Developing partners Hines and Prime Asset Management are looking to sell 717 Texas, a nearly 20-year-old Downtown Houston Class-A office tower.

The 698K SF building, which was designed by HOK in 2003, was renovated in 2019 for $12M with a new lobby and other features. The developers are now shopping for a buyer for the building, with bids expected around $225M, according to Real Estate Alert.

The property had been fully leased for most of its existence, but Freeport-McMoRan Oil & Gas, which had leased half the tower, moved in 2017, and the building currently only stands 65.7% leased. JLL Capital Markets secured a $163.5M loan to refinance the building in 2017, which went to leasing efforts,  the Houston Business Journal reported at the time.

Developers are pitching the building on that renovation and its leasing potential from the vacant space, with Real Estate Alert reporting that investors have been told that recent Downtown leases make the property appealing.

The sale would be one of the largest transactions since the beginning of the pandemic, and one of a small handful of offices to trade for more than $200M. California State Teachers bought a $418M, 90% stake in the Bank of America Tower at the end of 2019, but the Downtown office market has suffered severely in coronavirus lockdowns.

717 Texas, which is across the street from the new Hines office development Texas Tower, is being pitched as a relatively new building in a downtown heavily constructed in the 1980s but with lower rents than competitors, at about $25 to $27 per SF, versus Texas Tower's triple-net rents of $45 per SF.

Downtown Class-A offices are 75% leased, according to JLL research cited by Real Estate Alert, but several of Houston's largest recent office leases have closed in Downtown, including a 151K SF lease at Texas Tower. But the office market overall saw negative net absorption as occupiers are looking for new, Class-A space, according to a second-quarter Colliers report. Class-A rents are up to an average of $36.29 per SF, and leasing activity is steadily increasing.

“The office market, more than any other sector, is still dealing with occupiers grappling with long-term adjustments brought on by work-from-home shifts in the workforce and short-term concerns over the direction of the economy,” Colliers Houston President Patrick Duffy said in the report.

“The result is that larger organizations have been quiet, and most of the leasing activity has been with smaller, private companies. The larger organizations, which can best move the occupancy needle, are on the sidelines for now.”