houston office market report 1q 2010

8/9/2019 Houston Office Market Report 1Q 2010

1/9

COLLIERS INTERNATIONAL | HOUSTON OFFICE MARKET | 1ST QUARTER 2010

HOUSTON | 1ST QUARTER | 2010

Our Knowledge is your Pro


2/9

COLLIERS INTERNATIONAL | HOUSTON OFFICE MARKET | 3RD QUARTER UPDATE 2009

Houston Office Market Posts Signs of Stabilizing

Houstons office market closed the first quarter 2010 with encouraging signs it is nearing the end oMARKET INDICATORS


1Q-09 1Q-10

AR-TO-DATE NET ABSORPTION

(672,346) SF 408,209 SF

CITYWIDE AVERAGE VACANCY

ALL CLASSES

the downward shift that began in late 2008, with current trends suggesting the suburban market

may recover before the CBD. Positive net absorption, not expected until the end of this year, came

early with 408,209 SF of first quarter gains in occupied space citywide. Boosting the overall net

gains was Suburban Class A positive net absorption of 335,037 SF. This contrasted sharply with

CBD Class A the only property class citywide to post losses in occupied space with negative net

absorption of 200,377 SF. Likewise, the rate of decrease for major indicators, including occupancy

and rental rates, slowed significantly for Suburban property classes on a year-over-year basis in the

14.4% 16.2%

CITYWIDE AVERAGE

GROSS QUOTED RENTAL RATE

ALL CLASSES

$23.68/SF $23.46/SF

CLASS A

irst quarter.

Houstons CBD office market has shown strong resiliency throughout the current economic

slowdown, with CBD Class A properties maintaining occupancy above the 90% mark consistently

over the past 12 consecutive quarters. Year-over-year occupancy for all CBD property classes

remained stable with Class A dipping slightly to 91.2% from 91.5% in the first quarter. Weak

tenant demand for the available space on the market, however, continued to weigh on landlords

D $38.87/SF $35.57/SF

BURBAN $28.10/SF $27.88/SF

CLASS A VACANCY

D 8.5% 8.8%

BURBAN 14.5% 19.1%

o s gn cant y re uce quote renta rates y . an . or ass an ass

buildings , respectively, compared to only a 0.8% and 1.0% decrease for Suburban Class A and B

buildings. Even though CBD occupancy was significantly stronger than the combined Suburban

market, the CBD closed the first quarter conceding significant rental rate cuts in order to hold

ground, while the Suburban market avoided sharp rate drops due, in part, to a significantly slowerrate of decrease in occupancy.

OB GROWTH & UNEMPLOYMENT

vera , ous on s o ce mar e an economy rema n among e s ronges n e . . n arc

2010, Forbes ranked Houston fourth among U.S. major metros where the recession is easing, due

primarily to a solid diversified base of growth industries. Houston is benefiting from high oil prices

with demand driven by global markets in recovery, and the local MSA is projected to end the year

with positive job growth, albeit below previous expansion periods. With commercial real estate a

lagging indicator, however, the office market recovery is not expected before 2011.

FEB. 09 FEB. 10

USTON -3.1% job growth

80,000 jobs lost

9%

11%

13%

15%

17%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

,

EMPLOYMENT 6.7% 8.5%

XAS-2.3% job growth

241,300 jobs lost


5%

7%

-1,000,000

-500,000

Absorption New Supply Vacancy

Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10

- . o growt

3.2M jobs lost



3/9


Occupancy & Availability

Houstons office occupancy continued

Absorption & Demand

Houston recorded positive net absorptio2010 TOP OFFICE LEASES

average for all property classes at 83.8% in

the first quarter, compared to 85.6% at this

time last year. It is important to note,

however, that the rate of decrease slowedcitywide, particularly for Suburban office

property classes. Although Suburban

, ,

compared to 672,346 SF negative net

absorption at this time last year. Suburb

Class A product contributed the most to

the citywide gains with 335,037 SF ofpositive net absorption. In contrast, CB

Class A properties the only property cl

Kellogg Brown & Root*

KBR Tower, CBD

Feb-10 883,487 SF

Kellogg Brown & Root**Cullen Center, CBD

Feb-10 291,536 SF

,

large gap in the rate of decrease between

the two sectors narrowed considerably in

the first quarter.

In the CBD, Class A office occupancy

dipped slightly to 91.2% from 91.5% 12

months earlier. The downtown markets

reported negative net absorption of

200,377 SF.

Although net absorption gains from

tenants with less than 25,000 SF

dominated in the first quarter, larger mo

ins included: Tax Masters 107,890 SF at

CyrusOne

5150 Westway Park Blvd, Northwest

Mar-10 92,420 SF

Wyle Laboratories**

Aerotech Business Ctr, NASA-Clear Lake

Mar-10 51,803 SF

ability to maintain occupancy above 90%

by retaining top tenants with significant

blocks of space most recently Kellogg

Brown & Root (see lease section) speaks

to the resiliency of top-tier office landlords

during the ongoing economic slowdown.

Suburban Class A occupancy fell to 80.9%

Dairy Ashford Plaza; Quorum Business

Solutions expansion of 27,084 SF (for a

total of 63,084 SF occupied) at Pinnacle

Westchase; and Willis of Texas 45,766

at Cemex Center.

Energy FirmEnclave Parkway, Energy Corridor

Mar-10 29,976 SF

WEUS Holdings**

Marathon Oil Tower, Galleria/West Loop

Feb-10 26,407 SF

at the end of the first quarter from 85.5%

one year ago. In contrast, Suburban Class B

occupancy increased slightly to 83.6% from

83.5% during the same period.

Citywide, a total of 59 office properties had

over 100,000 SF available for lease in

While rental rates for all property classes

continued to decrease from one year ago

the rate of decrease for Suburban

properties was significantly slower,compared to CBD properties, in the firs

quarter. Citywide, office landlords

Erskine Energy**

Energy Tower I, Energy Corridor

Mar-10 23,608 SF

Purvin & Gertz**JP Morgan Chase Tower, CBD

Mar-10 19,412 SF

of the first quarter. Sublease space on the

market held steady from the previous

quarter with a total of 4.7 million SF,

including 2.3 million SF of vacant space

and an additional 2.4 million SF of

subleases available for occupancy over theCBD VS. SUBURBANCLASS A OFFICE VACANCY & RENTS

cont nue to ncrease ease concess ons,

including free rent and generous tenant

improvement packages, by way of attract

and retaining credit-strong tenants.

On a year-over-year basis, CBD Class A

average quoted rental rates fell 8.5% to

$35.57/SF (from $38.87), while suburba

*Renewal of 695,800 SF and Expansion of

187,687 SF for a total of 883,487 SF

**Renewal

.

being marketed is located downtown in theRRI Energy Plaza building (1000 Main,

CBD) where 432,862 SF is available for

occupancy in October 2010 (through

October 2018). Outside the CBD, major

sublease assignments include the 119,718

SF throu h December 2013 available at$27

$30

$32

$35

$37

$40

Class A rental rates decreased 0.8% to

$27.88/SF (from $28.10).

CBD Class B average quoted rental rates

plunged 11.5% to $23.76 per SF (from

$26.85), while suburban Class B rates

slipped 1.0% to $15.82 per SF (from

16.6 on a full-service basis. Althou h

9700 Bissonnet (Southwest); 48,151-SF at 9

Greenway Plaza; and 36,309 SF (through

February 2012) at The Braeswood Tower II

(Galleria/West Loop).

$221Q-09 2Q-09 3Q-09 4Q-09 1Q-10

CBD VACANCYSUBURB AN VACANCYCBD RENTS

. .

continued downward pressure on rental

rates is likely, current trends suggest

Suburban office rental rates may hit

bottom well before CBD properties.


4/9


Top Performing Office Buildings

ells Fargo Pl

1000 Louisian

CBD

RBA: 1,72

Built: 1983

Leased: 84.9

Available: 259

Bank of America Ctr.

700 Louisiana

CBD

RBA: 1,268,480 SF

Built: 1983

Leased: 81.3%

Available: 236,641 SF

Five Houston Center

1401 McKinney Street

CBD

RBA: 580,875 SF

Built: 2002

Leased: 85.4%


Rents: $40.

Owner:

Metropolitan L

Insurance Com

Rents: $37.96/SF

Owner:

The Novarti Group

Rents: $41.25/SF

Owner:

Wells REIT II

Five Post Oak

4400 Post Oak

Galleria/West

Wells Fargo Tower

1300 Post Oak Blvd.

Galleria/West Loop

Marathon Oil Tower

5555 San Felipe

Galleria/West Loop

RBA: 567

Built: 198

Leased: 92.7

Available: 41,4

Rents: $34

Owner:

RBA: 491,254 SF

Built: 1983

Leased: 87.4%


Rents: $34.39/SF

Owner:

RBA: 1,178,750 SF

Built: 1983

Leased: 87.0%

Available: 153,301/SF

Rents: $28.00/SF

Owner:

Shorenstein CoTIAA-CREFHanover Real Estate

Partners

The Plaza at Enclave

1254 Enclave Parkway

Energy Corridor

RBA: 343, 541 SF

Built: 2008

One Eldridge Place

777 N. Eldridge Parkway

Energy Corridor

RBA: 239,417 SF

Built: 1985/2001

One BriarLak

2000 W. Sam

Pkwy

Westchase

RBA: 502

Leased: 82.5%


Rents: $32.00/SF

Owner:

Core Real Estate

Leased: 82.9%


Rents: $31.22/SF

Owner:

Behringer Harvard

Leased: 95.6

Available: 22,

Rents: $40

Owner:

Behringer Har

ices at en

1600 HighwaySugar Land/

E. Fort Bend

RBA: 85,2

Built: 199

Leased: 86.0

11 Greenway

Greenway

RBA: 745,956 SF

Built: 1978

Leased: 81.8%


aterway aza

10003 WoodlochForest

Woodlands

RBA: 223,483 SF

Built: 2000

Leased: 96.2%

Available: 11,

Rents: $25

Owner:

KBS Real Esta

Investment Tr

Rents: $29.15/SF

Owner:

James C. McSherry

Available: 8,450 SF

Rents: $34.00/SF

Owner:

Triple Net Properties


5/9


Leasing Activity

Houstons office leasing activity reached 3.

million SF in the first uarter com ared t

Sales Activity

Investment sales activity remained weak at

-

3.1 million SF in the first quarter last year.

Three months into the year, only one tena

(Kellogg Brown & Root) committed to

leasing over 100,000-SF, although severalcredit-strong tenants are in the market for

significant blocks of space citywide.

,

recession period, with fewer quality

buildings on the market and the lack of

available credit still the primary factors

keeping transaction activity low.Transactions year-to-date through the first

quarter totaled 15 with a total dollar

olume of 257M avera in 76 er SFoper Cameron

Signi icant non-renewa o ice eases signe

through the first quarter included: Kellogg

Brown & Roots 187,687-SF lease at KBR

Tower (CBD); Cyrus Ones 92,420-SF leas

at 5150 Westway Park Boulevard

(Northwest); and Newfields 20,345-SF lea

at 363 North Belt (Greenspoint-North Bel

with a 9.0% capitalization rate.

Among the most significant transactions

closed in the first quarter were:

Brookfield Asset Management acquired a

19-property, 2.9M SF portfolio from

JPMorgan Chase for $200M ($63/SF), with

rthwest Submarket

RBA: 210,000 SF

Built: 2001

Buyer: Potamkin Auto Group

Seller: Maxxam Property Co.

le Date: February 2010

Key office lease renewals signed in 2010included Kellogg Brown & Roots renewal

for 695,800-SF and 291,536-SF at KBR

Tower and 500 Jefferson Building,

respectively (CBD); Wyle Laboratories

51,803-SF lease at Aerotech Business Cent

(NASA-Clear Lake); WEUS Holdings

office buildings across several states,including three in Houston, the largest

being 810,000-SF 712 Main.

James McSherry purchased the 745,956-SF

11 Greenway Plaza for an undisclosed

amount from Durango Portfolio. Built in

26,407-SF lease at Marathon Oil Tower

(Galleria-West Loop); Lorrance &

Thompsons 21,263-SF lease at Brookhollo

Central II (Northwest); and Bridgeway

Softwares 21,000 SF lease at 6575 WestLoop South (Bellaire).

For other si nificant office lease transactio

, .

Potamkin Auto Group purchased the

210,000-SF Cooper Cameron Building

from Maxxam Property Co. for

approximately $29.7M or $141/SF.

1110 Main Partners LP acquired the

187,000-SF Americana Building for an

mberway II

95 N. Barkers Landing Road

rgy Corridor/Katy Freeway

RBA: 130,822 SF

Built: 1983

Buyer: Beacon Investment Properties

HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN, & CITYWIDE)

signed year-to-date, please see the list noted

on page 3.

undisclosed amount from the American

National Insurance Company.

Seller: PS Business Parks

e Date: January 2010

Absorption Rent

Class

Total

Inventory

Sq. Ft.

Direct

Vacant

Sq. Ft.

Direct

Vacancy

Rate

Sublease

Vacant

Sq. Ft.

Sublease

Vacancy

Rate

Total

Vacant

Sq. Ft.

Q1 Vacancy

Rate

Q4 Vacancy

Rate

Q1 Net

Absorption

Sq. Ft.

YTD Net

Absorption

Sq. Ft.

Wgtd. A

Quote

Rate

CENTRAL BUSINESS DISTRICT

A 27,823,552 2,040,855 7.3% 417,377 1.5% 2,458,232 8.8% 8.1% (200,377) (200,377) $3B 8,483,563 1,676,929 19.8% 90,276 1.1% 1,767,205 20.8% 22.8% 169,251 169,251 $2

C 1,521,580 802,678 52.8% 0 0.0% 802,678 52.8% 53.4% 9,869 9,869 $1

Total 37,828,695 4,520,462 11.9% 507,653 1.3% 5,028,115 13.3% 13.2% (21,257) (21,257) $2

SUBURBAN TOTAL

A 68,534,386 12,177,457 17.8% 907,757 1.3% 13,085,214 19.1% 19.6% 335,037 335,037 $2

B 69,401,579 10,532,568 15.2% 842,120 1.2% 11,374,688 16.4% 17.4% 26,341 26,341 $1

C 19,707,647 2,241,311 11.4% 33,826 0.2% 2,275,137 11.5% 11.9% 68,088 68,088 $1

o a , , , , . , , . , , . . , ,

GRAND TOTAL

A 96,357,938 14,218,312 14.8% 1,325,134 1.4% 15,543,446 16.1% 16.3% 134,660 134,660 $2

B 77,885,142 12,209,497 15.7% 932,396 1.2% 13,141,893 16.9% 17.2% 195,592 195,592 $1

C 21,229,227 3,043,989 14.3% 33,826 0.2% 3,077,815 14.5% 14.8% 77,957 77,957 $1

Total 195,472,307 29,471,798 15.1% 2,291,356 1.2% 31,763,154 16.2% 16.5% 408,209 408,209 $2


6/9


HOUSTON SUBURBAN OFFICE MARKET

Class

Total

Inventory

Sq. Ft.

Direct

Vacant

Sq. Ft.

Direct

Vacancy

Rate

Sublease

Vacant

Sq. Ft.

Sublease

Vacancy

Rate

Total

Vacant

Sq. Ft.

Q1 Vacancy

Rate

Q1 Net

Absorption

Sq. Ft.

YTD Net

Absorption

Sq. Ft.

Wgtd. Avg.

Quoted

Gross Rate

Suburban Total

A 68,534,386 12,177,457 17.8% 907,757 1.3% 13,085,214 19.1% 335,037 335,037 $27.88

B 69,401,579 10,532,568 15.2% 842,120 1.2% 11,374,688 16.4% 26,341 26,341 $18.13

C 19,707,647 2,241,311 11.4% 33,826 0.2% 2,275,137 11.5% 68,088 68,088 $15.82

Total 157,643,612 24,951,336 15.8% 1,783,703 1.1% 26,735,039 17.0% 429,466 429,466 22.68$

Baytown

, , . . , . .

C 60,396 4,787 7.9% 0 0.0% 4,787 7.9% 0 0 $14.00

Total 585,940 10,187 1.7% 0 0.0% 10,187 1.7% 0 0 16.16$

Bellaire

A 1,389,252 104,882 7.5% 20,119 1.4% 125,001 9.0% (9,867) (9,867) $24.09

B 949,061 39,476 4.2% 0 0.0% 39,476 4.2% 11,091 11,091 $17.44

C 567,560 37,367 6.6% 11,654 2.1% 49,021 8.6% (16,820) (16,820) $15.25

Total 2,905,873 181,725 6.3% 31,773 1.1% 213,498 7.3% (15,596) (15,596) 20.83$

Conroe

A 60,000 0 0.0% 0 0.0% 0 0.0% 0 0 -

B 258,239 19,469 7.5% 0 0.0% 19,469 7.5% 1,077 1,077 $16.00

C 157,335 4,275 2.7% 0 0.0% 4,275 2.7% 0 0 $15.00

Total 475,574 23,744 5.0% 0 0.0% 23,744 5.0% 1,077 1,077 15.82$

E.Fort Bend/Sugarland

A 3,540,374 634,830 17.9% 5,780 0.2% 640,610 18.1% 16,376 16,376 $28.53

B 2,074,624 291,776 14.1% 2,377 0.1% 294,153 14.2% 25,816 25,816 $19.07

C 181,612 5,136 2.8% 0 0.0% 5,136 2.8% 1,356 1,356 $17.50

Total 5,796,610 931,742 16.1% 8,157 0.1% 939,899 16.2% 43,548 43,548 25.51$

FM 1960

A 2,382,096 1,541,958 64.7% 24,375 1.0% 1,566,333 65.8% 20,863 20,863 $26.58

B 5,104,117 959,471 18.8% 52,465 1.0% 1,011,936 19.8% 1,673 1,673 $16.07

C 828,120 98,322 11.9% 2,463 0.3% 100,785 12.2% (4,278) (4,278) $14.59

Total 8,314,333 2,599,751 31.3% 79,303 1.0% 2,679,054 32.2% 18,258 18,258 22.25$

Greenwa

A 6,069,998 916,427 15.1% 145,974 2.4% 1,062,401 17.5% (7,682) (7,682) $28.11

B 2,731,339 259,420 9.5% 1,310 0.0% 260,730 9.5% (12,321) (12,321) $21.21

C 950,509 238,281 25.1% 0 0.0% 238,281 25.1% 8,774 8,774 $16.83

Total 9,751,846 1,414,128 14.5% 147,284 1.5% 1,561,412 16.0% (11,229) (11,229) 24.94$

Gulf Freeway/Pasadena

A 88,000 44,000 50.0% 0 0.0% 44,000 0.0% 0 0 $24.64

B 1,625,319 145,020 8.9% 6,611 0.4% 151,631 9.3% 8,633 8,633 $19.96C 1,098,967 111,079 10.1% 0 0.0% 111,079 10.1% 3,160 3,160 $14.68

Total 2,812,286 300,099 10.7% 6,611 0.2% 306,710 10.9% 11,793 11,793 15.08$

I-10 East

B 268,516 81,980 30.5% 9,260 3.4% 91,240 34.0% 6,494 6,494 $15.21

C 221,473 16,748 7.6% 0 0.0% 16,748 7.6% 0 0 $9.88

Total 489,989 98,728 20.1% 9,260 1.9% 107,988 22.0% 6,494 6,494 14.31$

Katy Freeway

A 11,175,054 2,447,503 21.9% 76,576 0.7% 2,524,079 22.6% 113,372 113,372 $28.32

B 6,765,390 861,399 12.7% 80,463 1.2% 941,862 13.9% 208,815 208,815 $18.60

C 1,809,915 201,048 11.1% 2,600 0.1% 203,648 11.3% 6,298 6,298 $14.85

Total 19,750,359 3,509,950 17.8% 159,639 0.8% 3,669,589 18.6% 328,485 328,485 25.16$

Kingwood/Humble

A 134,000 25,904 19.3% 0 0.0% 25,904 19.3% 0 0 $27.50

B 1,651,450 177,397 10.7% 6,810 0.4% 184,207 11.2% 16,056 16,056 $20.55

C 644,358 28,284 4.4% 0 0.0% 28,284 4.4% (1,826) (1,826) $15.83

Total 2 429 808 231 585 9.5% 6 810 0.3% 238 395 9.8% 14 230 14 230 20.75

NASA/Clear Lake

A 699,372 32,594 4.7% 9,152 1.3% 41,746 6.0% 0 0 $23.91B 3,038,159 242,421 8.0% 15,284 0.5% 257,705 8.5% 18,573 18,573 $20.81

C 1,227,256 145,663 11.9% 13,047 1.1% 158,710 12.9% (20,522) (20,522) $15.07

Total 4,964,787 420,678 8.5% 37,483 0.8% 458,161 9.2% (1,949) (1,949) 19.06$

Neartown/Allen Parkway

A 1,613,358 233,692 14.5% 120,877 7.5% 354,569 22.0% 18,731 18,731 $30.87

B 2,654,419 199,589 7.5% 33,139 1.2% 232,728 8.8% (47,542) (47,542) $22.69

C 1,191,545 413,158 34.7% 0 0.0% 413,158 34.7% 7,938 7,938 $21.19

Total 5,459,322 846,439 15.5% 154,016 2.8% 1,000,455 18.3% (20,873) (20,873) 24.22$

Greenspoint/North Belt

A 4,806,816 351,074 7.3% 70,220 1.5% 421,294 8.8% 14,627 14,627 $20.68

B 5,026,160 1,187,535 23.6% 153,735 3.1% 1,341,270 26.7% (84,052) (84,052) $16.12

C 1,347,079 191,672 14.2% 4,062 0.3% 195,734 14.5% (2,468) (2,468) $13.22

Total 11,180,055 1,730,281 15.5% 228,017 2.0% 1,958,298 17.5% (71,893) (71,893) 16.72$


7/9


HOUSTON SUBURBAN OFFICE MARKET

Class

Total

Inventory

Sq. Ft.

Direct

Vacant

Sq. Ft.

Direct

Vacancy

Rate

Sublease

Vacant

Sq. Ft.

Sublease

Vacancy

Rate

Total

Vacant

Sq. Ft.

Q1 Vacancy

Rate

Q1 Net

Absorption

Sq. Ft.

YTD Net

Absorption

Sq. Ft.

Wgtd. Avg.

Quoted

Gross Rate

Northeast

B 291,773 50,291 17.2% 0 0.0% 50,291 17.2% 0 0 $17.02C 164,053 15,851 9.7% 0 0.0% 15,851 9.7% 0 0 $11.95

Total 455,826 66,142 14.5% 0 0.0% 66,142 14.5% 0 0 15.80$

Northwest

A 3,774,963 1,357,879 36.0% 1,404 0.0% 1,359,283 36.0% 67,051 67,051 $25.70

B 6,864,990 1,442,862 21.0% 33,808 0.5% 1,476,670 21.5% (53,414) (53,414) $15.30

C 1,576,840 53,888 3.4% 0 0.0% 53,888 3.4% 35,576 35,576 $12.24

Total 12,216,793 2,854,629 23.4% 35,212 0.3% 2,889,841 23.7% 49,213 49,213 20.19$

Northwest Outlier

A 89,750 0 0.0% 0 0.0% 0 0.0% 0 0 -

B 135,457 4,264 3.1% 0 0.0% 4,264 3.1% 3,308 3,308 $13.80

Total 225,207 4,264 1.9% 0 0.0% 4,264 1.9% 3,308 3,308 $13.80

Richmond/Fountainview

B 643,051 60,689 9.4% 0 0.0% 60,689 9.4% 2,213 2,213 $13.74

C 794,419 114,354 14.4% 0 0.0% 114,354 14.4% 9,448 9,448 $12.63

Total 1,437,470 175,043 12.2% 0 0.0% 175,043 12.2% 11,661 11,661 13.01$

San Felipe/Voss

, , , . , . , . , , .

B 3,389,384 310,553 9.2% 28,454 0.8% 339,007 10.0% (2,400) (2,400) $19.73C 161,393 23,501 14.6% 0 0.0% 23,501 14.6% (1,601) (1,601) $12.53

Total 5,292,005 568,464 10.7% 68,958 1.3% 637,422 12.0% (29,826) (29,826) 23.89$

South

A 105,869 100,369 94.8% 0 0.0% 100,369 94.8% 5,500 5,500 $27.11

B 402,864 35,198 8.7% 0 0.0% 35,198 8.7% (2,584) (2,584) $23.57

C 223,029 42,220 18.9% 0 0.0% 42,220 18.9% 0 0 $16.68

Total 731,762 177,787 24.3% 0 0.0% 177,787 24.3% 2,916 2,916 23.93$

South Main/Med Center

A 3,443,233 373,641 10.9% 0 0.0% 373,641 10.9% (22,613) (22,613) $30.70

B 3,731,688 323,735 8.7% 4,800 0.1% 328,535 8.8% (76,192) (76,192) $20.08

C 2,745,096 122,008 4.4% 0 0.0% 122,008 4.4% 31,497 31,497 $18.73

Total 9,920,017 819,384 8.3% 4,800 0.0% 824,184 8.3% (67,308) (67,308) 24.72$

Southeast/Outlier

A 159,304 0 0.0% 0 0.0% 0 0.0% 0 0 -

B 461,945 70,754 15.3% 0 0.0% 70,754 15.3% 725 725 $22.28

C 22,783 0 0.0% 0 0.0% 0 0.0% 0 0 $15.00

Total 644,032 70,754 11.0% 0 0.0% 70,754 11.0% 725 725 22.28$

Southwest

A 726,310 218,392 30.1% 20,719 2.9% 239,111 32.9% (10,768) (10,768) $18.45

B 6,890,396 1,393,164 20.2% 195,056 2.8% 1,588,220 23.0% 7,708 7,708 $15.63

C 2,475,389 271,762 11.0% 0 0.0% 271,762 11.0% 707 707 $12.22

, , , , . , . , , . , , .

Southwest Outlier

A 87,710 10,116 11.5% 0 0.0% 10,116 11.5% 0 0 $27.71

B 392,488 61,203 15.6% 0 0.0% 61,203 15.6% (1,405) (1,405) $25.41

C 150,735 8,500 5.6% 0 0.0% 8,500 5.6% (3,000) (3,000) $16.70

Total 630,933 79,819 12.7% 0 0.0% 79,819 12.7% (4,405) (4,405) 24.77$

Galleria/West Loop

A 16,338,093 1,490,361 9.1% 197,147 1.2% 1,687,508 10.3% 100,322 100,322 $30.35

B 5,461,120 1,188,631 21.8% 36,066 0.7% 1,224,697 22.4% 56,384 56,384 $22.09

C 426,332 11,631 2.7% 0 0.0% 11,631 2.7% 11,763 11,763 $16.50

Total 22,225,545 2,690,623 12.1% 233,213 1.0% 2,923,836 13.2% 168,469 168,469 26.64$

Westchase

A 7,813,357 1,514,487 19.4% 133,110 1.7% 1,647,597 21.1% 14,114 14,114 $29.08

B 5,088,940 780,561 15.3% 107,219 2.1% 887,780 17.4% (65,310) (65,310) $19.81

C 509,131 56,699 11.1% 0 0.0% 56,699 11.1% 2,086 2,086 $15.05

Total 13,411,428 2,351,747 17.5% 240,329 1.8% 2,592,076 19.3% (49,110) (49,110) 25.66$

Woodlands

A 2,296,249 544,938 23.7% 41,800 1.8% 586,738 25.6% 40,836 40,836 $29.27

B 2,975,146 340,310 11.4% 75,263 2.5% 415,573 14.0% 2,995 2,995 $20.43

C 172,322 25,077 14.6% 0 0.0% 25,077 14.6% 0 0 $19.60

Total 5,443,717 910,325 16.7% 117,063 2.2% 1,027,388 18.9% 43,831 43,831 25.70$


8/9


Office Development Pipeline

Houston s eve opment activity s owe signi icant y at t e start o 2010, wit no new o ice ui ings a e in t e irst quarter,

compared to 1.6M SF added in the first quarter last year. Under construction activity totaling 2.1M SF (in five new office buildings) also

fell below the 5.4M SF in the development pipeline one year ago.

Of the 2.1M SF of office space underway at the end of the first quarter, two new buildings in the CBD - Hines 972,474-SF Main Place(slated for delivery by February 2011) and Trammell Crow Companys Hess Tower (formerly Discovery Tower, scheduled for completion

by May 2010) accounted for 88% of the total development citywide. Outside the CBD, three new office projects under construction

included: Midway Companies 152,619-SF Eco Center at Lake Pointe, located in the East Fort Bend/Sugar Land submarket and

scheduled for completion by January 2011; The Quinn Companys 64,000-SF Black Forest Park, located in The Woodlands submarket

and slated for delivery by August 2010; and Jacob White Constructions 24,831-SF office building located at 12941 Gulf Freeway in the

Gulf Freeway/Pasadena submarket expected to come online in June 2010.

With supply continuing to exceed demand for office space, developers have been wise to curtail any new development projects until

stronger fundamentals resume. Although Houston remains among the least affected U.S. metros in terms of job losses during the past

several years, the local metro is not expected to see significant job growth until 2011. By extension, speculative office construction is not

Select Under Construction Office Buildings

.

Submarket Name Building Name Building Address SF % Leased Developer Name

Estimated

Delivery

CBD MainPlace 811 Main St 972,474 11.2 Hines Holdings Inc. Feb-11

CBD Hess Tower 1501 McKinne St 844 763 100 TCC Develo ment Ma -10 ,

E Fort Bend Co/Sugar Land Eco Centre at Lake Pointe 16750 Creek Bend Dr 152,619 0 Midway Companies Jan-11

Woodlands Black Forest Park 4526 Research Forest Dr 64,000 0 The Quinn Company Aug-10

Gulf Freeway/Pasadena 12941 Gulf Freeway Office Building 12941 Gulf Freeway 24,831 46.02 Jacob White Construction Jun-10

Total office properties under construction listed above 2,058,687

Grand total office properties under construction over 20,000 sq. ft. 2,058,687


9/9


294 Offices Worldwide

NORTH AMERICA

EUROPE AND

MIDDLE EAST

HAWAII

SOUTH

AMERICA

AFRICA

ASIA PACIFIC

AUSTRALIA

61 Countries on 6 Continents

133 AMERICAS

94 USA

22 CANADA

17 LATIN AMERICA

COLLIERS INTERNATIONA

1300 Post Oak Blvd, 2nd Floo

Houston, Texas 7705

Main: 713.222.21

Fax: 713.830.21

www.collierstexas.co

64 ASIA/PACIFIC

97 EUROPE/MIDDLE

EAST/AFRICA

$1.6 BILLION IN GLOBAL

REVENUE

1.1 BILLION S UARE FEET

UNDER MANAGEMENT

12,700 PROFESSIONALS

houston office market report 1q 2010

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