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Q2 2013 | OFFICE MARKET
HOUSTON OFFICE
MARKET INDICATORS
Q2 2012 Q2 2013
CITYWIDE NET
ABSORPTION ...
RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
$26.00
$28.00
$30.00
$32.00
$34.00
$36.00
$38.00
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Class...
RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
Q2 2013 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or great...
RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN & OVERALL)
HOUST...
RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED
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RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED
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RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
OFFICE DEVELOPMENT PIPELINE
Houston’s construction pipeline c...
RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
COLLIERS INTERNATIONAL | P. 8
OFFICE DEVELOPMENT PIPELINE - C...
RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET
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Q2 2013 Houston Office Market Research Report

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  1. 1. www.colliers.com/houston Q2 2013 | OFFICE MARKET HOUSTON OFFICE MARKET INDICATORS Q2 2012 Q2 2013 CITYWIDE NET ABSORPTION (SF) 688K 286K CITYWIDE AVERAGE VACANCY 14.8% 14.9% CITYWIDE AVERAGE RENTAL RATE $23.98 $24.26 CLASS A RENTAL RATE CBD $36.94 $36.86 SUBURBAN $28.33 $28.82 CLASS A VACANCY CBD 11.4% 11.7% SUBURBAN 12.8% 11.8% RESEARCH & FORECAST REPORT HOUSTON OFFICE MARKET HOUSTON’S OFFICE MARKET INVIGORATED BY ENERGY GIANTS’ GROWTH Houston’s strong job growth, spurred by growth in the energy sector, continued to boost Houston’s office market in Q2 2013. Although leasing momentum slowed in the first quarter due in part to a lack of quality inventory, absorption increased in the second quarter as newly constructed space was delivered. Houston’s office market posted 286,000 SF of positive net absorption in the second quarter, much less than the 688,000 SF posted in the same quarter one year ago. Absorption will pick up momentum again later in the year when a portion of the 9.4 million SF of office space under construction is delivered. Additionally, energy giants such as Chevron, Apache, BHP, and many others have announced plans to build new office buildings to accommodate growth. Approximately 9.9M SF of office space is either under construction (ExxonMobil, Shell and Anadarko) or planned over the next two to three years. The citywide average rental rate increased slightly from $23.98 per SF to $24.26 per SF over the year and from $24.06 per SF between quarters. Some of the top-performing Class A building rental rates increased by as much as 1.5% to 7.1% between quarters. The Houston metropolitan area added 91,600 jobs between May 2012 and May 2013, an annual increase of 3.4% over the prior year’s job growth. Further, Houston’s unemployment fell to 6.4% from 6.8% one year ago and Houston area home sales increased significantly, growing by 28.0% over the year. With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy for both the near and long-term. ABSORPTION, NEW SUPPLY & VACANCY RATES 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% -1,500,000 -1,000,000 -500,000 0 500,000 1,000,000 1,500,000 Net Absorption New Supply Vacancy Houston UNEMPLOYMENT 5/12 5/13 HOUSTON 6.8% 6.4% TEXAS 6.8% 6.5% U.S. 7.9% 7.3% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.4% 91.6K TEXAS 2.7% 297.9K U.S. 1.2% 1.7M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted)
  2. 2. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET $26.00 $28.00 $30.00 $32.00 $34.00 $36.00 $38.00 $40.00 Class A Office Rents CBD Rents Suburban Rents 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% CBD VS. Suburban Class A Office Vacancy CBD Vacancy Suburban Vacancy QUOTED GROSS RENTAL RATES FOR EXISTING TOP PERFORMING OFFICE BUILDINGS BUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR BUILT LEASED AVAIL. SF RENT ($/SF) OWNER 717 Texas 717 Texas CBD 696,228 2003 100.0% 76,892 $44.50 Hines 5 Houston Center 1401 McKinney St CBD 600,000 2002 95.3% 80,850 $42.50 Wells Real Estate Funds 1000 Main 1000 Main St CBD 837,161 2003 96.5% 237,068 $45.00 Invesco Realty Advisors, Inc. Heritage Plaza 1111 Bagby CBD 1,089,266 1986 99.7% 46,865 $42.00 Brookfield Office Properties BG Group Place 811 Main CBD 972,474 2011 96.1% 38,397 $48.50 Invesco Realty Advisors, Inc. Williams Tower 2800 Post Oak Blvd West Loop/Galleria 1,476,973 1983 98.5% 42,180 $47.22 Invesco Real Estate 1330 Post Oak Blvd 1330 Post Oak Blvd West Loop/Galleria 1,168,805 1983 99.1% 6,094 $44.00 TIAA-CREF CityCentre Three 842 W Sam Houston Pky N Katy Freeway 120,211 2012 78.8% 25,435 $41.50 Midway T & C Land Investors San Felipe Plaza 5847 San Felipe St San Felipe/Voss 980,472 1984 87.4% 154,061 $38.00 Thomas Properties Group, L.P. One BriarLake Plaza 2000 W Sam Houston Pky Westchase 502,410 2000 95.4% 63,659 $44.50 Behringer Harvard Holdings 4 Waterway Square Place 4 Waterway Ave The Woodlands 232,364 2008 100.0% 42,838 $42.00 The Woodlands Development Company, L.P. Note: Avail. SF includes direct and sublet space. Source: CoStar Property 2COLLIERS INTERNATIONAL | P. VACANCY & AVAILABILITY Houston’s overall vacancy rate increased 10 basis points between quarters, as well as over the year, going from 14.8% to 14.9%. Between quarters, the average CBD vacancy rate increased by 30 basis points to 14.1% from 13.8%, as additional sublease space was added to the market. On a year-over-year basis, the average CBD vacancy rate increased by 10 basis points. Between quarters, the average suburban vacancy rate increased by 10 basis points to 15.2% and increased 20 basis points from 15.0% over the year. The CBD Class A vacancy rate increased by 50 basis points to 11.7% from 11.2% between quarters. The CBD Class B vacancy rate decreased 30 basis points to 15.1%. The suburban Class A vacancy rate decreased by 10 basis points between quarters to 11.8% and suburban the Class B vacancy rate increased by 10 basis points to 17.7%. Of the 1,285 existing office buildings in our survey, only 46 have 100,000 SF of contiguous space available for lease or sublease. Further, only 17 have 200,000 SF of contiguous space available. Citywide, available sublease space totals 4.0 million SF or 2.3% of Houston’s total office inventory, and 1.5 million SF of this sublease space is currently vacant. ABSORPTION & DEMAND Absorption increased in the second quarter as new space was delivered and tenants expanded. Houston’s office market posted only 286,000 SF of positive net absorption in the second quarter, less than the 688,000 SF posted in the same quarter one year ago. Absorption will pick up momentum again later in the year when a portion of the 9.4 million SF of office space under construction is delivered. CBD Class A space posted the largest loss, with 154,500 SF of negative net absorption, mostly due in large part to the addition of sublease space. Suburban Class A space posted the largest gain, with 517,000 SF of positive net absorption. Some of the larger tenants that moved into new space or expanded into additional space during the second quarter include Wood Group Mustang, which moved into 170,000 SF in Westgate 3 located in the Katy Freeway submarket; Baker McKenzie, which moved into 50,000 SF in the Bank of America Center and Rosetta, which moved into 93,000 SF in Heritage Plaza, both buildings in the CBD submarket; Parsons moved into 25,200 SF in 2200 West Loop South located in the West Loop/Galleria submarket. RENTAL RATES The average citywide rental rate increased to $24.26 from $23.98 per SF on an annual basis, and from $24.06 per SF between quarters. The CBD Class A average quoted rental rate decreased to $36.86 from $37.04 per SF between quarters, while the suburban Class A average quoted rental rate remained unchanged at $28.82 per SF. The average CBD Class B quoted rental rate increased to $24.79 from $24.78 per square foot, while the average suburban Class B quoted rental rate increased to $18.60 from $18.56 per square foot over the quarter.
  3. 3. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET Q2 2013 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or greater) BUILDING NAME SUB- MARKET RBA (SF) YEAR BUILT BUYER SELLER SALE PRICE $/SF CAP RATE CLOSED BG Group Place CBD 972,474 2011 Invesco Realty Advisors, Inc. Hines/CalPERS $480M $494 5.8% 5/2013 1200 Enclave Parkway Katy Freeway 149,683 1999 Griffin Capital Essential Asset REIT, Inc. Piedmont Office Realty Trust $49M $326 6.3% 5/2013 One Westchase Center Westchase 466,137 1982/ 2004 Investcorp International Inc. LNR Property Corporation $84M $179 N/A 4/2013 Park Ten Plaza Katy Freeway 155,140 1999 USAA Real Estate Company Invesco Realty Advisors, Inc. $31M $202 8.4% 5/2013 919 Milam CBD 542,919 1956/ 2007 M-M Properties Credit Suisse $115M $212 6.0% Pending 3COLLIERS INTERNATIONAL | P. SALES ACTIVITY Houston’s office investment sales activity included 34 sales transactions with a total sales volume of approximately $783.5 million, averaging $354 per SF. Listed below are a few significant transactions that closed during the second quarter. LEASING ACTIVITY Houston’s office leasing activity reached 2.5 million SF in the second quarter, bringing the year-to-date leasing activity to 3.2 million SF. Below is a list of Q2 2013 top lease transactions, the majority of which were new. 1 Renewal 2 Expansion 3 Sublease 4 Pre-lease/proposed or under construction Building name/address Submarket SF Tenant Lease date Energy Center Three Katy Freew ay 550,000 ConocoPhillips May-13 Energy Center Four Katy Freew ay 300,000 ConocoPhillips May-13 Chasew ood Bldg 5 FM 1960/Hw y 249 220,000 Sw ift Energy Jun-13 1600 Smith CBD 71,300 Chevron2 May-13 10500 Richmond Ave Westchase 48,900 Worley Parsons Group1 Jun-13 Three Allen Center CBD 48,560 Oiltanking Partners, L.P.3 Apr-13 Atrium II North Belt/Greenspoint 40,741 BBVA Compass Bank May-13 One Allen Center CBD 28,193 Talos Energy Jun-13 2200 West Loop South West Loop/Galleria 25,198 Parsons Engineering Apr-13 One Corporate Plaza NASA/Clear Lake 20,127 Flow -Cal Jun-13 Sam Houston Crossing One Northw est 17,750 Farmers Insurance Group1 May-13 2730 Technology Forest Dr The Woodlands 16,000 Clariant Oil & Mining Services Jun-13 Granite Tow ers at Sugar Creek E Fort Bend Co/Sugar Land 14,465 Noble Corporation2 Apr-13 Granite Tow er @ 290 Northw est 14,619 Hotchkiss Insurance Apr-13 One Arena Place Southw est 13,620 American Surgical Assistants May-13 Nexen Tow er Katy Freew ay 12,911 Trustmark Bank Texas Apr-13 12941 North Freew ay North Belt/Greenspoint 12,803 Lone Star Group May-13 Younan Place Westchase 12,146 MaloneBailey, LLP Apr-13 Millennium Tow er Westchase 11,014 Applied Engineering Solutions2 Apr-13 Ashford 5 Katy Freew ay 10,345 OSIsoft1 Apr-13 Marathon Oil Tow er San Fellipe/Voss 10,114 Pacific Rubuiales, USA May-13 Q2 2013 Top Office Leases
  4. 4. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN & OVERALL) HOUSTON SUBURBAN OFFICE MARKET SUMMARY COLLIERS INTERNATIONAL | P. 4 Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q2-2013 Q1-2013 Q2-2013 YTD-2013 AVG($/SF) A 29 28,517,756 2,426,073 8.5% 918,759 3.2% 3,344,832 11.7% 11.2% -154,532 -528,122 $36.86 B 33 10,213,941 1,528,379 15.0% 10,050 0.1% 1,538,429 15.1% 15.4% 34,121 -15,157 $24.79 C 21 1,509,550 797,217 52.8% 0 0.0% 797,217 52.8% 52.2% -8,875 -8,460 $19.63 Total 83 40,241,247 4,751,669 11.8% 928,809 2.3% 5,680,478 14.1% 13.8% -129,286 -551,739 $33.25 A 203 55,192,668 5,970,540 10.8% 516,064 0.9% 6,486,604 11.8% 11.9% 517,471 1,020,517 $28.82 B 742 67,434,393 11,385,767 16.9% 521,275 0.8% 11,907,042 17.7% 17.6% -49,433 -609,374 $18.60 C 257 11,624,669 1,899,302 16.3% 64,344 0.6% 1,963,646 16.9% 16.4% -52,933 -148,107 $14.69 Total 1202 134,251,730 19,255,609 14.3% 1,101,683 0.8% 20,357,292 15.2% 15.1% 415,105 263,036 $22.11 A 232 83,710,424 8,396,613 10.0% 1,434,823 1.7% 9,831,436 11.7% 11.7% 362,939 492,395 $31.35 B 775 77,648,334 12,914,146 16.6% 531,325 0.7% 13,445,471 17.3% 17.3% -15,312 -624,531 $19.19 C 278 13,134,219 2,696,519 20.5% 64,344 0.5% 2,760,863 21.0% 20.5% -61,808 -156,567 $15.22 Total 1285 174,492,977 24,007,278 13.8% 2,030,492 1.2% 26,037,770 14.9% 14.8% 285,819 -288,703 $24.26 Net Absorption (SF)Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) CBD Suburban Overall Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q2-2013 Q1-2013 Q2-2013 YTD-2013 AVG($/SF) A 4 1,704,677 132,691 7.8% 0 0.0% 132,691 7.8% 8.2% 7,027 77,032 $27.23 B 28 2,427,900 252,224 10.4% 6,745 0.3% 258,969 10.7% 11.9% 29,730 32,344 $24.12 C 16 589,141 71,255 12.1% 0 0.0% 71,255 12.1% 8.9% -19,058 -11,968 $24.07 Total 48 4,721,718 456,170 9.7% 6,745 0.1% 462,915 9.8% 10.2% 17,699 97,408 $25.59 B 4 281,332 3,914 1.4% 0 0.0% 3,914 1.4% 1.4% 0 -3,914 $17.18 C 1 22,400 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00 Total 5 303,732 3,914 1.3% 0 0.0% 3,914 1.3% 1.3% 0 -3,914 $17.18 A 5 888,540 192,557 21.7% 14,185 1.6% 206,742 23.3% 21.5% -15,401 -19,579 $24.34 B 15 2,250,357 127,351 5.7% 2,647 0.1% 129,998 5.8% 5.7% -2,507 8,862 $21.88 C 8 347,807 18,771 5.4% 0 0.0% 18,771 5.4% 6.9% 5,385 6,824 $15.09 Total 28 3,486,704 338,679 9.7% 16,832 0.5% 355,511 10.2% 9.8% -12,523 -3,893 $23.83 Conroe  B 4 232,766 22,787 9.8% 0 0.0% 22,787 9.8% 9.8% 0 0 $17.46 C 5 181,925 2,250 1.2% 0 0.0% 2,250 1.2% 1.2% 0 0 $18.45 Total 9 414,691 25,037 6.0% 0 0.0% 25,037 6.0% 6.0% 0 0 $17.64 A 11 1,985,075 689,570 34.7% 6,144 0.3% 695,714 35.0% 34.4% -12,401 23,210 $27.63 B 29 1,678,853 317,966 18.9% 98,619 5.9% 416,585 24.8% 23.5% -22,826 8,974 $21.36 C 2 183,972 3,914 2.1% 1,506 0.8% 5,420 2.9% 2.9% 0 384 $18.36 Total 42 3,847,900 1,011,450 26.3% 106,269 2.8% 1,117,719 29.0% 28.1% -35,227 32,568 $24.69 Allen Parkway Baytown Bellaire E. Fort Bend/Sugar Land Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  5. 5. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED 5COLLIERS INTERNATIONAL | P. Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q2-2013 Q1-2013 Q2-2013 YTD-2013 AVG($/SF) A 14 2,752,095 656,800 23.9% 0 0.0% 656,800 23.9% 23.2% -17,491 -15,983 $25.39 B 68 4,244,888 949,697 22.4% 15,086 0.4% 964,783 22.7% 21.2% -66,682 -40,555 $14.87 C 17 624,932 58,125 9.3% 19,615 3.1% 77,740 12.4% 13.4% 5,959 6,747 $12.82 Total 99 7,621,915 1,664,622 21.8% 34,701 0.5% 1,699,323 22.3% 21.3% -78,214 -49,791 $17.85 A 12 4,866,788 533,634 11.0% 58,292 1.2% 591,926 12.2% 11.0% -56,599 -54,122 $31.42 B 26 3,190,004 281,921 8.8% 300 0.0% 282,221 8.8% 8.9% 3,068 -16,157 $24.13 C 16 707,028 265,966 37.6% 0 0.0% 265,966 37.6% 37.9% 1,667 4,786 $17.42 Total 54 8,763,820 1,081,521 12.3% 58,592 0.7% 1,140,113 13.0% 12.4% -51,864 -65,493 $27.25 A 2 75,068 17,922 23.9% 6,405 8.5% 24,327 32.4% 32.2% -132 705 $29.37 B 29 1,720,950 258,181 15.0% 0 0.0% 258,181 15.0% 15.1% 1,785 6,157 $18.23 C 24 810,509 119,479 14.7% 0 0.0% 119,479 14.7% 15.6% 7,330 -4,824 $15.30 Total 55 2,606,527 395,582 15.2% 6,405 0.2% 401,987 15.4% 15.8% 8,983 2,038 $17.57 B 4 319,048 89,969 28.2% 0 0.0% 89,969 28.2% 28.3% 426 -2,707 $14.70 C 2 73,713 4,210 5.7% 0 0.0% 4,210 5.7% 5.4% -210 10 $14.85 Total 6 392,761 94,179 24.0% 0 0.0% 94,179 24.0% 24.0% 216 -2,697 $14.74 A 32 7,056,764 238,846 3.4% 19,236 0.3% 258,082 3.7% 4.3% 43,447 142,747 $29.23 B 89 8,654,158 901,540 10.4% 35,285 0.4% 936,825 10.8% 11.4% 47,200 105,093 $19.47 C 27 1,117,653 82,394 7.4% 4,408 0.4% 86,802 7.8% 7.8% 40 11,386 $17.22 Total 148 16,828,575 1,222,780 7.3% 58,929 0.4% 1,281,709 7.6% 8.2% 90,687 259,226 $20.69 B 10 657,404 65,872 10.0% 856 0.1% 66,728 10.2% 9.6% -3,354 -7,379 $20.28 C 4 132,761 3,594 2.7% 0 0.0% 3,594 2.7% 4.8% 2,823 2,823 $16.54 Total 14 790,165 69,466 8.8% 856 0.1% 70,322 8.9% 8.8% -531 -4,556 $19.94 A 10 1,554,794 150,557 9.7% 0 0.0% 150,557 9.7% 9.2% -7,557 39,011 $22.50 B 35 2,661,791 944,967 35.5% 469 0.0% 945,436 35.5% 34.0% -40,220 -401,199 $18.08 C 17 670,235 217,957 32.5% 0 0.0% 217,957 32.5% 34.0% 9,881 -12,647 $14.58 Total 62 4,886,820 1,313,481 26.9% 469 0.0% 1,313,950 26.9% 26.1% -37,896 -374,835 $18.51 A 19 4,211,425 396,831 9.4% 55,943 1.3% 452,774 10.8% 9.6% -47,682 19,560 $27.41 B 52 5,819,568 1,259,434 21.6% 18,157 0.3% 1,277,591 22.0% 21.9% -5,232 -83,223 $15.91 C 18 1,100,096 257,143 23.4% 0 0.0% 257,143 23.4% 20.0% -37,281 -42,760 $12.79 Total 89 11,131,089 1,913,408 17.2% 74,100 0.7% 1,987,508 17.9% 17.0% -90,195 -106,423 $21.65 B 5 219,158 85,042 38.8% 3,321 1.5% 88,363 40.3% 36.6% -8,159 -11,480 $20.90 C 4 105,183 22,177 21.1% 0 0.0% 22,177 21.1% 13.7% -7,739 -8,186 $12.36 Total 9 324,341 107,219 33.1% 3,321 1.0% 110,540 34.1% 29.2% -15,898 -19,666 $17.40 Kingw ood/Humble NASA/Clear Lake North Belt/Greenspoint Northeast Near and Outlier FM 1960 Greenw ay Gulf Freew ay/Pasadena I-10 East Katy Freew ay Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  6. 6. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED 6COLLIERS INTERNATIONAL | P. Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q2-2013 Q1-2013 Q2-2013 YTD-2013 AVG($/SF) A 21 3,783,871 436,848 11.5% 35,870 0.9% 472,718 12.5% 11.7% -28,694 -8,645 $22.51 B 74 6,642,237 1,310,707 19.7% 112,654 1.7% 1,423,361 21.4% 20.8% -44,540 -190,642 $17.62 C 41 1,603,843 173,050 10.8% 0 0.0% 173,050 10.8% 10.9% 2,536 -39,000 $13.35 Total 136 12,029,951 1,920,605 16.0% 148,524 1.2% 2,069,129 17.2% 16.6% -70,698 -238,287 $18.70 B 14 774,150 233,380 30.1% 0 0.0% 233,380 30.1% 31.7% 11,722 20,172 $15.75 C 16 600,383 100,573 16.8% 37,215 6.2% 137,788 23.0% 23.9% 5,419 -40,967 $11.30 Total 30 1,374,533 333,953 24.3% 37,215 2.7% 371,168 27.0% 28.3% 17,141 -20,795 $14.41 A 3 1,714,930 286,077 16.7% 0 0.0% 286,077 16.7% 17.3% 11,341 31,852 $32.61 B 33 3,345,671 316,277 9.5% 29,460 0.9% 345,737 10.3% 8.6% -58,995 -70,834 $21.44 C 3 204,649 66,952 32.7% 0 0.0% 66,952 32.7% 30.1% -5,453 -3,048 $13.00 Total 39 5,265,250 669,306 12.7% 29,460 0.6% 698,766 13.3% 12.3% -53,107 -42,030 $24.78 A 1 80,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $20.52 B 14 575,498 85,262 14.8% 0 0.0% 85,262 14.8% 16.7% 7,044 18,976 $16.84 C 5 192,262 74,120 38.6% 0 0.0% 74,120 38.6% 37.8% -1,450 1,250 $13.73 Total 20 847,760 159,382 18.8% 0 0.0% 159,382 18.8% 20.0% 5,594 20,226 $16.50 A 14 4,488,845 351,929 7.8% 2000 0.0% 353,929 7.9% 7.9% -1,282 316,589 $27.59 B 38 4,221,828 376,541 8.9% 0 0.0% 376,541 8.9% 8.9% 0 8,615 $22.51 C 31 2,373,043 102,169 4.3% 0 0.0% 102,169 4.3% 5.1% 18,778 24,733 $18.02 Total 83 11,083,716 830,639 7.5% 2,000 0.0% 832,639 7.5% 7.7% 17,496 349,937 $23.70 A 1 159,304 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 13 776,863 104,595 13.5% 0 0.0% 104,595 13.5% 14.5% 8,068 14,054 $18.53 C 4 168,311 4,914 2.9% 0 0.0% 4,914 2.9% 2.9% 0 2,400 $27.00 Total 18 1,104,478 109,509 9.9% 0 0.0% 109,509 9.9% 10.6% 8,068 16,454 $18.91 A 6 1,583,702 296,428 18.7% 24,235 1.5% 320,663 20.2% 19.3% -15,744 -45,829 $15.36 B 62 6,157,205 1,693,442 27.5% 161,867 2.6% 1,855,309 30.1% 30.1% -4,137 -25,726 $14.55 C 38 2,112,761 231,476 11.0% 1,600 0.1% 233,076 11.0% 10.4% -14,195 -22,539 $13.15 Total 106 9,853,668 2,221,346 22.5% 187,702 1.9% 2,409,048 24.4% 24.1% -34,076 -94,094 $14.50 A 1 61,049 12,051 19.7% 0 0.0% 12,051 19.7% 23.2% 2,092 337 $25.00 B 16 742,401 59,476 8.0% 0 0.0% 59,476 8.0% 9.2% 8,909 8,909 $27.02 C 3 151,836 4,600 3.0% 0 0.0% 4,600 3.0% 1.9% -1,700 -2,550 $16.84 Total 20 955,286 76,127 8.0% 0 0.0% 76,127 8.0% 8.9% 9,301 6,696 $26.24 Southeast/Outlier Southw est Southw est Far and Outlier Northw est/Outlier Richmond/Fountainview San Felipe/Voss South South Main/Med Center Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  7. 7. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET OFFICE DEVELOPMENT PIPELINE Houston’s construction pipeline continues to expand with 9.4 million SF under construction at the end of Q2 2013. The table below includes buildings containing 75,000 SF or greater. HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED COLLIERS INTERNATIONAL | P. 7 Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q2-2013 Q1-2013 Q2-2013 YTD-2013 AVG($/SF) A 32 13,468,291 1,472,029 10.9% 234,731 1.7% 1,706,760 12.7% 13.3% 362,253 294,333 $32.86 B 49 6,356,670 905,344 14.2% 4,732 0.1% 910,076 14.3% 14.6% 16,736 40,719 $22.94 C 6 369,268 4,717 1.3% 0 0.0% 4,717 1.3% 0.9% -1,499 -3,155 $19.57 Total 87 20,194,229 2,382,090 11.8% 239,463 1.2% 2,621,553 13.0% 13.5% 377,490 331,897 $28.88 A 22 6,256,478 437,668 7.0% 44,639 0.7% 482,307 7.7% 9.4% 104,000 10,464 $33.47 B 50 5,705,008 678,078 11.9% 18,944 0.3% 697,022 12.2% 12.7% 28,306 -5,875 $18.93 C 11 721,969 59,494 8.2% 0 0.0% 59,494 8.2% 8.0% -1,937 -1,933 $15.05 Total 83 12,683,455 1,175,240 9.3% 63,583 0.5% 1,238,823 9.8% 10.8% 130,369 2,656 $26.20 A 14 2,992,274 22,589 0.8% 16,384 0.5% 38,973 1.3% 0.3% 200,695 226,412 $36.97 B 41 2,631,922 241,535 9.2% 12,133 0.5% 253,668 9.6% 11.1% 66,514 36,270 $21.25 C 1 24,080 2,000 8.3% 0 0.0% 2,000 8.3% 8.3% 0 1,500 $19.20 Total 56 5,648,276 266,124 4.7% 28,517 0.5% 294,641 5.2% 5.5% 267,209 264,182 $27.36 West Loop/Galleria Westchase The Woodlands Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF) Building Name Address Submarket SF Pre- Leased Developer Est. Delivery ExxonMobil North Campus I-45 & Springw oods Village Pkw y Woodlands 3,000,000 100.00% ExxonMobil (Gilbane Building Co) Jun-14 Anadarko Tow er 2 1201 Lake Robbins Dr Woodlands 550,000 100.00% Patrinely Group Inc Apr-14 Energy Center Three 935 N Eldridge Pky Katy Freew ay 520,340 100.00% Principal Real Estate Investors & Trammel Crow Company Nov-14 Energy Tow er III 11740 Katy Freew ay Katy Freew ay 428,831 100.00% Mac Haik Realty LLC Jan-14 Tw o BriarLake Plaza 2050 W Sam Houston Pky S Westchase 331,689 50.80% Cassidy Turley Mar-14 Energy Crossing II 15011 Katy Freew ay Katy Freew ay 321,508 63.60% Opus Corporation Aug-13 Murphy Exploration 9805 Katy Freew ay Katy Freew ay 320,000 64.90% MetroNational Corp Nov-13 3009 Post Oak Blvd. Building 3009 Post Oak Blvd Galleria/Uptow n 302,536 21.40% Skanska Commercial Development Jul-13 Research Forest Lakeside 4 2445 Technology Forest Blvd Woodlands 300,000 50.00% Warmack Investments Jul-13 Granite Briarpark Green 3151 Briarpark Dr Westchase 299,664 2.09% Granite Properties Jul-13 Westgate I 17220 Katy Fw y Katy Freew ay West 248,500 38.75% Transw estern Dec-13 8 West Centre 3505 W Sam Houston Pky N Katy Freew ay 228,000 100.00% CORE Parkw ay Central, Ltd Jul-13 Mustang Engineering 17325 Park Row Katy Freew ay 225,885 100.00% Transw estern Dec-13 The Offices at Greenhouse 18918 Katy Fw y Katy Freew ay West 203,149 64.07% Stream Realty Partners Jul-14 Building 5 - Repsol 2455 Technology Forest Blvd Woodlands 200,000 100.00% Warmack Investments May-14
  8. 8. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET COLLIERS INTERNATIONAL | P. 8 OFFICE DEVELOPMENT PIPELINE - CONTINUED COLLIERS INTERNATIONAL NORTH AMERICAN DATA STANDARDS Effective as of 2Q 2013 the data criteria in this report and any future reports reflects the Colliers International North American Data Standards. Standards can be reviewed at www.colliers.com/houston/insights/resources/datastandards Building Name Address Submarket SF Pre- Leased Developer Est. Delivery One Hughes Landing 1800 Hughes Landing Blvd Woodlands 197,841 34.86% The Woodlands Development Company, L.P. Sep-13 Tw o Hughes Landing Hughes Landing Blvd Woodlands 197,719 0.00% The Woodlands Development Company, L.P. Apr-14 17320 Katy Freew ay Building 17320 Katy Freew ay Katy Freew ay 186,375 100.00% Transw estern Dec-13 Texas Instruments Hw y 59 S & University Blvd E Fort Bend Co/Sugar Land 165,000 100.00% Planned Community Developers Mar-14 Sam Houston Crossing II 10344 Sam Houston Pky N Northw est Far 159,056 68.30% Duke Realty Jul-13 Mason Creek Office Center 21420 Merchants Way Katy Freew ay 135,716 0.00% Myers, Crow & Saviers Jul-13 Blvd Place 1 1 Blvd Place Galleria/Uptow n 130,916 56.57% Wulfe & Co. Oct-13 LaCenterra II 23501 Cinco Ranch Blvd Southw est Outlier 122,000 0.00% Transw estern Apr-14 CityCentre Four 840 W Sam Houston Pky N Katy Freew ay 120,052 52.75% Midw ay Companies Jul-13 21920 Merchants Way Building 21920 Merchants Way Northw est Outlier 103,575 100.00% Interw est Holdings Nov-13 Blvd Place 2 2 Blvd Place Galleria/Uptow n 80,002 0.00% Wulfe & Co. Jun-14 4306 Yoakum Blvd 4306 Yoakum Blvd Allen Parkw ay (Midtow n) 80,000 0.00% Hansen Properties Mar-14 24301 Tomball Pkw y Building 24301 Tomball Pkw y Northw est Outlier 68,676 100.00% Emerus Dev Co LLC Nov-13 5655 W Sam Houston Pky N Building 5655 W Sam Houston Pky N FM 1960/Hw y 249 48,664 100.00% Priority Houston Props LLC Oct-13 Grogan's Ridge Office Condominiums2219 Saw dust Rd Woodlands 43,695 91.72% SHB Development LLC Aug-13 The Entrust Building 22322 Grand Corner Dr Southw est Outlier 32,542 69.18% NAI Houston Dec-13 Woodlands Gatew ay 26865 I-45 Woodlands 23,051 0.00% Archw ay Properties Jul-13
  9. 9. RESEARCH & FORECAST REPORT | Q2 2013 | HOUSTON OFFICE MARKET Accelerating success. COLLIERS INTERNATIONAL 1223 W. Loop South Suite 900 Houston, Texas 77027 Main +1 713 222 2111 LISA R. BRIDGES Director of Market Research | Houston Direct +1 713 830 2125 Fax +1 713 830 2118 lisa.bridges@colliers.com The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients’ success. This is evident throughout our platform—from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That’s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the “best places to work” by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. COLLIERS INTERNATIONAL | P. 9

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