Q3 2011 Houston Office Market Report

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Q3 2011 Houston Office Market Report

  1. 1. Q3 2011 | OFFICE MARKET HOUSTON OFFICE MARKETRESEARCH & FORECAST REPORT Large Blocks of Class A Office Space Continues to Shrink in Popular Suburban Submarkets – Developers Respond to Demand The Houston Office Market posted 957,000 square feet of positive net absorption during the third quarter mainly due to the suburban sector. Year-over-year vacancy rates decreased from 16.6% to 16.0% citywide. Rental rates rose slightly between quarters to $22.93 from $22.70 per square foot in the second quarter. Vacancy in CBD Class A properties continued to rise, reaching 15.1% MARKET INDICATORS compared to 10.1% a year ago. In contrast, Class A suburban vacancy decreased to 15.0% from 3Q10 3Q11 19.3% a year earlier. Although leasing activity decreased between quarters, several large transactions did occur (listed in the table on page 3 of this report).CITYWIDE NETABSORPTION (SF) (26k) 957k Macro factors driving the absorption of office space ultimately ties back to job count. According to) the Texas Labor Market Review, total nonagricultural employment in Texas lost -1,300 jobs inCITYWIDE AVERAGE August, while at the local level, Houston’s MSA gained only 2,400 jobs. Texas and Houston’s annual employment grew by 2.6%, while U.S. employment grew at a slower rate of 1.0%. Although TexasVACANCY 16.6% 16.0% and Houston saw little or no job growth in August, annual growth was more than twice that of the U.S.CITYWIDE AVERAGERENTAL RATE $23.11 $22.93 Houston is once again making headlines as one of best markets in the nation in which to live, study, and do business. Houston was ranked #1 in the following categories:CLASS A RENTAL RATE Green Building Initiatives (Large City Category - population over 100,000) CBD $35.16 $34.43 The U.S. Conference of Mayors – June 17, 2011 SUBURBAN $27.30 $27.03 Fastest Growing Millionaire City in the U.S. Forbes.com – July 14, 2011CLASS A VACANCY Fastest Growing Metro Area CBD 10.1% 15.1% Rice Universitys Kinder Institute for Urban Research – July 12, 2011 New Housing Construction SUBURBAN 19.3% 15.0% Houston Business Journal - August 26, 2011 Highest Quality of Life Among Students - Rice University Princeton Review (as reported by Houston Business Journal) - August 2, 2011 Top 10 Manufacturing Cities Business Facilities - July/August 2011 Americas Best Hospitals - Cancer, M.D. Anderson Cancer Center U.S News & World Report - July 2011 JOB GROWTH & UNEMPLOYMENT Highest Retail Employment Growth Since Recession (Seasonally Adjusted) On Numbers (as reported by the American City Business Journals) – June 10, 2011UNEMPLOYMENT 8/10 8/11HOUSTON 8.6% 8.6% ABSORPTION, NEW SUPPLY & VACANCY RATESTEXAS 8.2% 8.5% 3,000,000 17.0%U.S. 9.6% 9.1% 2,000,000 15.0% 13.0% ANNUAL 1,000,000 11.0%JOB GROWTH CHANGE 8/11 0 9.0%HOUSTON 2.6% 2,400 7.0%TEXAS 2.6% -1,300 -1,000,000 5.0%U.S. 1.0% 0 Net Absorption New Supply Vacancywww.colliers.com/houston
  2. 2. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET VACANCY & AVAILABILITY largest suburban contiguous block of sublease Overall vacancy levels increased by 10 basis space available, 146,392 SF. points between quarters to 16.0% from 15.9%. ABSORPTION & DEMAND CBD VS. SUBURBAN The average suburban vacancy decreased by Houston recorded positive net absorption of 30 basis points to 15.6% from 15.9% the CLASS A OFFICE VACANCY 956,939 SF in the third quarter, compared to previous quarter, while CBD vacancy remained 25,586 SF of negative net absorption at the 20.0% the same at 16.0%. On a year-over-year 18.0% same time last year. Contributing to the basis, city-wide vacancy decreased by 60 16.0% quarter’s positive gain was suburban Class A basis points to 16.0% from 16.6%, suburban 14.0% space with a positive net absorption of 432,224 12.0% vacancy decreased 140 basis points to 15.6% SF, followed by suburban Class B space with 10.0% from 17.0%, and CBD increased 270 basis positive net absorption of 393,730 SF, and CBD 8.0% points to 17.6% from 14.9%. 6.0% Class A space with positive net absorption of Vacancy in CBD Class A properties continued 275,027 SF. The majority of the CBD positive 4.0% to rise, reaching 15.1% compared to 10.1% a net absorption was due to Hess moving out of year ago. In contrast, vacancy rates in CBD One Allen Center and into their new building Cass B properties decreased to 19.5% from where they almost double their space. CBD VACANCY SUBURBAN VACANCY 23.1% 12 months earlier. RENTAL RATES Although suburban vacancy rates remained in double-digits, Class A vacancy actually dropped Citywide rental rates rose slightly between between quarters to 15.0% from 16.2%. By quarters to $22.93 from $22.70 per square CLASS A OFFICE RENTS comparison, suburban Class B vacancy foot. On a year-over-year basis, CBD Class A remained unchanged between quarters at average quoted rental rates dropped $0.73 to $40.00 16.7% . $34.43 per square foot (from $35.16), while $38.00 suburban Class A rates dropped $0.27 to $36.00 Citywide, a total of 50 office properties had a $27.03 per square foot (from $27.30). The $34.00 minimum of 100,000 SF available for lease in average CBD Class B asking rate decreased by $32.00 both direct and sublease space, and 11 of those $0.18 to $23.69 per square foot (from properties have over 200,000 SF $23.87), while suburban Class B rates rose $30.00 available, down from 14 the previous quarter. $0.34 to $18.22 per square foot (from $17.88) $28.00 Available sublease space totaled 3.1 million on a year-over-year basis. Until demand $26.00 SF, including 1.7 million SF of vacant space and outpaces supply, rental rates are expected to 1.4 million SF of subleases available for remain flat. occupancy over the next 18 months. The largest sublease space being marketed is Devon CBD RENTS SUBURBAN RENTS Energy’s 198,478 SF space in Two Allen Center in the CBD. Braeswood Tower II has the QUOTED GROSS RENTAL RATES FOR TOP PERFORMING OFFICE BUILDINGS YEAR AVAIL. RENT BUILDING NAME ADDRESS SUBMARKET RBA (SF) LEASED OWNER BUILT SF ($/SF) Metropolitan Life Insurance Co. & Wells Fargo Plaza 1000 Louisiana CBD 1,721,242 1982 94.5% 357,683 $41.10 N.Y. State Retirement Fund Heritage Plaza 1111 Bagby CBD 1,089,266 1986 90.8% 205,612 $40.50 Brookfield Office Properties 1100 Louisiana 1100 Louisiana CBD 1,265,332 1980 98.0% 89,153 $38.64 Enterprise Products Partners Minute Maid Building 2150 Town Square Place E. Fort Bend 185,000 2008 76.2% 44,109 $30.00 Planned Community Developers Wells Fargo Bank Tower 1300 Post Oak Blvd. Galleria 491,254 1983 93.8% 58,217 $36.15 TIAA-CREF Williams Tower 2800 Post Oak Blvd Galleria 1,476,973 1983 88.3% 244,514 $32.17 Hines 9 Greenway Plaza 9 Greenway Greenway 746,824 1978 90.0% 102,823 $30.00 Crescent Real Estate Equities One BriarLake Plaza 2000 W. Sam Houston Westchase 550,000 2000 98.5% 7,507 $39.15 Behringer Harvard Waterway Plaza II 10001 Woodloch Forest Woodlands 142,560 2001 84.7% 69,759 $34.30 Triple Net Properties Waterway Square 4 Waterway Ave. Woodlands 232,364 2009 98.9% 2,539 $36.00 The Woodlands Development Note: Avail. SF includes direct and sublet space. Source: CoStar Property COLLIERS INTERNATIONAL | P. 2
  3. 3. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET SALES ACTIVITY Houston’s Office Investment sales activity decreased between quarters with only 15 properties changing hands, compared to 25 in the previous quarter. According to CoStar, office sale transactions had a total dollar volume of $164.7 million, averaging $75/SF with a 8.3% capitalization rate. Most of the transactions were mid-rise Class B properties. The most significant transactions that closed during the third quarter are listed in the table below. Q3 2011 SIGNIFICANT SALES TRANSACTIONS YEAR SALE BUILDING NAME SUBMARKET RBA (SF) BUYER SELLER $/SF CLOSED BUILT PRICE North Belt Intercontinental Center 196,895 1983 Laurus Corporation Bresler & Reiner, Inc. $23.4M $119 8/2011 /Greenspoint 4601 Westway Park Blvd Northwest Far 88,000 2006 Cameron International Baker Hughes Inc. $14.2M $161 7/2011 San Felipe/ 7700 San Felipe 100,716 1978 Velocis Partners Unilev Capital Corp $10.5M $104 9/2011 Voss Houston Club Building CBD 348,429 1938 Skanska USA Wells Fargo & Co $13.0M $37 9/2011 LEASING ACTIVITY Houston’s office leasing activity reached 2.8 million SF in the second quarter, compared to 3.2 million SF in the same quarter last year. Leasing activity is still below levels prior to the economic downturn, with many tenants relocating to buildings/submarkets offering more attractive terms. Some of the more significant leases signed during the third quarter are listed in the table below. Q3 2011 TOP OFFICE LEASES BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE Westway III Northwest Far 181,814 GE Oil & Gas 7/2011 Three Eldridge Katy Freeway 166,452 BP 6/2011 CityWestPlace 3 Westchase 115,056 ION Geophysical Corp* 6/2011 One Allen Center CBD 110,816 Carrizo Oil & Gas, Inc. 8/2011 Williams Tower Galleria/West Loop 75,000 Rowan Companies* 6/2011 1177 W Loop S Post Oak Park 49,574 Cornerstone Mortgage* 7/2011 Two Riverway Riverway 44,818 Gainer, Donnelly, & Desroches 7/2011 *Renewal and/or Expansion; HOUSTON OFFICE SUBMARKET MAP COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN & CITYWIDE) Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate # of Class Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2011 Q2-2011 Q3-2011 YTD 2011 AVG ($/SF) Bldgs. CBD A 28 26,025,539 3,083,726 11.8% 848,920 3.3% 3,932,646 15.1% 12.5% 275,027 273,615 $34.43 B 34 9,684,529 1,862,652 19.2% 28,208 0.3% 1,890,860 19.5% 20.0% 6,282 30,739 $23.69 C 19 1,704,299 760,024 44.6% 0 0.0% 760,024 44.6% 60.2% -11,791 -28,546 $18.28 Total 81 37,414,367 5,706,402 15.3% 877,128 2.3% 6,583,530 17.6% 16.0% 269,518 275,808 $30.06 SUBURBAN A 255 67,572,847 9,791,970 14.5% 336,914 0.5% 10,128,884 15.0% 16.2% 432,224 1,231,051 $27.03 B 907 73,933,024 11,912,920 16.1% 431,759 0.6% 12,344,679 16.7% 16.7% 393,730 131,103 $18.22 C 432 17,843,100 2,336,626 13.1% 70,495 0.4% 2,407,121 13.5% 11.6% -138,533 -221,716 $15.14 Total 1594 159,348,971 24,041,516 15.1% 839,168 0.5% 24,880,684 15.6% 15.9% 687,421 1,140,438 $21.40 OVERALL A 283 93,598,386 12,875,696 13.8% 1,185,834 1.3% 14,061,530 15.0% 15.2% 707,251 1,504,666 $28.91 B 941 83,617,553 13,775,572 16.5% 459,967 0.6% 14,235,539 17.0% 17.1% 400,012 161,842 $18.89 C 451 19,547,399 3,096,650 15.8% 70,495 0.4% 3,167,145 16.2% 14.8% -150,324 -250,262 $15.43 Total 1675 196,763,338 29,747,918 15.1% 1,716,296 0.9% 31,464,214 16.0% 15.9% 956,939 1,416,246 $22.93 HOUSTON SUBURBAN OFFICE MARKET SUMMARY Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate # of Class Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2011 Q2-2011 Q3-2011 YTD 2011 AVG ($/SF) Bldgs. Allen Parkway A 2 1,198,654 193,788 16.2% 0 0.0% 193,788 16.2% 17.5% 5,280 50,487 $28.75 B 30 2,864,290 184,241 6.4% 3,348 0.1% 187,589 6.5% 9.8% -73,252 -25,005 $22.74 C 25 1,141,150 408,436 35.8% 0 0.0% 408,436 35.8% 35.0% 5,250 18,293 $19.64 Total 57 5,204,094 786,465 15.1% 3,348 0.1% 789,813 15.2% 17.2% -62,722 43,775 $25.51 Baytown B 4 244,544 6,802 2.8% 0 0.0% 6,802 2.8% 1.3% 0 0 $14.53 C 3 173,578 5,587 3.2% 0 0.0% 5,587 3.2% 2.6% 0 1,040 $13.01 Total 7 418,122 12,389 3.0% 0 0.0% 12,389 3.0% 1.4% 0 1,040 $13.95 Bellaire A 6 1,086,526 80,525 7.4% 8,169 0.8% 88,694 8.2% 11.4% -2,796 -7,649 $22.61 B 13 1,714,873 231,912 13.5% 4,671 0.3% 236,583 13.8% 12.5% 848 6,625 $20.63 C 7 604,738 139,762 23.1% 10,454 1.7% 150,216 24.8% 8.6% 0 -16,620 $14.06 Total 26 3,406,137 452,199 13.3% 23,294 0.7% 475,493 14.0% 11.4% -1,948 -17,644 $20.69 Conroe  A 1 60,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 3 129,475 34,730 26.8% 0 0.0% 34,730 26.8% 6.7% -535 -18,022 $15.77 C 6 332,939 2875 0.9% 0 0.0% 2875 0.9% 0.0% 0 0 $13.40 Total 10 522,414 37,605 7.2% 0 0.0% 37,605 7.2% 2.7% -535 -18,022 $15.32 E. Fort Bend A 18 3,416,828 935,179 27.4% 8,043 0.2% 943,222 27.6% 26.6% 34,893 33,418 $27.71 B 37 2,118,385 254,827 12.0% 81,009 3.8% 335,836 15.9% 13.8% -9,498 -11,384 $17.96 C 4 142,013 1,668 1.2% 0 0.0% 1,668 1.2% 1.7% 0 1,587 $17.50 Total 59 5,677,226 1,191,674 21.0% 89,052 1.6% 1,280,726 22.6% 21.5% 25,395 23,621 $23.65 COLLIERS INTERNATIONAL | P. 4
  5. 5. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate # of Class Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2011 Q2-2011 Q3-2011 YTD 2011 AVG ($/SF) Bldgs. FM 1960 A 11 2,115,640 1,270,183 60.0% 5,442 0.3% 1,275,625 60.3% 47.6% 1,514 -6,810 $24.37 B 87 4,886,291 871,148 17.8% 35,751 0.7% 906,899 18.6% 21.9% 20,037 37,311 $15.10 C 19 664,680 66,725 10.0% 19,615 3.0% 86,340 13.0% 8.2% 3,062 -24,644 $13.76 Total 117 7,666,611 2,208,056 28.8% 60,808 0.8% 2,268,864 29.6% 28.3% 24,613 5,857 $18.53 Greenway A 14 5,014,298 678,931 13.5% 25,705 0.5% 704,636 14.1% 16.0% 17,506 73,872 $27.74 B 27 3,703,113 289,954 7.8% 16,950 0.5% 306,904 8.3% 11.1% 3,034 52,703 $22.44 C 20 839,062 258,803 30.8% 0 0.0% 258,803 30.8% 29.9% -984 -13,989 $17.41 Total 61 9,556,473 1,227,688 12.8% 42,655 0.4% 1,270,343 13.3% 15.9% 19,556 112,586 $24.94 Gulf Freeway/Pasadena A 1 52,362 14,361 27.4% 0 0.0% 14,361 27.4% 33.1% 1,809 4,087 $28.74 B 27 1,653,779 202,447 12.2% 13,275 0.8% 215,722 13.0% 12.2% -17,386 -16,506 $19.18 C 22 883,702 94,502 10.7% 0 0.0% 94,502 10.7% 8.3% 12,396 -9,169 $14.30 Total 50 2,589,843 311,310 12.0% 13,275 0.5% 324,585 12.5% 11.2% -3,181 -21,588 $18.43 I-10 East B 4 274,672 75,502 27.5% 0 0.0% 75,502 27.5% 29.2% -5,120 -268 $13.95 C 6 189,062 0 0.0% 0 0.0% 0 0.0% 0.0% 0 6,536 $12.00 Total 10 463,734 75,502 16.3% 0 0.0% 75,502 16.3% 18.5% -5,120 6,268 $13.93 Katy Freeway A 44 11,134,152 1,236,083 11.1% 25,613 0.2% 1,261,696 11.3% 17.4% 115,848 635,339 $30.42 B 89 7,885,525 1,399,483 17.7% 80,802 1.0% 1,480,285 18.8% 13.7% -31,806 -23,978 $19.24 C 35 1,428,135 139,759 9.8% 13,678 1.0% 153,437 10.7% 9.8% -2,315 -10,138 $15.24 Total 168 20,447,812 2,775,325 13.6% 120,093 0.6% 2,895,418 14.2% 15.5% 81,727 601,223 $23.71 Kingwood/Humble A 1 91,962 41,824 45.5% 0 0.0% 41,824 45.5% 19.1% 1,247 -15,920 $31.60 B 59 1,869,342 136,798 7.3% 1,000 0.1% 137,798 7.4% 9.1% 11,646 44,141 $19.78 C 79 741,112 22,314 3.0% 0 0.0% 22,314 3.0% 3.6% 3,423 8,076 $16.35 Total 139 2,702,416 200,936 7.4% 1,000 0.0% 201,936 7.5% 8.1% 16,316 36,297 $20.71 NASA/Clear Lake A 9 1,374,794 279,904 20.4% 0 0.0% 279,904 20.4% 18.4% -10,128 -74,813 $23.98 B 45 3,231,690 465,052 14.4% 0 0.0% 465,052 14.4% 13.4% -200,841 -195,887 $19.58 C 25 913,506 123,599 13.5% 0 0.0% 123,599 13.5% 15.6% 2,672 21,134 $14.94 Total 79 5,519,990 868,555 15.7% 0 0.0% 868,555 15.7% 14.6% -208,297 -249,566 $19.96 North Belt/Greenspoint A 18 4,189,708 234,540 5.6% 83,524 2.0% 318,064 7.6% 8.2% -42,465 -71,151 $20.08 B 58 6,060,292 1,203,564 19.9% 83,201 1.4% 1,286,765 21.2% 23.0% 73,335 110,009 $15.75 C 20 1,225,036 293,638 24.0% 7,454 0.6% 301,092 24.6% 20.4% -29,572 -66,294 $14.16 Total 96 11,475,036 1,731,742 15.1% 174,179 1.5% 1,905,921 16.6% 16.5% 1,298 -27,436 $16.38 Northeast Far and Outlier B 5 301,773 70,728 23.4% 0 0.0% 70,728 23.4% 24.4% 1,764 4,799 $21.94 C 5 129,152 18,200 14.1% 0 0.0% 18,200 14.1% 11.5% -5,355 -5,694 $12.00 Total 10 430,925 88,928 20.6% 0 0.0% 88,928 20.6% 20.2% -3,591 -895 $17.18 COLLIERS INTERNATIONAL | P. 5
  6. 6. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate # of Class Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2011 Q2-2011 Q3-2011 YTD 2011 AVG ($/SF) Bldgs. Northwest A 20 3,551,237 1,017,296 28.6% 19,832 0.6% 1,037,128 29.2% 30.3% 7,495 160,078 $24.24 B 69 6,437,999 1,451,121 22.5% 26,351 0.4% 1,477,472 22.9% 23.2% -2,174 32,385 $16.09 C 39 1,473,170 168,359 11.4% 0 0.0% 168,359 11.4% 7.8% -24,895 -41,439 $12.29 Total 128 11,462,406 2,636,776 23.0% 46,183 0.4% 2,682,959 23.4% 23.4% -19,574 151,024 $18.30 Northwest Outlier A 1 89,750 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 4 135,457 5,067 3.7% 0 0.0% 5,067 3.7% 3.4% -2282 -2,728 $18.12 Total 5 225,207 5,067 2.2% 0 0.0% 5,067 2.2% 2.1% -2282 -2,728 $18.12 Richmond/Fountainview B 14 781,369 81,025 10.4% 0 0.0% 81,025 10.4% 12.1% -10,676 2,871 $15.80 C 16 597,509 80,183 13.4% 0 0.0% 80,183 13.4% 8.7% -7,385 -36,109 $13.64 Total 30 1,378,878 161,208 11.7% 0 0.0% 161,208 11.7% 10.5% -18,061 -33,238 $15.35 San Felipe/Voss A 3 1,714,930 250,288 14.6% 0 0.0% 250,288 14.6% 15.9% -15,348 10,651 $31.94 B 32 3,357,119 309,452 9.2% 13,416 0.4% 322,868 9.6% 9.2% -4,060 5,796 $19.53 C 3 161,393 31,327 19.4% 0 0.0% 31,327 19.4% 19.9% -1,744 -8,754 $14.02 Total 38 5,233,442 591,067 11.3% 13,416 0.3% 604,483 11.6% 11.7% -21,152 7,693 $24.16 South A 1 80,000 19,000 23.8% 0 0.0% 19,000 23.8% 23.8% 0 1,500 $26.63 B 14 534,107 98,223 18.4% 0 0.0% 98,223 18.4% 16.1% -7,000 -10,888 $19.84 C 4 223,029 41,629 18.7% 0 0.0% 41,629 18.7% 17.7% 368 -2,709 $14.83 Total 19 837,136 158,852 19.0% 0 0.0% 158,852 19.0% 17.2% -6,632 -12,097 $19.36 South Main/Med Center A 13 3,578,810 382,317 10.7% 0 0.0% 382,317 10.7% 7.8% -17,283 -65,741 $29.22 B 35 4,055,427 278,080 6.9% 0 0.0% 278,080 6.9% 7.9% 6,734 43,500 $23.26 C 31 2,453,446 124,701 5.1% 762 0.0% 125,463 5.1% 4.4% -2,533 -18,270 $19.04 Total 79 10,087,683 785,098 7.8% 762 0.0% 785,860 7.8% 7.0% -13,082 -40,511 $24.79 Southeast/Outlier A 1 159,304 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 9 520,515 106,633 20.5% 0 0.0% 106,633 20.5% 19.8% 0 -22,356 $20.02 C 2 118,772 12,533 10.6% 0 0.0% 12,533 10.6% 10.6% 0 0 $24.00 Total 12 798,591 119,166 14.9% 0 0.0% 119,166 14.9% 14.5% 0 -22,356 $20.47 Southwest A 6 1,501,746 309,952 20.6% 0 0.0% 309,952 20.6% 21.3% 110,609 157,506 $15.91 B 59 5,989,052 1,238,707 20.7% 34,083 0.6% 1,272,790 21.3% 21.5% 41,981 -62,532 $15.40 C 41 2,301,297 223,673 9.7% 18,532 0.8% 242,205 10.5% 10.9% -26,149 -34,884 $13.35 Total 106 9,792,095 1,772,332 18.1% 52,615 0.5% 1,824,947 18.6% 19.0% 126,441 60,090 $15.20 Southwest Far and Outlier A 1 57,710 5,947 10.3% 0 0.0% 5,947 10.3% 12.0% -2,553 3,394 $22.62 B 15 668,837 142,306 21.3% 0 0.0% 142,306 21.3% 12.6% -4,479 142,337 $26.73 C 3 128,735 1,000 0.8% 0 0.0% 1,000 0.8% 0.8% -1000 0 $16.00 Total 19 855,282 149,253 17.5% 0 0.0% 149,253 17.5% 10.7% -8,032 145,731 $26.24 COLLIERS INTERNATIONAL | P. 6
  7. 7. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED Inventory Direct Vacancy Sublease Vacancy Vacancy Vacancy Rate (%) Net Absorption (SF) Rental Rate # of Class Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2011 Q2-2011 Q3-2011 YTD 2011 AVG ($/SF) Bldgs. West Loop/Galleria A 38 15,619,230 1,563,499 10.0% 83,094 0.5% 1,646,593 10.5% 9.9% 38,983 -116,703 $28.65 B 56 6,371,937 1,402,453 22.0% 5,482 0.1% 1,407,935 22.1% 21.6% 56,703 -5,541 $21.02 C 4 240,656 0 0.0% 0 0.0% 0 0.0% 0.0% 0 940 $16.75 Total 98 22,231,823 2,965,952 13.3% 88,576 0.4% 3,054,528 13.7% 12.7% 95,686 -121,304 $26.02 Westchase A 27 7,861,857 972,654 12.4% 71,828 0.9% 1,044,482 13.3% 14.2% 1,004 242,957 $26.59 B 53 5,041,513 913,985 18.1% 9,819 0.2% 923,804 18.3% 19.3% 8,905 -113,580 $18.18 C 7 339,118 50,923 15.0% 0 0.0% 50,923 15.0% 8.3% 11,485 1,954 $15.65 Total 87 13,242,488 1,937,562 14.6% 81,647 0.6% 2,019,209 15.2% 15.9% 21,394 131,331 $22.32 The Woodlands A 19 3,623,349 305,699 8.4% 5,664 0.2% 311,363 8.6% 20.1% 183,649 216,549 $28.24 B 59 3,101,648 458,680 14.8% 22,601 0.7% 481,281 15.5% 16.3% 9,157 157,301 $19.83 C 6 398,110 26,430 6.6% 0 0.0% 26,430 6.6% 7.1% -1,311 7,437 - Total 84 7,123,107 790,809 11.1% 28,265 0.4% 819,074 11.5% 17.2% 191,495 381,287 $22.22 OFFICE DEVELOPMENT PIPELINE Houston’s development activity increased slightly during the third quarter, with eight projects under construction. Large blocks of quality Class A space in the more popular suburban submarkets has become harder to find. Office developers have slowly taken notice of the demand and have begun building in those select areas. The following table is a summary of the projects currently in the construction pipeline. SELECT OFFICE BUILDINGS UNDER CONSTRUCTION BUILDING NAME ADDRESS SUBMARKET SF PRE-LEASED DEVELOPER EST. DELIVERY Nexen Building 945 Bunker Hill Katy Freeway 331,513 57.2% MetroNational Corp 8/2012 BBVA Compass/2200 Post Oak 2200 Post Oak Blvd. Galleria/Uptown 306,012 51.1% Redstone and Stream 4/2013 Saturn Three 1800 Space Park Dr. Nasa/Clear Lake 264,000 0.0% Nassau Development Co 12/2012 CityCentre Three 842 W Sam Houston Pky N Katy Freeway 120,228 25.1% Midway Companies 9/2012 CityCentre Four 840 W Sam Houston Pky N Katy Freeway 120,000 0.0% Midway Companies 12/2012 Halliburton North Belt Campus Milner Road North Belt/Greenspoint 100,000 100.0% D. E. Harvey Builders 1/2013 High Street 4410 Westheimer Rd Post Oak Park 78,966 0.0% Trademark Property 3/2012 Technology Forest Professional 4055 Technology Forest Woodlands 50,000 50.0% Woodlands Land Dev 12/2011 COLLIERS INTERNATIONAL | P. 7
  8. 8. RESEARCH & FORECAST REPORT | Q3 2011 | HOUSTON OFFICE MARKET Colliers International Statistics Revenues: $1.5 Billion Countries: 61 Offices: 512 Professionals & Staff: 12,509 Brokers: 4,387 Square Feet Managed: 979 Million* Lease/Sale Transactions: 73,972 Total Transaction Value: $59.6 Billion (Based on 2010 results.) *The combination of Colliers International and FirstService results in 2.2 Billion under management (2nd largest in the world. 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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