Q1 2012 Houston Office Market Report

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Q1 2012 Houston Office Market Report

  1. 1. Q1 2012 | OFFICE MARKET HOUSTON OFFICE MARKETRESEARCH & FORECAST REPORT Houston’s Class A Suburban Office Rental Rate Increases 5.5% Houston’s office market has undergone significant changes in the past twelve months benefiting from positive absorption, falling vacancy, and rising rental rates. Increased leasing activity has made it harder to find available blocks of quality Class A office space, leading to new office MARKET INDICATORS construction. Demand for both multi-tenant and single tenant buildings are spurring this new growth. Q1 2011 Q1 2012CITYWIDE NET Expansion in the energy sector has spurred demand for office space. Anadarko has begunABSORPTION (SF) 378k 1.1m construction on a second office tower (550,000 SF) in The Woodlands, and Phillips 66 recently) announced plans to build a new headquarters in West Houston.CITYWIDE AVERAGE The Woodlands Development Company currently has 3 Waterway Square Place underVACANCY 15.9% 14.6% construction where Nexeo Solutions pre-leased 64,000 square feet and Waste Connections pre- leased 49,929 square feet in the 11-story, 234,000 square foot Class A project. A complete listCITYWIDE AVERAGE of properties currently under construction can be found on page 7 of this report.RENTAL RATE $22.81 $23.56 Citywide, overall vacancy levels decreased by 90 basis points between quarters from 15.5% to 14.6% and by 130 basis points from a year ago. The most significant decrease in vacancyCLASS A RENTAL RATE between quarters was the CBD Class A vacancy rate, which decreased by a remarkable 300 basis points from 14.3% to 11.3%. CBD $34.19 $36.42 The average citywide rental rate rose by 1.5% between quarters to $23.56 from $23.20 per SUBURBAN $26.91 $28.86 square foot, and on a year-over-year basis by 3.3% to $23.56 per square foot from $22.81 perCLASS A VACANCY square foot. The largest quarterly rental rate increase was Class A suburban office rental rates CBD 12.6% 11.3% which increased by 5.5% to $28.86 per square foot from $27.34. SUBURBAN 16.6% 14.4% The Houston metropolitan area added 93,400 jobs between February 2011 and February 2012, a 3.7% increase. Unemployment fell to 7.2% from 8.4% one year ago. Houston area home sales increased by 16.9% compared to February 2011 sales. 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. JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) ABSORPTION, NEW SUPPLY & VACANCY RATESUNEMPLOYMENT 2/11 2/12 3,000,000 17.0%HOUSTON 8.4% 7.2% 2,500,000TEXAS 8.1% 7.2% 2,000,000 15.0%U.S. 9.5% 8.7% 1,500,000 13.0% 1,000,000 11.0% ANNUAL # OF JOBS 500,000JOB GROWTH CHANGE ADDED 9.0% 0HOUSTON 3.7% 93.4k -500,000 7.0%TEXAS 2.6% 266.2k -1,000,000 5.0%U.S. 1.9% 2.6m Net Absorption New Supply Vacancywww.colliers.com/houston
  2. 2. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET VACANCY & AVAILABILITY ABSORPTION & DEMAND CBD VS. SUBURBAN Overall vacancy levels decreased by 90 basis Houston recorded positive net absorption of CLASS A OFFICE VACANCY points between quarters to 14.6% from 15.5%. 1,074,493 SF in the first quarter. Contributing to The average suburban vacancy rate decreased the first quarter’s positive gain was suburban 20.0% by 60 basis points to 14.7% from 15.3% the Class A space with a positive net absorption of 18.0% previous quarter, while CBD vacancy decreased 964,119 SF, followed by CBD Class A space with 16.0% by 230 basis points to 14.3% from 16.6%. On a positive net absorption of 239,148 SF. The 14.0% year-over-year basis, the city-wide vacancy majority of the suburban positive absorption 12.0% 10.0% rate decreased by 130 basis points to 14.6% was due to The University of Texas MD 8.0% from 15.9%. The suburban vacancy rate Anderson Cancer Center moving into their new 6.0% decreased by 110 basis points to 14.7% from administrative building in the South 4.0% 15.8%, and the CBD vacancy rate decreased by Main/Medical Center submarket. Administrative 170 basis points to 14.3% from 16.0%. employees were relocated from eight different The CBD Class A vacancy rate decreased by locations to the new building. 300 basis points to 11.3% from 14.3% between RENTAL RATES CBD VACANCY SUBURBAN VACANCY quarters, while the CBD Class B vacancy rate The average citywide rental rate rose between decreased 50 basis points to 17.5% from 18.0%. quarters from $23.20 to $23.56 per square The suburban Class A vacancy rate decreased foot. The CBD Class A average quoted rental by 200 basis points to 12.4% from 14.4% rate increased by 3.2% from $35.29 to $36.42 CLASS A OFFICE RENTS between quarters, while the suburban Class B per square foot, while the suburban Class A $40.00 vacancy rate increased between quarters from average rate increased 5.56% from $27.34 to $38.00 16.6% to 17.3%. $28.86 per square foot. $36.00 Citywide, a total of 39 office properties (7 less The CBD Class B average rate increased slightly $34.00 than the previous quarter) had a minimum of from $23.65 to $23.81 per square foot, while 100,000 SF available for lease in both direct the suburban Class B average rate rose from $32.00 and sublease space, and 12 of those properties $18.30 to $19.05 per square foot between $30.00 have over 200,000 SF available. quarters. $28.00 Available sublease space totaled 2.4 million On a year-over-year basis the citywide average $26.00 SF, including 0.9 million SF of vacant space and rental rate increased by 3.3% from $22.81 to 1.5 million SF of subleases available for $23.56 per square foot. occupancy over the next 18 months. CBD RENTS SUBURBAN RENTS QUOTED GROSS RENTAL RATES FOR TOP PERFORMING OFFICE BUILDINGS YEAR AVAIL. RENT BUILDING NAME ADDRESS SUBMARKET RBA (SF) LEASED OWNER BUILT SF ($/SF) New York State Common Retirement 5 Houston Center 1401 McKinney St CBD 600,000 2002 91.8% 82,822 $42.65 Fund 1000 Main 1000 Main St CBD 837,161 2003 98.7% 15,094 $44.57 KAN AM 1000 Main LP Heritage Plaza 1111 Bagby CBD 1,089,266 1986 86.7% 144,551 $41.90 Brookfield Office Properties BG Group Place 811 Main CBD 972,474 2011 70.1% 291,079 $42.00 CalPERS Wells Fargo Bank Tower 1300 Post Oak Blvd. Galleria 491,254 1983 94.1% 53,711 $37.15 TIAA-CREF Williams Tower 2800 Post Oak Blvd Galleria 1,476,973 1983 91.8% 183,582 $37.66 Hines 9 Greenway Plaza 9 Greenway Greenway 746,824 1978 93.6% 71,503 $31.40 Crescent Real Estate Equities Enclave Business Park 1200 Enclave Pky Katy Freeway 149,683 1999 82.4% 39,094 $33.00 Piedmont Office Realty Trust, Inc. San Felipe Plaza 5847 San Felipe St San Felipe/Voss 980,472 1984 84.8% 189002 $36.42 Thomas Properties Group, L.P. One BriarLake Plaza 2000 W. Sam Houston Westchase 502410 2000 100% 47,332 $41.55 Behringer Harvard Waterway Square 4 Waterway Ave. Woodlands 232,364 2009 98.9% 2,539 $37.75 The Woodlands Development Company Note: Avail. SF includes direct and sublet space. Source: CoStar Property COLLIERS INTERNATIONAL | P. 2
  3. 3. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET SALES ACTIVITY Houston’s Office Investment sales activity increased between quarters with 21 properties changing hands, compared to 10 in the previous quarter. According to CoStar Comps, Houston office sale transactions had a total dollar volume of $269.2 million, averaging $125/SF with an 8.0% capitalization rate. Some of the more significant transactions that closed during the first quarter are listed in the table below. Q1 2012 SIGNIFICANT SALES TRANSACTIONS SALE BUILDING NAME SUBMARKET RBA (SF) YEAR BUILT BUYER SELLER $/SF CLOSED PRICE Brookhollow Renovated Parmenter Realty Northwest 806,004 Thomas Properties $71M $88 1/2012 Central I, II & III in 2009 Partners Renovated Parmenter Realty KBS Real Estate 2200 West Loop S Galleria/Uptown 201,720 $30M $149 1/2012 in 2000 Partners Investment Trust, Inc. Skanska USA Building, 15375 Memorial Dr Katy Freeway 349,674 1985 Allstate Insurance Co $15.8M $45 2/2012 Inc. The Plaza at CORE Real Estate, Katy Freeway 344,296 2008 The Azrieli Foundation $13.5M $312 1/2012 Enclave LLC Highland Resources Cougar Investors 510 Bering San Felipe/Voss 100,840 1984 $9.9M $135 2/2012 Inc. LTD, LLLP LEASING ACTIVITY Houston’s office leasing activity reached 3.2 million SF in the first quarter. Below is a list of the significant 1Q 2012 lease transactions. 1Q 2012 TOP OFFICE LEASES BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE 20555 Hwy 249 FM 1960/Hwy 249 497,124 Noble Energy Jan-12 1 1221 McKinney St CBD 310,178 LyondellBasell Industries Jan-12 Post Oak Central Three Galleria/West Loop 131,068 Apache Corporation Jan-12 Chase Center 601 Travis CBD 62,261 Dynegy Jan-12 3 Waterway Square Place Woodlands 49,929 Waste Connections, Inc. Feb-12 920 Memorial City Way Katy Freeway 49,000 Cobalt International Energy Mar-12 1 Two Eldridge Place Katy Freeway 46,000 Sunqaurd VeriCenter, Inc. Mar-12 2 3 Waterway Square Place Woodlands 42,684 Nexeo Solutions, LLC Mar-12 Phoenix Tower Greenway Plaza 33,394 New York Life Mar-12 1 2000 West Loop South Galleria/West Loop 31,744 Post Oak Bank, N.A. Mar-12 BG Group Place 811 Main CBD 27,126 Louis Dreyfus Energy Services Feb-12 The Reserve at Sierra Pines Woodlands 27,253 Strike, LLC Mar-12 Heritage Plaza 1111 Bagby CBD 26,656 McGraw Hill Jan-12 One Eldridge Place Katy Freeway 20,485 Marubeni Offshore Production1, 2 Mar-12 1 Renewal 2 Expansion 3 Sublease COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN & CITYWIDE) Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate # of Class Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q1-2012 Q4-2011 Q1-2012 Q4-2011 AVG ($/SF) Bldgs. CBD A 27 26,122,128 2,596,084 9.9% 345,372 1.3% 2,941,456 11.3% 14.3% 239,148 174,827 $36.42 B 39 10,184,893 1,771,945 17.4% 15,128 0.1% 1,787,073 17.5% 18.0% 20,857 87,259 $23.81 C 23 2,025,972 741,392 36.6% 0 0.0% 741,392 36.6% 43.9% 6,841 11,791 $19.45 Total 89 38,332,993 5,109,421 13.3% 360,500 0.9% 5,469,921 14.3% 16.6% 266,846 273,877 $32.03 SUBURBAN A 247 67,598,251 8,021,881 11.9% 350,625 0.5% 8,372,506 12.4% 14.4% 964,119 631,143 $28.86 B 918 74,358,163 12,418,264 16.7% 431,586 0.6% 12,849,850 17.3% 16.6% -172,551 269,402 $19.05 C 443 18,274,749 2,300,383 12.6% 35,754 0.2% 2,336,137 12.8% 13.3% 16,079 52,057 $15.71 Total 1608 160,231,163 22,740,528 14.2% 817,965 0.5% 23,558,493 14.7% 15.3% 807,647 952,602 $22.17 OVERALL A 274 93,720,379 10,617,965 11.3% 695,997 0.7% 11,313,962 12.1% 14.3% 1,203,267 805,970 $30.22 B 957 84,543,056 14,190,209 16.8% 446,714 0.5% 14,636,923 17.3% 16.7% -151,694 356,661 $19.05 C 466 20,300,721 3,041,775 15.0% 35,754 0.2% 3,077,529 15.2% 15.9% 22,920 63,848 $15.14 Total 1697 198,564,156 27,849,949 14.0% 1,178,465 0.6% 29,028,414 14.6% 15.5% 1,074,493 1,226,479 $23.56 HOUSTON SUBURBAN OFFICE MARKET SUMMARY Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q1-2012 Q4-2011 Q1-2012 Q4-2011 AVG ($/SF) Allen Parkway A 3 1,476,605 211,147 14.3% 0 0.0% 211,147 14.3% 15.8% -21,557 4,198 $29.10 B 30 2,868,619 203,053 7.1% 8,531 0.3% 211,584 7.4% 7.9% 14,776 -37,199 $24.09 C 24 1,109,650 374,736 33.8% 0 0.0% 374,736 33.8% 35.6% 0 3,434 $19.64 Total 57 5,454,874 788,936 14.5% 8,531 0.2% 797,467 14.6% 15.8% -6,781 -29,567 $26.34 Baytown B 4 244,544 0 0.0% 0 0.0% 0 0.0% 2.8% 6,802 0 $14.53 C 4 201,358 8,367 4.2% 0 0.0% 8,367 4.2% 3.5% -1,284 -1,496 $16.25 Total 8 445,902 8,367 1.9% 0 0.0% 8,367 1.9% 3.1% 5,518 -1,496 $15.11 Bellaire A 6 1,086,526 122,806 11.3% 0 0.0% 122,806 11.3% 9.9% -14,816 -19,296 $24.75 B 13 1,714,873 227,836 13.3% 3,710 0.2% 231,546 13.5% 14.4% 15,932 -10,895 $20.99 C 6 512,242 50,792 9.9% 0 0.0% 50,792 9.9% 25.4% 10,356 -3,428 $14.30 Total 25 3,313,641 401,434 12.1% 3,710 0.1% 405,144 12.2% 14.9% 11,472 -33,619 $22.33 Conroe  A 1 60,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 3 129,475 33,213 25.7% 0 0.0% 33,213 25.7% 26.8% 1,517 0 $15.79 C 8 376,307 2250 0.6% 0 0.0% 2,250 0.6% 0.8% 625 0 $7.98 Total 12 565,782 35,463 6.3% 0 0.0% 35,463 6.3% 6.9% 2,142 0 $15.31 E. Fort Bend/Sugar Land A 18 3,382,781 838,005 24.8% 10,641 0.3% 848,646 25.1% 26.9% 7,955 34,232 $28.72 B 35 2,086,565 301,423 14.4% 90,471 4.3% 391,894 18.8% 12.6% -51,353 57,705 $19.26 C 5 216,013 3,260 1.5% 0 0.0% 3,260 1.5% 0.8% -1,592 0 $18.50 Total 58 5,685,359 1,142,688 20.1% 101,112 1.8% 1,243,800 21.9% 20.6% -44,990 91,937 $23.88 COLLIERS INTERNATIONAL | P. 4
  5. 5. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q1-2012 Q4-2011 Q1-2012 Q4-2011 AVG ($/SF) FM 1960 A 13 2,307,455 808,648 35.0% 3,051 0.1% 811,699 35.2% 58.7% 45,556 57,778 $24.46 B 87 4,881,030 910,954 18.7% 55,146 1.1% 966,100 19.8% 18.8% -61,926 -3,694 $15.46 C 19 664,680 61,848 9.3% 19,615 3.0% 81,463 12.3% 12.1% -1,246 5,148 $13.87 Total 119 7,853,165 1,781,450 22.7% 77,812 1.0% 1,859,262 23.7% 30.1% -17,616 59,232 $18.43 Greenway A 15 6,144,417 558,840 9.1% 13,129 0.2% 571,969 9.3% 13.4% 69,427 18,787 $28.44 B 26 2,579,187 321,708 12.5% 6,346 0.2% 328,054 12.7% 7.7% -30,114 145,592 $22.12 C 20 839,062 242,196 28.9% 0 0.0% 242,196 28.9% 30.9% 17121 -1439 $17.38 Total 61 9,562,666 1,122,744 11.7% 19,475 0.2% 1,142,219 11.9% 12.4% 56,434 162,940 $25.26 Gulf Freeway/Pasadena A 1 52,362 8,279 15.8% 0 0.0% 8,279 15.8% 25.0% 4,819 1,263 $27.44 B 28 1,709,836 210,343 12.3% 6,405 0.4% 216,748 12.7% 13.1% 7,102 -8,128 $19.38 C 24 951,109 100,365 10.6% 0 0.0% 100,365 10.6% 10.7% -6,187 324 $14.34 Total 53 2,713,307 318,987 11.8% 6,405 0.2% 325,392 12.0% 12.5% 5,734 -6,541 $18.29 I-10 East B 4 274,672 72,711 26.5% 0 0.0% 72,711 26.5% 27.8% 5,750 -456 $14.59 C 6 189,062 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - Total 10 463,734 72,711 15.7% 0 0.0% 72,711 15.7% 16.5% 5,750 -456 $14.59 Katy Freeway A 44 11,147,153 935,821 8.4% 81,463 0.7% 1,017,284 9.1% 10.5% 141,681 96,871 $30.51 B 90 7,913,184 1,490,558 18.8% 67,220 0.8% 1,557,778 19.7% 18.5% -90,922 105,276 $18.75 C 36 1,663,336 163,346 9.8% 5,594 0.3% 168,940 10.2% 10.5% 5,136 -20,639 $15.28 Total 170 20,723,673 2,589,725 12.5% 154,277 0.7% 2,744,002 13.2% 13.5% 55,895 181,508 $23.04 Kingwood/Humble A 1 91,962 41,824 45.5% 0 0.0% 41,824 45.5% 45.5% 0 0 $30.10 B 63 1,825,128 126,957 7.0% 1,000 0.1% 127,957 7.0% 7.6% 14,965 -4,298 $19.39 C 84 760,805 28,835 3.8% 0 0.0% 28,835 3.8% 5.5% 13,184 -17,153 $16.91 Total 148 2,677,895 197,616 7.4% 1,000 0.0% 198,616 7.4% 8.3% 28,149 -21,451 $20.37 NASA/Clear Lake A 9 1,374,794 194,322 14.1% 0 0.0% 194,322 14.1% 15.0% -6,044 69,916 $23.57 B 46 3,049,616 564,377 18.5% 0 0.0% 564,377 18.5% 14.1% -118,249 8,825 $19.29 C 25 913,506 143,046 15.7% 1100 0.1% 144,146 15.8% 12.6% -17,474 10,520 $14.65 Total 80 5,337,916 901,745 16.9% 1,100 0.0% 902,845 16.9% 14.1% -141,767 89,261 $19.71 North Belt/Greenspoint A 19 4,346,708 325,755 7.5% 62,232 1.4% 387,987 8.9% 8.4% -64,198 -33,509 $20.64 B 56 5,819,882 1,177,134 20.2% 83,411 1.4% 1,260,545 21.7% 21.5% 21,576 2,487 $16.50 C 20 1,225,036 276,857 22.6% 9,445 0.8% 286,302 23.4% 24.7% 16,243 -1,453 $13.09 Total 95 11,391,626 1,779,746 15.6% 155,088 1.4% 1,934,834 17.0% 17.0% -26,379 -32,475 $16.92 Northeast Far and Outlier B 5 301,773 77,923 25.8% 0 0.0% 77,923 25.8% 25.8% 0 -7,195 $21.79 C 5 129,152 16,333 12.6% 0 0.0% 16,333 12.6% 14.1% 1,867 0 $11.62 Total 10 430,925 94,256 21.9% 0 0.0% 94,256 21.9% 22.3% 1,867 -7,195 $20.03 COLLIERS INTERNATIONAL | P. 5
  6. 6. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q1-2012 Q4-2011 Q1-2012 Q4-2011 AVG ($/SF) Northwest/Outlier A 19 3,481,796 653,811 18.8% 22,922 0.7% 676,733 19.4% 24.7% 183,829 75,618 $24.15 B 69 6,241,411 1,371,502 22.0% 33,696 0.5% 1,405,198 22.5% 24.3% 21,686 23,913 $15.82 C 40 1,541,319 161,831 10.5% 0 0.0% 161,831 10.5% 10.9% -544 7,072 $12.40 Total 128 11,264,526 2,187,144 19.4% 56,618 0.5% 2,243,762 19.9% 22.7% 204,971 106,603 $18.57 Richmond/Fountainview B 14 775,717 247,444 31.9% 0 0.0% 247,444 31.9% 12.0% -153,993 -12,426 $17.40 C 16 598,633 106,218 17.7% 0 0.0% 106,218 17.7% 13.5% -22,692 -534 $13.49 Total 30 1,374,350 353,662 25.7% 0 0.0% 353,662 25.7% 12.6% -176,685 -12,960 $16.20 San Felipe/Voss A 3 1,714,930 297,783 17.4% 0 0.0% 297,783 17.4% 18.1% 12,726 -60,221 $31.49 B 32 3,306,422 260,225 7.9% 29,863 0.9% 290,088 8.8% 10.0% 47,631 -18,158 $20.00 C 4 239,680 48,425 20.2% 0 0.0% 48,425 20.2% 20.1% -358 -1,735 $14.63 Total 39 5,261,032 606,433 11.5% 29,863 0.6% 636,296 12.1% 13.1% 59,999 -80,114 $23.82 South A 1 80,000 19,000 23.8% 0 0.0% 19,000 23.8% 25.9% 1,702 -1,702 $28.17 B 13 479,107 70,680 14.8% 0 0.0% 70,680 14.8% 19.3% 3,978 2,394 $17.38 C 4 223,029 76,163 34.1% 0 0.0% 76,163 34.1% 18.9% 0 237 $13.88 Total 18 782,136 165,843 21.2% 0 0.0% 165,843 21.2% 19.8% 5,680 929 $18.23 South Main/Med Center A 14 4,474,422 371,612 8.3% 2000 0.0% 373,612 8.3% 8.4% 562,801 138,704 $29.77 B 35 4,064,970 305,841 7.5% 0 0.0% 305,841 7.5% 6.5% -43,940 16,179 $24.08 C 32 2,486,810 161,372 6.5% 0 0.0% 161,372 6.5% 5.7% 0 17,577 $18.48 Total 81 11,026,202 838,825 7.6% 2,000 0.0% 840,825 7.6% 7.1% 518,861 172,460 $25.32 Southeast/Outlier A 1 159,304 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 9 477,658 118,508 24.8% 0 0.0% 118,508 24.8% 23.6% -5,600 -6,275 $19.67 C 2 118,772 12,533 10.6% 0 0.0% 12,533 10.6% 10.6% 0 0 $24.00 Total 12 755,734 131,041 17.3% 0 0.0% 131,041 17.3% 16.6% -5,600 -6,275 $20.12 Southwest A 6 1,583,702 276,767 17.5% 3,665 0.2% 280,432 17.7% 17.9% 3,050 7,400 $16.12 B 58 5,856,602 1,445,470 24.7% 1,867 0.0% 1,447,337 24.7% 25.6% 46,651 -150,490 $15.73 C 41 2,300,174 198,386 8.6% 0 0.0% 198,386 8.6% 8.7% 2,006 64,813 $12.51 Total 105 9,740,478 1,920,623 19.7% 5,532 0.1% 1,926,155 19.8% 20.3% 51,707 -78,277 $15.36 Southwest Far and Outlier A 1 61,049 33,031 54.1% 0 0.0% 33,031 54.1% 13.5% -25,252 -1,832 $23.00 B 15 696,194 85,386 12.3% 0 0.0% 85,386 12.3% 12.5% 15,479 12,567 $25.17 C 2 94,735 1,000 1.1% 0 0.0% 1,000 1.1% 0.8% 0 0 $16.00 Total 18 851,978 119,417 14.0% 0 0.0% 119,417 14.0% 10.6% -9,773 10,735 $24.97 COLLIERS INTERNATIONAL | P. 6
  7. 7. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q1-2012 Q4-2011 Q1-2012 Q4-2011 AVG ($/SF) West Loop/Galleria A 35 14,737,279 1,463,808 9.9% 107,959 0.7% 1,571,767 10.7% 10.9% 20,785 50,604 $30.04 B 59 7,372,003 1,375,835 18.7% 8,798 0.1% 1,384,633 18.8% 18.9% 10,919 20,408 $21.79 C 4 240,656 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $16.75 Total 98 22,349,938 2,839,643 12.7% 116,757 0.5% 2,956,400 13.2% 13.5% 31,704 71,012 $27.12 Westchase A 21 6,636,105 777,631 11.7% 33,834 0.5% 811,465 12.2% 12.0% 4,841 162,360 $29.27 B 59 6,256,354 1,004,789 16.1% 14,661 0.2% 1,019,450 16.3% 16.3% 6,818 -22,508 $18.46 C 7 339,118 62,224 18.3% 0 0.0% 62,224 18.3% 18.3% 0 -11,301 $15.41 Total 87 13,231,577 1,844,644 13.9% 48,495 0.4% 1,893,139 14.3% 14.2% 11,659 128,551 $23.30 The Woodlands A 16 3,198,901 82,991 2.6% 9,729 0.3% 92,720 2.9% 6.4% 36,814 29,972 $33.16 B 65 3,433,341 414,394 12.1% 20,461 0.6% 434,855 12.7% 14.1% 141,964 155,778 $20.46 C 5 340,505 0 0.0% 0 0.0% 0 0.0% 6.1% 918 2,110 - Total 86 6,972,747 497,385 7.1% 30,190 0.4% 527,575 7.6% 10.0% 179,696 187,860 $24.13 OFFICE DEVELOPMENT PIPELINE Currently, there are 9 buildings in Houston’s construction pipeline. The following table is a summary of those projects. SELECT OFFICE BUILDINGS UNDER CONSTRUCTION PRE- EST. BUILDING NAME ADDRESS SUBMARKET SF LEASED DEVELOPER DELIVERY Anadarko Tower 2 1201 Lake Robbins Dr Woodlands 550,000 100.0% Patrinely Group 2014 Nexen Building 945 Bunker Hill Katy Freeway 331,513 64.3% MetroNational Corp 8/2012 BBVA Compass/2200 Post Oak 2200 Post Oak Blvd. Galleria/Uptown 306,012 59.3% Redstone and Stream 4/2013 Skanska Commercial 3009 Post Oak Blvd. 3009 Post Oak Blvd. Galleria/Uptown 302,536 0.0% 7/2013 Development Research Forest Lakeside – 2445 Technology Forest Blvd Woodlands 300,000 50.0% Warmack Investments 6/2013 Building 4 The Woodlands Development 3 Waterway Square Place 3 Waterway Ave. Woodlands 233,844 67.0% 6/2013 Company, L.P. CityCentre Three 842 W Sam Houston Pky N Katy Freeway 120,211 44.0% Midway Companies 9/2012 Halliburton North Belt Campus Milner Road North Belt/Greenspoint 100,000 100.0% - 1/2013 Datavox Technologies 6650 W Sam Houston Pky S Westchase 48,000 100.0% - 3/2012 HOUSTON OFFICE SUBMARKET MAP COLLIERS INTERNATIONAL | P. 7
  8. 8. RESEARCH & FORECAST REPORT | Q1 2012 | HOUSTON OFFICE MARKET Colliers International Statistics Revenues: $1.8 Billion Countries: 62 Offices: 522 Professionals & Staff: 12,300 Brokers: 4,800 Square Feet Managed: 1,250 Million* Lease/Sale Transactions: 76,000 Total Transaction Value: $68 Billion (Based on 2011 results.) *The combination of Colliers International and FirstService results in 2.5 Billion under management - 2nd largest in the world. Lisa R. Bridges Director of Market Research Houston Direct +1 713 830 2125 Fax +1 713 830 2118 lisa.bridges@colliers.com COLLIERS INTERNATIONAL | HOUSTON 1300 Post Oak Boulevard Suite 200 Houston, Texas 77056 Main +1 713 222 2111 Accelerating success. COLLIERS INTERNATIONAL | P. 8

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