Goddard Investment Group, has the captial to push through this slow period and wait for better days.
The office building, formerly known as Texaco Heritage Plaza, has shortened its name since Chevron absorbed Texaco and is pulling out of this and other downtown buildings.
Heritage Plaza is a very distintive building on the western side of Houston's downtown. It's primary architectural feature is it's unique top.
This is not a good time for the commercial real estate market in Houston...at least not if you're a property owner. The market is soft, and large discounts are being offered to encourage tenancy downtown. Heritage Plaza is in a good location, but if faces stiff compeititon:
While the building has good access on the western edge of downtown and unobstructed views of Sam Houston Park, competition is intense for tenants.
Downtown's office market is slowly improving after the 2001 collapse of Enron and other merchant energy traders, but some say it will take years for it to return to normal.
"It's probably not going to get significantly softer, but we're going to hang down here at the bottom in the foreseeable future," said Mark Russell, senior vice president and branch manager with Studley in Houston.
A recent report from Moody's Investor Service said Houston had one of the worst commercial real estate markets in the country.
Vacancies are relatively common downtown these days, and Texaco leaving Heritage Plaza obviously contributes to that soft market. This Wall St. Journal article notes that although the area has seen job-growth, that has yet to translate to a hotter commercial real estate market. Although the current market pales in comparison to the hard times during the oil bust of the late 80's, when office vacancy rates exceeded 30%.