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Houston Office Market -1Q 2010

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Costar Report - Houston Office Market

Costar Report - Houston Office Market

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  • 1. The CoStar Office Report F I R S T Q U A R T E R 2 0 1 0 Houston Office Market
  • 2. FIRST QUARTER 2010 – HOUSTON Houston Office Market Table of Contents Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D Market Highlights & Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 CoStar Markets & Submarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Employment & Tenant Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Employment & Unemployment Analysis Tenant Profiles Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Construction Activity Map Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Figures at a Glance by Class & Market Figures at a Glance by Class & Submarket Figures at a Glance Grouped by CBD vs Suburban Historical Figures at a Glance Leasing Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Leasing Activity Map Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Sales Activity Analysis Select Top Sales Transactions Select Same Building Sales Select Land Sales Analysis of Individual CoStar Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Austin County Market Bellaire Market Downtown Market E Fort Bend Co/Sugar Land Market FM 1960 Market Greenway Plaza Market Gulf Freeway/Pasadena Market I-10 East Market Katy Freeway Market Kingwood/Humble Market NASA/Clear Lake Market North Belt Market Northeast Near Market Northwest Market Richmond/Fountainview Market San Felipe/Voss Market San Jacinto County Market South Market South Hwy 35 Market South Main/Medical Center Market Southwest Market West Loop Market Westchase Market ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A
  • 3. HOUSTON – FIRST QUARTER 2010 Houston Office Market Table of Contents (Continued) Woodlands Market B THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 4. FIRST QUARTER 2010 – HOUSTON Houston Office Market Methodology The CoStar Office Report, unless specifically stated otherwise, calculates office statistics using CoStar Group’s entire database of existing and under construction office buildings in each metropolitan area. Included are office, office condominium, office loft, office medical, all classes and all sizes, and both multi-tenant and single-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 69.1 billion square feet of coverage in 2.8 million properties. All rental rates reported in the CoStar Office Report have been converted to a Full Service equivalent rental rate. For information on subscribing to CoStar’s other products and services, please contact us at 1-877-7COSTAR, or visit our web site at www.costar.com © Copyright 2010 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc. 2 Bethesda Metro Center • Bethesda, MD USA 20814 • (800) 204-5960 • www.costar.com • NASDAQ: CSGP ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C
  • 5. HOUSTON – FIRST QUARTER 2010 Houston Office Market Terms & Definitions Availability Rate: The ratio of available space to total rentable Deliveries: Buildings that complete construction during a specified space, calculated by dividing the total available square feet by the period of time. In order for space to be considered delivered, a total rentable square feet. certificate of occupancy must have been issued for the property. Available Space: The total amount of space that is currently Delivery Date: The date a building completes construction and being marketed as available for lease in a given time period. It receives a certificate of occupancy. includes any space that is available, regardless of whether the Developer: The company, entity or individual that transforms raw space is vacant, occupied, available for sublease, or available at land to improved property by use of labor, capital and entrepre- a future date. neurial efforts. Build-to-Suit: A term describing a particular property, developed Direct Space: Space that is being offered for lease directly from specifically for a certain tenant to occupy, with structural features, the landlord or owner of a building, as opposed to space being systems, or improvement work designed specifically for the needs offered in a building by another tenant (or broker of a tenant) of that tenant. A build-to-suit can be leased or owned by the ten- trying to sublet a space that has already been leased. ant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied Buyer: The individual, group, company, or entity that has pur- by tenants. It does not include space in buildings that are either chased a commercial real estate asset. planned, under construction or under renovation. Cap Rate: Short for capitalization rate. The Cap Rate is a calcula- Flex Building: A type of building designed to be versatile, which tion that reflects the relationship between one year’s net operating may be used in combination with office (corporate headquarters), income and the current market value of a particular property. research and development, quasi-retail sales, and including but The Cap Rate is calculated by dividing the annual net operating not limited to industrial, warehouse, and distribution uses. A typi- income by the sales price (or asking sales price). cal flex building will be one or two stories with at least half of the CBD: Abbreviation for Central Business District. (See also: rentable area being used as office space, have ceiling heights of 16 Central Business District) feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area Full Service Rental Rate: Rental rates that include all operating within a metropolitan statistical area (MSA) describing the level expenses such as utilities, electricity, janitorial services, taxes and of real estate development found there. The CBD is characterized insurance. by a high density, well organized core within the largest city of a Gross Absorption: The total change in occupied space over a given MSA. given period of time, counting space that is occupied but not Class A: A classification used to describe buildings that generally space that is vacated by tenants. Gross absorption differs from qualify as extremely desirable investment-grade properties and leasing Activity, which is the sum of all space leased over a certain command the highest rents or sale prices compared to other period of time. Unless otherwise noted Gross Absorption includes buildings in the same market. Such buildings are well located direct and sublease space. and provide efficient tenant layouts as well as high quality, and in Growth in Inventory: The change in size of the existing square some buildings, one-of-a-kind floor plans. They can be an archi- footage in a given area over a given period of time, generally due tectural or historical landmark designed by prominent architects. to the construction of new buildings. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best Industrial Building: A type of building adapted for such uses as quality materials and workmanship in their trim and interior fit- the assemblage, processing, and/or manufacturing of products tings. They are generally the most attractive and eagerly sought from raw materials or fabricated parts. Additional uses include by investors willing to pay a premium for quality. warehousing, distribution, and maintenance facilities. The pri- mary purpose of the space is for storing, producing, assembling, Class B: A classification used to describe buildings that generally or distributing product. qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such Landlord Rep: (Landlord Representative) In a typical lease trans- buildings offer utilitarian space without special attractions, and action between an owner/landlord and tenant, the broker that have ordinary design, if new or fairly new; good to excellent represents the interests of the owner/landlord is referred to as the design if an older non-landmark building. These buildings typical- Landlord Rep. ly have average to good maintenance, management and tenants. Leased Space: All the space that has a financial lease obligation. They are less appealing to tenants than Class A properties, and It includes all leased space, regardless of whether the space is may be deficient in a number of respects including floor plans, currently occupied by a tenant. Leased space also includes space condition and facilities. They lack prestige and must depend being offered for sublease. chiefly on a lower price to attract tenants and investors. Leasing Activity: The volume of square footage that is commit- Class C: A classification used to describe buildings that gener- ted to and signed under a lease obligation for a specific building ally qualify as no-frills, older buildings that offer basic space and or market in a given period of time. It includes direct leases, command lower rents or sale prices compared to other buildings subleases and renewals of existing leases. It also includes any in the same market. Such buildings typically have below-average pre-leasing activity in planned, under construction, or under maintenance and management, and could have mixed or low renovation buildings. tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly Market: Geographic boundaries that serve to delineate core areas on a lower price to attract tenants and investors. that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are building- Construction Starts: Buildings that began construction during a type specific, and are non-overlapping contiguous geographic specific period of time. (See also: Deliveries) designations having a cumulative sum that matches the boundar- Contiguous Blocks of Space: Space within a building that is, or is ies of the entire Region (See also: Region). Markets can be further able to be joined together into a single contiguous space. subdivided into Submarkets. (See also: Submarkets) D THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 6. FIRST QUARTER 2010 – HOUSTON Houston Office Market Multi-Tenant: Buildings that house more than one tenant at a Seller: The individual, group, company, or entity that sells a par- given time. Usually, multi-tenant buildings were designed and ticular commercial real estate asset. built to accommodate many different floor plans and designs for SF: Abbreviation for Square Feet. different tenant needs. (See also: Tenancy). Single-Tenant: Buildings that are occupied, or intended to be Net Absorption: The net change in occupied space over a given occupied by a single tenant. (See also: Build-to-suit and Tenancy) period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with Net Rental Rate: A rental rate that excludes certain expenses that the lease obligation. Sublease space is sometimes referred to as a tenant could incur in occupying office space. Such expenses sublet space. are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other Submarkets: Specific geographic boundaries that serve to delin- related costs. eate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive New Space: Sometimes called first generation space, refers to set, or peer group. Submarkets are building type specific (office, space that has never been occupied and/or leased by a tenant. industrial, retail, etc.), with distinct boundaries dependent on Occupied Space: Space that is physically occupied by a tenant. different factors relevant to each building type. Submarkets are It does not include leased space that is not currently occupied non-overlapping, contiguous geographic designations having a by a tenant. cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufactur- Suburban: The Suburban and Central Business District (CBD) ing, warehousing, or other uses. Office buildings may sometimes designations refer to a particular geographic area within a metro- have other associated uses within part of the building, i.e., retail politan statistical area (MSA). Suburban is defined as including all sales, financial, or restaurant, usually on the ground floor. office inventory not located in the CBD. (See also: CBD) Owner: The company, entity, or individual that holds title on a Tenancy: A term used to indicate whether or not a building is given building or property. occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Planned/Proposed: The status of a building that has been announced for future development but not yet started Tenant Rep: Tenant Rep stands for Tenant Representative. In a construction. typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to Preleased Space: The amount of space in a building that has been as a Tenant Rep. leased prior to its construction completion date, or certificate of occupancy date. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is Price/SF: Calculated by dividing the price of a building (either vacant or occupied. sales price or asking sales price) by the Rentable Building Area (RBA). Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is Property Manager: The company and/or person responsible for considered to be under construction after it has begun construc- the day-to-day operations of a building, such as cleaning, trash tion and until it receives a certificate of occupancy. removal, etc. The property manager also makes sure that the vari- ous systems within the building, such as the elevators, HVAC, and Vacancy Rate: A measurement expressed as a percentage of the electrical systems, are functioning properly. total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally Quoted Rental Rate: The asking rate per square foot for a par- is not included in vacancy calculations. ticular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by Vacant Space: Space that is not currently occupied by a tenant, tenants following the negotiation of all terms and conditions in regardless of any lease obligation that may be on the space. a specific lease. Vacant space could be space that is either available or not avail- RBA: Abbreviation for Rentable Building Area. (See also: able. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered Rentable Building Area) vacant space. Likewise, space that has been leased but not yet Region: Core areas containing a large population nucleus, that occupied because of finish work being done, would also be con- together with adjacent communities have a high degree of eco- sidered vacant space. nomic and social integration. Regions are further divided into Weighted Average Rental Rate: Rental rates that are calculated by market areas, called Markets. (See also: Markets) factoring in, or weighting, the square footage associated with each Relet Space: Sometimes called second generation or direct space, particular rental rate. This has the effect of causing rental rates refers to existing space that has previously been occupied by on larger spaces to affect the average more than that of smaller another tenant. spaces. The weighted average rental rate is calculated by taking Rentable Building Area: (RBA) The total square footage of a the ratio of the square footage associated with the rental rate on building that can be occupied by, or assigned to a tenant for the each individual available space to the square footage associated purpose of determining a tenant’s rental obligation. Generally with rental rates on all available spaces, multiplying the rental rate RBA includes a percentage of common areas including all hall- by that ratio, and then adding together all the resulting numbers. ways, main lobbies, bathrooms, and telephone closets. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. Sales Price: The total dollar amount paid for a particular property at a particular point in time. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through what- Sales Volume: The sum of sales prices for a given group of build- ever time period is being studied. ings in a given time period. ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT E
  • 7. FIRST QUARTER 2010 – HOUSTON Houston Office Market OVERVIEW Houston’s Vacancy Decreases to 14.4% Net Absorption Positive 569,759 SF in the Quarter T he Houston Office market ended the first quarter 2010 The Class-B office market recorded net absorption of posi- with a vacancy rate of 14.4%. The vacancy rate was tive 252,452 square feet in the first quarter 2010, compared to down over the previous quarter, with net absorption positive 107,360 square feet in the fourth quarter 2009, positive totaling positive 569,759 square feet in the first quarter. Vacant 8,727 in the third quarter 2009, and positive 109,295 in the sec- sublease space decreased in the quarter, ending the quarter at ond quarter 2009. 2,390,899 square feet. Rental rates ended the first quarter at The Class-C office market recorded net absorption of posi- $23.12, a decrease over the previous quarter. A total of eight tive 127,819 square feet in the first quarter 2010 compared to buildings delivered to the market in the quarter totaling 137,742 positive 72,474 square feet in the fourth quarter 2009, positive square feet, with 2,194,537 square feet still under construction at 123,070 in the third quarter 2009, and negative (111,685) in the the end of the quarter. second quarter 2009. Net absorption for Houston’s central business district was Absorption negative (204,980) square feet in the first quarter 2010. That Net absorption for the overall Houston office market was compares to positive 123,866 square feet in the fourth quarter positive 569,759 square feet in the first quarter 2010. That com- 2009, positive 9,210 in the third quarter 2009, and negative pares to positive 66,865 square feet in the fourth quarter 2009, (138,543) in the second quarter 2009. negative (52,577) square feet in the third quarter 2009, and posi- Net absorption for the suburban markets was positive tive 73,242 square feet in the second quarter 2009. 774,739 square feet in the first quarter 2010. That compares to Tenants moving out of large blocks of space in 2010 include: negative (57,001) square feet in fourth quarter 2009, negative Philip Industrial Services (Usa); Inc moving out of 800,000 square (61,787) in the third quarter 2009, and positive 211,785 in the feet at Sage Plaza; Sverdrup Technology moving out of 170,576 second quarter 2009. square feet at 2224 Bay Area Blvd; and Franklin Bank Corp. moving out of 44,046 square feet at 9800 Richmond Ave. Vacancy Tenants moving into large blocks of space in 2010 include: The office vacancy rate in the Houston market area Tax Masters, Inc. moving into 107,890 square feet at Dairy decreased to 14.4% at the end of the first quarter 2010. The Ashford Plaza; D’Amico’s Italian Restaurant moving into 50,000 vacancy rate was 14.6% at the end of the fourth quarter 2009, square feet at 5510 Morningside; and Willis of Texas moving into 14.4% at the end of the third quarter 2009, and 13.6% at the end 45,766 square feet at Cemex Center. of the second quarter 2009. The Class-A office market recorded net absorption of posi- Class-A projects reported a vacancy rate of 15.4% at the tive 189,488 square feet in the first quarter 2010, compared to end of the first quarter 2010, 15.6% at the end of the fourth negative (112,969) square feet in the fourth quarter 2009, nega- quarter 2009, 15.0% at the end of the third quarter 2009, and tive (184,374) in the third quarter 2009, and positive 75,632 in 13.1% at the end of the second quarter 2009. the second quarter 2009. Class-B projects reported a vacancy rate of 14.7% at the end Vacancy Rates by Class 1999-2010 A B C Total Market 20% 18% 16% 14% Vacancy Rate 12% 10% 8% 6% 4% 2% 0% 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 1 Absorption & Deliveries U.S. Vacancy Comparison
  • 8. HOUSTON – FIRST QUARTER 2010 Houston Office Market OVERVIEW of the first quarter 2010, 14.8% at the end of the fourth quarter quarter 2009. There were 1,470,808 square feet of sublease space 2009, 14.9% at the end of the third quarter 2009, and 14.7% at vacant at the end of the third quarter 2009, and 1,341,430 square the end of the second quarter 2009. feet at the end of the second quarter 2009. Class-C projects reported a vacancy rate of 11.2% at the Class-B projects reported vacant sublease space of 991,945 end of the first quarter 2010, 11.5% at the end of fourth quarter square feet at the end of the first quarter 2010, down from the 2009, 11.6% at the end of the third quarter 2009, and 12.0% at 998,829 square feet reported at the end of the fourth quarter the end of the second quarter 2009. 2009. At the end of the third quarter 2009 there were 890,711 The overall vacancy rate in Houston’s central business dis- square feet, and at the end of the second quarter 2009 there were trict at the end of the first quarter 2010 increased to 11.6%. The 854,219 square feet vacant. vacancy rate was 11.2% at the end of the fourth quarter 2009, Class-C projects reported increased vacant sublease space 11.4% at the end of the third quarter 2009, and 11.5% at the end from the fourth quarter 2009 to the first quarter 2010. Sublease of the second quarter 2009. vacancy went from 27,378 square feet to 46,242 square feet dur- The vacancy rate in the suburban markets decreased to ing that time. There was 55,031 square feet at the end of the third 15.0% in the first quarter 2010. The vacancy rate was 15.3% at quarter 2009, and 49,603 square feet at the end of the second the end of the fourth quarter 2009, 15.1% at the end of the third quarter 2009. quarter 2009, and 14.1% at the end of the second quarter 2009. Sublease vacancy in Houston’s central business district stood at 507,653 square feet at the end of the first quarter 2010. It Largest Lease Signings was 414,389 square feet at the end of the fourth quarter 2009, The largest lease signings occurring in 2010 included: the 471,445 square feet at the end of the third quarter 2009, and B C 695,800-square-foot lease signed by Kellogg Brown & Root Llc Total Market 473,913 square feet at the end of the second quarter 2009. at KBR Tower in the Downtown market; the 291,536-square-foot Sublease vacancy in the suburban markets ended the first deal signed by Kellogg Brown & Root at 500 Jefferson Bldg in quarter 2010 at 1,883,246 square feet. At the end of the fourth the Downtown market; and the 187,687-square-foot lease signed quarter 2009 sublease vacancy was 1,988,508 square feet, was by Kellogg Brown & Root Llc at KBR Tower in the Downtown 1,945,105 square feet at the end of the third quarter 2009, and market. was 1,771,339 square feet at the end of the second quarter Sublease Vacancy 2009. The amount of vacant sublease space in the Houston market Rental Rates decreased to 2,390,899 square feet by the end of the first quarter The average quoted asking rental rate for available office 2010, from 2,402,897 square feet at the end of the fourth quarter space, all classes, was $23.12 per square foot per year at the end 2009. There was 2,416,550 square feet vacant at the end of the of the first quarter 2010 in the Houston market area. This rep- third quarter 2009 and 2,245,252 square feet at the end of the resented a 0.2% decrease in quoted rental rates from the end of second quarter 2009. 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 the fourth quarter 2009, when rents were reported at $23.16 per 1q 3q 1q Houston’s Class-A1q 3q 1q 3q projects reported vacant sublease space 3q 1q 3q 1q 3q 1q square foot. of 1,352,712 square feet at the end of first quarter 2010, down The average quoted rate within the Class-A sector was from the 1,376,690 square feet reported at the end of the fourth $29.19 at the end of the first quarter 2010, while Class-B rates U.S. Vacancy Comparison stood at $18.90, and Class-C rates at $15.64. At the end of the Past 7 Quarters fourth quarter 2009, Class-A rates were $29.03 per square foot, Class-B rates were $18.74, and Class-C rates were $15.60. Houston United States 16.0% The average quoted asking rental rate in Houston’s CBD was $30.38 at the end of the first quarter 2010, and $21.81 in the 14.0% suburban markets. In the fourth quarter 2009, quoted rates were 12.0% $30.59 in the CBD and $21.67 in the suburbs. Vacancy Rate 10.0% Deliveries and Construction 8.0% During the first quarter 2010, eight buildings totaling 6.0% 137,742 square feet were completed in the Houston market area. This compares to eight buildings totaling 607,878 square feet that 4.0% were completed in the fourth quarter 2009, 23 buildings totaling 2.0% 2,409,093 square feet completed in the third quarter 2009, and 0.0% 1,188,676 square feet in 24 buildings completed in the second 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q quarter 2009. Source: CoStar Property• 2 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 9. 4% 2% 0% FIRST QUARTER 2010 – HOUSTON 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Houston Office Market 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q OVERVIEW Source: CoStar Property® There were 2,194,537 square feet of office space under con- Absorption & Deliveries struction at the end of the first quarter 2010. Past 7 Quarters Some of the notable 2010 deliveries include: 1111 Medical Net Absorption Deliveries Plaza Dr, a 30,000-square-foot facility that delivered in first quar- 3.0 ter 2010 and is now 76% occupied, and 1235 Lake Pointe Pky, 2.36 2.41 2.5 a 26,594-square-foot building that delivered in first quarter 2010 1.89 and is now 8% occupied. 2.0 The largest projects underway at the end of first quarter 1.5 Millions SF 1.18 1.14 1.19 2010 were MainPlace, a 972,474-square-foot building with 11% 1.0 of its space pre-leased, and Hess Tower, an 844,763-square-foot 0.61 0.57 facility that is 100% pre-leased. 0.5 0.07 0.07 0.14 0.0 Inventory (0.03) (0.05) Total office inventory in the Houston market area amounted (0.5) to 259,984,615 square feet in 4,851 buildings as of the end of (1.0) (0.60) the first quarter 2010. The Class-A office sector consisted of 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 108,311,334 square feet in 371 projects. There were 2,051 Class- Source: CoStar Property• B buildings totaling 110,908,984 square feet, and the Class-C sector consisted of 40,764,297 square feet in 2,429 buildings. 21 office sales transactions with a total volume of $351,533,815. Within the Office market there were 412 owner-occupied build- The price per square foot averaged $114.55. In the same twelve ings accounting for 23,022,879 square feet of office space. months of 2008, the market posted 47 transactions with a total Sales Activity volume of $1,271,010,999. The price per square foot averaged Tallying office building sales of 15,000 square feet or larger, $175.27. Houston office sales figures rose during the fourth quarter 2009 in Cap rates have been higher in 2009, averaging 9.71% com- terms of dollar volume compared to the third quarter of 2009. pared to the same period in 2008 when they averaged 7.38%. In the fourth quarter, six office transactions closed with One of the largest transactions that has occurred within the a total volume of $229,950,000. The six buildings totaled last four quarters in the Houston market is the sale of Anadarko 1,356,416 square feet and the average price per square foot Tower in The Woodlands. This 807,586-square-foot office build- equated to $169.53 per square foot. That compares to six trans- ing sold for $166,000,000, or $205.55 per square foot. The prop- actions totaling $71,333,815 in the third quarter 2009. The total erty sold on 12/28/2009. square footage in the third quarter was 837,982 square feet for an average price per square foot of $85.13. Reports compiled by: Alfredo Negron CoStar Research Manager; and Total office building sales activity in 2009 was down com- Meghan Drennan, CoStar Research Associate. pared to 2008. In the twelve months of 2009, the market saw ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3
  • 10. HOUSTON – FIRST QUARTER 2010 Houston Office Market MARKETS CoStar Markets & Submarkets In analyzing metropolitan areas in the U.S., CoStar has developed geographic designations to help group properties together, called Regions, Markets and Submarkets. Regions are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are then divided into Markets, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Markets Submarkets Austin County Austin County Bellaire Bellaire Downtown CBD* Midtown E Fort Bend Co/Sugar Land E Fort Bend Co/Sugar Land FM 1960 FM 1960/Champions FM 1960/Hwy 249 FM 1960/I-45 North Greenway Plaza Greenway Plaza Gulf Freeway/Pasadena Gulf Freeway/Pasadena I-10 East I-10 East Katy Freeway Katy Freeway East Katy Freeway West Kingwood/Humble Kingwood/Humble NASA/Clear Lake NASA/Clear Lake North Belt Greenspoint/IAH Greenspoint/N Belt West Northeast Near Northeast Near Northwest North Loop West Northwest Far Northwest Near Richmond/Fountainview Richmond/Fountainview San Felipe/Voss San Felipe/Voss San Jacinto County San Jacinto County South South South Hwy 35 South Hwy 35 South Main/Medical Center South Main/Medical Center Southwest Southwest Beltway 8 Southwest/Hillcroft West Loop Galleria/Uptown Post Oak Park Riverway Westchase Westchase Woodlands Woodlands * Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. 4 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 11. FIRST QUARTER 2010 – HOUSTON Houston Office Market EMPLOYMENT AND TENANT Total Employment by Industry Total Employment Growth Percent of Total Employment by Industry Total Number of Jobs Added Per Year 7% Natural Resources & Houston U.S. Average 3% 9% Mining 5.0% Construction 4.0% Manufacturing 15% 3.0% Trade, Transportation & Utilities 2.0% 21% Information Percent Growth 1.0% Financial Activities 4% 0.0% Professional & Business Services -1.0% Education & Health 9% Services -2.0% 1% Leisure & Hospitality -3.0% 5% Other Services -4.0% Government 12% -5.0% 14% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics Office* Employment Growth Office* Employment Growth Cumulative Growth in Office* Jobs Over the Past 5 Years Number of Office* Jobs Added Per Year Employment Inventory Houston U.S. Average Market Growth Growth Difference 6.0% Atlanta -8.90% 6.90% -15.80% 5.0% 4.0% Boston -3.40% 2.70% -6.10% 3.0% Chicago -10.20% 4.40% -14.60% 2.0% 1.0% Percent Growth Dallas/Ft Worth 1.70% 7.70% -6.00% 0.0% Denver -3.30% 5.30% -8.60% -1.0% Los Angeles -10.50% 3.00% -13.50% -2.0% -3.0% New York City -3.20% 1.80% -5.00% -4.0% Seattle/Puget Sound -2.30% 8.40% -10.70% -5.0% -6.0% Tampa/St Petersburg -11.00% 8.20% -19.20% -7.0% Washington -1.70% 9.40% -11.10% -8.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Houston -0.40% 8.20% -8.60% Source: Department of Labor, Bureau of Labor Statistics. * Office employment is defined as jobs in the Information, Source: Department of Labor, Bureau of Labor Statistics Financial Activities, and Professional & Business Services industries Historical Unemployment Rates Houston U.S. Average 12.0% 10.0% Percent Unemployment 8.0% 6.0% 4.0% 2.0% 0.0% 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q Source: Department of Labor, Bureau of Labor Statistics. ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5
  • 12. HOUSTON – FIRST QUARTER 2010 Houston Office Market EMPLOYMENT AND TENANT Tenant by Size Range Tenants by Lease Expiration Based on Total Number of Tenants Based on Total Square Footage of Tenants 75,000 SF & Up 2.5% 2016 3.7% 50,000-74,999 SF 1.4% 2015 10.3% 25,000-49,999 SF 3.6% 2014 12.4% 10,000-24,999 SF 11.5% 2013 11.9% 5,000-9,999 SF 14.3% 2012 11.6% 2,500-4,999 SF 20.4% Up to 2,499 SF 46.2% 2011 13.1% 0% 10% 20% 30% 40% 50% 0% 2% 4% 6% 8% 10% 12% 14% Percentage of Tenants Percentage of Tenants Source: CoStar Tenant® Source: CoStar Tenant® Tenants by Industry SF Per Employee by Industry Based on Total Square Footage of Tenants Based on All Tenants Agri/Mining/Util 19.9% Law Firms 425.8 Finance/Ins/RE 15.7% Retailers/Wholes 363.1 Retailers/Wholes 9.0% Agri/Mining/Util 341.9 Business-Service 8.8% Services 334.6 Manufacturing 8.6% Transportation 307.5 Law Firms 8.4% Finance/Ins/RE 287.8 Services 7.9% Engineers/Archit 263.0 Engineers/Archit 7.4% Communications 254.1 Medical 6.6% Business-Service 252.9 Government 2.2% Government 251.9 Transportation 2.2% Accountants 243.4 Communications 1.9% Manufacturing 239.5 Accountants 1.5% Medical 176.3 0% 5% 10% 15% 20% 25% 0 50 100 150 200 250 300 350 400 450 Percentage of Tenants SF Per Employee Source: CoStar Tenant® Source: CoStar Tenant® 6 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 13. FIRST QUARTER 2010 – HOUSTON Houston Office Market INVENTORY & DEVELOPMENT Construction Highlights in Select CoStar Markets Color Coded by Under Construction Square Footage as a Percentage of Existing Inventory �� ���� ��� ���������� ��� � �� ������� ����� ������ ���� � �� ���������������� ��������� �� ���� �� ����� ���� ��������� ��� ���������� ��� �� ��� ���������� ��� �� ����� ������ ��� �� ����� ������ ��� �� ��������� �� �� ��������� �� �� ���� ������� �� ��� ���������� ��� � �� ���� ���� ��� ����� ������ ��� �� ��� ���������� ��� �� ��������� �� �� ����� ������ ��� �� ��������� �� �� �� �� �� �� �������� ��� ���������� ��� �� ����� ������ ��� � �� ��������� �� ��� ��� �� �������� ����� ��� ���������� ��� �� ��������� ����� ������ ��� �� ��� ���������� ��� �� ��� ��������� �� �� ����� ������ ��� �� ��������� �� �� �� ����� ������������ ������ ��� ���������� ��� �� ��������� ����� ������ ��� �� ��������� �� �� ��� ���������� ��� �� ����� ������ ��� �� ��������� �� �� ������������ ������ ���� ���� ����� ����� �� ����� ����� �� ����� ����� �� ����� ���� ����� Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7
  • 14. HOUSTON – FIRST QUARTER 2010 Houston Office Market INVENTORY & DEVELOPMENT Historical Deliveries 1982 - 2010 Deliveries Average Delivered SF 30.0 24.7 25.0 23.2 20.0 Millions of SF 15.0 13.9 10.0 6.0 6.6 5.6 5.8 5.0 4.7 5.0 3.9 3.6 4.0 2.8 2.6 3.1 2.0 2.5 1.4 1.7 1.4 1.1 1.6 1.1 0.9 1.0 0.6 0.6 0.6 0.3 0.0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: CoStar Property® * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction Square Footage Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Downtown 2 1,817,237 951,735 52.4% 106,374 908,618 E Fort Bend Co/Sugar Land 3 178,469 14,009 7.8% 31,126 59,490 Woodlands 2 139,000 0 0.0% 32,948 69,500 Gulf Freeway/Pasadena 1 24,831 11,422 46.0% 17,503 24,831 FM 1960 1 23,000 23,000 100.0% 27,883 23,000 NASA/Clear Lake 1 12,000 0 0.0% 31,890 12,000 San Jacinto County 0 0 0 0.0% 2,882 0 Austin County 0 0 0 0.0% 4,629 0 Bellaire 0 0 0 0.0% 74,533 0 Greenway Plaza 0 0 0 0.0% 57,167 0 All Other 0 0 0 0.0% 60,414 0 Totals 10 2,194,537 1,000,166 45.6% 53,594 219,454 Source: CoStar Property® Recent Deliveries Future Deliveries Leased & Un-Leased SF in Deliveries Since 2006 Preleased & Un-Leased SF in Properties Scheduled to Deliver Leased Un-Leased Preleased Un-Leased 7.0 1,400 6.0 1,200 5.0 1,000 T Thousands of SF Millions of SF 4.0 800 3.0 600 2.0 400 1.0 200 0.0 0 2006 2007 2008 2009 2010 2010 2q 2010 3q 2010 4q 2011 1q Source: CoStar Property® Source: CoStar Property® 8 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 15. FIRST QUARTER 2010 – HOUSTON Houston Office Market INVENTORY & DEVELOPMENT Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction Construction Starts Deliveries 3.0 2.36 2.41 2.5 2.11 2.16 2.08 2.03 2.0 1.89 1.76 Millions of SF 1.67 1.42 1.47 1.5 1.25 1.19 1.13 1.18 0.95 0.90 1.0 0.71 0.61 0.5 0.34 0.27 0.15 0.11 0.10 0.090.14 0.0 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 8 137,742 79,933 58.0% $27.06 0 137,742 50,000 SF - 99,999 SF 0 0 0 0.0% $0.00 0 0 100,000 SF - 249,999 SF 0 0 0 0.0% $0.00 0 0 250,000 SF - 499,999 SF 0 0 0 0.0% $0.00 0 0 >= 500,000 SF 0 0 0 0.0% $0.00 0 0 Source: CoStar Property® Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA 2010 Deliveries Currently Under Construction By Class By Space Type 16% 17% 0% 38% 42% 62% 42% 100% 83% Class A Class B Class C Multi Single Multi Single Multi Single Source: CoStar Property® Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9
  • 16. HOUSTON – FIRST QUARTER 2010 Houston Office Market INVENTORY & DEVELOPMENT ������������������������������ ������������������������������� ���� ��������������������� ���� �������������������� ���� ���������������� ����������� ��������� ����������� ������������������������� ����������� ������������������������� ����� ������ ����� ������ ����� ������ ���������� � ���������� � ���������� � ������� � ������� � ������� � ���������� ��� ���������� �� ���������� ��� ������������� ������ ������������� ������ ������������� ������ ���������������������������������� ���������������������������������� ���������������������������������� ������������ ������������������ ������������ ������������������ ������������ ������������������ ������������ �������������������� ������������ ����������������������� ������������ ��������������� ����������� ��� ����������� ����������� ��� ����������� ��� ����������� ��� ����������� ��� � ����������� ��� � � ���� ���������������������� ���� �������������������������� ���� ���������������������� ����������� ��������������� ����������� ������������������������� ����������� ������� ����� ������ ����� ������ ����� ����� ���������� � ���������� � ���������� � ������� � ������� � ������� � ���������� ��� ���������� ��� ���������� ��� ������������� ������ ������������� ���������� ������������� ���������� ��������������������������������� ���������������������������������� ���������������������������������� ������������ ������������������ ������������ ������������������ ������������ ������������������ ������������ ����������������������������� ������������ ��������������������� ������������ ����������������������������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� � � � ���� ������������������ ���� ������������������� ����������� ������������������������� ����������� ������������ ����� ����� ����� ����� ���������� � ���������� � ������� � ������� � ���������� ��� ���������� ��� ������������� ���������� ������������� ������ ��������������������������������� ���������������������������������� ������������ ������������������ ������������ ������������������ ������������ ���������� ������������ ���������������������� ����������� ��� ����������� ��� ����������� ��� ����������� ��� � � ������������������������ 10 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 17. FIRST QUARTER 2010 – HOUSTON Houston Office Market INVENTORY & DEVELOPMENT ���������������������������������������� ������������������������������� ���� ����������� ���� ���������������� ���� ������������������� ����������� �������� ����������� �������� ����������� ������������������������� ����� ������� ����� ������� ����� ������� ���������� �� ���������� �� ���������� � ������� � ������� � ������� � ����������� ��� ����������� ���� ����������� �� ������������� ���������� ������������� ��� ������������� ������ ��������������������������������� ���������������������������������� ���������������������������������� ������������ ������������������ ������������ ������������������� ������������ ������������������ ������������ ������������������� ������������ ���������������� ������������ ������������������������ ����������� ������������������� ����������� ��������������� ����������� ���������������� ����������� �������������������������� ����������� ������� ����������� ������������������������� � � � ���� ������������������ ���� ����������������������� ���� �������������� ����������� ��������� ����������� ��������� ����������� ��������������������� ����� ������ ����� ������ ����� ������ ���������� � ���������� � ���������� � ������� � ������� � ������� � ����������� �� ����������� �� ����������� ��� ������������� ������ ������������� ���������� ������������� ������ ��������������������������������� ��������������������������������� ��������������������������������� ������������ ������������������ ������������ ������������������ ������������ ������������������� ������������ ����������������� ������������ ����������������������� ������������ ������������������������ ����������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� � � � ���� ������������������������ ���� �������������������������� ���� ��������������������� ����������� ������� ����������� ������������������������� ����������� ��������������� ����� ������ ����� ������ ����� ������ ���������� � ���������� � ���������� � ������� � ������� � ������� � ����������� ���� ����������� ��� ����������� �� ������������� ������ ������������� ������ ������������� ���������� ���������������������������������� ���������������������������������� ��������������������������������� ������������ ������������������� ������������ ������������������� ������������ ������������������� ������������ ���������������������������� ������������ ��������������������� ������������ ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� ����������� ��� � � � ����� ������������� ����������� ������������������������� ����� ����� ���������� � ������� � ����������� ��� ������������� ������ ��������������������������������� ������������ ������������������� ������������ ������������������������ �������� ����������� ��� ����������� ��� � ������������������������ ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 11
  • 18. HOUSTON – FIRST QUARTER 2010 Houston Office Market FIGURES AT A GLANCE Class A Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 0 0 0 0 0.0% 0 0 0 $0.00 Bellaire 11 1,489,020 122,971 143,090 9.6% (5,342) 0 0 $25.28 Downtown 35 31,187,481 2,281,418 2,819,672 9.0% (179,913) 0 1,817,237 $34.80 E Fort Bend Co/Sugar Land 24 3,970,336 838,494 844,274 21.3% 16,087 26,594 152,619 $29.07 FM 1960 23 4,115,397 2,019,248 2,054,177 49.9% 20,863 0 0 $26.33 Greenway Plaza 17 6,276,698 929,121 1,075,095 17.1% (7,682) 0 0 $27.56 Gulf Freeway/Pasadena 2 140,362 60,829 60,829 43.3% 0 0 0 $26.63 I-10 East 0 0 0 0 0.0% 0 0 0 $0.00 Katy Freeway 77 15,790,797 2,741,229 2,824,705 17.9% 140,036 0 0 $27.63 Kingwood/Humble 2 134,000 25,904 25,904 19.3% 0 0 0 $27.50 NASA/Clear Lake 11 1,118,136 63,717 72,869 6.5% 3,329 0 0 $22.97 North Belt 23 5,262,378 351,074 421,294 8.0% 14,627 0 0 $20.51 Northeast Near 0 0 0 0 0.0% 0 0 0 $0.00 Northwest 26 4,235,170 1,357,879 1,359,283 32.1% 67,051 0 0 $25.29 Richmond/Fountainview 0 0 0 0 0.0% 0 0 0 $0.00 San Felipe/Voss 3 1,741,228 234,410 274,914 15.8% (25,825) 0 0 $28.77 San Jacinto County 0 0 0 0 0.0% 0 0 0 $0.00 South 4 214,369 118,469 118,469 55.3% 5,500 0 0 $26.47 South Hwy 35 0 0 0 0 0.0% 0 0 0 $0.00 South Main/Medical Center 14 3,443,233 373,641 373,641 10.9% (22,613) 0 0 $30.70 Southwest 6 1,069,654 255,763 276,482 25.8% (10,768) 0 0 $17.90 West Loop 46 16,735,383 1,508,113 1,715,384 10.3% 99,340 0 0 $29.48 Westchase 27 7,813,357 1,514,487 1,647,597 21.1% 14,114 0 0 $28.76 Woodlands 20 3,574,335 557,926 599,726 16.8% 60,684 30,000 75,000 $29.99 Totals 371 108,311,334 15,354,693 16,707,405 15.4% 189,488 56,594 2,044,856 $29.19 Source: CoStar Property® Class B Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 3 16,460 0 0 0.0% 0 0 0 $0.00 Bellaire 21 2,576,154 62,047 62,047 2.4% 16,216 0 0 $17.05 Downtown 134 17,504,430 2,291,751 2,415,166 13.8% (64,536) 0 0 $24.18 E Fort Bend Co/Sugar Land 181 3,897,666 449,646 452,023 11.6% 104,364 48,509 25,850 $21.42 FM 1960 275 8,048,645 2,093,910 2,151,354 26.7% 6,446 6,210 23,000 $16.66 Greenway Plaza 45 4,262,587 278,350 279,660 6.6% (3,551) 0 0 $20.56 Gulf Freeway/Pasadena 126 3,220,858 410,083 428,167 13.3% 63,262 0 24,831 $20.21 I-10 East 29 875,970 125,631 134,891 15.4% 15,294 0 0 $15.12 Katy Freeway 191 11,514,148 1,066,397 1,149,288 10.0% 222,139 3,500 0 $18.79 Kingwood/Humble 57 1,651,450 177,397 184,207 11.2% 16,056 22,929 0 $20.06 NASA/Clear Lake 126 5,120,393 461,536 476,820 9.3% 33,153 0 12,000 $21.04 North Belt 71 6,443,062 1,222,895 1,376,630 21.4% (97,421) 0 0 $15.77 Northeast Near 25 673,123 99,023 99,023 14.7% 14,819 0 0 $16.73 Northwest 151 9,271,259 1,598,713 1,632,521 17.6% (34,451) 0 0 $15.19 Richmond/Fountainview 18 792,393 77,045 77,045 9.7% 4,844 0 0 $13.88 San Felipe/Voss 37 3,577,313 310,553 339,007 9.5% 3,000 0 0 $19.60 San Jacinto County 1 2,882 0 0 0.0% 0 0 0 $0.00 South 46 975,387 150,733 167,388 17.2% (2,484) 0 0 $22.31 South Hwy 35 16 202,389 4,925 4,925 2.4% 500 0 0 $15.91 South Main/Medical Center 54 3,876,432 333,538 338,338 8.7% (72,285) 0 0 $21.13 Southwest 118 8,345,569 1,557,146 1,756,100 21.0% 9,945 0 0 $15.65 West Loop 62 5,827,830 1,206,761 1,242,827 21.3% 62,454 0 0 $21.62 Westchase 62 6,618,313 788,438 895,657 13.5% (66,709) 0 0 $19.49 Woodlands 202 5,614,271 497,825 593,204 10.6% 21,397 0 64,000 $20.89 Totals 2,051 110,908,984 15,264,343 16,256,288 14.7% 252,452 81,148 149,681 $18.90 Source: CoStar Property® 12 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 19. FIRST QUARTER 2010 – HOUSTON Houston Office Market FIGURES AT A GLANCE Class C Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 5 20,575 0 0 0.0% 0 0 0 $0.00 Bellaire 35 928,528 132,883 144,537 15.6% (15,420) 0 0 $16.87 Downtown 349 6,409,591 1,592,052 1,592,052 24.8% 10,364 0 0 $17.05 E Fort Bend Co/Sugar Land 80 1,002,918 64,325 64,325 6.4% 284 0 0 $22.70 FM 1960 236 2,725,309 321,629 324,092 11.9% 9,992 0 0 $15.90 Greenway Plaza 158 2,037,377 279,595 279,595 13.7% 8,642 0 0 $17.77 Gulf Freeway/Pasadena 222 2,764,688 265,220 268,810 9.7% 4,932 0 0 $14.50 I-10 East 56 484,916 27,165 27,165 5.6% (1,500) 0 0 $10.91 Katy Freeway 166 3,478,450 282,258 293,684 8.4% (1,621) 0 0 $14.70 Kingwood/Humble 63 644,358 28,284 28,284 4.4% (1,826) 0 0 $15.83 NASA/Clear Lake 127 2,180,477 205,321 218,368 10.0% (19,417) 0 0 $16.86 North Belt 62 1,964,030 245,915 249,977 12.7% (2,468) 0 0 $13.32 Northeast Near 75 762,800 27,004 27,004 3.5% 16,942 0 0 $14.52 Northwest 210 2,949,756 107,754 107,754 3.7% 71,450 0 0 $12.93 Richmond/Fountainview 69 1,365,352 137,908 137,908 10.1% 14,026 0 0 $15.14 San Felipe/Voss 11 234,509 23,501 23,501 10.0% (1,601) 0 0 $15.34 San Jacinto County 0 0 0 0 0.0% 0 0 0 $0.00 South 70 621,632 82,800 82,800 13.3% (5,050) 0 0 $14.56 South Hwy 35 23 132,726 4,176 4,176 3.1% 500 0 0 $0.00 South Main/Medical Center 130 3,338,736 176,333 176,333 5.3% 30,381 0 0 $19.33 Southwest 149 4,051,049 367,596 367,596 9.1% (2,837) 0 0 $12.37 West Loop 21 755,047 11,631 11,631 1.5% 11,763 0 0 $0.00 Westchase 30 1,083,769 65,902 65,902 6.1% 2,576 0 0 $15.25 Woodlands 82 827,704 52,697 52,697 6.4% (2,293) 0 0 $18.39 Totals 2,429 40,764,297 4,501,949 4,548,191 11.2% 127,819 0 0 $15.64 Source: CoStar Property® Total Office Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 8 37,035 0 0 0.0% 0 0 0 $0.00 Bellaire 67 4,993,702 317,901 349,674 7.0% (4,546) 0 0 $21.77 Downtown 518 55,101,502 6,165,221 6,826,890 12.4% (234,085) 0 1,817,237 $29.36 E Fort Bend Co/Sugar Land 285 8,870,920 1,352,465 1,360,622 15.3% 120,735 75,103 178,469 $26.77 FM 1960 534 14,889,351 4,434,787 4,529,623 30.4% 37,301 6,210 23,000 $19.19 Greenway Plaza 220 12,576,662 1,487,066 1,634,350 13.0% (2,591) 0 0 $24.65 Gulf Freeway/Pasadena 350 6,125,908 736,132 757,806 12.4% 68,194 0 24,831 $18.61 I-10 East 85 1,360,886 152,796 162,056 11.9% 13,794 0 0 $14.43 Katy Freeway 434 30,783,395 4,089,884 4,267,677 13.9% 360,554 3,500 0 $23.35 Kingwood/Humble 122 2,429,808 231,585 238,395 9.8% 14,230 22,929 0 $20.33 NASA/Clear Lake 264 8,419,006 730,574 768,057 9.1% 17,065 0 12,000 $20.53 North Belt 156 13,669,470 1,819,884 2,047,901 15.0% (85,262) 0 0 $16.54 Northeast Near 100 1,435,923 126,027 126,027 8.8% 31,761 0 0 $15.84 Northwest 387 16,456,185 3,064,346 3,099,558 18.8% 104,050 0 0 $19.42 Richmond/Fountainview 87 2,157,745 214,953 214,953 10.0% 18,870 0 0 $14.52 San Felipe/Voss 51 5,553,050 568,464 637,422 11.5% (24,426) 0 0 $22.60 San Jacinto County 1 2,882 0 0 0.0% 0 0 0 $0.00 South 120 1,811,388 352,002 368,657 20.4% (2,034) 0 0 $21.63 South Hwy 35 39 335,115 9,101 9,101 2.7% 1,000 0 0 $15.91 South Main/Medical Center 198 10,658,401 883,512 888,312 8.3% (64,517) 0 0 $23.83 Southwest 273 13,466,272 2,180,505 2,400,178 17.8% (3,660) 0 0 $15.27 West Loop 129 23,318,260 2,726,505 2,969,842 12.7% 173,557 0 0 $26.56 Westchase 119 15,515,439 2,368,827 2,609,156 16.8% (50,019) 0 0 $24.86 Woodlands 304 10,016,310 1,108,448 1,245,627 12.4% 79,788 30,000 139,000 $25.16 Totals 4,851 259,984,615 35,120,985 37,511,884 14.4% 569,759 137,742 2,194,537 $23.12 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13
  • 20. HOUSTON – FIRST QUARTER 2010 Houston Office Market FIGURES AT A GLANCE Class A Submarket Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 0 0 0 0 0.0% 0 0 0 $0.00 Bellaire 11 1,489,020 122,971 143,090 9.6% (5,342) 0 0 $25.28 CBD 30 29,277,242 2,040,855 2,458,232 8.4% (200,377) 0 1,817,237 $35.56 E Fort Bend Co/Sugar Land 24 3,970,336 838,494 844,274 21.3% 16,087 26,594 152,619 $29.07 FM 1960/Champions 1 150,000 0 0 0.0% 0 0 0 $0.00 FM 1960/Hwy 249 19 3,569,632 1,958,250 1,980,554 55.5% 26,357 0 0 $26.82 FM 1960/I-45 North 3 395,765 60,998 73,623 18.6% (5,494) 0 0 $20.30 Galleria/Uptown 29 12,198,640 1,213,474 1,334,312 10.9% 48,446 0 0 $29.96 Greenspoint/IAH 5 744,018 135,701 135,701 18.2% 9,307 0 0 $21.17 Greenspoint/N Belt West 18 4,518,360 215,373 285,593 6.3% 5,320 0 0 $20.27 Greenway Plaza 17 6,276,698 929,121 1,075,095 17.1% (7,682) 0 0 $27.56 Gulf Freeway/Pasadena 2 140,362 60,829 60,829 43.3% 0 0 0 $26.63 I-10 East 0 0 0 0 0.0% 0 0 0 $0.00 Katy Freeway East 16 3,647,930 612,668 619,718 17.0% 76,909 0 0 $30.67 Katy Freeway West 61 12,142,867 2,128,561 2,204,987 18.2% 63,127 0 0 $26.57 Kingwood/Humble 2 134,000 25,904 25,904 19.3% 0 0 0 $27.50 Midtown 5 1,910,239 240,563 361,440 18.9% 20,464 0 0 $27.37 NASA/Clear Lake 11 1,118,136 63,717 72,869 6.5% 3,329 0 0 $22.97 North Loop West 5 1,054,673 271,524 272,928 25.9% 40,479 0 0 $24.17 Northeast Near 0 0 0 0 0.0% 0 0 0 $0.00 Northwest Far 20 2,943,113 1,086,355 1,086,355 36.9% 26,572 0 0 $25.56 Northwest Near 1 237,384 0 0 0.0% 0 0 0 $0.00 Post Oak Park 9 2,498,115 132,738 190,400 7.6% (20,963) 0 0 $28.91 Richmond/Fountainview 0 0 0 0 0.0% 0 0 0 $0.00 Riverway 8 2,038,628 161,901 190,672 9.4% 71,857 0 0 $27.11 San Felipe/Voss 3 1,741,228 234,410 274,914 15.8% (25,825) 0 0 $28.77 San Jacinto County 0 0 0 0 0.0% 0 0 0 $0.00 South 4 214,369 118,469 118,469 55.3% 5,500 0 0 $26.47 South Hwy 35 0 0 0 0 0.0% 0 0 0 $0.00 South Main/Medical Center 14 3,443,233 373,641 373,641 10.9% (22,613) 0 0 $30.70 Southwest Beltway 8 3 573,152 160,028 180,747 31.5% (10,768) 0 0 $19.80 Southwest/Hillcroft 3 496,502 95,735 95,735 19.3% 0 0 0 $16.23 Westchase 27 7,813,357 1,514,487 1,647,597 21.1% 14,114 0 0 $28.76 Woodlands 20 3,574,335 557,926 599,726 16.8% 60,684 30,000 75,000 $29.99 Totals 371 108,311,334 15,354,693 16,707,405 15.4% 189,488 56,594 2,044,856 $29.19 Source: CoStar Property® 14 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 21. FIRST QUARTER 2010 – HOUSTON Houston Office Market FIGURES AT A GLANCE Class B Submarket Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 3 16,460 0 0 0.0% 0 0 0 $0.00 Bellaire 21 2,576,154 62,047 62,047 2.4% 16,216 0 0 $17.05 CBD 47 13,789,736 1,928,847 2,019,123 14.6% (12,422) 0 0 $24.66 E Fort Bend Co/Sugar Land 181 3,897,666 449,646 452,023 11.6% 104,364 48,509 25,850 $21.42 FM 1960/Champions 78 2,636,252 611,816 615,702 23.4% 6,280 0 0 $14.26 FM 1960/Hwy 249 138 3,803,286 1,235,655 1,263,590 33.2% 9,209 6,210 0 $18.35 FM 1960/I-45 North 59 1,609,107 246,439 272,062 16.9% (9,043) 0 23,000 $15.47 Galleria/Uptown 27 2,879,845 692,226 703,611 24.4% 49,910 0 0 $23.16 Greenspoint/IAH 25 1,832,849 94,509 94,509 5.2% (7,783) 0 0 $16.41 Greenspoint/N Belt West 46 4,610,213 1,128,386 1,282,121 27.8% (89,638) 0 0 $15.65 Greenway Plaza 45 4,262,587 278,350 279,660 6.6% (3,551) 0 0 $20.56 Gulf Freeway/Pasadena 126 3,220,858 410,083 428,167 13.3% 63,262 0 24,831 $20.21 I-10 East 29 875,970 125,631 134,891 15.4% 15,294 0 0 $15.12 Katy Freeway East 63 3,632,986 267,316 276,370 7.6% 25,108 0 0 $19.87 Katy Freeway West 128 7,881,162 799,081 872,918 11.1% 197,031 3,500 0 $18.54 Kingwood/Humble 57 1,651,450 177,397 184,207 11.2% 16,056 22,929 0 $20.06 Midtown 87 3,714,694 362,904 396,043 10.7% (52,114) 0 0 $21.33 NASA/Clear Lake 126 5,120,393 461,536 476,820 9.3% 33,153 0 12,000 $21.04 North Loop West 61 3,663,403 911,476 934,412 25.5% (52,714) 0 0 $15.50 Northeast Near 25 673,123 99,023 99,023 14.7% 14,819 0 0 $16.73 Northwest Far 71 4,698,934 542,412 553,284 11.8% 16,076 0 0 $14.75 Northwest Near 19 908,922 144,825 144,825 15.9% 2,187 0 0 $15.09 Post Oak Park 24 2,057,754 428,500 444,516 21.6% 1,686 0 0 $19.52 Richmond/Fountainview 18 792,393 77,045 77,045 9.7% 4,844 0 0 $13.88 Riverway 11 890,231 86,035 94,700 10.6% 10,858 0 0 $21.44 San Felipe/Voss 37 3,577,313 310,553 339,007 9.5% 3,000 0 0 $19.60 San Jacinto County 1 2,882 0 0 0.0% 0 0 0 $0.00 South 46 975,387 150,733 167,388 17.2% (2,484) 0 0 $22.31 South Hwy 35 16 202,389 4,925 4,925 2.4% 500 0 0 $15.91 South Main/Medical Center 54 3,876,432 333,538 338,338 8.7% (72,285) 0 0 $21.13 Southwest Beltway 8 90 5,787,899 898,204 1,065,821 18.4% 7,838 0 0 $15.91 Southwest/Hillcroft 28 2,557,670 658,942 690,279 27.0% 2,107 0 0 $15.17 Westchase 62 6,618,313 788,438 895,657 13.5% (66,709) 0 0 $19.49 Woodlands 202 5,614,271 497,825 593,204 10.6% 21,397 0 64,000 $20.89 Totals 2,051 110,908,984 15,264,343 16,256,288 14.7% 252,452 81,148 149,681 $18.90 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15
  • 22. HOUSTON – FIRST QUARTER 2010 Houston Office Market FIGURES AT A GLANCE Class C Submarket Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 5 20,575 0 0 0.0% 0 0 0 $0.00 Bellaire 35 928,528 132,883 144,537 15.6% (15,420) 0 0 $16.87 CBD 67 3,254,884 898,685 898,685 27.6% 7,819 0 0 $16.31 E Fort Bend Co/Sugar Land 80 1,002,918 64,325 64,325 6.4% 284 0 0 $22.70 FM 1960/Champions 92 1,016,707 108,525 108,525 10.7% 4,043 0 0 $14.04 FM 1960/Hwy 249 107 1,071,705 93,015 95,478 8.9% (1,116) 0 0 $15.42 FM 1960/I-45 North 37 636,897 120,089 120,089 18.9% 7,065 0 0 $18.90 Galleria/Uptown 6 311,749 0 0 0.0% 0 0 0 $0.00 Greenspoint/IAH 18 295,979 54,243 54,243 18.3% 0 0 0 $14.17 Greenspoint/N Belt West 44 1,668,051 191,672 195,734 11.7% (2,468) 0 0 $13.13 Greenway Plaza 158 2,037,377 279,595 279,595 13.7% 8,642 0 0 $17.77 Gulf Freeway/Pasadena 222 2,764,688 265,220 268,810 9.7% 4,932 0 0 $14.50 I-10 East 56 484,916 27,165 27,165 5.6% (1,500) 0 0 $10.91 Katy Freeway East 115 2,659,569 201,821 204,421 7.7% 8,398 0 0 $14.45 Katy Freeway West 51 818,881 80,437 89,263 10.9% (10,019) 0 0 $15.28 Kingwood/Humble 63 644,358 28,284 28,284 4.4% (1,826) 0 0 $15.83 Midtown 282 3,154,707 693,367 693,367 22.0% 2,545 0 0 $18.43 NASA/Clear Lake 127 2,180,477 205,321 218,368 10.0% (19,417) 0 0 $16.86 North Loop West 110 1,290,268 29,930 29,930 2.3% 4,456 0 0 $13.59 Northeast Near 75 762,800 27,004 27,004 3.5% 16,942 0 0 $14.52 Northwest Far 74 1,084,616 51,989 51,989 4.8% 48,518 0 0 $13.71 Northwest Near 26 574,872 25,835 25,835 4.5% 18,476 0 0 $11.46 Post Oak Park 11 283,933 0 0 0.0% 0 0 0 $0.00 Richmond/Fountainview 69 1,365,352 137,908 137,908 10.1% 14,026 0 0 $15.14 Riverway 4 159,365 11,631 11,631 7.3% 11,763 0 0 $0.00 San Felipe/Voss 11 234,509 23,501 23,501 10.0% (1,601) 0 0 $15.34 San Jacinto County 0 0 0 0 0.0% 0 0 0 $0.00 South 70 621,632 82,800 82,800 13.3% (5,050) 0 0 $14.56 South Hwy 35 23 132,726 4,176 4,176 3.1% 500 0 0 $0.00 South Main/Medical Center 130 3,338,736 176,333 176,333 5.3% 30,381 0 0 $19.33 Southwest Beltway 8 79 1,822,674 125,925 125,925 6.9% (27,466) 0 0 $12.77 Southwest/Hillcroft 70 2,228,375 241,671 241,671 10.8% 24,629 0 0 $12.15 Westchase 30 1,083,769 65,902 65,902 6.1% 2,576 0 0 $15.25 Woodlands 82 827,704 52,697 52,697 6.4% (2,293) 0 0 $18.39 Totals 2,429 40,764,297 4,501,949 4,548,191 11.2% 127,819 0 0 $15.64 Source: CoStar Property® 16 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 23. FIRST QUARTER 2010 – HOUSTON Houston Office Market FIGURES AT A GLANCE Total Office Submarket Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County 8 37,035 0 0 0.0% 0 0 0 $0.00 Bellaire 67 4,993,702 317,901 349,674 7.0% (4,546) 0 0 $21.77 CBD 144 46,321,862 4,868,387 5,376,040 11.6% (204,980) 0 1,817,237 $30.38 E Fort Bend Co/Sugar Land 285 8,870,920 1,352,465 1,360,622 15.3% 120,735 75,103 178,469 $26.77 FM 1960/Champions 171 3,802,959 720,341 724,227 19.0% 10,323 0 0 $14.22 FM 1960/Hwy 249 264 8,444,623 3,286,920 3,339,622 39.5% 34,450 6,210 0 $21.54 FM 1960/I-45 North 99 2,641,769 427,526 465,774 17.6% (7,472) 0 23,000 $16.90 Galleria/Uptown 62 15,390,234 1,905,700 2,037,923 13.2% 98,356 0 0 $28.03 Greenspoint/IAH 48 2,872,846 284,453 284,453 9.9% 1,524 0 0 $17.70 Greenspoint/N Belt West 108 10,796,624 1,535,431 1,763,448 16.3% (86,786) 0 0 $16.28 Greenway Plaza 220 12,576,662 1,487,066 1,634,350 13.0% (2,591) 0 0 $24.65 Gulf Freeway/Pasadena 350 6,125,908 736,132 757,806 12.4% 68,194 0 24,831 $18.61 I-10 East 85 1,360,886 152,796 162,056 11.9% 13,794 0 0 $14.43 Katy Freeway East 194 9,940,485 1,081,805 1,100,509 11.1% 110,415 0 0 $24.54 Katy Freeway West 240 20,842,910 3,008,079 3,167,168 15.2% 250,139 3,500 0 $22.91 Kingwood/Humble 122 2,429,808 231,585 238,395 9.8% 14,230 22,929 0 $20.33 Midtown 374 8,779,640 1,296,834 1,450,850 16.5% (29,105) 0 0 $22.90 NASA/Clear Lake 264 8,419,006 730,574 768,057 9.1% 17,065 0 12,000 $20.53 North Loop West 176 6,008,344 1,212,930 1,237,270 20.6% (7,779) 0 0 $17.38 Northeast Near 100 1,435,923 126,027 126,027 8.8% 31,761 0 0 $15.84 Northwest Far 165 8,726,663 1,680,756 1,691,628 19.4% 91,166 0 0 $21.39 Northwest Near 46 1,721,178 170,660 170,660 9.9% 20,663 0 0 $14.01 Post Oak Park 44 4,839,802 561,238 634,916 13.1% (19,277) 0 0 $22.50 Richmond/Fountainview 87 2,157,745 214,953 214,953 10.0% 18,870 0 0 $14.52 Riverway 23 3,088,224 259,567 297,003 9.6% 94,478 0 0 $25.17 San Felipe/Voss 51 5,553,050 568,464 637,422 11.5% (24,426) 0 0 $22.60 San Jacinto County 1 2,882 0 0 0.0% 0 0 0 $0.00 South 120 1,811,388 352,002 368,657 20.4% (2,034) 0 0 $21.63 South Hwy 35 39 335,115 9,101 9,101 2.7% 1,000 0 0 $15.91 South Main/Medical Center 198 10,658,401 883,512 888,312 8.3% (64,517) 0 0 $23.83 Southwest Beltway 8 172 8,183,725 1,184,157 1,372,493 16.8% (30,396) 0 0 $15.83 Southwest/Hillcroft 101 5,282,547 996,348 1,027,685 19.5% 26,736 0 0 $14.48 Westchase 119 15,515,439 2,368,827 2,609,156 16.8% (50,019) 0 0 $24.86 Woodlands 304 10,016,310 1,108,448 1,245,627 12.4% 79,788 30,000 139,000 $25.16 Totals 4,851 259,984,615 35,120,985 37,511,884 14.4% 569,759 137,742 2,194,537 $23.12 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 17
  • 24. HOUSTON – FIRST QUARTER 2010 Houston Office Market FIGURES AT A GLANCE Class A Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 30 29,277,242 2,040,855 2,458,232 8.4% (200,377) 0 1,817,237 $35.56 Suburban 341 79,034,092 13,313,838 14,249,173 18.0% 389,865 56,594 227,619 $27.58 Totals 371 108,311,334 15,354,693 16,707,405 15.4% 189,488 56,594 2,044,856 $29.19 Source: CoStar Property® Class B Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 47 13,789,736 1,928,847 2,019,123 14.6% (12,422) 0 0 $24.66 Suburban 2,004 97,119,248 13,335,496 14,237,165 14.7% 264,874 81,148 149,681 $18.14 Totals 2,051 110,908,984 15,264,343 16,256,288 14.7% 252,452 81,148 149,681 $18.90 Source: CoStar Property® Class C Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 67 3,254,884 898,685 898,685 27.6% 7,819 0 0 $16.31 Suburban 2,362 37,509,413 3,603,264 3,649,506 9.7% 120,000 0 0 $15.56 Totals 2,429 40,764,297 4,501,949 4,548,191 11.2% 127,819 0 0 $15.64 Source: CoStar Property® Class A & B Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 77 43,066,978 3,969,702 4,477,355 10.4% (212,799) 0 1,817,237 $31.48 Suburban 2,345 176,153,340 26,649,334 28,486,338 16.2% 654,739 137,742 377,300 $22.53 Totals 2,422 219,220,318 30,619,036 32,963,693 15.0% 441,940 137,742 2,194,537 $23.95 Source: CoStar Property® Total Office Market Statistics First Quarter 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates CBD 144 46,321,862 4,868,387 5,376,040 11.6% (204,980) 0 1,817,237 $30.38 Suburban 4,707 213,662,753 30,252,598 32,135,844 15.0% 774,739 137,742 377,300 $21.81 Totals 4,851 259,984,615 35,120,985 37,511,884 14.4% 569,759 137,742 2,194,537 $23.12 Source: CoStar Property® 18 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 25. FIRST QUARTER 2010 – HOUSTON Houston Office Market FIGURES AT A GLANCE Class A Market Statistics First Quarter 2010 Existing Inventory Vacancy Net Deliveries UC Inventory Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2010 1q 371 108,311,334 15,354,693 16,707,405 15.4% 189,488 2 56,594 4 2,044,856 $29.19 2009 4q 369 108,254,740 15,463,609 16,840,299 15.6% (112,969) 4 577,346 5 2,026,450 $29.03 2009 3q 365 107,677,394 14,679,176 16,149,984 15.0% (184,374) 11 2,178,135 8 2,451,177 $28.31 2009 2q 354 105,499,259 12,446,045 13,787,475 13.1% 75,632 6 829,402 19 4,629,312 $28.68 2009 1q 348 104,669,857 11,736,014 13,033,705 12.5% 372,783 8 2,070,963 23 5,409,784 $29.00 2008 4q 340 102,598,894 10,335,516 11,335,525 11.0% 825,656 9 1,372,507 29 7,235,128 $29.17 2008 3q 331 101,226,387 9,838,348 10,788,674 10.7% 580,822 6 846,439 36 8,501,041 $28.99 2008 2q 325 100,379,948 9,590,178 10,523,057 10.5% 561,219 7 1,098,135 39 8,147,006 $29.30 2008 1q 318 99,281,813 9,217,853 9,986,141 10.1% 283,791 6 1,259,171 40 7,627,518 $28.41 2007 312 98,022,642 8,123,316 9,010,761 9.2% 4,242,940 14 2,099,719 37 7,123,544 $27.21 2006 298 95,922,923 9,959,821 11,153,982 11.6% 5,178,463 10 1,630,664 19 3,420,366 $23.73 2005 288 94,292,259 13,133,326 14,701,781 15.6% 2,156,922 9 1,062,873 10 2,018,558 $20.64 2004 279 93,229,386 14,017,091 15,795,830 16.9% 60,185 4 511,000 11 1,854,882 $20.86 2003 275 92,718,386 13,179,574 15,345,015 16.6% 168,193 8 2,167,642 5 807,000 $20.61 2002 267 90,550,744 10,628,333 13,345,566 14.7% (551,901) 5 2,789,351 8 2,167,642 $21.13 2001 262 87,761,393 7,687,152 10,004,314 11.4% 255,331 5 1,057,886 9 4,591,532 $22.47 Source: CoStar Property® Class B Market Statistics First Quarter 2010 Existing Inventory Vacancy Net Deliveries UC Inventory Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2010 1q 2,051 110,908,984 15,264,343 16,256,288 14.7% 252,452 6 81,148 6 149,681 $18.90 2009 4q 2,045 110,827,836 15,428,763 16,427,592 14.8% 107,360 4 30,532 11 218,829 $18.74 2009 3q 2,041 110,797,304 15,613,709 16,504,420 14.9% 8,727 12 230,958 15 249,361 $18.99 2009 2q 2,029 110,566,346 15,427,970 16,282,189 14.7% 109,295 18 359,274 23 378,988 $19.05 2009 1q 2,011 110,207,072 15,207,325 16,032,210 14.5% (925,697) 17 286,912 37 681,552 $19.13 2008 4q 1,995 110,043,160 14,095,689 14,942,601 13.6% 424,074 18 518,339 44 873,827 $19.30 2008 3q 1,977 109,524,821 14,219,651 14,848,336 13.6% (268,262) 22 329,421 47 1,230,315 $19.41 2008 2q 1,955 109,195,400 13,719,547 14,250,653 13.1% 380,391 13 149,693 58 1,286,790 $19.34 2008 1q 1,942 109,045,707 13,920,131 14,481,351 13.3% (80,436) 18 407,398 62 1,298,223 $19.14 2007 1,924 108,638,309 13,484,117 13,993,517 12.9% 2,784,774 84 1,887,230 64 1,303,917 $18.70 2006 1,843 106,977,583 13,892,484 15,117,565 14.1% 2,222,449 60 1,489,272 77 1,647,124 $17.12 2005 1,785 105,554,986 14,349,708 15,917,417 15.1% 2,198,427 61 1,489,352 57 1,618,524 $16.18 2004 1,724 104,065,634 14,688,774 16,626,492 16.0% 1,575,721 43 983,402 55 1,524,447 $15.85 2003 1,682 103,178,948 15,002,348 17,315,527 16.8% (37,130) 45 1,323,416 34 1,066,354 $15.69 2002 1,637 101,855,532 13,776,670 15,954,981 15.7% 174,170 48 1,820,708 32 980,114 $16.48 2001 1,589 100,034,824 12,396,101 14,308,443 14.3% (672,161) 37 1,318,842 43 1,768,888 $17.10 Source: CoStar Property® Total Office Market Statistics First Quarter 2010 Existing Inventory Vacancy Net Deliveries UC Inventory Quoted Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates 2010 1q 4,851 259,984,615 35,120,985 37,511,884 14.4% 569,759 8 137,742 10 2,194,537 $23.12 2009 4q 4,843 259,846,873 35,541,004 37,943,901 14.6% 66,865 8 607,878 16 2,245,279 $23.16 2009 3q 4,835 259,238,995 34,986,338 37,402,888 14.4% (52,577) 23 2,409,093 23 2,700,538 $22.98 2009 2q 4,812 256,829,902 32,695,966 34,941,218 13.6% 73,242 24 1,188,676 42 5,008,300 $23.22 2009 1q 4,788 255,641,226 31,668,426 33,825,784 13.2% (598,409) 25 2,357,875 60 6,091,336 $23.35 2008 4q 4,764 253,406,351 29,111,813 30,992,500 12.2% 1,141,106 27 1,890,846 73 8,108,955 $23.37 2008 3q 4,737 251,515,505 28,631,416 30,242,760 12.0% (26,482) 28 1,175,860 83 9,731,356 $23.40 2008 2q 4,709 250,339,645 27,547,243 29,040,418 11.6% 895,321 20 1,247,828 97 9,433,796 $23.51 2008 1q 4,690 249,171,317 27,379,561 28,767,411 11.5% 172,413 24 1,666,569 102 8,925,741 $22.81 2007 4,666 247,504,748 25,823,223 27,273,255 11.0% 7,402,551 99 3,992,649 101 8,427,461 $22.01 2006 4,571 243,765,945 28,488,580 30,937,003 12.7% 7,035,172 74 3,132,850 97 5,073,190 $19.66 2005 4,502 240,893,820 31,936,253 35,100,050 14.6% 4,610,998 77 2,604,280 71 3,649,996 $18.00 2004 4,428 238,422,176 33,482,971 37,239,404 15.6% 2,076,682 57 1,611,313 72 3,422,784 $17.84 2003 4,375 236,972,909 33,331,663 37,866,819 16.0% (772,180) 59 3,556,783 47 1,984,279 $17.63 2002 4,320 233,668,603 28,849,511 33,790,333 14.5% (236,022) 60 4,724,623 46 3,213,481 $18.12 2001 4,262 229,003,795 24,627,214 28,889,503 12.6% (569,080) 50 2,495,112 57 6,470,690 $18.62 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 19
  • 26. HOUSTON – FIRST QUARTER 2010 Houston Office Market LEASING ACTIVITY Leasing Highlights in Select CoStar Markets Color Coded by Vacancy Rate �� ���� �������� ����� ������� ��� ���� �� � �� ���������������� ��� ����� ������ ��� �� ����� ���� ��������� �������� ����� �������� ����� ��� ���� ���� � �� ��� ���� ��� � �� ��� ����� ������ ��� ��� ����� ������ ��� ���� ������� �� �������� ����� ���� ���� ��� ��� ���� ��� � �� �������� ����� ��� ����� ������ ��� ��� ���� ��� � �� ��� ����� ������ ��� �� �� �� �� �������� �������� ����� ��� ���� ����� � �� ��� ����� �������� � ��� �� �������� ����� �������� ����� ��������� ��� ���� ��� � �� �������� ����� ��� ��� ����� ������ ��� ��� ���� ���� � �� ��� ����� ������ ��� �� ����� ������������ ������ �������� ���� ��������� ��� ���� ���� � �� ��� ����� ������ ��� �������� ����� ��� ���� ��� � �� ��� ����� ������ ��� ������� ����� ���� ���� �� �� �� ��� ��� �� ��� ��� �� ��� ���� ��� Source: CoStar Property® 20 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 27. FIRST QUARTER 2010 – HOUSTON Houston Office Market LEASING ACTIVITY Historical Rental Rates Based on Full-Service Equivalent Rental Rates A B C Total Market $35.00 $30.00 $25.00 Dollars/SF/Year $20.00 $15.00 $10.00 $5.00 $0.00 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Source: CoStar Property® Vacancy by Available Space Type Vacancy by Class Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Class Houston United States Houston United States 6% 6% 12% 15% 43% 47% 38% 45% 94% 94% Direct Sublet Direct Sublet Class A Class B Class C Class A Class B Class C Source: CoStar Property® Source: CoStar Property® U.S. Rental Rate Comparison Future Space Available Based on Full-Service Equivalent Rental Rates Space Scheduled to be Available for Occupancy* Houston United States 3.0 $25.00 2.62 2.5 $20.00 2.0 1.76 Dollars/SF/Year $15.00 Millions 1.5 $10.00 1.0 0.61 $5.00 0.37 0.5 0.04 0.00 $0.00 0.0 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q 2010 3q 2010 4q 2011 1q 2011 2q 2011 3q Source: CoStar Property® * Includes Under Construction Spaces Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 21
  • 28. HOUSTON – FIRST QUARTER 2010 Houston Office Market LEASING ACTIVITY Select Top Office Leases Based on Leased Square Footage For Deals Signed in 2010 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 KBR Tower* CBD 695,800 1st Kellogg Brown & Root Jones Lang LaSalle Americas, Inc. Brookfield Properties Management, L 2 500 Jefferson Bldg* CBD 291,536 1st Kellogg Brown & Root Jones Lang LaSalle Americas, Inc. Brookfield Properties Management, L 3 KBR Tower CBD 187,687 1st Kellogg Brown & Root N/A Brookfield Properties Management, L 4 5150 Westway Park Blvd Northwest Far 92,420 1st CyrusOne Direct Deal Stan Johnson Company 5 Aerotech Business Center* NASA/Clear Lake 51,803 1st Wyle Laboratories Studley N/A 6 Bank of America Center CBD 30,188 1st N/A N/A PM Realty Group 7 Enclave Parkway Katy Freeway West 29,976 1st N/A N/A CB Richard Ellis 8 Marathon Oil Tower* Galleria/Uptown 26,407 1st WEUS Holdings CB Richard Ellis CB Richard Ellis 9 Energy Tower I Katy Freeway West 23,608 1st N/A N/A Mac Haik Management LLC 10 San Felipe Plaza San Felipe/Voss 21,495 1st N/A N/A Cushman & Wakefield, Inc. 11 Brookhollow Central II* North Loop West 21,263 1st Lorance & Thompson, P.C. NAI Houston Colvill Office Properties 12 6575 West Loop S* Bellaire 21,000 1st Bridgeway Software, Inc. N/A N/A 13 363 North Belt Greenspoint/N Belt West 20,345 1st Newfield N/A N/A 14 Younan Place Westchase 19,257 1st N/A N/A PM Realty Group 15 Galleria Plaza I Galleria/Uptown 19,204 1st N/A N/A Transwestern Commercial Services 16 3100 Main St Midtown 18,000 1st City of Houston N/A Yancey-Hausman, Inc. 17 10940 W Sam Houston Pky N Northwest Far 16,782 1st N/A N/A Betz Commercial Brokerage Inc 18 Cypress Court* FM 1960/I-45 North 15,809 1st South Bay Energy South Bay Energy BGK Texas Property Management, LLC 19 Two Riverway Riverway 15,671 1st IBM Corporation N/A Stream Realty Partners, L.P. 20 7850 N Sam Houston Pky W FM 1960/Hwy 249 14,718 1st N/A N/A Caldwell Companies 21 Timberway One Katy Freeway West 14,009 1st N/A N/A Jones Lang LaSalle Americas, Inc. 22 3700 Buffalo Speedway Greenway Plaza 13,579 1st Hale-Mills Construction, LTD N/A Moody National Realty Company 23 1 Houston Center CBD 13,439 1st N/A N/A CB Richard Ellis 24 Bank of America Center CBD 13,169 1st N/A N/A Jones Lang LaSalle Americas, Inc. 25 Granite Towers Phase I E Fort Bend Co/Sugar Land 12,857 1st N/A N/A Granite Properties 26 14511 Old Katy Rd Katy Freeway West 12,600 1st N/A Direct Deal NAI Houston 27 301 Commerce Green Blvd* E Fort Bend Co/Sugar Land 12,485 1st Weichert Relocation Resources Inc. Direct Deal Mac Haik Development Corporation 28 Beltway Lakes Phase I Northwest Far 12,077 1st N/A N/A Colliers International 29 1455 W Loop Fwy S Post Oak Park 11,566 1st N/A N/A Moody Rambin Interests 30 Ashford Crossing II Katy Freeway West 11,479 1st N/A N/A CB Richard Ellis 31 1 Houston Center CBD 10,862 1st N/A CB Richard Ellis Crescent Real Estate Equities Ltd. 32 Sandtrap V FM 1960/Hwy 249 10,621 1st N/A N/A Caldwell Companies 33 Bank of America Center CBD 10,185 1st N/A N/A PM Realty Group 34 Millennium Tower Westchase 10,175 1st Berkley Oil & Gas Specialty Services, LLC CresaPartners CB Richard Ellis 35 4110 Bellaire Blvd Bellaire 9,993 1st Texas Children Pediatric Associates Jones Lang LaSalle Pipeline Realty Company 36 NewQuest Properties FM 1960/Hwy 249 9,963 1st N/A N/A Transwestern Commercial Services 37 Granite Towers Phase I E Fort Bend Co/Sugar Land 8,971 1st N/A N/A Granite Properties 38 Atrium @ Nassau Bay Bldg NASA/Clear Lake 8,813 1st Futron JacksonCooksey PM Realty Group 39 Heritage Plaza CBD 8,737 1st N/A CBRE Lincoln Property Company 40 10940 W Sam Houston Pky N Northwest Far 8,600 1st N/A N/A Betz Commercial Brokerage Inc Source: CoStar Property® * Renewal 22 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 29. FIRST QUARTER 2010 – HOUSTON Houston Office Market SALES ACTIVITY The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter Cap Rate Price/SF 12.0% $300 10.0% $250 Cap Rate Percentage 8.0% $200 Dollars/SF 6.0% $150 4.0% $100 2.0% $50 0.0% $0 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q Source: CoStar COMPS® Sales Volume & Price Sales Analysis by Building Size Based on Office Building Sales of 15,000 SF and Larger Based on Office Building Sales From Jan. 2009 - Dec. 2009 Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate $1,200 $250 < 50,000 SF 25 272,489 $ 26,664,014 $ 97.85 7.82% $1,000 Millions of Sales Volume Dollars $200 $800 $150 Price/SF 50K-249K SF 13 1,660,815 $ 122,400,000 $ 73.70 10.70% $600 $100 $400 250K-499K SF 1 449,909 $ 52,873,000 $ 117.52 - $50 $200 $0 $0 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 >500K SF 1 807,586 $ 166,000,000 $ 205.55 - 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q Source: CoStar COMPS® Source: CoStar COMPS® U.S. Price/SF Comparison U.S. Cap Rate Comparison Based on Office Building Sales of 15,000 SF and Larger Based on Office Building Sales of 15,000 SF and Larger Houston US Houston US $320 11.0% 10.0% $270 9.0% Cap Rate Percentage $220 8.0% Dollars per SF $170 7.0% 6.0% $120 5.0% $70 4.0% $20 3.0% 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3q Source: CoStar COMPS® Source: CoStar COMPS® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 23
  • 30. HOUSTON – FIRST QUARTER 2010 Houston Office Market SALES ACTIVITY ���������������� ��������������������������������������������������� ����������������� ���������������������������� ������������������������������ ������� ������� ������� ������ ����������� ������ ����������� ������ ����������� ��������� ������� ��������� ������� ��������� ������ ��������� ��� ��������� ��� ��������� ��� ���� ������� ���� ������� ���� ������� ����� ��������� ����� �������� ����� ��������� ����������� ���� ����������� ���� ����������� ���� ������ ���������������������� ������ ������������������� ������ ��������������������������������� ������� ������������������� ������� ����������������������� ������� ����������������������� �������������������� ���������������������� ������������������������ ������� ������� ���������� ������ ���������� ������ ���������� ������ ���������� ��������� ������ ��������� ������ ��������� ������� ��������� ��� ��������� ����� ��������� ��� ���� ������� ���� ������� ���� ������ ����� �������� ����� ��������� ����� ���������� ����������� ���� ����������� ���� ����������� ���� ������ ��������������������������������� ������ ������������������������ ������ ���������� ������� ���������������������� ������� ����������������������������� ������� ������������������ ������������������ ��������������������� ������������������� ������� ������� ������� ������ ���������� ������ ���������� ������ ���������� ��������� ������ ��������� ������ ��������� ������ ��������� ��� ��������� ��� ��������� ��� ���� ������� ���� ������ ���� ������ ����� ��������� ����� �������� ����� ��������� ����������� ���� ����������� ���� ����������� ���� ������ ������������������� ������ ����������������� ������ ��������������������������� ������� �������������������������������������� ������� ��������������������� ������� �������������������� ��������������������� 24 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 31. FIRST QUARTER 2010 – HOUSTON Houston Office Market SALES ACTIVITY �������������������������� ����������������������������������������������������� ������������ ���������������� ������������������������������ �������� ������������ ������ ������������ ������ ������������ ����� ������� ��������� ������� ��������� ������� ���� ������� ��������� ��� ��������� ��� ����������� ���� ����� ��������� ����� ���������� ������������� ����������� ������ ���������������������������� ������ ��������������������������� ������������� ��� ������� ��������������������������� ������� �������������� ����������� �� �������� ��� �������� ��� ������������ �� ������������ ���������������� ������������������������������ �������� ������������ ������ ������������ ������ ����������� ����� ������� ��������� ������� ��������� ������ ���� ������� ��������� ��� ��������� ��� ����������� ���� ����� ��������� ����� ���������� ������������� ����������� ������ �������������������������� ������ ����� ������������� ���� ������� ����� ������� ������������������ ����������� ��� �������� ��� �������� ��� ������������ �� ���������� ���������������� ������������������������������ �������� ���������� ������ ����������� ������ ����������� ����� ������� ��������� ������� ��������� ������ ���� ������� ��������� ���� ��������� ��� ����������� ���� ����� ���������� ����� ���������� ������������� ����������� ������ �������������������� ������ �������������������� ������������� ��� ������� �������������������� ������� ������������� ����������� ��� �������� ��� �������� ���������������� ������������ �� ���������������������� ���������������� ������������������������������ �������� ���������������������� ������ ����������� ������ ����������� ����� ������� ��������� ������� ��������� ������� ���� ������� ��������� ���� ��������� ��� ����������� ���� ����� ���������� ����� ��������� ������������� ���������� ������ �������������������������� ������ ���������������������������� ������������� ��� ������� ���������������������������� ������� ��������������������������� ����������� ��� �������� ���������������������������� �������� ��� ������������ �� ��������������������� Select Land Sales Based on Commercially Zoned Land Sales Occurring From Jan. 2009 - March 2010 5940 Clay Rd, Katy Martindale Rd, Houston 11019 Shadow Creek Pky, Pearland Sale Price: $2,590,500 Sale Price: $2,580,000 Sale Price: $2,300,000 Acres: 157.00 Acres: 164.00 Acres: 1.71 Price/SF: $0.38 Price/SF: $0.36 Price/SF: $30.86 Closing Date: 03/16/2009 Closing Date: 02/03/2010 Closing Date: 06/18/2009 Zoning: Unrestricted Zoning: None Zoning: PUD Intended Use: Hold for Development Intended Use: Hold for Development Intended Use: Restaurant Buyer: Clay & Co. Buyer: ElTesoro DelBajio LLC Buyer: CB PTX, LLC Seller: Clay Katy Hockley Ltd Seller: WL Woodland Lakes LLC Seller: Gulf Coast Commercial Group E Sam Houston Pky, Pasadena Aldine Westfield, Houston 13826 Furman Rd, Houston Sale Price: $2,200,000 Sale Price: $2,060,933 Sale Price: $1,266,055 Acres: 2.78 Acres: 37.85 Acres: 25.00 Price/SF: $18.18 Price/SF: $1.25 Price/SF: $1.16 Closing Date: 12/23/2009 Closing Date: 02/01/2009 Closing Date: 10/15/2009 Zoning: None Zoning: None Zoning: None Intended Use: Commercial Intended Use: Office Intended Use: Commercial Buyer: H & D Equities, Inc. Buyer: The National Realty Group, Inc. Buyer: OCB Properties, Ltd Seller: Joseph Langteau Seller: Morris Kagan & Israel Rudy Seller: McDonald Robert L Source: CoStar COMPS® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 25
  • 32. HOUSTON – FIRST QUARTER 2010 Houston Office Market A U S T I N C O U N T Y M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.000 100.0% 0.000 90.0% 0.000 80.0% 0.000 70.0% Percent Vacant Millions SF 0.000 60.0% 0.000 50.0% 0.000 40.0% 0.000 30.0% 0.000 20.0% 0.000 10.0% 0.000 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $1.00 0.00 $0.90 0.00 $0.80 0.00 $0.70 0.00 Dollars/SF/Year $0.60 Millions SF 0.00 $0.50 0.00 0.00 $0.40 0.00 $0.30 0.00 $0.20 0.00 $0.10 0.00 $0.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2009 4q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2009 3q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2009 2q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2009 1q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2008 4q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2008 3q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2008 2q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2008 1q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2007 4q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2007 3q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2007 2q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2007 1q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2006 4q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2006 3q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 2006 2q 8 37,035 0 0.0% 0 0 0 0 0 $0.00 Source: CoStar Property® 26 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 33. FIRST QUARTER 2010 – HOUSTON Houston Office Market B E L L A I R E M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.200 14.0% 0.150 12.0% 0.100 10.0% Percent Vacant 0.050 Millions SF 8.0% 0.000 6.0% (0.050) 4.0% (0.100) (0.150) 2.0% (0.200) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $22.20 0.45 $22.00 0.40 $21.80 0.35 $21.60 Dollars/SF/Year 0.30 Millions SF $21.40 0.25 $21.20 0.20 0.15 $21.00 0.10 $20.80 0.05 $20.60 0.00 $20.40 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 67 4,993,702 349,674 7.0% (4,546) 0 0 0 0 $21.77 2009 4q 67 4,993,702 345,128 6.9% 33,546 0 0 0 0 $22.02 2009 3q 67 4,993,702 378,674 7.6% 31,564 0 0 0 0 $21.02 2009 2q 67 4,993,702 410,238 8.2% (9,996) 0 0 0 0 $21.02 2009 1q 67 4,993,702 400,242 8.0% (61,898) 0 0 0 0 $21.86 2008 4q 67 4,993,702 338,344 6.8% 176,064 0 0 0 0 $23.24 2008 3q 67 4,993,702 514,408 10.3% 88,720 0 0 0 0 $22.99 2008 2q 67 4,993,702 603,128 12.1% 23,960 0 0 0 0 $22.89 2008 1q 67 4,993,702 627,088 12.6% (153,825) 1 27,716 0 0 $21.85 2007 4q 66 4,965,986 445,547 9.0% (56,664) 0 0 1 27,716 $21.32 2007 3q 66 4,965,986 388,883 7.8% 82,743 0 0 1 27,716 $20.82 2007 2q 66 4,965,986 471,626 9.5% 77,887 0 0 1 27,716 $18.54 2007 1q 66 4,965,986 549,513 11.1% 61,319 0 0 0 0 $18.26 2006 4q 66 4,965,986 610,832 12.3% 22,315 0 0 0 0 $17.72 2006 3q 66 4,965,986 633,147 12.7% (81,160) 0 0 0 0 $17.16 2006 2q 66 4,965,986 551,987 11.1% 40,813 0 0 0 0 $16.30 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 27
  • 34. HOUSTON – FIRST QUARTER 2010 Houston Office Market D O W N T O W N M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 1.600 16.0% 1.400 14.0% 1.200 12.0% 1.000 Percent Vacant 10.0% Millions SF 0.800 0.600 8.0% 0.400 6.0% 0.200 4.0% 0.000 2.0% (0.200) (0.400) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $30.00 7.00 6.80 $29.50 6.60 6.40 $29.00 Dollars/SF/Year Millions SF 6.20 $28.50 6.00 5.80 $28.00 5.60 5.40 $27.50 5.20 5.00 $27.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 518 55,101,502 6,826,890 12.4% (234,085) 0 0 2 1,817,237 $29.36 2009 4q 518 55,101,502 6,592,805 12.0% 109,494 1 18,930 2 1,817,237 $29.78 2009 3q 517 55,082,572 6,683,369 12.1% (188,739) 0 0 3 1,836,167 $28.20 2009 2q 517 55,082,572 6,494,630 11.8% (202,092) 0 0 3 1,836,167 $29.03 2009 1q 517 55,082,572 6,292,538 11.4% (243,762) 2 59,462 2 1,817,237 $29.51 2008 4q 515 55,023,110 5,989,314 10.9% 345,561 1 560,000 4 1,876,699 $30.63 2008 3q 514 54,463,110 5,774,875 10.6% (226,526) 0 0 4 2,424,699 $30.58 2008 2q 514 54,463,110 5,548,349 10.2% 50,073 0 0 3 1,452,225 $30.72 2008 1q 514 54,463,110 5,598,422 10.3% 92,604 0 0 2 607,462 $28.32 2007 4q 514 54,463,110 5,691,026 10.4% 119,492 0 0 1 560,000 $27.69 2007 3q 514 54,463,110 5,810,518 10.7% 537,721 1 55,000 1 560,000 $25.05 2007 2q 513 54,408,110 6,293,239 11.6% 1,323,065 0 0 2 615,000 $25.74 2007 1q 513 54,408,110 7,616,304 14.0% (62,600) 1 7,374 2 615,000 $24.25 2006 4q 512 54,400,736 7,546,330 13.9% 480,458 0 0 2 62,374 $23.07 2006 3q 512 54,400,736 8,026,788 14.8% 542,828 0 0 2 62,374 $21.63 2006 2q 513 54,463,786 8,632,666 15.9% 549,748 0 0 2 62,374 $21.06 Source: CoStar Property® 28 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 35. FIRST QUARTER 2010 – HOUSTON Houston Office Market E F O R T B E N D C O / S U G A R L A N D M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.500 18.0% 16.0% 0.400 14.0% 0.300 12.0% Percent Vacant Millions SF 0.200 10.0% 0.100 8.0% 6.0% 0.000 4.0% (0.100) 2.0% (0.200) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $26.90 1.45 $26.80 1.40 $26.70 1.35 $26.60 Dollars/SF/Year $26.50 Millions SF 1.30 $26.40 1.25 $26.30 1.20 $26.20 1.15 $26.10 1.10 $26.00 1.05 $25.90 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 285 8,870,920 1,360,622 15.3% 120,735 4 75,103 3 178,469 $26.77 2009 4q 281 8,795,817 1,406,254 16.0% (3,981) 2 166,619 7 253,572 $26.54 2009 3q 279 8,629,198 1,235,654 14.3% 67,648 7 97,868 8 267,572 $26.21 2009 2q 272 8,531,330 1,205,434 14.1% 123,376 0 0 14 357,940 $26.40 2009 1q 272 8,531,330 1,328,810 15.6% 66,926 1 6,000 13 333,940 $26.51 2008 4q 271 8,525,330 1,389,736 16.3% 213,149 2 215,780 12 173,321 $24.88 2008 3q 269 8,309,550 1,387,105 16.7% (43,855) 5 376,887 7 301,619 $24.46 2008 2q 264 7,932,663 966,363 12.2% (72,371) 0 0 12 678,506 $24.82 2008 1q 264 7,932,663 893,992 11.3% 5,199 2 24,340 11 672,506 $23.85 2007 4q 262 7,908,323 874,851 11.1% 146,144 3 30,346 12 690,687 $24.00 2007 3q 259 7,877,977 990,649 12.6% 70,508 0 0 12 638,542 $23.48 2007 2q 259 7,877,977 1,061,157 13.5% 299,960 2 159,645 10 248,752 $22.22 2007 1q 257 7,718,332 1,201,472 15.6% (123,433) 2 196,452 9 385,317 $21.92 2006 4q 255 7,521,880 881,587 11.7% 97,344 0 0 8 441,927 $20.17 2006 3q 255 7,521,880 978,931 13.0% 279,841 4 68,560 7 411,147 $19.77 2006 2q 251 7,453,320 1,190,212 16.0% 123,094 1 3,818 10 473,407 $18.92 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 29
  • 36. HOUSTON – FIRST QUARTER 2010 Houston Office Market F M 1 9 6 0 M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.300 35.0% 0.200 30.0% 0.100 0.000 25.0% Percent Vacant Millions SF (0.100) 20.0% (0.200) 15.0% (0.300) (0.400) 10.0% (0.500) 5.0% (0.600) (0.700) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $21.50 4.80 $21.00 4.70 $20.50 Dollars/SF/Year 4.60 Millions SF $20.00 4.50 $19.50 4.40 $19.00 4.30 $18.50 4.20 $18.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 534 14,889,351 4,529,623 30.4% 37,301 1 6,210 1 23,000 $19.19 2009 4q 533 14,883,141 4,560,714 30.6% 138,720 1 7,532 2 29,210 $20.75 2009 3q 532 14,875,609 4,691,902 31.5% 119,924 1 55,468 3 36,742 $21.06 2009 2q 531 14,820,141 4,756,358 32.1% 2,173 2 14,725 4 92,210 $21.31 2009 1q 529 14,805,416 4,743,806 32.0% (4,267) 5 82,705 4 77,725 $21.27 2008 4q 524 14,722,711 4,656,834 31.6% 103,781 8 208,799 8 152,898 $21.63 2008 3q 516 14,513,912 4,551,816 31.4% (599,283) 7 161,312 15 351,697 $21.70 2008 2q 509 14,352,600 3,791,221 26.4% (14,247) 3 212,624 20 452,816 $22.10 2008 1q 506 14,139,976 3,564,350 25.2% (309,812) 4 55,008 20 648,484 $22.05 2007 4q 502 14,084,968 3,199,530 22.7% (363,761) 3 79,400 16 576,503 $19.73 2007 3q 499 14,005,568 2,756,369 19.7% (60,265) 14 62,404 14 623,964 $20.17 2007 2q 485 13,943,164 2,633,700 18.9% (3,852) 7 97,938 27 645,443 $18.81 2007 1q 478 13,845,226 2,531,910 18.3% 227,646 11 214,073 26 332,150 $17.96 2006 4q 467 13,631,153 2,545,483 18.7% (85,756) 3 117,632 35 469,223 $18.02 2006 3q 464 13,513,521 2,342,095 17.3% 201,004 6 216,622 31 529,961 $17.67 2006 2q 458 13,296,899 2,326,477 17.5% (26,083) 1 33,358 22 638,615 $17.66 Source: CoStar Property® 30 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 37. FIRST QUARTER 2010 – HOUSTON Houston Office Market G R E E N W A Y P L A Z A M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.400 16.0% 0.300 14.0% 12.0% 0.200 Percent Vacant 10.0% Millions SF 0.100 8.0% 0.000 6.0% (0.100) 4.0% (0.200) 2.0% (0.300) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $26.50 1.75 1.70 $26.00 1.65 1.60 $25.50 Dollars/SF/Year Millions SF 1.55 $25.00 1.50 1.45 $24.50 1.40 1.35 $24.00 1.30 1.25 $23.50 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 220 12,576,662 1,634,350 13.0% (2,591) 0 0 0 0 $24.65 2009 4q 220 12,576,662 1,631,759 13.0% 50,423 0 0 0 0 $25.56 2009 3q 220 12,576,662 1,682,182 13.4% (56,109) 0 0 0 0 $25.71 2009 2q 220 12,576,662 1,626,073 12.9% 9,955 0 0 0 0 $26.20 2009 1q 220 12,576,662 1,636,028 13.0% (115,069) 0 0 0 0 $26.32 2008 4q 220 12,576,662 1,520,959 12.1% (101,738) 0 0 0 0 $26.59 2008 3q 220 12,576,662 1,419,221 11.3% (63,074) 0 0 0 0 $26.47 2008 2q 220 12,576,662 1,356,147 10.8% 28,385 1 20,000 0 0 $26.68 2008 1q 219 12,556,662 1,364,532 10.9% (212,439) 1 104,671 1 20,000 $25.59 2007 4q 218 12,451,991 1,047,422 8.4% 295,508 0 0 2 124,671 $24.31 2007 3q 218 12,451,991 1,342,930 10.8% 119,920 0 0 2 124,671 $22.58 2007 2q 218 12,451,991 1,462,850 11.7% 56,277 0 0 2 124,671 $21.01 2007 1q 218 12,451,991 1,519,127 12.2% (40,380) 0 0 2 124,671 $20.60 2006 4q 218 12,451,991 1,478,747 11.9% (31,577) 0 0 0 0 $21.02 2006 3q 218 12,451,991 1,447,170 11.6% 255,099 0 0 0 0 $19.17 2006 2q 218 12,451,991 1,702,269 13.7% 15,945 1 4,500 0 0 $19.22 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 31
  • 38. HOUSTON – FIRST QUARTER 2010 Houston Office Market G U L F F R E E W A Y / P A S A D E N A M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.200 15.0% 14.5% 0.150 14.0% 0.100 Percent Vacant 13.5% Millions SF 0.050 13.0% 12.5% 0.000 12.0% (0.050) 11.5% (0.100) 11.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $19.00 1.00 0.90 $18.50 0.80 0.70 $18.00 Dollars/SF/Year Millions SF 0.60 $17.50 0.50 0.40 $17.00 0.30 0.20 $16.50 0.10 0.00 $16.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 350 6,125,908 757,806 12.4% 68,194 0 0 1 24,831 $18.61 2009 4q 350 6,125,908 826,000 13.5% 58,392 0 0 1 24,831 $16.99 2009 3q 350 6,125,908 884,392 14.4% 43,859 1 88,000 1 24,831 $16.98 2009 2q 349 6,037,908 840,251 13.9% 48,920 0 0 1 88,000 $17.21 2009 1q 349 6,037,908 889,171 14.7% (3,286) 0 0 1 88,000 $17.75 2008 4q 349 6,037,908 885,885 14.7% (49,941) 1 28,800 0 0 $18.21 2008 3q 348 6,009,108 807,144 13.4% 12,592 0 0 1 28,800 $18.70 2008 2q 348 6,009,108 819,736 13.6% (53,052) 0 0 1 28,800 $18.91 2008 1q 348 6,009,108 766,684 12.8% 45,487 1 52,362 1 28,800 $18.06 2007 4q 347 5,956,746 759,809 12.8% 82,971 0 0 2 81,162 $17.09 2007 3q 347 5,956,746 842,780 14.1% 17,412 1 11,280 2 81,162 $17.18 2007 2q 346 5,945,466 848,912 14.3% 41,990 1 60,000 3 92,442 $17.44 2007 1q 345 5,885,466 830,902 14.1% 179,004 3 87,162 2 71,280 $16.95 2006 4q 342 5,798,304 922,744 15.9% (71,663) 0 0 5 158,442 $16.42 2006 3q 342 5,798,304 851,081 14.7% 21,116 0 0 3 87,162 $15.24 2006 2q 342 5,798,304 872,197 15.0% 2,738 1 504 3 87,162 $15.76 Source: CoStar Property® 32 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 39. FIRST QUARTER 2010 – HOUSTON Houston Office Market I - 1 0 E A S T M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.080 25.0% 0.060 20.0% 0.040 Percent Vacant 0.020 Millions SF 15.0% 0.000 10.0% (0.020) (0.040) 5.0% (0.060) (0.080) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $14.90 0.18 $14.80 0.18 $14.70 0.17 $14.60 Dollars/SF/Year 0.17 $14.50 Millions SF 0.16 $14.40 0.16 $14.30 0.15 $14.20 0.15 $14.10 0.14 $14.00 0.14 $13.90 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 85 1,360,886 162,056 11.9% 13,794 0 0 0 0 $14.43 2009 4q 85 1,360,886 175,850 12.9% (10,404) 0 0 0 0 $14.55 2009 3q 85 1,360,886 165,446 12.2% (13,580) 0 0 0 0 $14.85 2009 2q 85 1,360,886 151,866 11.2% 19,392 0 0 0 0 $14.22 2009 1q 85 1,360,886 171,258 12.6% (9,983) 0 0 0 0 $14.45 2008 4q 85 1,360,886 161,275 11.9% 45,204 0 0 0 0 $15.00 2008 3q 85 1,360,886 206,479 15.2% (1,266) 0 0 0 0 $15.00 2008 2q 85 1,360,886 205,213 15.1% (16,428) 0 0 0 0 $14.89 2008 1q 85 1,360,886 188,785 13.9% 796 0 0 0 0 $15.35 2007 4q 85 1,360,886 189,581 13.9% 68,761 0 0 0 0 $14.68 2007 3q 86 1,421,666 319,122 22.4% (40,667) 0 0 0 0 $14.49 2007 2q 86 1,421,666 278,455 19.6% (22,715) 1 25,000 0 0 $13.73 2007 1q 85 1,396,666 230,740 16.5% (71,826) 2 12,873 1 25,000 $13.77 2006 4q 83 1,383,793 146,041 10.6% 3,383 0 0 3 37,873 $13.69 2006 3q 83 1,383,793 149,424 10.8% 41,908 0 0 3 37,873 $13.81 2006 2q 83 1,383,793 191,332 13.8% 5,653 0 0 2 12,873 $12.95 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 33
  • 40. HOUSTON – FIRST QUARTER 2010 Houston Office Market K A T Y F R E E W A Y M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 1.800 16.0% 1.600 14.0% 1.400 12.0% 1.200 Percent Vacant 10.0% Millions SF 1.000 0.800 8.0% 0.600 6.0% 0.400 4.0% 0.200 2.0% 0.000 (0.200) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $23.50 5.00 4.50 $23.40 4.00 $23.30 3.50 Dollars/SF/Year Millions SF 3.00 $23.20 2.50 $23.10 2.00 1.50 $23.00 1.00 $22.90 0.50 0.00 $22.80 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 434 30,783,395 4,267,677 13.9% 360,554 1 3,500 0 0 $23.35 2009 4q 433 30,779,895 4,624,731 15.0% (27,120) 2 310,528 1 3,500 $23.41 2009 3q 431 30,469,367 4,287,083 14.1% 29,876 4 1,240,430 3 314,028 $23.28 2009 2q 427 29,228,937 3,076,529 10.5% 230,883 5 351,718 6 1,549,458 $23.03 2009 1q 422 28,877,219 2,955,694 10.2% 550,546 6 1,535,805 10 1,897,676 $23.18 2008 4q 416 27,341,414 1,970,435 7.2% 96,482 1 101,300 15 3,418,157 $23.37 2008 3q 415 27,240,114 1,965,617 7.2% 635,640 1 343,541 14 3,469,385 $23.60 2008 2q 414 26,896,573 2,257,716 8.4% 217,366 8 118,126 14 3,793,532 $23.21 2008 1q 406 26,778,447 2,356,956 8.8% 321,648 4 665,900 20 3,535,658 $23.76 2007 4q 402 26,112,547 2,012,704 7.7% 447,026 2 370,000 19 3,178,099 $22.94 2007 3q 400 25,742,547 2,089,730 8.1% 94,955 1 174,521 19 3,179,785 $21.20 2007 2q 399 25,568,026 2,010,164 7.9% 226,241 4 79,944 16 2,361,180 $19.78 2007 1q 395 25,488,082 2,156,461 8.5% (80,076) 2 13,711 11 1,448,380 $19.45 2006 4q 395 25,628,983 2,217,286 8.7% 646,910 3 557,183 10 1,100,176 $20.09 2006 3q 392 25,071,800 2,307,013 9.2% 127,394 3 169,400 11 1,150,838 $18.30 2006 2q 389 24,902,400 2,265,007 9.1% 201,830 6 126,423 10 792,097 $17.75 Source: CoStar Property® 34 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 41. FIRST QUARTER 2010 – HOUSTON Houston Office Market K I N G W O O D / H U M B L E M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.080 12.0% 0.070 10.0% 0.060 0.050 8.0% Percent Vacant Millions SF 0.040 0.030 6.0% 0.020 4.0% 0.010 0.000 2.0% (0.010) (0.020) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $21.60 0.25 $21.40 0.24 $21.20 0.24 $21.00 Dollars/SF/Year 0.23 $20.80 Millions SF 0.23 $20.60 0.22 $20.40 0.22 $20.20 0.21 $20.00 0.21 $19.80 0.20 $19.60 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 122 2,429,808 238,395 9.8% 14,230 1 22,929 0 0 $20.33 2009 4q 121 2,406,879 229,696 9.5% (7,314) 0 0 1 22,929 $20.32 2009 3q 121 2,406,879 222,382 9.2% 11,556 0 0 1 22,929 $20.33 2009 2q 121 2,406,879 233,938 9.7% 6,307 6 26,400 1 22,929 $21.01 2009 1q 115 2,380,479 213,845 9.0% (12,428) 0 0 7 49,329 $21.50 2008 4q 115 2,380,479 201,417 8.5% 989 0 0 2 26,529 $21.76 2008 3q 115 2,380,479 202,406 8.5% (11,257) 0 0 1 22,929 $20.89 2008 2q 115 2,380,479 191,149 8.0% 14,764 0 0 0 0 $21.58 2008 1q 115 2,380,479 205,913 8.7% 29,269 1 16,100 0 0 $21.92 2007 4q 114 2,364,379 219,082 9.3% (12,151) 1 2,620 1 16,100 $21.95 2007 3q 113 2,361,759 204,311 8.7% 46,886 2 67,688 2 18,720 $21.69 2007 2q 111 2,294,071 183,509 8.0% 13,384 0 0 4 86,408 $21.97 2007 1q 111 2,294,071 196,893 8.6% (10,361) 1 44,000 2 67,688 $21.81 2006 4q 110 2,250,071 142,532 6.3% (842) 0 0 3 111,688 $22.02 2006 3q 110 2,250,071 141,690 6.3% (3,733) 1 27,518 3 111,688 $21.75 2006 2q 109 2,222,553 110,439 5.0% 758 0 0 2 71,518 $22.10 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 35
  • 42. HOUSTON – FIRST QUARTER 2010 Houston Office Market N A S A / C L E A R L A K E M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.200 10.5% 0.150 10.0% 0.100 Percent Vacant Millions SF 9.5% 0.050 9.0% 0.000 8.5% (0.050) (0.100) 8.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $20.80 0.90 $20.70 0.85 $20.60 $20.50 Dollars/SF/Year Millions SF 0.80 $20.40 $20.30 0.75 $20.20 $20.10 0.70 $20.00 0.65 $19.90 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 264 8,419,006 768,057 9.1% 17,065 0 0 1 12,000 $20.53 2009 4q 264 8,419,006 785,122 9.3% 44,741 1 9,000 0 0 $20.73 2009 3q 263 8,410,006 820,863 9.8% 66,191 2 51,240 1 9,000 $20.35 2009 2q 261 8,358,766 835,814 10.0% 34,432 1 11,250 3 60,240 $20.72 2009 1q 260 8,347,516 858,996 10.3% (53,173) 1 10,000 4 71,490 $20.24 2008 4q 259 8,337,516 795,823 9.5% 84,712 2 138,407 5 81,490 $20.19 2008 3q 257 8,199,109 742,128 9.1% 93,297 1 1,800 6 216,657 $19.90 2008 2q 256 8,197,309 833,625 10.2% 7,558 1 4,800 5 159,207 $19.60 2008 1q 255 8,192,509 836,383 10.2% (36,819) 2 17,820 5 154,007 $19.09 2007 4q 253 8,174,689 781,744 9.6% 7,681 4 46,118 5 134,420 $18.06 2007 3q 250 8,167,025 781,761 9.6% (4,298) 3 65,600 8 178,738 $17.10 2007 2q 247 8,101,425 711,863 8.8% 184,842 3 96,084 9 129,538 $16.65 2007 1q 244 8,005,341 800,621 10.0% 77,638 1 5,005 11 220,822 $15.74 2006 4q 243 8,000,336 873,254 10.9% 152,525 2 122,537 7 129,609 $14.93 2006 3q 241 7,877,799 903,242 11.5% 96,763 1 8,000 7 236,646 $15.41 2006 2q 240 7,869,799 992,005 12.6% 58,478 0 0 5 148,562 $15.24 Source: CoStar Property® 36 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 43. FIRST QUARTER 2010 – HOUSTON Houston Office Market N O R T H B E LT M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.200 16.0% 0.100 14.0% 12.0% 0.000 Percent Vacant 10.0% Millions SF (0.100) 8.0% (0.200) 6.0% (0.300) 4.0% (0.400) 2.0% (0.500) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $17.40 2.50 $17.20 2.00 $17.00 Dollars/SF/Year Millions SF 1.50 $16.80 $16.60 1.00 $16.40 0.50 $16.20 0.00 $16.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 156 13,669,470 2,047,901 15.0% (85,262) 0 0 0 0 $16.54 2009 4q 156 13,669,470 1,962,639 14.4% 76,650 0 0 0 0 $16.73 2009 3q 156 13,669,470 2,039,289 14.9% (387,332) 0 0 0 0 $17.30 2009 2q 156 13,669,470 1,651,957 12.1% (44,800) 1 63,621 0 0 $17.28 2009 1q 155 13,605,849 1,543,536 11.3% 6,259 0 0 1 63,621 $17.09 2008 4q 155 13,605,849 1,549,795 11.4% 41,649 1 84,125 1 63,621 $16.66 2008 3q 154 13,521,724 1,507,319 11.1% 89,398 0 0 2 147,746 $16.31 2008 2q 154 13,521,724 1,596,717 11.8% (76,307) 0 0 2 147,746 $16.97 2008 1q 154 13,521,724 1,520,410 11.2% 35,382 0 0 1 84,125 $16.99 2007 4q 154 13,521,724 1,555,792 11.5% 108,615 0 0 1 84,125 $16.84 2007 3q 154 13,521,724 1,664,407 12.3% 61,272 1 135,030 1 84,125 $16.65 2007 2q 153 13,386,694 1,590,649 11.9% 10,330 0 0 2 219,155 $16.09 2007 1q 153 13,386,694 1,600,979 12.0% 132,837 1 15,900 1 135,030 $15.67 2006 4q 152 13,370,794 1,717,916 12.8% 86,791 0 0 2 150,930 $15.91 2006 3q 152 13,370,794 1,804,707 13.5% 90,360 0 0 1 15,900 $15.46 2006 2q 152 13,370,794 1,895,067 14.2% 105,793 0 0 1 15,900 $15.36 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 37
  • 44. HOUSTON – FIRST QUARTER 2010 Houston Office Market N O R T H E A S T N E A R M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.050 25.0% 0.040 20.0% 0.030 Percent Vacant 0.020 Millions SF 15.0% 0.010 10.0% 0.000 (0.010) 5.0% (0.020) (0.030) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $17.50 0.25 $17.00 0.20 Dollars/SF/Year $16.50 Millions SF 0.15 0.10 $16.00 0.05 $15.50 0.00 $15.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 100 1,435,923 126,027 8.8% 31,761 0 0 0 0 $15.84 2009 4q 100 1,435,923 157,788 11.0% 1,896 0 0 0 0 $15.95 2009 3q 100 1,435,923 159,684 11.1% 39,967 0 0 0 0 $16.00 2009 2q 100 1,435,923 199,651 13.9% 29,877 1 8,000 0 0 $16.02 2009 1q 99 1,427,923 221,528 15.5% (8,320) 0 0 1 8,000 $17.32 2008 4q 99 1,427,923 213,208 14.9% 22,041 0 0 1 8,000 $17.37 2008 3q 99 1,427,923 235,249 16.5% 21,663 0 0 1 8,000 $16.93 2008 2q 99 1,427,923 256,912 18.0% 35,264 0 0 0 0 $15.72 2008 1q 99 1,427,923 292,176 20.5% (19,479) 1 9,682 0 0 $15.02 2007 4q 98 1,418,241 263,015 18.5% (5,032) 0 0 1 9,682 $16.02 2007 3q 98 1,418,241 257,983 18.2% 13,954 0 0 1 9,682 $15.82 2007 2q 98 1,418,241 271,937 19.2% (13,292) 0 0 1 9,682 $15.76 2007 1q 98 1,418,241 258,645 18.2% (18,142) 0 0 0 0 $17.24 2006 4q 98 1,418,241 240,503 17.0% 9,869 0 0 0 0 $15.97 2006 3q 98 1,418,241 250,372 17.7% (27,642) 0 0 0 0 $15.56 2006 2q 98 1,418,241 222,730 15.7% (14,170) 0 0 0 0 $16.29 Source: CoStar Property® 38 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 45. FIRST QUARTER 2010 – HOUSTON Houston Office Market N O R T H W E S T M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.500 25.0% 0.400 20.0% 0.300 Percent Vacant Millions SF 15.0% 0.200 0.100 10.0% 0.000 5.0% (0.100) (0.200) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $19.50 3.30 $19.40 3.20 $19.30 3.10 Dollars/SF/Year $19.20 Millions SF 3.00 $19.10 2.90 2.80 $19.00 2.70 $18.90 2.60 $18.80 2.50 $18.70 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 387 16,456,185 3,099,558 18.8% 104,050 0 0 0 0 $19.42 2009 4q 387 16,456,185 3,203,608 19.5% (108,264) 1 95,269 0 0 $19.00 2009 3q 386 16,360,916 3,000,075 18.3% 114,258 1 92,420 1 95,269 $19.26 2009 2q 385 16,268,496 3,021,913 18.6% 223,955 3 405,639 2 187,689 $19.24 2009 1q 382 15,862,857 2,840,229 17.9% (21,117) 1 250,000 5 593,328 $19.21 2008 4q 381 15,612,857 2,569,112 16.5% 140,494 3 373,629 6 843,328 $18.93 2008 3q 378 15,239,228 2,335,977 15.3% 162,770 1 48,139 9 1,216,957 $19.04 2008 2q 377 15,191,089 2,450,608 16.1% 55,158 1 163,436 9 1,172,676 $19.83 2008 1q 376 15,027,653 2,342,330 15.6% 127,558 0 0 8 1,002,873 $20.10 2007 4q 376 15,027,653 2,469,888 16.4% 138,194 3 308,857 6 835,204 $19.25 2007 3q 373 14,718,796 2,299,225 15.6% 229,713 1 158,518 7 712,247 $18.58 2007 2q 372 14,560,278 2,370,420 16.3% 261,764 1 130,000 5 515,514 $17.43 2007 1q 371 14,430,278 2,502,184 17.3% 5,141 1 63,546 5 597,375 $17.04 2006 4q 370 14,366,732 2,443,779 17.0% 61,032 2 103,373 5 655,200 $16.58 2006 3q 368 14,263,359 2,401,438 16.8% (2,230) 1 36,183 4 325,437 $16.56 2006 2q 367 14,227,176 2,363,025 16.6% (121,608) 0 0 5 361,620 $15.82 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 39
  • 46. HOUSTON – FIRST QUARTER 2010 Houston Office Market R I C H M O N D / F O U N T A I N V I E W M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.060 25.0% 0.040 0.020 20.0% 0.000 Percent Vacant Millions SF 15.0% (0.020) (0.040) 10.0% (0.060) (0.080) 5.0% (0.100) (0.120) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $14.80 0.30 $14.70 0.25 $14.60 Dollars/SF/Year 0.20 Millions SF $14.50 0.15 $14.40 0.10 $14.30 0.05 $14.20 0.00 $14.10 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 87 2,157,745 214,953 10.0% 18,870 0 0 0 0 $14.52 2009 4q 87 2,157,745 233,823 10.8% 10,673 0 0 0 0 $14.43 2009 3q 87 2,157,745 244,496 11.3% 16,002 0 0 0 0 $14.61 2009 2q 87 2,157,745 260,498 12.1% 13,142 0 0 0 0 $14.73 2009 1q 87 2,157,745 273,640 12.7% 1,707 0 0 0 0 $14.33 2008 4q 87 2,157,745 275,347 12.8% 36,675 0 0 0 0 $14.41 2008 3q 87 2,157,745 312,022 14.5% 45,588 0 0 0 0 $13.65 2008 2q 87 2,157,745 357,610 16.6% 14,458 0 0 0 0 $13.98 2008 1q 87 2,157,745 372,068 17.2% 6,454 0 0 0 0 $13.64 2007 4q 87 2,157,745 378,522 17.5% 33,024 0 0 0 0 $13.48 2007 3q 87 2,157,745 411,546 19.1% (30,473) 0 0 0 0 $13.31 2007 2q 87 2,157,745 381,073 17.7% (31,787) 0 0 0 0 $14.59 2007 1q 87 2,157,745 349,286 16.2% (94,785) 0 0 0 0 $14.23 2006 4q 87 2,157,745 254,501 11.8% (33) 0 0 0 0 $13.85 2006 3q 87 2,157,745 254,468 11.8% (57,546) 0 0 0 0 $13.59 2006 2q 88 2,163,745 202,922 9.4% (4,131) 0 0 0 0 $13.97 Source: CoStar Property® 40 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 47. FIRST QUARTER 2010 – HOUSTON Houston Office Market S A N F E L I P E / V O S S M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.150 18.0% 16.0% 0.100 14.0% 12.0% Percent Vacant Millions SF 0.050 10.0% 8.0% 0.000 6.0% (0.050) 4.0% 2.0% (0.100) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $25.00 0.70 $24.50 0.60 $24.00 0.50 Dollars/SF/Year Millions SF $23.50 0.40 $23.00 0.30 0.20 $22.50 0.10 $22.00 0.00 $21.50 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 51 5,553,050 637,422 11.5% (24,426) 0 0 0 0 $22.60 2009 4q 51 5,553,050 612,996 11.0% 10,540 0 0 0 0 $22.63 2009 3q 51 5,553,050 623,536 11.2% (80,075) 0 0 0 0 $23.12 2009 2q 51 5,553,050 543,461 9.8% 12,606 0 0 0 0 $23.51 2009 1q 51 5,553,050 556,067 10.0% (74,449) 0 0 0 0 $24.47 2008 4q 51 5,553,050 481,618 8.7% (48,159) 0 0 0 0 $23.61 2008 3q 51 5,553,050 433,459 7.8% 4,412 0 0 0 0 $24.41 2008 2q 51 5,553,050 437,871 7.9% (34,535) 0 0 0 0 $23.94 2008 1q 52 5,632,550 482,836 8.6% 63,122 0 0 0 0 $21.94 2007 4q 52 5,632,550 545,958 9.7% 101,798 0 0 0 0 $20.30 2007 3q 52 5,632,550 647,756 11.5% 100,761 0 0 0 0 $19.83 2007 2q 52 5,632,550 748,517 13.3% 131,539 0 0 0 0 $19.78 2007 1q 52 5,632,550 880,056 15.6% 74,244 1 8,333 0 0 $19.55 2006 4q 51 5,624,217 945,967 16.8% 13,674 0 0 1 8,333 $19.09 2006 3q 51 5,624,217 959,641 17.1% 26,874 0 0 1 8,333 $18.66 2006 2q 51 5,624,217 986,515 17.5% 64,261 0 0 1 8,333 $18.02 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 41
  • 48. HOUSTON – FIRST QUARTER 2010 Houston Office Market S A N J A C I N T O C O U N T Y M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.000 100.0% 0.000 90.0% 0.000 80.0% 0.000 70.0% Percent Vacant Millions SF 0.000 60.0% 0.000 50.0% 0.000 40.0% 0.000 30.0% 0.000 20.0% 0.000 10.0% 0.000 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $1.00 0.00 $0.90 0.00 $0.80 0.00 $0.70 0.00 Dollars/SF/Year $0.60 Millions SF 0.00 $0.50 0.00 0.00 $0.40 0.00 $0.30 0.00 $0.20 0.00 $0.10 0.00 $0.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2009 4q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2009 3q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2009 2q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2009 1q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2008 4q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2008 3q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2008 2q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2008 1q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2007 4q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2007 3q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2007 2q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2007 1q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2006 4q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2006 3q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 2006 2q 1 2,882 0 0.0% 0 0 0 0 0 $0.00 Source: CoStar Property® 42 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 49. FIRST QUARTER 2010 – HOUSTON Houston Office Market S O U T H M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.100 25.0% 0.080 0.060 20.0% 0.040 Percent Vacant Millions SF 15.0% 0.020 0.000 10.0% (0.020) (0.040) 5.0% (0.060) (0.080) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $23.50 0.45 0.40 $23.00 0.35 $22.50 Dollars/SF/Year 0.30 Millions SF 0.25 $22.00 0.20 0.15 $21.50 0.10 $21.00 0.05 0.00 $20.50 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 120 1,811,388 368,657 20.4% (2,034) 0 0 0 0 $21.63 2009 4q 120 1,811,388 366,623 20.2% 40,475 0 0 0 0 $22.11 2009 3q 120 1,811,388 407,098 22.5% 52,132 1 80,000 0 0 $23.33 2009 2q 119 1,731,388 379,230 21.9% (60,733) 0 0 1 80,000 $23.19 2009 1q 119 1,731,388 318,497 18.4% 12,280 1 20,000 1 80,000 $22.93 2008 4q 118 1,711,388 310,777 18.2% 37,681 2 50,869 2 100,000 $22.59 2008 3q 116 1,660,519 297,589 17.9% 13,417 1 72,000 3 70,869 $21.33 2008 2q 115 1,588,519 239,006 15.0% (11,884) 0 0 4 142,869 $19.41 2008 1q 115 1,588,519 227,122 14.3% (36,077) 1 30,000 4 142,869 $21.31 2007 4q 114 1,558,519 161,045 10.3% 3,826 0 0 3 80,869 $20.95 2007 3q 114 1,558,519 164,871 10.6% 29,916 0 0 3 80,869 $19.35 2007 2q 114 1,558,519 194,787 12.5% 3,934 0 0 3 80,869 $19.26 2007 1q 114 1,558,519 198,721 12.8% (30,151) 1 37,714 3 80,869 $18.16 2006 4q 113 1,520,805 130,856 8.6% 34,160 3 64,738 1 37,714 $13.05 2006 3q 110 1,456,067 100,278 6.9% 25,652 1 10,500 4 102,452 $12.53 2006 2q 109 1,445,567 115,430 8.0% 98,820 1 81,500 5 112,952 $12.30 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 43
  • 50. HOUSTON – FIRST QUARTER 2010 Houston Office Market S O U T H H W Y 3 5 M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.030 12.0% 0.020 10.0% 0.010 8.0% Percent Vacant Millions SF 0.000 6.0% (0.010) 4.0% (0.020) 2.0% (0.030) (0.040) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $18.00 0.01 $16.00 0.01 $14.00 $12.00 Dollars/SF/Year 0.01 Millions SF $10.00 0.01 $8.00 0.00 $6.00 $4.00 0.00 $2.00 0.00 $0.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 39 335,115 9,101 2.7% 1,000 0 0 0 0 $15.91 2009 4q 39 335,115 10,101 3.0% (725) 0 0 0 0 $17.05 2009 3q 39 335,115 9,376 2.8% (2,851) 0 0 0 0 $11.50 2009 2q 39 335,115 6,525 1.9% (400) 0 0 0 0 $10.25 2009 1q 39 335,115 6,125 1.8% 4,900 0 0 0 0 $10.25 2008 4q 39 335,115 11,025 3.3% 7,080 0 0 0 0 $10.25 2008 3q 39 335,115 18,105 5.4% 8,575 0 0 0 0 $11.97 2008 2q 39 335,115 26,680 8.0% (22,780) 0 0 0 0 $13.28 2008 1q 39 335,115 3,900 1.2% 0 0 0 0 0 $10.02 2007 4q 39 335,115 3,900 1.2% 3,800 0 0 0 0 $10.02 2007 3q 39 335,115 7,700 2.3% 5,800 0 0 0 0 $19.75 2007 2q 39 335,115 13,500 4.0% 22,254 0 0 0 0 $19.75 2007 1q 39 335,115 35,754 10.7% (27,854) 0 0 0 0 $19.75 2006 4q 39 335,115 7,900 2.4% (500) 0 0 0 0 $23.76 2006 3q 39 335,115 7,400 2.2% 0 0 0 0 0 $23.76 2006 2q 39 335,115 7,400 2.2% 0 0 0 0 0 $23.76 Source: CoStar Property® 44 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 51. FIRST QUARTER 2010 – HOUSTON Houston Office Market S O U T H M A I N / M E D I C A L C E N T E R M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.600 14.0% 0.500 12.0% 0.400 10.0% 0.300 Percent Vacant Millions SF 0.200 8.0% 0.100 6.0% 0.000 4.0% (0.100) 2.0% (0.200) (0.300) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $24.15 1.00 $24.10 0.95 $24.05 $24.00 Dollars/SF/Year 0.90 $23.95 Millions SF $23.90 0.85 $23.85 $23.80 0.80 $23.75 $23.70 0.75 $23.65 0.70 $23.60 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 198 10,658,401 888,312 8.3% (64,517) 0 0 0 0 $23.83 2009 4q 198 10,658,401 823,795 7.7% 67,847 0 0 0 0 $23.99 2009 3q 198 10,658,401 891,642 8.4% 45,024 0 0 0 0 $24.09 2009 2q 198 10,658,401 936,666 8.8% 32,402 0 0 0 0 $23.78 2009 1q 198 10,658,401 969,068 9.1% 37,014 1 4,760 0 0 $23.79 2008 4q 197 10,653,641 1,001,322 9.4% 235,666 0 0 1 4,760 $25.65 2008 3q 197 10,653,641 1,236,988 11.6% (188,789) 1 23,000 1 4,760 $25.24 2008 2q 196 10,630,641 1,025,199 9.6% 137,064 1 300,000 1 23,000 $25.17 2008 1q 195 10,330,641 862,263 8.3% (7,472) 0 0 2 323,000 $24.35 2007 4q 195 10,330,641 854,791 8.3% (9,821) 0 0 2 323,000 $24.19 2007 3q 195 10,330,641 844,970 8.2% 88,616 1 12,000 1 300,000 $24.02 2007 2q 194 10,318,641 921,586 8.9% (50,362) 0 0 2 312,000 $22.73 2007 1q 194 10,318,641 871,224 8.4% 174,960 2 514,022 2 312,000 $21.17 2006 4q 192 9,804,619 532,162 5.4% 213,590 0 0 4 826,022 $21.31 2006 3q 192 9,804,619 745,752 7.6% (40,087) 0 0 3 814,022 $21.03 2006 2q 192 9,804,619 705,665 7.2% (8,825) 0 0 2 514,022 $21.24 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 45
  • 52. HOUSTON – FIRST QUARTER 2010 Houston Office Market S O U T H W E S T M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.500 25.0% 0.400 20.0% 0.300 Percent Vacant Millions SF 15.0% 0.200 0.100 10.0% 0.000 5.0% (0.100) (0.200) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $15.50 2.45 $15.45 2.40 $15.40 2.35 $15.35 Dollars/SF/Year Millions SF 2.30 $15.30 2.25 $15.25 2.20 $15.20 2.15 $15.15 2.10 $15.10 2.05 $15.05 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 273 13,466,272 2,400,178 17.8% (3,660) 0 0 0 0 $15.27 2009 4q 273 13,466,272 2,396,518 17.8% (57,597) 0 0 0 0 $15.45 2009 3q 273 13,466,272 2,338,921 17.4% (60,878) 0 0 0 0 $15.36 2009 2q 273 13,466,272 2,278,043 16.9% 75,426 0 0 0 0 $15.38 2009 1q 273 13,466,272 2,353,469 17.5% (129,818) 0 0 0 0 $15.21 2008 4q 273 13,466,272 2,223,651 16.5% 35,376 0 0 0 0 $15.41 2008 3q 273 13,466,272 2,259,027 16.8% (167,929) 0 0 0 0 $15.61 2008 2q 273 13,466,272 2,091,098 15.5% (43,947) 1 37,884 0 0 $15.55 2008 1q 272 13,428,388 2,009,267 15.0% 19,916 0 0 1 37,884 $15.35 2007 4q 272 13,428,388 2,029,183 15.1% 110,888 1 4,750 1 37,884 $15.12 2007 3q 271 13,423,638 2,135,321 15.9% 451,279 1 211,587 2 42,634 $14.97 2007 2q 270 13,212,051 2,375,013 18.0% 245,392 1 39,996 2 216,337 $14.93 2007 1q 269 13,172,055 2,580,409 19.6% (85,481) 3 174,958 3 256,333 $14.84 2006 4q 266 12,997,097 2,319,970 17.8% 345,362 0 0 5 426,541 $14.82 2006 3q 266 12,997,097 2,665,332 20.5% (127,249) 0 0 3 194,954 $14.75 2006 2q 266 12,997,097 2,538,083 19.5% 14,882 2 58,350 2 154,958 $14.60 Source: CoStar Property® 46 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 53. FIRST QUARTER 2010 – HOUSTON Houston Office Market W E S T L O O P M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.400 16.0% 0.300 14.0% 0.200 12.0% 0.100 Percent Vacant 10.0% Millions SF 0.000 8.0% (0.100) 6.0% (0.200) 4.0% (0.300) (0.400) 2.0% (0.500) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $27.50 3.50 3.00 $27.00 2.50 $26.50 Dollars/SF/Year Millions SF 2.00 $26.00 1.50 $25.50 1.00 $25.00 0.50 0.00 $24.50 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 129 23,318,260 2,969,842 12.7% 173,557 0 0 0 0 $26.56 2009 4q 129 23,318,260 3,143,399 13.5% (95,263) 0 0 0 0 $25.55 2009 3q 129 23,318,260 3,048,136 13.1% (13,568) 0 0 0 0 $26.63 2009 2q 129 23,318,260 3,034,568 13.0% (383,125) 0 0 0 0 $27.34 2009 1q 129 23,318,260 2,651,443 11.4% (416,061) 1 66,408 0 0 $27.25 2008 4q 129 23,374,852 2,291,974 9.8% (71,780) 0 0 1 66,408 $27.14 2008 3q 129 23,374,852 2,220,194 9.5% (45,102) 0 0 1 66,408 $26.68 2008 2q 129 23,374,852 2,175,092 9.3% 73,706 0 0 1 66,408 $26.17 2008 1q 129 23,374,852 2,248,798 9.6% 36,905 0 0 1 66,408 $24.73 2007 4q 129 23,374,852 2,285,703 9.8% 114,628 0 0 1 66,408 $24.54 2007 3q 129 23,374,852 2,400,331 10.3% 360,195 0 0 0 0 $23.09 2007 2q 129 23,374,852 2,760,526 11.8% 9,464 0 0 0 0 $22.69 2007 1q 129 23,374,852 2,769,990 11.9% 201,037 0 0 0 0 $21.88 2006 4q 129 23,374,852 2,971,027 12.7% 411,481 0 0 0 0 $20.54 2006 3q 129 23,374,852 3,382,508 14.5% 167,959 0 0 0 0 $19.63 2006 2q 129 23,374,852 3,550,467 15.2% 238,558 0 0 0 0 $19.00 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 47
  • 54. HOUSTON – FIRST QUARTER 2010 Houston Office Market W E S T C H A S E M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.600 18.0% 0.500 16.0% 0.400 14.0% 0.300 12.0% Percent Vacant Millions SF 0.200 10.0% 0.100 8.0% 0.000 6.0% (0.100) (0.200) 4.0% (0.300) 2.0% (0.400) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $25.00 3.00 $24.80 2.50 $24.60 $24.40 Dollars/SF/Year 2.00 $24.20 Millions SF $24.00 1.50 $23.80 1.00 $23.60 $23.40 0.50 $23.20 0.00 $23.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 119 15,515,439 2,609,156 16.8% (50,019) 0 0 0 0 $24.86 2009 4q 119 15,515,439 2,559,137 16.5% (301,694) 0 0 0 0 $23.68 2009 3q 119 15,515,439 2,257,443 14.5% 43,066 1 272,361 0 0 $23.95 2009 2q 118 15,243,078 2,028,148 13.3% (160,671) 2 222,342 1 272,361 $23.85 2009 1q 116 15,020,736 1,645,135 11.0% (262,069) 1 20,000 3 494,703 $24.08 2008 4q 115 15,000,736 1,363,066 9.1% (136,039) 1 24,000 4 514,703 $23.31 2008 3q 114 14,976,736 1,203,027 8.0% 122,988 0 0 5 538,703 $23.36 2008 2q 114 14,976,736 1,326,015 8.9% 482,049 2 371,458 5 538,703 $24.20 2008 1q 112 14,605,278 1,436,606 9.8% (57,184) 2 309,200 6 841,161 $24.14 2007 4q 110 14,296,078 1,070,222 7.5% 101,771 0 0 6 724,658 $22.71 2007 3q 110 14,296,078 1,171,993 8.2% 76,641 0 0 4 680,658 $22.82 2007 2q 110 14,296,078 1,248,634 8.7% 46,938 0 0 3 627,751 $22.10 2007 1q 110 14,296,078 1,295,572 9.1% 90,815 0 0 3 627,751 $21.32 2006 4q 110 14,296,078 1,386,387 9.7% 267,641 0 0 0 0 $20.39 2006 3q 110 14,296,078 1,654,028 11.6% (41,189) 1 206,362 0 0 $19.51 2006 2q 109 14,089,716 1,406,477 10.0% 176,607 0 0 1 206,362 $19.32 Source: CoStar Property® 48 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.
  • 55. FIRST QUARTER 2010 – HOUSTON Houston Office Market W O O D L A N D S M A R K E T MARKET HIGHLIGHTS – CLASS “A, B & C” Deliveries, Absorption & Vacancy Historical Analysis, All Classes Delivered SF Absorption SF Vacancy 0.500 14.0% 12.0% 0.400 10.0% 0.300 Percent Vacant Millions SF 8.0% 0.200 6.0% 0.100 4.0% 0.000 2.0% (0.100) 0.0% 2007 1q 2007 2q 2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Vacant Space Quoted Rental Rates Historical Analysis, All Classes Historical Analysis, All Classes Direct SF Sublet SF $25.50 1.40 1.20 $25.00 1.00 Dollars/SF/Year $24.50 Millions SF 0.80 0.60 $24.00 0.40 $23.50 0.20 0.00 $23.00 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q Source: CoStar Property® Source: CoStar Property® Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted Period # Bldgs Total RBA Vacant SF Vacancy % Absorption # Bldgs Total RBA # Bldgs Total RBA Rates 2010 1q 304 10,016,310 1,245,627 12.4% 79,788 1 30,000 2 139,000 $25.16 2009 4q 303 9,986,310 1,295,415 13.0% 35,830 0 0 2 94,000 $23.79 2009 3q 303 9,986,310 1,331,245 13.3% 69,488 5 431,306 2 94,000 $24.23 2009 2q 298 9,555,004 969,427 10.1% 72,213 3 84,981 6 461,306 $24.84 2009 1q 295 9,470,023 956,659 10.1% 137,659 5 302,735 8 516,287 $25.34 2008 4q 290 9,167,288 791,583 8.6% (73,841) 5 105,137 11 779,041 $25.26 2008 3q 285 9,062,151 612,605 6.8% 21,539 11 149,181 13 862,127 $25.62 2008 2q 274 8,912,970 484,963 5.4% 101,067 2 19,500 20 777,308 $25.46 2008 1q 272 8,893,470 566,530 6.4% 221,180 4 353,770 19 760,504 $27.00 2007 4q 268 8,539,700 433,940 5.1% 77,415 1 60,000 21 876,273 $25.04 2007 3q 267 8,479,700 451,355 5.3% 78,621 0 0 20 860,742 $24.92 2007 2q 267 8,479,700 529,976 6.2% 21,244 1 25,000 8 730,742 $24.60 2007 1q 266 8,454,700 526,220 6.2% 123,179 2 28,200 4 428,938 $23.50 2006 4q 264 8,426,500 621,199 7.4% 237,129 3 76,804 6 457,138 $23.36 2006 3q 261 8,349,696 781,524 9.4% (22,804) 1 20,444 9 533,942 $23.37 2006 2q 260 8,329,252 738,276 8.9% 148,931 1 5,000 7 195,644 $20.65 Source: CoStar Property® ©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 49

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