Q1 2013 Houston Office Market Report

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Q1 2013 Houston Office Market Report

  1. 1. Q1 2013 | OFFICE MARKET HOUSTON OFFICE MARKETRESEARCH & FORECAST REPORT HOUSTON’S OFFICE MARKET BUILDING ON A BOOM – 9.4M SF UNDER CONSTRUCTION Houston’s strong job growth continues to boost Houston’s office market in Q1 2013. Although leasing momentum slowed in the first quarter, vacancy MARKET INDICATORS levels only increased 10 basis points between quarters, and decreased by Q1 2012 Q1 2013 120 basis points on an annual basis. Absorption slowed too, due to a lack ofCITYWIDE NET quality blocks of space. Houston’s office market posted only 76,000 SF ofABSORPTION (SF) 1.3M 76K positive net absorption in the first quarter, much less than the 1.3M SF) posted in the same quarter one year ago. Absorption will pick upCITYWIDE AVERAGE momentum again later in the year when some of the 9.4 million SF of officeVACANCY 15.1% 13.9% space under construction is delivered. The citywide average rental rate increased slightly from $23.70 per SF toCITYWIDE AVERAGE $23.86 per SF over the year; however, some of the top-performing Class ARENTAL RATE $23.70 $23.86 rental rates increased by as much as 8.5% to 10.0%.CLASS A RENTAL RATE The Houston metropolitan area added 118,700 jobs between February 2012 CBD $36.43 $36.86 and February 2013, an astounding annual increase of 4.5% over the prior SUBURBAN $27.82 $28.43 year’s job growth. Further, Houston’s unemployment fell to 6.3% fromCLASS A VACANCY 7.3% one year ago, which bolstered annual Houston area home sales by 17.1%. CBD 12.8% 11.9% SUBURBAN 13.6% 11.2% 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 JOB GROWTH & UNEMPLOYMENT 2,500,000 (Not Seasonally Adjusted) 17.0% 2,000,000UNEMPLOYMENT 2/12 2/13 15.0%Houston 7.3% 6.3% 1,500,000Texas 7.2% 6.5% 13.0% 1,000,000U.S. 8.7% 8.1% 11.0% 500,000 ANNUAL # OF JOBS 9.0%JOB GROWTH CHANGE ADDED 0Houston 4.5% 118.7K -500,000 7.0%Texas 3.3% 355.6K -1,000,000 5.0%U.S. 1.7% 2.2M Net Absorption New Supply Vacancywww.colliers.com/houston
  2. 2. RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON OFFICE MARKET VACANCY & AVAILABILITY only 76,000 SF of positive net absorption in the first quarter, much less than the 1.3M SF posted CBD VS. SUBURBAN Although Houston’s overall average vacancy in the same quarter one year ago. Absorption CLASS A OFFICE VACANCY rate increased 10 basis points between will pick up momentum again later in the year quarters, vacancy decreased by 120 basis 20.0% when some of the 9.2 million SF of office space points to 13.9% on an annual basis. Between 18.0% under construction is delivered. quarters, the average CBD vacancy rate 16.0% increased by 30 basis points to 14.0% from CBD Class A space posted the largest loss, with 14.0% 13.7%, as additional sublease space was added 286,000 SF of negative net absorption, mostly to the market. On a year-over-year basis, the due to the addition of sublease space vacated by 12.0% average CBD vacancy rate decreased by 110 Devon. Some of the larger tenants that moved 10.0% basis points from 15.1%. Between quarters, the into new space or expanded into additional 8.0% average suburban vacancy rate increased by 10 space during the first quarter include Energy 6.0% basis points to 13.9% from 13.8%, and Transfer, moving into 220,000 SF in Travis 4.0% decreased 130 basis points from 15.2% over Tower which they purchased in late 2011; Noble the year. Energy moved into 497,124 SF in 20555 Hwy 249; Wood Group Mustang moved into 170,000 The CBD Class A vacancy rate increased by 210 SF in Westgate 2 and Subsea 7 Inc. moved into CBD VACANCY SUBURBAN VACANCY basis points to 11.9% from 9.8% between 100,000 SF in Westgate 1. UHY Advisors TX, quarters. The CBD Class B vacancy rate LLC relocated to 90,000 SF in 2929 Allen decreased more significantly moving 560 basis Parkway from 85,000 SF in 12 Greenway Plaza. CLASS A OFFICE RENTS points to 14.6% from 20.2%. The suburban Class A vacancy rate decreased by 20 basis RENTAL RATES $40.00 points between quarters to 11.2% from 11.4% The average citywide rental rate increased to $38.00 and suburban the Class B vacancy rate $23.86 from $23.70 per square foot on an $36.00 increased by 20 basis points to 16.3% from annual basis, but decreased between quarters 16.1%. $34.00 from $23.97 per square foot. The CBD Class A Of the 1,716 buildings in the Houston office average quoted rental rate decreased to $36.86 $32.00 market, only 43 have 100,000 SF of contiguous from $37.02 from per square foot between $30.00 space available for lease or sublease. Further, quarters, while the suburban Class A average $28.00 only 19 have 200,000 SF of contiguous space quoted rental rate increased to $28.43 from available. Citywide, available sublease space $28.20 per square foot. The average CBD Class $26.00 totals 3.7 million SF or 1.9% of Houston’s total B quoted rental rate decreased to $24.77 from office inventory, of which 1.6 million SF is $25.00 per square foot, while the average currently vacant. suburban Class B quoted rental rate increased CBD RENTS SUBURBAN RENTS to $18.79 from $18.75 per square foot over the ABSORPTION & DEMAND quarter. Absorption slowed too, due to a lack of quality blocks of space. Houston’s office market posted QUOTED GROSS RENTAL RATES FOR EXISTING TOP PERFORMING OFFICE BUILDINGS YEAR AVAIL. RENT BUILDING NAME ADDRESS SUBMARKET RBA (SF) LEASED OWNER BUILT SF ($/SF) 717 Texas 717 Texas CBD 696,228 2003 100.0% 76,892 $43.79 Hines 5 Houston Center 1401 McKinney St CBD 600,000 2002 95.3% 33,843 $43.66 Wells Real Estate Funds 1000 Main 1000 Main St CBD 837,161 2003 96.2% 180,833 $42.00 INVESCO Realty Advisers, Inc. Heritage Plaza 1111 Bagby CBD 1,089,266 1986 99.6% 40,400 $42.00 Brookfield Office Properties BG Group Place 811 Main CBD 972,474 2011 91.1% 86,917 $45.64 CalPERS/Hines Williams Tower 2800 Post Oak Blvd West Loop/Galleria 1,476,973 1983 98.9% 16,926 $47.12 Invesco Real Estate Marathon Oil Tower 5555 San Felipe West Loop/Galleria 1,168,805 1983 95.0% 88,616 $36.60 Hanover Real Estate Partners CityCentre Three 842 W Sam Houston Pky N Katy Freeway 120,211 2012 74.3% 30,950 $40.00 Midway T & C Land Investors San Felipe Plaza 5847 San Felipe St San Felipe/Voss 980,472 1984 87.0% 135,086 $38.00 Thomas Properties Group, L.P. One BriarLake Plaza 2000 W Sam Houston Pky Westchase 502,410 2000 98.1% 63,659 $44.55 Behringer Harvard Holdings 4 Waterway Square The Woodlands Development 4 Waterway Ave The Woodlands 232,364 2008 100.0% 42,838 $41.72 Place Company, L.P. Note: Avail. SF includes direct and sublet space. Source: CoStar Property COLLIERS INTERNATIONAL | P. 2
  3. 3. RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON OFFICE MARKET SALES ACTIVITY Houston’s office investment sales activity increased between quarters with 57 properties changing hands compared to 33 in the previous quarter. According to CoStar Comps, total transaction sales volume for office space in Houston was approximately $892.3 million, averaging $260 per SF. Some of the more significant transactions that closed during the first quarter are listed below. Q1 2013 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or greater) SUB- YEAR SALE CAP BUILDING NAME RBA (SF) BUYER SELLER $/SF CLOSED MARKET BUILT PRICE RATE West Loop/ Williams Tower 1,479,764 1983 Invesco RE Hines REIT $412M $278 6.0% 3/2013 Galleria JP Morgan Asset West Loop/ 1974/ Post Oak Central 1,279,759 Cousins Properties Management JV GE $233M $182 7.5% 2/2013 Galleria 1981 Pension Trust 800 Bell CBD 1,258,000 1962 Shorenstein Properties ExxonMobil Corp $50M $40 N/A 1/2013 LEASING ACTIVITY Houston’s office leasing activity reached 2.7 million SF in the first quarter, about half of the amount of activity posted in the previous quarter. Below is a list of Q1 2013 top lease transactions. Q1 2013 TOP OFFICE LEASES Building name/address Submarket SF Tenant Lease date 1 10001 Richmond Ave Westchase 554,385 Western Geophysical Jan-13 Noble Energy Center Two FM 1960 456,000 Noble Energy4 Jan-13 Two Allen Center CBD 315,814 Chevron 3 Jan-13 San Felipe Plaza San Felipe/Voss 166,136 Ensco International1 Dec-12 1 Waterway Plaza I The Woodlands 158,598 Huntsman International LLC Dec-12 Sugar Creek on the Lake E Fort Bend/Sugar Land 156,617 Undisclosed - Confidential Mar-13 16290 Katy Freeway Katy Freeway 144,000 Conoco Phillips3 Jan-13 8 West Centre Katy Freeway 106,801 Cameron International Corp.4 Jan-13 11 Greenway Plaza Greenway Plaza 86,733 Camden Property Trust4 Jan-13 BG Group Place CBD 75,737 Baker Hostetler Jan-13 3009 Post Oak Blvd West Loop/Galleria 49,000 Datacert Inc.4 Jan-13 Dairy Ashford Plaza Katy Freeway 36,832 Dow Chemical Company Jan-13 1021 Main CBD 28,000 Energy XXI Services2 Jan-13 13430 Northwest Fwy Northwest Far 26,527 RICOH Americas Corporation Jan-13 Williams Tower West Loop/Galleria 23,110 Community Bancorp1 Jan-13 America Tower Allen Parkway 22,229 Huron Consulting Services1 Feb-13 Waterway Plaza II The Woodlands 18,543 Steptoe & Johnson LLP Jan-13 Dairy Ashford Plaza Katy Freeway 17,927 Petrofac Inc Jan-13 One Westway Northwest Far 15,945 Cbeyond Jan-13 Columbia Centre Westchase 12,800 First Continental Mortgage3 Jan-13 1 Renewal 2 Expansion 3 Sublease 4 Pre-lease/proposed or under construction COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH & FORECAST REPORT | Q1 2013 | 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) Q1-2013 Q4-2012 Q1-2013 YE-2012 AVG ($/SF) Bldgs. CBD A 27 26,059,142 2,449,440 9.4% 653,703 2.5% 3,103,143 11.9% 9.8% -286,433 1,026,710 $36.86 B 33 10,424,794 1,488,552 14.3% 32,173 0.3% 1,520,725 14.6% 20.2% 151,480 107,407 $24.77 C 23 2,047,365 788,342 38.5% 0 0.0% 788,342 38.5% 37.6% 415 5,091 $19.32 Total 83 38,531,301 4,726,334 12.3% 685,876 1.8% 5,412,210 14.0% 13.7% -134,538 1,139,208 $32.85 SUBURBAN A 251 67,459,735 7,149,867 10.6% 396,726 0.6% 7,546,593 11.2% 11.4% 380,160 2,695,311 $28.43 B 935 73,913,739 11,634,212 15.7% 450,045 0.6% 12,084,257 16.3% 16.1% -61,812 617,223 $18.79 C 447 17,983,888 2,404,391 13.4% 64,344 0.4% 2,468,735 13.7% 13.1% -107,357 -45,166 $15.04 Total 1633 159,357,362 21,188,470 13.3% 911,115 0.6% 22,099,585 13.9% 13.8% 210,991 3,267,368 $22.00 OVERALL A 278 93,518,877 9,599,307 10.3% 1,050,429 1.1% 10,649,736 11.4% 11.0% 93,727 3,741,711 $30.80 B 968 84,338,533 13,122,764 15.6% 482,218 0.6% 13,604,982 16.1% 16.5% 89,668 724,630 $19.34 C 470 20,031,253 3,192,733 15.9% 64,344 0.3% 3,257,077 16.3% 15.7% -106,942 -40,075 $15.45 Total 1716 197,888,663 25,914,804 13.1% 1,596,991 0.8% 27,511,795 13.9% 13.8% 76,453 4,426,266 $23.86 HOUSTON SUBURBAN OFFICE MARKET SUMMARY Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate AVG Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q1-2013 Q4-2012 Q1-2013 YE-2012 ($/SF) Allen Parkway A 3 1,320,082 146,020 11.1% 19,900 1.5% 165,920 12.6% 13.6% -17,820 -11,247 $28.73 B 30 2,817,023 294,107 10.4% 0 0.0% 294,107 10.4% 10.3% 863 -75,700 $24.40 C 21 969,745 393,447 40.6% 0 0.0% 393,447 40.6% 40.7% 1,243 -21,385 $23.04 Total 54 5,106,850 833,574 16.3% 19,900 0.4% 853,474 16.7% 16.6% -15,714 -108,332 $26.39 Baytown B 4 244,544 3,914 1.6% 0 0.0% 3,914 1.6% 0.0% -3,914 6,802 $17.18 C 4 203,635 0 0.0% 0 0.0% 0 0.0% 0.0% 0 3,293 $0.00 Total 8 448,179 3,914 0.9% 0 0.0% 3,914 0.9% 0.0% -3,914 10,095 $17.18 Bellaire A 6 1,090,472 197,470 18.1% 5,226 0.5% 202,696 18.6% 20.4% -2,183 -114,030 $25.50 B 13 1,714,936 134,382 7.8% 2,647 0.2% 137,029 8.0% 8.7% 11,604 98,845 $21.88 C 7 533,622 51,510 9.7% 0 0.0% 51,510 9.7% 9.9% 1,439 11,749 $14.10 Total 26 3,339,030 383,362 11.5% 7,873 0.2% 391,235 11.7% 12.7% 10,860 -3,436 $23.58 Conroe  A 1 60,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 5 222,789 35,638 16.0% 0 0.0% 35,638 16.0% 23.9% 0 -908 $16.65 C 8 384,307 2,250 0.6% 0 0.0% 2,250 0.6% 0.6% 0 625 $14.68 Total 14 667,096 37,888 5.7% 0 0.0% 37,888 5.7% 6.7% 0 -283 $16.35 E. Fort Bend/Sugar Land A 18 3,564,236 811,500 22.8% 6,144 0.2% 817,644 22.9% 23.7% 27,342 104,558 $27.48 B 35 2,092,322 330,427 15.8% 79,566 3.8% 409,993 19.6% 20.7% 21,561 -68,617 $21.14 C 7 276,773 9,742 3.5% 1506 0.5% 11,248 4.1% 2.8% -3,505 -1,598 $18.36 Total 60 5,933,331 1,151,669 19.4% 87,216 1.5% 1,238,885 20.9% 21.7% 45,398 34,343 $24.24 COLLIERS INTERNATIONAL | P. 4
  5. 5. RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate AVG Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 ($/SF) FM 1960 A 12 2,038,724 1,136,439 55.7% 0 0.0% 1,136,439 55.7% 50.8% 1,508 204,421 $24.59 B 90 4,998,155 953,797 19.1% 61,733 1.2% 1,015,530 20.3% 21.3% 37,197 -99,391 $15.58 C 19 659,555 69,429 10.5% 19,615 3.0% 89,044 13.5% 13.5% 4,246 -8,874 $12.92 Total 121 7,696,434 2,159,665 28.1% 81,348 1.1% 2,241,013 29.1% 29.0% 42,951 96,156 $17.80 Greenway A 16 6,379,684 567,922 8.9% 14,184 0.2% 582,106 9.1% 8.4% -44,302 44,859 $29.95 B 25 2,493,041 287,758 11.5% 0 0.0% 287,758 11.5% 10.7% -14,022 32,502 $23.70 C 23 952,464 268,405 28.2% 0 0.0% 268,405 28.2% 30.5% 4,619 11,464 $17.43 Total 64 9,825,189 1,124,085 11.4% 14,184 0.1% 1,138,269 11.6% 11.0% -53,705 88,825 $26.42 Gulf Freeway/Pasadena A 1 52,362 8,279 15.8% 0 0.0% 8,279 15.8% 15.8% 0 4,819 $32.75 B 27 1,658,643 212,972 12.8% 6,273 0.4% 219,245 13.2% 13.3% 5,209 -14,703 $18.76 C 26 1,006,420 132,524 13.2% 0 0.0% 132,524 13.2% 12.0% -12,154 -22,892 $15.50 Total 54 2,717,425 353,775 13.0% 6,273 0.2% 360,048 13.2% 12.9% -6,945 -32,776 $17.80 I-10 East B 5 341,830 90,395 26.4% 0 0.0% 90,395 26.4% 25.5% -3,133 10,284 $15.12 C 6 179,665 4,000 2.2% 0 0.0% 4,000 2.2% 2.3% 618 -4,220 $26.14 Total 11 521,495 94,395 18.1% 0 0.0% 94,395 18.1% 17.5% -2,515 5,750 $15.84 Katy Freeway A 44 10,582,000 357,012 3.4% 0 0.0% 357,012 3.4% 5.2% 163,581 673,791 $29.55 B 90 7,686,052 1,154,358 15.0% 20,835 0.3% 1,175,193 15.3% 14.8% 56,380 54,301 $20.09 C 35 1,622,689 108,844 6.7% 4,408 0.3% 113,252 7.0% 7.9% 13,846 24,579 $16.48 Total 169 19,890,741 1,620,214 8.1% 25,243 0.1% 1,645,457 8.3% 9.0% 233,807 752,671 $22.53 Kingwood/Humble A 2 131,665 31,291 23.8% 0 0.0% 31,291 23.8% 29.0% 40,873 16,710 $31.59 B 65 1,670,508 101,003 6.0% 856 0.1% 101,859 6.1% 6.0% -1,026 46,885 $19.92 C 85 750,098 29,757 4.0% 0 0.0% 29,757 4.0% 3.4% -3,685 13,184 $17.88 Total 152 2,552,271 162,051 6.3% 856 0.0% 162,907 6.4% 6.1% 36,162 76,779 $21.13 NASA/Clear Lake A 8 1,230,469 143,000 11.6% 0 0.0% 143,000 11.6% 14.1% 29,998 -1,290 $21.72 B 44 2,740,847 482,286 17.6% 0 0.0% 482,286 17.6% 16.8% 7,378 -110,850 $19.53 C 24 855,958 239,838 28.0% 0 0.0% 239,838 28.0% 21.4% -27,569 -71,699 $14.50 Total 76 4,827,274 865,124 17.9% 0 0.0% 865,124 17.9% 17.0% 9,807 -183,839 $19.12 North Belt/Greenspoint A 20 4,602,225 314,839 6.8% 41,044 0.9% 355,883 7.7% 8.4% 10,702 -38,042 $23.09 B 57 5,488,660 1,328,067 24.2% 20,857 0.4% 1,348,924 24.6% 22.6% -69,493 38,764 $16.79 C 20 1,223,182 227,640 18.6% 0 0.0% 227,640 18.6% 18.8% 1,875 73,030 $12.89 Total 97 11,314,067 1,870,546 16.5% 61,901 0.5% 1,932,447 17.1% 16.8% -56,916 73,752 $18.60 Northeast Near and Outlier B 5 301,773 80,204 26.6% 0 0.0% 80,204 26.6% 25.5% -3,321 1,040 $21.07 C 5 133,163 14,438 10.8% 0 0.0% 14,438 10.8% 10.5% -447 4,209 $12.53 Total 10 434,936 94,642 21.8% 0 0.0% 94,642 21.8% 20.9% -3,768 1,867 $18.12 COLLIERS INTERNATIONAL | P. 5
  6. 6. RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate AVG Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 ($/SF) Northwest/Outlier A 20 3,545,697 402,956 11.4% 41,068 1.2% 444,024 12.5% 13.4% 20,049 393,626 $22.69 B 67 6,077,008 1,343,032 22.1% 35,789 0.6% 1,378,821 22.7% 19.9% -148,502 206,171 $17.15 C 41 1,584,315 175,586 11.1% 0 0.0% 175,586 11.1% 8.8% -41,536 51,441 $13.21 Total 128 11,207,020 1,921,574 17.1% 76,857 0.7% 1,998,431 17.8% 16.4% -169,989 651,238 $18.47 Richmond/Fountainview B 14 774,150 245,102 31.7% 0 0.0% 245,102 31.7% 32.8% 8,450 -160,101 $15.75 C 16 600,333 105,992 17.7% 37,215 6.2% 143,207 23.9% 16.2% -46,386 -16,418 $11.58 Total 30 1,374,483 351,094 25.5% 37,215 2.7% 388,309 28.3% 25.5% -37,936 -171,962 $14.35 San Felipe/Voss A 3 1,714,930 297,418 17.3% 0 0.0% 297,418 17.3% 18.5% 20,511 -10,730 $31.83 B 33 3,345,671 254,654 7.6% 14,784 0.4% 269,438 8.1% 8.2% 5,465 64,773 $21.38 C 3 204,649 60,470 29.5% 0 0.0% 60,470 29.5% 31.2% 3,434 -23,207 $13.00 Total 39 5,265,250 612,542 11.6% 14,784 0.3% 627,326 11.9% 12.5% 29,410 30,836 $24.29 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 92,306 16.7% 0 0.0% 92,306 16.7% 18.9% 11,932 -578 $16.84 C 5 192,262 72,670 37.8% 0 0.0% 72,670 37.8% 39.2% 2,700 5,250 $13.64 Total 20 823,369 164,976 20.0% 0 0.0% 164,976 20.0% 21.8% 14,632 25,374 $16.49 South Main/Med Center A 14 4,471,845 367,147 8.2% 2000 0.0% 369,147 8.3% 15.0% 301,371 601,492 $28.09 B 36 4,146,241 296,461 7.2% 0 0.0% 296,461 7.2% 7.8% 7,745 -8,534 $23.54 C 31 2,373,043 120,947 5.1% 0 0.0% 120,947 5.1% 5.4% 5,955 32,114 $19.33 Total 81 10,991,129 784,555 7.1% 2,000 0.0% 786,555 7.2% 10.2% 315,071 625,072 $24.48 Southeast/Outlier A 1 159,304 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 13 776,863 112,663 14.5% 0 0.0% 112,663 14.5% 15.3% 5,986 15,205 $18.53 C 3 145,811 4,914 3.4% 0 0.0% 4,914 3.4% 4.1% 2,400 7,619 $27.00 Total 17 1,081,978 117,577 10.9% 0 0.0% 117,577 10.9% 11.7% 8,386 22,824 $18.91 Southwest A 6 1,583,702 297,884 18.8% 24,235 1.5% 322,119 20.3% 18.4% -30,085 10,529 $16.32 B 61 6,091,205 1,691,791 27.8% 161,867 2.7% 1,853,658 30.4% 26.8% -24,075 -57,710 $15.41 C 39 2,134,568 217,281 10.2% 1,600 0.1% 218,881 10.3% 9.5% -8,344 -33,145 $13.18 Total 106 9,809,475 2,206,956 22.5% 187,702 1.9% 2,394,658 24.4% 21.6% -62,504 -80,326 $15.27 Southwest Far and Outlier A 1 61,049 14,143 23.2% 0 0.0% 14,143 23.2% 20.3% -1,755 -4,609 $25.00 B 16 717,194 68,440 9.5% 745 0.1% 69,185 9.6% 10.1% 3,438 28,242 $27.19 C 3 151,836 2,900 1.9% 0 0.0% 2,900 1.9% 1.4% -850 -550 $16.00 Total 20 930,079 85,483 9.2% 745 0.1% 86,228 9.3% 9.4% 833 23,083 $26.20 COLLIERS INTERNATIONAL | P. 6
  7. 7. RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate AVG Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q4-2012 Q3-2012 Q4-2012 YTD-2012 ($/SF) West Loop/Galleria A 35 14,733,676 1,587,777 10.8% 195,046 1.3% 1,782,823 12.1% 9.8% -77,025 170,832 $30.73 B 58 7,053,118 925,057 13.1% 14,152 0.2% 939,209 13.3% 16.6% 24,023 99,861 $22.31 C 3 147,042 3,218 2.2% 0 0.0% 3,218 2.2% 1.1% -1,656 -1,562 $19.04 Total 96 21,933,836 2,516,052 11.5% 209,198 1.0% 2,725,250 12.4% 12.0% -54,658 269,131 $27.43 Westchase A 22 6,798,787 457,802 6.7% 44,639 0.7% 502,441 7.4% 6.0% -85,082 506,669 $34.96 B 58 6,054,268 784,174 13.0% 15,140 0.3% 799,314 13.2% 12.7% 15,413 135,450 $19.14 C 7 316,597 84,989 26.8% 0 0.0% 84,989 26.8% 27.5% 0 -32,840 $18.14 Total 87 13,169,652 1,326,965 10.1% 59,779 0.5% 1,386,744 10.5% 9.6% -69,669 609,279 $26.80 The Woodlands A 17 3,258,826 10,968 0.3% 3,240 0.1% 14,208 0.4% 0.9% 22,477 97,842 $37.57 B 70 3,855,791 331,224 8.6% 14,801 0.4% 346,025 9.0% 9.6% -16,970 254,378 $21.13 C 6 382,156 3,600 0.9% 0 0.0% 3,600 0.9% 0.0% -3,600 918 - Total 93 7,496,773 345,792 4.6% 18,041 0.2% 363,833 4.9% 5.2% 1,907 353,138 $25.90 OFFICE DEVELOPMENT PIPELINE Houston’s construction pipeline continues to expand with 9.4 million SF under construction at the end of Q1 2013. The table below includes buildings containing 75,000 SF or greater. Building Name Address Submarket SF Pre-Leased Developer Est. Delivery ExxonMobil North Campus I-45 & Springwoods Village Pkwy Woodlands 3,000,000 100.00% ExxonMobil (Gilbane Building Co) Jun-14 Anadarko Tower 2 1201 Lake Robbins Dr Woodlands 550,000 100.00% Patrinely Group Inc Apr-14 Energy Center Three 935 N Eldridge Pky Katy Freeway 520,340 4.80% Principal Real Estate Investors & Nov-14 Trammel Crow Company Energy Tower III 11740 Katy Freeway Katy Freeway 428,831 0.00% Mac Haik Realty LLC Jan-14 Two BriarLake Plaza 2050 W Sam Houston Pky S Westchase 331,689 50.80% Behringer Harvard Mar-14 Energy Crossing II 15011 Katy Freeway Katy Freeway 321,508 64.90% LPC 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 68.90% Redstone and Stream Apr-13 3009 Post Oak Blvd. 3009 Post Oak Blvd Galleria/Uptown 302,536 21.40% Skanska Commercial Jul-13 Research Forest Lakeside 4 2445 Technology Forest Blvd Woodlands 300,000 50.00% Warmack Investments Apr-13 Granite Briarpark Green 3151 Briarpark Dr Westchase 299,664 2.09% Granite Properties Jul-13 3 Waterway Square Place 3 Waterway Ave Woodlands 232,693 91.50% The Woodlands Development Jun-13 8 West Centre 3505 W Sam Houston Pky N Katy Freeway 228,000 86.80% CORE Parkway Central, Ltd Jul-13 Mustang Engineering 17325 Park Row Katy Freeway 225,885 100.00% Transwestern Dec-13 One Hughes Landing 1800 Hughes Landing Blvd Woodlands 197,841 34.86% The Woodlands Development Sep-13 17320 Katy Freeway 17320 Katy Freeway Katy Freeway 186,375 100.00% Transwestern Dec-13 Texas Instruments Hwy 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 Northwest Far 159,056 68.30% 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 56.57% Wulfe & Co. Oct-13 CityCentre Four 840 W Sam Houston Pky N Katy Freeway 120,052 52.75% Midway Companies Jun-13 Haliburton North Campus Bldg 3000 N Sam Houston Pky North Belt/Greenspoint 100,000 100.00% Haliburton May-13 Blvd Place 2 2 Blvd Place Galleria/Uptown 80,002 0.00% Wulfe & Co. Jun-14 4306 Yoakum Blvd 4306 Yoakum Blvd Allen Parkway (Midtown) 80,000 0.00% Hansen Properties Mar-14 128 Vision Park 128 Vision Park Blvd Woodlands 75,000 0.00% DAgostino Companies Mar-14 COLLIERS INTERNATIONAL | P. 7
  8. 8. RESEARCH & FORECAST REPORT | Q1 2013 | HOUSTON OFFICE MARKET LISA R. BRIDGES COLLIERS INTERNATIONAL | HOUSTON Director of Market Research Houston 1300 Post Oak Boulevard Direct +1 713 830 2125 Suite 200 Fax +1 713 830 2118 Houston, Texas 77056 lisa.bridges@colliers.com Main +1 713 222 2111 Accelerating success. COLLIERS INTERNATIONAL | P. 8

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