3L Real Estate Plans Office-to-Residential for Houston Tower

A once-struggling downtown Houston office tower is headed for a second act as apartments.

Chicago-based 3L Real Estate filed plans to convert One City Centre, at 1021 Main Street, into a 553-unit residential project, the Houston Business Journal reported. The $26.5 million redevelopment, designed by Gensler’s Houston office, is slated to start in 2026 and finish by the end of 2027.

The 780,530-square-foot tower will feature 93 “hotel apartments” — corporate suites for visiting employees — on the second through sixth floors, and 460 traditional apartments on floors seven through 29.

3L CEO Joseph Slezak said the concept is still in early stages, but the building’s rectangular floor plates offer flexibility for layouts.

The firm specializes in turning underperforming office buildings into housing, a strategy it has deployed in more than a dozen projects nationwide.

Delaware Street Capital bought One City Centre last year from special servicer Midland, which seized the 65-year-old building from Accesso Partners after years of financial strain and more than 500,000 square feet of vacancy. The property’s largest tenant, Waste Management, exited in 2020, leaving it about 90 percent empty. By 2023, annual net operating income barely topped $2,000, and its valuation plunged from $162 million in 2015 to just under $26 million a year ago.

Slezak said 3L will pursue historic preservation credits and other tax incentives to make the numbers work. Houston’s office-to-residential conversions often hinge on such subsidies, given the high costs of retrofitting older buildings for plumbing, electrical and residential amenities. Downtown Houston+, the nonprofit charged with promoting downtown, has floated an incentive program modeled after the city’s prior Downtown Living Initiative, which fueled a wave of apartment development.

One City Centre has been on local planners’ radar as a prime conversion candidate because of its large floor plates, ample parking, direct access to Houston’s tunnel system and a central elevator core that leaves options for design. JLL’s marketing materials projected it could hold up to 550 units averaging 900 square feet.

If 3L delivers, the project will add significant housing to a downtown with one of the highest office vacancy rates in the nation — 25.2 percent as of late 2023 — and join a growing national pipeline of obsolete office towers making the jump to multifamily.— Eric Weilbacher