Exxon Mobil Looking To Sell Or Lease Vast Amount Of Unused Space At Massive Spring Campus
Exxon Mobil Corp. is using less than half of the space available at its 385-acre Houston-area campus and is considering dramatically trimming its footprint as part of a plan to cut billions of dollars in structural costs.
Despite reporting record Q3 profits, the oil giant could lease or sell a significant portion of unused office space at its Spring campus, according to an internal Exxon Mobil memo first reported on Friday by The Wall Street Journal.
Per the memo, Exxon uses less than 50% of the available space at its campus, which was built to accommodate up to 10,000 workers.
The campus, near Interstate 45 and the Hardy Toll Road, about 25 miles north of downtown Houston, opened in 2014 and features child development centers, a fitness facility, and dining and retail, as well as more than a dozen office buildings.
But the campus never reached full capacity. According to the memo reported on by the WSJ, employees are currently situated all over the sprawling campus, but could be grouped into working neighborhoods, which offer more options than being assigned to specific desks or offices across the far-flung locale.
That would also free up space — and lots of it — for sale or lease.
The oil giant is in the process of moving its headquarters from Dallas suburb Irving to the Spring campus, a move it expects to complete next year. It has said the move would help it save $6B by 2023, enough to fund 40% of its shareholder dividend.
But the company doesn’t need as much space for employees, because it doesn’t have as many.
Exxon Mobil cut 15% of its total workforce after the oil-market crash in 2020, eliminating 1,900 jobs, primarily in the Houston area, the WSJ reported. Meanwhile, the company’s global workforce has fallen by more than 10,000 since the pandemic began.
Exxon spokesman Casey Norton confirmed to the WSJ that the company is weighing its options for the unused space. According to its internal memo, the company has hired a broker to gauge outside interest in the space.
One option under consideration calls for closing five of the 14 office buildings on the campus.
If that space goes up for lease, it could sit vacant for a while, considering the 9M SF of office space now available for sublease in the Houston metro. Houston office leasing is at about 75% of pre-pandemic levels and availability has yet to see the bottom, Cresa said in its Q3 office report.
Much can be attributed to a trend called “rightsizing” — tenants reducing office space by as much as half when leases come up for renewal and sometimes relocating to tonier buildings — discussed in detail at a Bisnow event last month.
Houston has a higher return-to-office rate than other cities, yet it currently holds the national title for highest office vacancy rate of any major market at 19%, The Real Deal reported using CoStar figures. And the Energy Corridor in west Houston, which Exxon’s campus is not a part of, has a higher proportion of its office space available than the rest of the city, the WSJ reported.
Some of the overall vacancy can be explained by hybrid and remote work arrangements, but Exxon is not known to regularly offer those options. It has been on a cost-cutting tear, however, halting salary increases, reducing benefits and completing thousands of layoffs, Bloomberg reported.
Oil prices briefly went negative in 2020, sinking to an average $41.96 a barrel. But crude prices recovered and then some. 2022’s barrel price so far averages $104.85 and Exxon Mobil reported last week a nearly $20B profit for Q3, its highest-profit period ever.
U.S. oil companies have focused on pumping as much oil and gas as they can to send most of their incoming money to shareholders and pay off debt, reducing their need for labor, the WSJ reported. This is also reflected by Chevron Corp. selling its 92-acre Chevron Park campus in San Ramon, California, in September.
Chevron said 200 employees elected to move to Houston this summer, where it has two downtown offices and has proposed building a 1.5M SF multistory office building, according to Realty News Report.
