HOUSTON – Brookfield Asset Management has agreed to acquire the Houston Center office complex in downtown Houston for $875 million. The 4.2 million square foot portfolio transaction ranks among the largest in the city’s history and significantly expands Brookfield’s footprint in the downtown core.
J.P. Morgan Asset Management, represented by HFF, chose to sell Houston Center as the local office market shifts. Newer downtown developments emphasize energy-efficient layouts, contemporary design and amenities targeted to millennial workers, which is reshaping what qualifies as Class A office space. Older towers that don’t keep pace are increasingly repositioning to Class B.
Constructed between 1974 and 1982, Houston Center is well positioned for substantial reinvestment and “value-add” upgrades to align with today’s tenant expectations. Brookfield has signaled its willingness to spend heavily to maintain its downtown properties at Class A standards—already committing $50 million to refresh the Allen Center complex and planning renovations for its 350-room downtown hotel.
Following the acquisition, Brookfield will become one of the dominant office landlords in downtown Houston. The Toronto-based company already owns roughly 8.1 million square feet in the area, including the three-building Allen Center complex, Heritage Plaza, Total Plaza and 1600 Smith, along with the DoubleTree Hotel.
Houston Center comprises four major office towers and an adjacent retail component:
- LyondellBasell Tower – a 46-story tower at 1221 McKinney with 1,061,351 square feet;
- 2 Houston Center – a 40-story tower at 909 Fannin with 1,024,651 square feet;
- Fulbright Tower – a 51-story tower at 1301 McKinney with 1,247,061 square feet;
- 4 Houston Center – located at 1221 and 1331 Lamar with 674,264 square feet;
- and the Shops at Houston Center – a roughly 200,000-square-foot retail concourse and food court at 1201 McKinney (formerly known as the Park Shops).
At the time of the sale, the office buildings were approximately 75 percent leased.
The deal stands alongside other major Houston transactions, such as Cousins Properties’ 2013 purchase of the 10-building, 4.4 million square foot Greenway Plaza for $950 million. It also arrives during a challenging period for Houston’s office market, driven largely by contraction in the energy sector. In the second quarter, the market experienced about 1 million square feet of negative absorption and had more than 11 million square feet listed for sublease midyear. Downtown office availability climbed to roughly 20 percent in that quarter, according to CBRE.
Houston Center’s development dates back to the 1960s, when Texas Eastern owned approximately 40 acres in the eastern portion of downtown. Over subsequent decades, the area evolved with major additions such as the George R. Brown Convention Center, what is now Minute Maid Park, the Toyota Center, Discovery Green and a number of high-rise residential projects including One Park Place and 500 Crawford.
The complex was not damaged during Hurricane Harvey, and the sale—expected to close by the end of the year—signals a resurgence in Houston investment activity after several slower years.