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Q4 2012 | OFFICE MARKET
RESEARCH & FORECAST REPORT
HOUSTON OFFICE MARKET
HOUSTON’S HOT ECONOMY BO...
RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
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RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
Q4 2012 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or great...
RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
Vacancy Rental Rate
Class
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RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED
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RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED
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RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
OFFICE DEVELOPMENT PIPELINE
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RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET
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Q4 2012 Houston Office Market Research Report

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Q4 2012 Houston Office Market Research Report

  1. 1. www.colliers.com/houston Q4 2012 | OFFICE MARKET RESEARCH & FORECAST REPORT HOUSTON OFFICE MARKET HOUSTON’S HOT ECONOMY BOOSTS OFFICE LEASING, SALES, AND DEVELOPMENT ACTIVITY Houston’s strong job growth boosted office leasing in 2012. Fourth quarter leasing activity reached 2.4 million SF, pushing the year-end total to over 12.2 million SF. The Houston metropolitan area added 85,300 jobs between November 2011 and November 2012, an annual increase of 3.2% over the prior year’s job growth. Further, Houston’s unemployment fell to 5.8% from 7.3% one year ago, which bolstered annual Houston area home sales by 27.9%. Expansion in the energy industry has driven demand for new office development as tenants find it harder to locate blocks of quality office space. Currently, over 4.2 million SF of office space is under construction and approximately 50.0% of it is pre-leased. A complete list of properties under construction can be found on page 7 of this report. Houston’s office market posted 824,400 SF of positive absorption in the fourth quarter, pushing the year-end total to 4.4 million SF. Houston’s overall vacancy levels fell to 13.8%, an annual decrease of 170 basis points. The city-wide average rental rate increased from $22.20 per SF to $23.97 per SF over the year, a nearly 8.0% increase. 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. MARKET INDICATORS YE 2011 YE 2012 CITYWIDE NET ABSORPTION (SF) 2.6M 4.4M ) CITYWIDE AVERAGE VACANCY 15.5% 13.8% CITYWIDE AVERAGE RENTAL RATE $23.20 $23.97 CLASS A RENTAL RATE CBD $35.29 $37.02 SUBURBAN $27.34 $28.20 CLASS A VACANCY CBD 14.3% 9.8% SUBURBAN 14.4% 11.4% ABSORPTION, NEW SUPPLY & VACANCY RATES UNEMPLOYMENT 11/11 11/12 Houston 7.3% 5.8% Texas 7.2% 5.8% U.S. 8.2% 7.4% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED Houston 3.2% 85K Texas 2.6% 274K U.S. 1.4% 1.9M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% -1,000,000 -500,000 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Net Absorption New Supply Vacancy
  2. 2. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET $26.00 $28.00 $30.00 $32.00 $34.00 $36.00 $38.00 $40.00 CLASS A OFFICE RENTS CBD RENTS SUBURBAN RENTS 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% CBD VS. SUBURBAN CLASS A OFFICE VACANCY CBD VACANCY SUBURBAN VACANCY QUOTED GROSS RENTAL RATES FOR TOP PERFORMING OFFICE BUILDINGS BUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR BUILT LEASED AVAIL. SF RENT ($/SF) OWNER 717 Texas 717 Texas CBD 696,228 2003 100% 67,509 $43.79 Hines 5 Houston Center 1401 McKinney St CBD 600,000 2002 97.4% 28,500 $43.66 Wells Real Estate Funds 1000 Main 1000 Main St CBD 837,161 2003 98.3% 22,420 $42.00 INVESCO Realty Advisers, Inc. Heritage Plaza 1111 Bagby CBD 1,089,266 1986 99.3% 360,917 $41.94 Brookfield Office Properties BG Group Place 811 Main CBD 972,474 2011 77.2% 221,440 $41.87 CalPERS/Hines Wells Fargo Bank Tower 1300 Post Oak Blvd. West Loop/ Galleria 491,254 1983 98.4% 8,071 $40.15 TIAA-CREF Williams Tower 2800 Post Oak Blvd West Loop/ Galleria 1,476,973 1983 98.9% 16,926 $40.66 Hines REIT 9 Greenway Plaza 9 Greenway Greenway 746,824 1978 95.7% 37,455 $32.90 Crescent Real Estate Equities Two Eldridge Place 757 N Eldridge Pky Katy Freeway 280,322 1986 98.3% 11,882 $34.45 Behringer Harvard REIT I, Inc. San Felipe Plaza 5847 San Felipe St San Felipe/Voss 980,472 1984 89.0% 136,891 $37.92 Thomas Properties Group, L.P. One BriarLake Plaza 2000 W Sam Houston Parkway Westchase 502,410 2000 100.0% 26,910 $44.55 Behringer Harvard Holdings Waterway Plaza II 10001 Woodloch Forest Dr The Woodlands 142560 2001 100.0% 56,826 $38.58 The Lionstone Group Note: Avail. SF includes direct and sublet space. Source: CoStar Property 2COLLIERS INTERNATIONAL | P. VACANCY & AVAILABILITY Houston’s average vacancy rate and the average suburban vacancy rate both decreased by 40 basis points to 13.8% from 14.2% on a quarterly basis. The average CBD vacancy rate decreased by 20 basis points to 13.7% from 13.9% between quarters. On a year-over-year basis, the city-wide vacancy rate decreased by 170 basis points to 13.8% from 15.5%. The average suburban vacancy rate decreased by 150 basis points to 13.8% from 15.3%, and the average CBD vacancy rate decreased by 290 basis points to 13.7% from 16.6%. The CBD Class A vacancy rate decreased by 80 basis points to 9.8% from 10.6% between quarters, while the CBD Class B vacancy rate increased 220 basis points to 20.2% from 18.0%. The suburban Class A and B vacancy rates both decreased by 60 basis points between quarters to 11.4% from 12.0% and to 16.1% from 16.5%, respectively. Of the 1,707 buildings in the Houston office market, only 43 have 100,000 SF of contiguous space available for lease or sublease. Further, only 13 have 200,000 SF of contiguous space available. Available sublease space citywide totals 3.2 million SF or 1.7% of total inventory, of which 1.1 million SF is currently vacant. ABSORPTION & DEMAND Houston recorded positive net absorption of 824,400 SF in the fourth quarter, pushing the year-end absorption total to 4,426,000 SF. Contributing to the fourth quarter’s positive gain was suburban Class A space with positive net absorption of 403,000 SF, followed by CBD Class A space with positive net absorption of 244,800 SF. Some of the larger tenants that moved into their space or expanded into additional space during the third quarter include Seadrill relocating to 64,400 SF in Two Westway from 23,600 SF in Westway One, and several expansions including: Wells Fargo (35,000 SF in Wells Fargo Plaza), Wood Mackenzie, Inc. (expanded to 51,919 SF from 28,986 in San Felipe Plaza), Superior Energy Services (15,165 SF in 13333 Northwest Freeway), and Gregg & Valby, LLP (14,000 SF in 1700 West Loop S). RENTAL RATES The average citywide rental rate increased slightly between quarters increasing to $23.97 from $23.61 per square foot. The CBD Class A average quoted rental rate increased to $37.02 from $36.85 per square foot, while the suburban Class A average quoted rental rate increased to $28.20 from $27.31 per square foot. The CBD Class B average quoted rental rate increased to $25.00 from $24.00 per square foot, while the suburban Class B average quoted rental rate increased to $18.75 from $18.74 per square foot between quarters.
  3. 3. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET Q4 2012 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or greater) BUILDING NAME SUB- MARKET RBA (SF) YEAR BUILT BUYER SELLER SALE PRICE $/SF CAP RATE CLOSED KBR Tower CBD 1,047,748 1973 Corporate Property Associates 17 Global, Inc. Brookfield Office Properties & KBR, Inc. $175M $167 6.80% 11/2012 1800 West Loop S. West Loop/ Galleria 406,634 1982 KBS Strategic Opportunity REIT Pearlmark Real Estate Partners $69M $168 7.00% 12/2012 West Loop I & II Bellaire 313,873 1980 KBS Strategic Opportunity REIT Chase Merritt $36M $117 N/A 12/2012 Reserve at Park Ten Katy Fwy 145,000 2009 CapLease, Inc. Principal Global Investors $35.5M $245 8.20% 12/2012 Woodway Tower West Loop/ Galleria 119,127 1979 Donerail Corporation Fidelis Realty Partners $13M $146 8.00% 10/2012 3COLLIERS INTERNATIONAL | P. SALES ACTIVITY Houston’s office investment sales activity increased between quarters with 33 properties changing hands, compared to 21 in the previous quarter. According to CoStar Comps, Houston office total transaction sales volume was approximately $908 million, averaging $200 per SF. Some of the more significant transactions that closed during the fourth quarter are listed below. LEASING ACTIVITY Houston’s office leasing activity reached 2.4 million SF in the fourth quarter, pushing the year-end total to over 12.2 million SF. Below is a list of Q4 2012 top lease transactions. 1 Renewal 2 Expansion 3 Sublease 4 Pre-lease/under construction Building name/address Submarket SF Tenant Lease date Energy Crossing II Katy Freeway 127,000 Modec International4 Oct-12 8 West Centre Katy Freeway 119,000 Helix Energy Solutions Group4 Nov-12 3555 Timmons Ln Greenway 65,000 Houston-Galveston Area Council 1 Nov-12 One Hughes Landing The Woodlands 51,152 Layne Christensen4 Nov-12 Memorial 6 Center Katy Freeway 34,013 Expro Americas1 Nov-12 8584 Katy Freeway Katy Freeway 33,922 IHS Global, Inc.1 Oct-12 Pennzoil Place North CBD 31,879 Seyfarth Shaw Nov-12 San Felipe Plaza West Loop/Galleria 51,919 Wood Mackenzie, Inc.1,2 Nov-12 One Riverway West Loop/Galleria 20,000 Harper & Pearson1 Nov-12 1800 West Loop West Loop/Galleria 20,000 Quanex Building Nov-12 1442 Lake Front Circle The Woodlands 18,819 Shrieve Chemical Company Oct-12 Memorial 6 Center Katy Freeway 18,275 Deep Gulf Energy, LP1 Oct-12 11111 Wilcrest Green Dr Westchase 18,065 Othon, Inc., Consulting Engineers1 Oct-12 7141 Office City Dr Gulf Freeway/Pasadena 17,852 General Services Administration Oct-12 Decorative Center of Houston West Loop/Galleria 17,356 PreCash, Inc. Oct-12 Dairy Ashford Plaza Katy Freeway 17,287 Resurgent Capital Services, LP Oct-12 13333 Northwest Freeway Northwest 15,165 Superior Energy Services2 Nov-12 BBVA Compass Plaza West Loop/Galleria 15,000 Worldwide Machinery4 Nov-12 1700 West Loop S West Loop/Galleria 13,732 Gregg & Valby, LLP2 Oct-12 Q4 2012 Top Office Leases
  4. 4. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 AVG ($/SF) CBD A 27 26,119,764 2,230,661 8.5% 316,628 1.2% 2,547,289 9.8% 10.6% 244,855 1,026,710 $37.02 B 33 8,297,714 1,665,240 20.1% 6,965 0.1% 1,672,205 20.2% 18.0% 21,647 107,407 $25.00 C 25 2,096,603 788,757 37.6% 0 0.0% 788,757 37.6% 37.2% 2,500 5,091 $19.32 Total 85 36,514,081 4,684,658 12.8% 323,593 0.9% 5,008,251 13.7% 13.9% 269,002 1,139,208 $33.09 SUBURBAN A 246 66,845,822 7,482,308 11.2% 162,980 0.2% 7,645,288 11.4% 12.0% 403,193 2,695,311 $28.20 B 935 74,348,619 11,430,272 15.4% 552,195 0.7% 11,982,467 16.1% 16.5% 215,770 617,223 $18.75 C 441 17,884,647 2,313,093 12.9% 26,974 0.2% 2,340,067 13.1% 12.9% -63,526 -45,166 $15.03 Total 1622 159,079,088 21,225,673 13.3% 742,149 0.5% 21,967,822 13.8% 14.2% 555,437 3,267,368 $22.10 CITYWIDE A 273 92,965,586 9,712,969 10.4% 479,608 0.5% 10,192,577 11.0% 11.6% 648,048 3,741,711 $30.58 B 968 82,646,333 13,095,512 15.8% 559,160 0.7% 13,654,672 16.5% 16.7% 237,417 724,630 $19.32 C 466 19,981,250 3,101,850 15.5% 26,974 0.1% 3,128,824 15.7% 15.4% -61,026 -40,075 $15.47 Total 1707 195,593,169 25,910,331 13.2% 1,065,742 0.5% 26,976,073 13.8% 14.2% 824,439 4,426,266 $23.97 Net Absorption (SF)Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 AVG ($/SF) Allen Parkway A 3 1,478,488 200,837 13.6% 0 0.0% 200,837 13.6% 14.5% 13,152 -11,247 $29.80 B 32 2,984,030 303,943 10.2% 3,718 0.1% 307,661 10.3% 10.0% -16,787 -75,700 $24.04 C 21 969,745 394,690 40.7% 0 0.0% 394,690 40.7% 36.2% -27,850 -21,385 $22.02 Total 56 5,432,263 899,470 16.6% 3,718 0.1% 903,188 16.6% 16.3% -31,485 -108,332 $26.84 Baytown B 4 244,544 0 0.0% 0 0.0% 0 0.0% 0.0% 0 6,802 $17.18 C 3 163,362 0 0.0% 0 0.0% 0 0.0% 2.5% 4,024 3,293 $0.00 Total 7 407,906 0 0.0% 0 0.0% 0 0.0% 1.0% 4,024 10,095 $17.18 Bellaire A 6 1,090,462 216,794 19.9% 5,226 0.5% 222,020 20.4% 26.5% -33,287 -114,030 $24.86 B 13 1,714,873 148,633 8.7% 0 0.0% 148,633 8.7% 8.2% -7,757 98,845 $21.46 C 7 533,622 52,949 9.9% 0 0.0% 52,949 9.9% 9.9% 0 11,749 $14.02 Total 26 3,338,957 418,376 12.5% 5,226 0.2% 423,602 12.7% 14.4% -41,044 -3,436 $22.83 Conroe  A 1 60,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 4 148,970 35,638 23.9% 0 0.0% 35,638 23.9% 23.9% 0 -908 $16.79 C 7 354,307 2,250 0.6% 0 0.0% 2,250 0.6% 0.6% 0 625 - Total 12 563,277 37,888 6.7% 0 0.0% 37,888 6.7% 6.5% 0 -283 $16.79 E. Fort Bend/Sugar Land A 18 3,563,634 838,842 23.5% 6,144 0.2% 844,986 23.7% 23.2% 7,311 104,558 $27.19 B 35 2,092,123 345,478 16.5% 87,600 4.2% 433,078 20.7% 22.3% 27,028 -68,617 $20.20 C 7 276,773 6,237 2.3% 1506 0.5% 7,743 2.8% 2.6% -1,598 -1,598 $18.40 Total 60 5,932,530 1,190,557 20.1% 95,250 1.6% 1,285,807 21.7% 22.1% 32,741 34,343 $24.65 Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF) HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN & CITYWIDE) HOUSTON SUBURBAN OFFICE MARKET SUMMARY
  5. 5. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED 5COLLIERS INTERNATIONAL | P. Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 AVG ($/SF) FM 1960 A 13 2,241,970 1,137,947 50.8% 0 0.0% 1,137,947 50.8% 50.7% 41,590 204,421 $24.28 B 89 4,974,972 994,631 20.0% 67,481 1.4% 1,062,112 21.3% 23.0% 97,327 -99,391 $15.29 C 20 693,603 73,675 10.6% 19,615 2.8% 93,290 13.5% 12.1% -6,769 -8,874 $12.88 Total 122 7,910,545 2,206,253 27.9% 87,096 1.1% 2,293,349 29.0% 30.4% 132,148 96,156 $18.85 Greenway A 16 6,403,983 535,214 8.4% 0 0.0% 535,214 8.4% 8.3% -59,266 44,859 $29.41 B 26 2,549,721 271,736 10.7% 2,000 0.1% 273,736 10.7% 10.4% 8,266 32,502 $23.50 C 22 895,784 273,024 30.5% 0 0.0% 273,024 30.5% 31.4% 8,224 11,464 $17.43 Total 64 9,849,488 1,079,974 11.0% 2,000 0.0% 1,081,974 11.0% 11.0% -42,776 88,825 $25.92 Gulf Freeway/Pasadena A 1 52,362 8,279 15.8% 0 0.0% 8,279 15.8% 15.8% 0 4,819 $30.22 B 28 1,682,643 218,181 13.0% 6,273 0.4% 224,454 13.3% 13.9% 3,647 -14,703 $18.63 C 26 1,006,420 120,370 12.0% 0 0.0% 120,370 12.0% 11.8% -1,802 -22,892 $15.37 Total 55 2,741,425 346,830 12.7% 6,273 0.2% 353,103 12.9% 13.2% 1,845 -32,776 $17.76 I-10 East B 5 342,302 87,262 25.5% 0 0.0% 87,262 25.5% 24.6% -342 10,284 $14.85 C 6 179,665 4,220 2.3% 0 0.0% 4,220 2.3% 2.1% 618 -4,220 - Total 11 521,967 91,482 17.5% 0 0.0% 91,482 17.5% 15.5% 276 5,750 $14.85 Katy Freeway A 44 10,582,810 533,352 5.0% 14,844 0.1% 548,196 5.2% 4.2% 79,004 673,791 $29.79 B 89 7,476,052 997,596 13.3% 105,327 1.4% 1,102,923 14.8% 17.3% -59,831 54,301 $19.41 C 35 1,622,689 125,794 7.8% 3,153 0.2% 128,947 7.9% 10.0% 12,567 24,579 $15.81 Total 168 19,681,551 1,656,742 8.4% 123,324 0.6% 1,780,066 9.0% 9.9% 31,740 752,671 $22.74 Kingwood/Humble A 1 86,665 25,114 29.0% 0 0.0% 25,114 29.0% 45.5% 16,710 16,710 $32.13 B 64 1,668,188 99,833 6.0% 1,000 0.1% 100,833 6.0% 6.7% 10,566 46,885 $20.01 C 82 739,853 25,072 3.4% 0 0.0% 25,072 3.4% 2.4% -7,275 13,184 $17.62 Total 147 2,494,706 150,019 6.0% 1,000 0.0% 151,019 6.1% 6.9% 20,001 76,779 $21.49 NASA/Clear Lake A 8 1,230,469 172,998 14.1% 0 0.0% 172,998 14.1% 14.3% 3,380 -1,290 $23.93 B 45 2,906,147 488,924 16.8% 740 0.0% 489,664 16.8% 15.3% 14,360 -110,850 $19.12 C 26 920,896 196,193 21.3% 1,100 0.1% 197,293 21.4% 20.2% -19,531 -71,699 $14.19 Total 79 5,057,512 858,115 17.0% 1,840 0.0% 859,955 17.0% 15.9% -1,791 -183,839 $19.51 North Belt/Greenspoint A 19 4,348,663 325,541 7.5% 41,044 0.9% 366,585 8.4% 8.8% 16,454 -38,042 $22.66 B 58 5,744,249 1,241,697 21.6% 57,993 1.0% 1,299,690 22.6% 23.1% 30,377 38,764 $16.69 C 20 1,223,182 229,515 18.8% 0 0.0% 229,515 18.8% 20.1% 21,789 73,030 $13.22 Total 97 11,316,094 1,796,753 15.9% 99,037 0.9% 1,895,790 16.8% 17.2% 68,620 73,752 $18.35 Northeast Near and Outlier B 5 301,773 76,883 25.5% 0 0.0% 76,883 25.5% 25.8% 1,040 1,040 $20.84 C 5 133,163 13,991 10.5% 0 0.0% 13,991 10.5% 15.5% 2,342 4,209 $12.48 Total 10 434,936 90,874 20.9% 0 0.0% 90,874 20.9% 23.2% 3,382 1,867 $17.43 Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  6. 6. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED 6COLLIERS INTERNATIONAL | P. Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 AVG ($/SF) Northwest/Outlier A 19 3,464,162 423,005 12.2% 41,068 1.2% 464,073 13.4% 14.6% 43,418 393,626 $22.67 B 67 6,153,473 1,220,830 19.8% 5,789 0.1% 1,226,619 19.9% 22.0% 127,098 206,171 $16.79 C 39 1,523,443 134,050 8.8% 0 0.0% 134,050 8.8% 9.3% 7,858 51,441 $12.26 Total 125 11,141,078 1,777,885 16.0% 46,857 0.4% 1,824,742 16.4% 18.0% 178,374 651,238 $18.33 Richmond/Fountainview B 14 774,150 253,552 32.8% 0 0.0% 253,552 32.8% 32.6% -556 -160,101 $16.05 C 16 598,633 96,821 16.2% 0 0.0% 96,821 16.2% 16.0% -834 -16,418 $13.01 Total 30 1,372,783 350,373 25.5% 0 0.0% 350,373 25.5% 25.4% -1,390 -171,962 $15.26 San Felipe/Voss A 3 1,714,930 317,929 18.5% 0 0.0% 317,929 18.5% 19.7% 19,201 -10,730 $32.68 B 33 3,344,943 263,564 7.9% 11,339 0.3% 274,903 8.2% 9.5% 46,178 64,773 $20.68 C 3 204,649 63,904 31.2% 0 0.0% 63,904 31.2% 27.2% -5,210 -23,207 $13.00 Total 39 5,264,522 645,397 12.3% 11,339 0.2% 656,736 12.5% 13.6% 60,169 30,836 $24.83 South A 1 80,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 20,702 20.52 B 14 551,107 104,238 18.9% 0 0.0% 104,238 18.9% 15.1% -3,000 -578 $15.64 C 5 192,262 75,370 39.2% 0 0.0% 75,370 39.2% 39.5% -1450 5250 $13.80 Total 20 823,369 179,608 21.8% 0 0.0% 179,608 21.8% 19.7% -4,450 25,374 $16.17 South Main/Med Center A 14 4,471,845 668,518 14.9% 2000 0.0% 670,518 15.0% 15.4% 16,542 601,492 $29.71 B 36 4,146,241 324,976 7.8% 0 0.0% 324,976 7.8% 7.3% 19,885 -8,534 $23.70 C 32 2,401,818 130,277 5.4% 0 0.0% 130,277 5.4% 5.0% -10,471 32,114 $18.72 Total 82 11,019,904 1,123,771 10.2% 2,000 0.0% 1,125,771 10.2% 9.9% 25,956 625,072 $25.29 Southeast/Outlier A 1 159,304 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 13 776,863 118,649 15.3% 0 0.0% 118,649 15.3% 17.1% 3,739 15,205 $18.36 C 2 118,772 4,914 4.1% 0 0.0% 4,914 4.1% 4.1% 0 7,619 $27.00 Total 16 1,054,939 123,563 11.7% 0 0.0% 123,563 11.7% 13.1% 3,739 22,824 $18.72 Southwest A 6 1,583,702 288,369 18.2% 3,665 0.2% 292,034 18.4% 19.6% 37,137 10,529 $16.27 B 61 6,058,435 1,461,486 24.1% 161,867 2.7% 1,623,353 26.8% 24.1% -152,970 -57,710 $15.81 C 40 2,210,889 208,937 9.5% 1,600 0.1% 210,537 9.5% 8.0% -34,416 -33,145 $13.09 Total 107 9,853,026 1,958,792 19.9% 167,132 1.7% 2,125,924 21.6% 19.8% -150,249 -80,326 $15.56 Southwest Far and Outlier A 1 61,049 12,388 20.3% 0 0.0% 12,388 20.3% 49.4% 17,780 -4,609 $25.00 B 16 717,194 71,878 10.0% 745 0.1% 72,623 10.1% 10.2% 667 28,242 $26.88 C 3 151,836 2,050 1.4% 0 0.0% 2,050 1.4% 1.4% 0 -550 $16.00 Total 20 930,079 86,316 9.3% 745 0.1% 87,061 9.4% 11.3% 18,447 23,083 $26.32 Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  7. 7. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET OFFICE DEVELOPMENT PIPELINE Houston’s construction pipeline continues to expand with 4.4 million SF currently under construction. The table below includes buildings 80,000 SF or larger. HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Building Name Address Submarket SF Pre-Leased Developer Est. Delivery Anadarko Tower 2 1201 Lake Robbins Dr The Woodlands 550,000 100.00% Patrinely Group Inc Apr-14 Energy Tower III 11740 Katy Freeway Katy Freeway 428,831 0.00% Mac Haik Realty LLC Jan-14 Energy Crossing II 15011 Katy Freeway Katy Freeway 321,508 64.90% Opus Corporation Aug-13 Murphy Exploration 9805 Katy Freeway Katy Freeway 320,000 100.00% MetroNational Corp Nov-13 BBVA Compass 2200 Post Oak Blvd Galleria/Uptown 306,012 65.40% Redstone and Stream Apr-13 3009 Post Oak Blvd. 3009 Post Oak Blvd Galleria/Uptown 302,536 0.00% Skanska Commercial Development Jul-13 Research Forest Lakeside 4 2445 Technology Forest Blvd The Woodlands 300,000 50.00% Warmack Investments Apr-13 Granite Briarpark Green 3151 Briarpark Dr Westchase 299,664 2.10% Granite Properties Jul-13 3 Waterway Square Place 3 Waterway Ave The Woodlands 232,693 90.30% The Woodlands Development Company, L.P. Jun-13 8 West Centre 3505 W Sam Houston Pky N Katy Freeway 228,000 52.60% CORE Parkway Central, Ltd Jul-13 One Hughes Landing Grogan's Mill Rd The Woodlands 197,841 28.20% The Woodlands Development Company, L.P. Sep-13 17320 Katy Freeway 17320 Katy Freeway Katy Freeway 182,000 1.10% Transwestern Dec-13 Sam Houston Crossing II 10344 Sam Houston Pky N Northwest Far 159,056 0.00% Duke Realty May-13 Mason Creek Office Center 21420 Merchants Way Katy Freeway 135,716 0.00% Myers, Crow & Saviers Apr-13 Blvd Place 1 1 Blvd Place Galleria/Uptown 130,916 56.60% Wulfe & Co. Oct-13 CityCentre Four 840 W Sam Houston Pky N Katy Freeway 120,052 52.80% Midway Companies Jun-13 Haliburton North Campus Bldg Milner Rd & N Sam Houston Pky North Belt/Greenspoint 100,000 100.00% Haliburton Jan-13 Blvd Place 2 2 Blvd Place Galleria/Uptown 80,002 0.00% Wulfe & Co. Jun-14 Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 AVG ($/SF) West Loop/Galleria A 33 14,173,964 1,349,066 9.5% 39,369 0.3% 1,388,435 9.8% 10.0% 24,684 170,832 $31.39 B 58 7,298,163 1,200,590 16.5% 12,617 0.2% 1,213,207 16.6% 16.9% 12,155 99,861 $23.49 C 3 147,042 1562 1.1% 0 0.0% 1,562 1.1% 0.3% -1,129 -1,562 $18.79 Total 94 21,619,169 2,551,218 11.8% 51,986 0.2% 2,603,204 12.0% 12.2% 35,710 269,131 $27.93 Westchase A 22 6,798,460 399,509 5.9% 9,620 0.1% 409,129 6.0% 7.8% 123,216 506,669 $34.20 B 59 6,218,685 782,040 12.6% 10,468 0.2% 792,508 12.7% 13.8% 17,000 135,450 $18.52 C 6 281,047 77,228 27.5% 0 0.0% 77,228 27.5% 26.5% -2,613 -32,840 $18.32 Total 87 13,298,192 1,258,777 9.5% 20,088 0.2% 1,278,865 9.6% 11.0% 137,603 609,279 $26.81 The Woodlands A 16 3,198,900 28,606 0.9% 0 0.0% 28,606 0.9% 2.1% 36,167 97,842 $35.51 B 67 3,478,778 318,034 9.1% 17,238 0.5% 335,272 9.6% 10.7% 37,680 254,378 $21.48 C 5 341,192 0 0.0% 0 0.0% 0 0.0% 0.0% 0 918 - Total 88 7,018,870 346,640 4.9% 17,238 0.2% 363,878 5.2% 6.3% 73,847 353,138 $24.54 Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  8. 8. RESEARCH & FORECAST REPORT | Q4 2012 | HOUSTON OFFICE MARKET Accelerating success. COLLIERS INTERNATIONAL | HOUSTON 1300 Post Oak Boulevard Suite 200 Houston, Texas 77056 Main +1 713 222 2111 8COLLIERS INTERNATIONAL | P. LISA R. BRIDGES Director of Market Research Houston Direct +1 713 830 2125 Fax +1 713 830 2118 lisa.bridges@colliers.com

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