Shell Oil Company - Commercial Real Estate Case Study - Cushman & Wakefield

World's Largest Office Lease In 2011


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The Challenge

Shell has had a significant presence in downtown Houston since 1970. When Shell moved its U.S. headquarters from New York to Houston, it moved into the Hines-developed One Shell Plaza. Shortly thereafter, Shell expanded into Hines’ newly developed Two Shell Plaza upon the building’s completion. Forty-one years later, Cushman & Wakefield was retained under highly confidential circumstances to analyze Shell’s owned and leased Americas portfolio.

As a result, Cushman & Wakefield represented Shell in the renegotiation of its leases totaling 1.2 million square feet in One and Two Shell Plaza, representing the largest office space lease in the world in 2011, as well as also completing a significant lease for Shell Trading (304,000 square feet) and for Shell’s office leases in New Orleans, Louisiana (656,000 square feet), and Calgary, Canada (659,000 square feet).


The Solution

Cushman & Wakefield’s team led by Tim Relyea and Joe Peddie began analyzing Shell’s Houston office occupancy seven years out from the lease expiration. While existing availabilities for the significant size requirement were unavailable in the market, the team concentrated on a renegotiation of Shell’s existing lease versus a build-to-suit option both within and outside of the CBD.

Multiple build-to-suit scenarios were studied in detail, where Cushman & Wakefield worked with a team of architects, general contractors, MEP engineers, and so on. These scenarios were compared to an existing lease renegotiation on a qualitative and economic basis utilizing in-depth market and financial analysis of each option. Many of the sophisticated scenarios incorporated the collaboration of the Tenant Representative team with Cushman & Wakefield’s Consulting and Research and Analysis groups to ensure the analyses included the advanced specialties and tasks relevant to Shell’s complex assignment.

After all of the scenarios were thoroughly analyzed, Shell decided to remain in its two existing downtown buildings – One and Two Shell Plaza – by signing a 15-year lease. In the end, structuring new leases in Shell’s existing buildings made the most economical and transactional sense.


The Result

As a part of the negotiations, and in order to drive value for Shell, the Cushman & Wakefield team negotiated a comprehensive list of improvements with the current landlord to complete extensive base-building modifications totaling approximately $40 million in both buildings. This ensured that they will remain Class A buildings for years to come.

Shell’s new 15-year lease represents a significant commitment to stay in downtown Houston. Cushman & Wakefield ensured that Shell maintained its legacy and support of downtown as a vibrant commercial hub.