McDermott Signs Lease for Major Office Tower in Energy Corridor
McDermott leased the 18-story Energy Center Five building in the Energy Corridor on the west side of Houston.
HOUSTON – McDermott International Inc. has signed a 524,323-square-foot lease for the entire Energy Center Five, an 18-story office tower in Houston’s Energy Corridor.
The building will become McDermott’s new corporate headquarters, consolidating roughly 1,700 employees from five separate Houston-area locations into a single facility. Completed in 2016, the tower had remained unoccupied until this lease.
CBRE broker Steve Rocher represented the building owner, TCH Energy Corridor Venture, LLC.
Steve Hesse, Brandon Clarke, Ryan Roth and Paul Penland of CBRE represented McDermott in the transaction, which ranks among the largest office leases in Houston in recent years. McDermott signed a 16-year lease for the property at 915 North Eldridge Parkway, near Interstate 10.
The Energy Corridor — the stretch west of Houston along I‑10 — suffered in recent years as energy companies cut staff and returned space to the market. That downturn followed a steep drop in West Texas Intermediate crude, from about $107 per barrel in mid‑2014 to nearly $27 per barrel in early 2016. Around that time, JLL reported the Energy Corridor had more sublease space than any other submarket in the United States. Although a joint venture of Trammell Crow Co. and Principal Real Estate Investors completed the building in 2016, the energy sector’s downturn left new office space largely vacant. The market swung quickly from tight occupancy a few years earlier to a surplus of empty buildings.
Recently, however, the Energy Corridor has shown clear signs of recovery.
“I think the Corridor is already recovering,” said David Hightower, executive vice president of development at Midway, in a recent interview. He pointed to several sizable lease announcements in fall 2018 and noted Occidental’s purchase of the former ConocoPhillips campus at the northeast corner of I‑10 and Eldridge as a major vote of confidence in the submarket’s future.
McDermott plans to begin operations in the tower in the third quarter of 2019 and will move employees into the building gradually. The company employs about 44,000 people across 54 countries and provides engineering, technology and construction services to the energy industry. McDermott also operates a fleet of vessels for marine construction projects globally.
“The new, state-of-the-art building will enhance collaboration and productivity among our employees and drive efficiency and cost savings for the company,” said David Dickson, McDermott’s president and chief executive officer. “We are also staying in Houston’s Energy Corridor, which is strategic for McDermott given the close proximity to many of our customers and partners.”
Many major energy companies maintain offices in the Energy Corridor. CBRE reported the submarket’s third-quarter office availability rate, including sublease space, at 27.3 percent. While that level reflects a still-soft market, the McDermott lease and other recent transactions are expected to materially improve availability figures in early 2019.
