Q3 2013 Houston Office Market Research Report

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Q3 2013 Houston Office Market Research Report

  1. 1. www.colliers.com/houston Q3 2013 | OFFICE MARKET HOUSTON OFFICE MARKET INDICATORS Q3 2012 Q3 2013 CITYWIDE NET ABSORPTION (SF) 298K 715K CITYWIDE AVERAGE VACANCY 14.9% 15.4% CITYWIDE AVERAGE RENTAL RATE $24.31 $24.80 CITYWIDE DELIVERED INVENTORY (SF) 165K 1.4M CLASS A RENTAL RATE CBD $37.00 $37.19 SUBURBAN $29.00 $29.79 CLASS A VACANCY CBD 10.8% 10.8% SUBURBAN 12.8% 12.5% RESEARCH & FORECAST REPORT HOUSTON OFFICE MARKET Houston’s Office Market Construction Pipeline Expands to 10.5M SF Houston’s strong job growth, spurred by growth in the energy sector, continued to boost Houston’s office market in the third quarter. More than 1.4M SF was added to Houston’s office inventory and, at the close of Q3, 10.5M SF of new office development was under construction. Energy giants such as Chevron, Apache, BHP, and many others have announced plans to build new office buildings to accommodate growth. Approximately 9.9M SF of office space is either under construction (ExxonMobil, Shell and Anadarko) or planned over the next two to three years. The citywide average rental rate increased 2.0% from $24.31 per SF to $24.80 per SF over the year and 1.5% from $24.43 per SF between quarters. However, rental rates in some of the top-performing Class A buildings increased by as much as 11.0% between quarters. The Houston metropolitan area added 80,700 jobs between August 2012 and August 2013, an annual increase of 3.0% over the prior year’s job growth. Further, Houston’s unemployment fell to 6.1% from 6.9% one year ago, and Houston area home sales increased significantly between May and August, 2013, up 16.2%. With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy for both the near and long-term. ABSORPTION, NEW SUPPLY & VACANCY RATES 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% -1,500,000 -1,000,000 -500,000 0 500,000 1,000,000 1,500,000 2,000,000 Net Absorption New Supply Vacancy Houston UNEMPLOYMENT 8/12 8/13 HOUSTON 6.9% 6.1% TEXAS 6.9% 6.3% U.S. 8.2% 7.3% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.0% 80.7K TEXAS 2.4% 258.5K U.S. 1.6% 2.2M JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted)
  2. 2. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET $26.00 $28.00 $30.00 $32.00 $34.00 $36.00 $38.00 $40.00 Class A Office Rents CBD Rents Suburban Rents 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% CBD VS. Suburban Class A Office Vacancy CBD Vacancy Suburban Vacancy QUOTED GROSS RENTAL RATES FOR EXISTING TOP PERFORMING OFFICE BUILDINGS BUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR BUILT LEASED AVAIL. SF RENT ($/SF) OWNER 717 Texas 717 Texas CBD 696,228 2003 100.0% 76,892 $49.50 Hines Bank of America Center 700 Louisiana CBD 1,268,480 2001 94.3% 152550 $45.00 GE Pension Trust Heritage Plaza 1111 Bagby CBD 1,149,635 1986 99.2% 41,923 $46.00 Brookfield Office Properties BG Group Place 811 Main CBD 972,474 2011 96.1% 147,642 $48.70 Invesco Realty Advisors, Inc. CityCentre Three 842 W Sam Houston Pky N Katy Freeway 120,211 2012 94.7% 6,349 $45.00 Midway T & C Land Investors Williams Tower 2800 Post Oak Blvd West Loop/Galleria 1,476,973 1983 99.1% 44027 $47.22 Invesco Real Estate BBVA Compass Plaza 2200 Post Oak Blvd West Loop/Galleria 312,574 2013 73.4% 83,026 $45.28 The Redstone Companies CityWestPlace 4 2107 CityWest Blvd Westchase 518,293 2001 99.5% 71,223 $46.43 Thomas Properties Group, L.P. One BriarLake Plaza 2000 W Sam Houston Pky Westchase 502,410 2000 97.5% 53,384 $44.50 TIER REIT, Inc. One Hughes Landing 1800 Hughes Landing Blvd The Woodlands 197,719 2013 92.0% 16,408 $37.70 The Woodlands Development Company, L.P. Note: Avail. SF includes direct and sublet space. Source: CoStar Property 2COLLIERS INTERNATIONAL | P. VACANCY & AVAILABILITY Houston’s citywide vacancy rate rose 30 basis points between quarters and 40 basis points annually, increasing to 15.4% and 15.5%, respectively, from 15.1%. The average CBD vacancy rate decreased 90 basis points to 14.2% from 15.1%. Between quarters, the average suburban vacancy rate increased by 50 basis points to 15.7% from 15.2% due to the addition of new inventory. Between quarters the CBD Class A vacancy rate decreased by 120 basis points to 10.8% from 12.0%. The CBD Class B vacancy rate remained at 18.9%. The suburban Class A vacancy rate increased by 80 basis points between quarters to 12.5% from 11.7%, and the suburban Class B vacancy rate increased by 40 basis points to 18.1% from 17.7%. Of the 1,306 existing office buildings in our survey, only 50 have 100,000 SF of contiguous space available for lease or sublease. Further, only 21 have 200,000 SF of contiguous space available. Citywide, available sublease space totals 4.3 million SF or 2.5% of Houston’s total office inventory, but only 1.8 million SF of this sublease space is currently vacant. ABSORPTION & DEMAND Absorption increased in the third quarter as new space was delivered and tenants expanded. Houston’s office market posted 715,000 SF of positive net absorption in the third quarter, more than the 298,000 SF posted in the same quarter one year ago. Suburban Class B space posted the largest loss, with 391,818 SF of negative net absorption. Suburban Class A space posted the largest gain, with 846,497 SF of positive net absorption. Some of the larger tenants that moved into new space or expanded into additional space during the third quarter include Noble Energy, which moved into 497,000 SF in Noble Energy Center I in the FM 1960/Hwy 249 submarket; TransCanada, which moved into 180,000 SF in Bank of America Center located in the CBD submarket; Helix Energy Solutions and Cameron International Corp., which leased 120,000 SF and 108,000 SF respectively, in the newly constructed 8 West Centre located in the Katy Freeway submarket; and Forum Energy Technologies, which moved into 109,000 SF in the newly constructed Sam Houston Crossing Two located in the Northwest Far submarket. RENTAL RATES The average citywide rental rate increased 2.0% from $24.31 per SF to $24.80 per SF on an annual basis, and 1.5% from $24.43 per SF between quarters. The CBD Class A average quoted rental rate increased 0.4% from $37.04 per SF to $37.19 per SF between quarters, while the suburban Class A average quoted rental rate increased 3.4% from $28.82 per SF to $29.79 per SF. The average CBD Class B quoted rental rate increased 1.4% from $24.70 per SF to $25.04 per SF, while the average suburban Class B quoted rental rate increased 2.0% from $18.60 per SF to $18.97 per SF over the quarter.
  3. 3. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET Q2 2013 SIGNIFICANT SALES TRANSACTIONS – (100,000 SF or greater) BUILDING NAME SUB- MARKET RBA (SF) YEAR BUILT BUYER SELLER SALE PRICE $/SF CAP RATE CLOSED Greenway Plaza Portfolio (12 bldgs.) Greenway Plaza 5,328,000 1968 - 1982 Crescent Real Estate Equities Cousins Properties Inc. $1.1B $208 7.4 9/2013 3009 Post Oak Blvd West Loop/ Galleria 302,536 2013 alliantgroup Skanska USA $112M $370 N/A 9/2013 2200 West Loop S West Loop/ Galleria 201,720 1974/ 2000 APF Properties LLC Parmenter Realty Partners $38M $188 8.5 8/2013 Westwood Plaza I Southwest Beltway 8 113,273 1980 Merlyn Holdings LLC Rosemont Realty $5.1M $45 N/A 7/2013 3COLLIERS INTERNATIONAL | P. SALES ACTIVITY Houston’s office investment sales activity included 28 sales transactions with a total sales volume of approximately $1.3 billion, averaging $227 per SF. Listed below are a few significant transactions that closed during the third quarter. LEASING ACTIVITY Houston’s office leasing activity reached 2.6 million SF in the first quarter, bringing the year-to-date leasing activity to 8.6 million SF. Below is a list of Q3 2013 top lease transactions, the majority of which were new. 1 Renewal 2 Expansion 3 Sublease 4 Pre-lease/proposed or under construction Building Name/Address Submarket SF Tenant Lease Date Newpark Drilling Fluids Katy Freeway 117,698 New Park Drilling Fluids Sep-13 Jacobs Plaza Katy Freeway 82,000 Jacobs Engineering Aug-13 Intercontinental Center North Belt/Greenspoint 67,730 INTEC Engineering1 Aug-13 1700 West Loop S West Loop/Galleria 58,341 Burns & McDonnell2 Sep-13 363 N Sam Houston Pky E North Belt/Greenspoint 33,672 Murex Petroleum Jul-13 America Tower Allen Parkway 22,754 Ware Jackson Lee & Chambers, LLP1 Jul-13 6750 West Loop South Bellaire 22,374 Frost National Bank1 Jul-13 1300 Post Oak Blvd West Loop/Galleria 20,226 Mitsui & Co. (USA), Inc.1 Sep-13 Three Riverway West Loop/Galleria 18,547 King Ranch1 Aug-13 Ashford 6 Katy Freeway 10,947 Ocean Installers International Jul-13 Q3 2013 Top Office Leases
  4. 4. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET HOUSTON OFFICE MARKET SUMMARY (CBD, SUBURBAN & OVERALL) HOUSTON SUBURBAN OFFICE MARKET SUMMARY COLLIERS INTERNATIONAL | P. 4 Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2013 Q2-2013 Q3-2013 YTD-2013 AVG($/SF) A 28 28,249,120 2,410,786 8.5% 649,627 2.3% 3,060,413 10.8% 12.0% 326,951 -243,703 $37.19 B 29 8,283,453 1,537,884 18.6% 24,341 0.3% 1,562,225 18.9% 18.9% 5,936 -7,393 $25.04 C 21 1,390,823 766,346 55.1% 0 0.0% 766,346 55.1% 54.2% -12,791 -20,001 $18.18 Total 78 37,923,396 4,715,016 12.4% 673,968 1.8% 5,388,984 14.2% 15.1% 320,096 -271,097 $33.20 A 210 56,155,919 6,465,455 11.5% 555,117 1.0% 7,020,572 12.5% 11.7% 846,497 1,767,461 $29.79 B 758 68,057,788 11,755,575 17.3% 565,458 0.8% 12,321,033 18.1% 17.7% -391,818 -841,800 $18.97 C 260 11,695,221 1,961,922 16.8% 9,992 0.1% 1,971,914 16.9% 16.7% -59,820 -231,189 $14.98 Total 1228 135,908,928 20,182,952 14.9% 1,130,567 0.8% 21,313,519 15.7% 15.2% 394,859 694,472 $22.98 A 238 84,405,039 8,876,241 10.5% 1,204,744 1.4% 10,080,985 11.9% 11.8% 1,173,448 1,566,290 $31.81 B 787 76,341,241 13,293,459 17.4% 589,799 0.8% 13,883,258 18.2% 17.8% -385,882 -851,021 $19.58 C 281 13,086,044 2,728,268 20.8% 9,992 0.1% 2,738,260 20.9% 20.1% -72,611 -251,190 $15.18 Total 1306 173,832,324 24,897,968 14.3% 1,804,535 1.0% 26,702,503 15.4% 15.1% 714,955 464,079 $24.80 Net Absorption (SF)Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) CBD Suburban Overall Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2013 Q2-2013 Q3-2013 YTD-2013 AVG($/SF) A 4 1,704,677 83,788 4.9% 0 0.0% 83,788 4.9% 6.5% 26,915 103,947 $28.13 B 28 2,339,234 232,069 9.9% 6,745 0.3% 238,814 10.2% 11.2% 23,402 52,143 $25.38 C 17 569,557 70,795 12.4% 0 0.0% 70,795 12.4% 12.5% 460 -15,675 $24.21 Total 49 4,613,468 386,652 8.4% 6,745 0.1% 393,397 8.5% 9.6% 50,777 140,415 $26.47 B 4 281,332 3,914 1.4% 0 0.0% 3,914 1.4% 1.4% 0 -3,914 $17.18 C 2 42,582 1,812 4.3% 0 0.0% 1,812 4.3% 0.0% -1,812 -1,812 $7.95 Total 6 323,914 5,726 1.8% 0 0.0% 5,726 1.8% 1.2% -1,812 -5,726 $15.47 A 5 901,614 189,136 21.0% 14,185 1.6% 203,321 22.6% 22.9% 3,421 -16,158 $24.84 B 15 2,250,357 127,373 5.7% 2,647 0.1% 130,020 5.8% 5.8% -22 8,840 $22.16 C 8 348,315 23,612 6.8% 0 0.0% 23,612 6.8% 5.4% -4,841 1,983 $14.92 Total 28 3,500,286 340,121 9.7% 16,832 0.5% 356,953 10.2% 10.2% -1,442 -5,335 $23.67 Conroe  A 1 46,832 46,832 100.0% 0 0.0% 46,832 100.0% 100.0% 0 0 $27.53 B 4 334,266 21,819 6.5% 0 0.0% 21,819 6.5% 11.3% 15,968 15,968 $22.49 C 4 157,925 9,250 5.9% 0 0.0% 9,250 5.9% 1.4% -7,000 -7,000 $17.46 Total 9 539,023 77,901 14.5% 0 0.0% 77,901 14.5% 16.1% 8,968 8,968 $24.92 A 11 1,985,075 606,793 30.6% 18,954 1.0% 625,747 31.5% 35.0% 69,967 93,177 $28.06 B 29 1,687,253 299,727 17.8% 100,490 6.0% 400,217 23.7% 24.6% 15,168 15,062 $21.36 C 2 183,972 5,447 3.0% 3,984 2.2% 9,431 5.1% 2.9% -4,011 -3,627 $18.41 Total 42 3,856,300 911,967 23.6% 123,428 3.2% 1,035,395 26.8% 29.0% 81,124 104,612 $24.92 Allen Parkway Baytown Bellaire E. Fort Bend/Sugar Land Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  5. 5. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED 5COLLIERS INTERNATIONAL | P. Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2013 Q2-2013 Q3-2013 YTD-2013 AVG ($/SF) FM 1960 A 14 2,752,095 582,202 21.2% 0 0.0% 582,202 21.2% 23.2% 57,182 41,199 $25.39 B 74 4,446,946 1,077,912 24.2% 16,273 0.4% 1,094,185 24.6% 22.4% -99,050 -130,821 $15.48 C 16 597,349 59,888 10.0% 0 0.0% 59,888 10.0% 9.5% -2,863 5,692 $13.32 Total 104 7,796,390 1,720,002 22.1% 16,273 0.2% 1,736,275 22.3% 21.7% -44,731 -83,930 $18.27 Greenway A 12 4,866,788 472,563 9.7% 53,150 1.1% 525,713 10.8% 12.7% 89,983 12,091 $31.77 B 25 3,109,493 281,623 9.1% 925 0.0% 282,548 9.1% 9.1% -327 -16,484 $24.14 C 18 786,606 292,735 37.2% 0 0.0% 292,735 37.2% 33.8% -26,769 -19,711 $17.48 Total 55 8,762,887 1,046,921 11.9% 54,075 0.6% 1,100,996 12.6% 13.3% 62,887 -24,104 $27.08 Gulf Freeway/Pasadena A 2 75,068 17,922 23.9% 0 0.0% 17,922 23.9% 32.4% 6,405 7,110 $29.37 B 28 1,630,936 243,229 14.9% 0 0.0% 243,229 14.9% 15.1% 2,452 8,609 $18.65 C 24 812,585 129,372 15.9% 0 0.0% 129,372 15.9% 14.7% -9,893 -14,717 $15.31 Total 54 2,518,589 390,523 15.5% 0 0.0% 390,523 15.5% 15.5% -1,036 1,002 $17.88 I-10 East B 5 373,248 91,363 24.5% 0 0.0% 91,363 24.5% 24.1% -1,394 -4,101 $14.96 C 2 73,713 1,780 2.4% 0 0.0% 1,780 2.4% 5.7% 2,430 2,440 $11.95 Total 7 446,961 93,143 20.8% 0 0.0% 93,143 20.8% 21.1% 1,036 -1,661 $14.32 Katy Freeway A 34 7,335,394 445,154 6.1% 0 0.0% 445,154 6.1% 3.2% 350,050 434,154 $32.04 B 91 8,847,705 1,115,511 12.6% 20,762 0.2% 1,136,273 12.8% 12.5% -29,625 76,577 $20.66 C 25 1,048,849 77,461 7.4% 4,408 0.4% 81,869 7.8% 8.3% 4,933 16,319 $17.50 Total 150 17,231,948 1,638,126 9.5% 25,170 0.1% 1,663,296 9.7% 8.5% 325,358 527,050 $24.85 Kingwood/Humble B 11 707,192 61,843 8.7% 11,989 1.7% 73,832 10.4% 9.4% -7,104 -14,483 $20.05 C 4 132,761 2,984 2.2% 0 0.0% 2,984 2.2% 2.7% 610 3,433 $17.34 Total 15 839,953 64,827 7.7% 11,989 1.4% 76,816 9.1% 8.4% -6,494 -11,050 $19.90 NASA/Clear Lake A 10 1,554,794 152,038 9.8% 0 0.0% 152,038 9.8% 9.7% -1,481 37,530 $23.26 B 36 2,670,994 990,959 37.1% 6,748 0.3% 997,707 37.4% 33.8% -94,476 -495,675 $17.93 C 16 643,835 203,506 31.6% 0 0.0% 203,506 31.6% 33.9% 14,451 1,804 $14.54 Total 62 4,869,623 1,346,503 27.7% 6,748 0.1% 1,353,251 27.8% 26.1% -81,506 -456,341 $18.47 North Belt/Greenspoint A 18 3,827,095 448,390 11.7% 48,485 1.3% 496,875 13.0% 9.6% -129,535 -116,041 $28.18 B 51 5,868,137 1,271,579 21.7% 203,242 3.5% 1,474,821 25.1% 21.4% -216,877 -276,873 $18.34 C 20 1,159,424 266,055 22.9% 0 0.0% 266,055 22.9% 22.4% -6,612 -49,372 $12.85 Total 89 10,854,656 1,986,024 18.3% 251,727 2.3% 2,237,751 20.6% 17.4% -353,024 -442,286 $22.64 Northeast Near and Northeast Outlier B 5 204,177 52,196 25.6% 3,321 1.6% 55,517 27.2% 27.2% 0 -11,480 $20.90 C 5 129,823 22,177 17.1% 0 0.0% 22,177 17.1% 17.1% 0 -8,186 $12.00 Total 10 334,000 74,373 22.3% 3,321 1.0% 77,694 23.3% 23.3% 0 -19,666 $17.35 Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF)
  6. 6. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED 6COLLIERS INTERNATIONAL | P. Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2013 Q2-2013 Q3-2013 YTD-2013 AVG ($/SF) A 13 2,475,342 475,119 19.2% 35,870 1.4% 510,989 20.6% 19.0% -40,829 -86,059 $21.84 B 68 6,536,797 1,376,686 21.1% 114,628 1.8% 1,491,314 22.8% 21.6% -78,766 -133,031 $17.21 C 23 920,098 197,570 21.5% 0 0.0% 197,570 21.5% 18.9% -23,692 -69,064 $13.91 Total 104 9,932,237 2,049,375 20.6% 150,498 1.5% 2,199,873 22.1% 20.7% -143,287 -288,154 $18.20 B 12 695,665 214,679 30.9% 0 0.0% 214,679 30.9% 33.5% 18,701 38,873 $16.30 C 12 541,718 124,291 22.9% 0 0.0% 124,291 22.9% 21.7% -6,553 -47,470 $12.60 Total 24 1,237,383 338,970 27.4% 0 0.0% 338,970 27.4% 28.4% 12,148 -8,597 $15.24 A 3 1,714,929 264,182 15.4% 0 0.0% 264,182 15.4% 16.7% 21,895 53,747 $32.81 B 29 3,072,793 297,451 9.7% 15,862 0.5% 313,313 10.2% 11.3% 32,850 -43,975 $21.41 C 3 204,649 64,384 31.5% 0 0.0% 64,384 31.5% 32.7% 2,568 -480 $13.00 Total 35 4,992,371 626,017 12.5% 15,862 0.3% 641,879 12.9% 14.0% 57,313 9,292 $25.08 A 1 80,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $25.63 B 13 508,569 39,129 7.7% 0 0.0% 39,129 7.7% 8.4% 3,737 30,314 $19.05 C 6 204,042 45,900 22.5% 0 0.0% 45,900 22.5% 22.5% 0 1,250 $12.90 Total 20 792,611 85,029 10.7% 0 0.0% 85,029 10.7% 11.2% 3,737 31,564 $16.28 A 3 1,491,140 0 0.0% 0 0.0% 0 0.0% 0.0% 0 335,597 - B 13 1,136,299 290,558 25.6% 0 0.0% 290,558 25.6% 16.4% -104,595 -103,749 $24.46 C 6 429,923 71,791 16.7% 0 0.0% 71,791 16.7% 18.4% 7,148 10,384 $17.27 Total 22 3,057,362 362,349 11.9% 0 0.0% 362,349 11.9% 8.7% -97,447 242,232 $22.83 B 9 950,711 80,791 8.5% 0 0.0% 80,791 8.5% 9.0% 4,989 15,043 $20.02 C 2 48,054 17,283 36.0% 0 0.0% 17,283 36.0% 36.0% 0 0 $17.00 Total 11 998,765 98,074 9.8% 0 0.0% 98,074 9.8% 10.3% 4,989 15,043 $19.46 A 5 1,446,902 251,845 17.4% 24,235 1.7% 276,080 19.1% 22.2% 44,583 -1,246 $15.85 B 54 5,353,566 1,701,282 31.8% 1,867 0.0% 1,703,149 31.8% 34.5% 144,170 104,695 $15.48 C 26 1,528,278 210,145 13.8% 1,600 0.1% 211,745 13.9% 13.5% -5,501 -18,289 $13.24 Total 85 8,328,746 2,163,272 26.0% 27,702 0.3% 2,190,974 26.3% 28.5% 183,252 85,160 $15.27 A 2 93,951 19,292 20.5% 0 0.0% 19,292 20.5% 19.7% 25,301 25,638 $25.53 B 17 684,900 29,676 4.3% 1,594 0.2% 31,270 4.6% 4.3% -1,594 10,753 $22.72 C 2 51,396 2,100 4.1% 0 0.0% 2,100 4.1% 9.0% 2,500 -50 $18.00 Total 21 830,247 51,068 6.2% 1,594 0.2% 52,662 6.3% 5.8% 26,207 36,341 $23.40 Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF) Southeast/Outlier Southw est Southw est Far and Outlier Northw est and Northw est Outlier Richmond/Fountainview San Felipe/Voss South South Main/Med Center
  7. 7. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET OFFICE DEVELOPMENT PIPELINE Houston’s construction pipeline continues to expand with 10.5 million SF under construction at the end of Q3 2013. The table below includes buildings containing 150,000 SF or greater. HOUSTON SUBURBAN OFFICE MARKET SUMMARY - CONTINUED COLLIERS INTERNATIONAL | P. 7 Vacancy Rental Rate Class # of Bldgs. Total (SF) (SF) Rate (%) (SF) Rate (%) Total (SF) Q3-2013 Q2-2013 Q3-2013 YTD-2013 AVG ($/SF) A 35 14,188,640 1,739,127 12.3% 230,100 1.6% 1,969,227 13.9% 12.2% 55,743 382,087 $33.00 B 47 6,073,446 905,716 14.9% 4,732 0.1% 910,448 15.0% 14.9% -2,839 37,556 $23.39 C 6 369,268 4,464 1.2% 0 0.0% 4,464 1.2% 1.3% 253 -2,902 $19.27 Total 88 20,631,354 2,649,307 12.8% 234,832 1.1% 2,884,139 14.0% 12.8% 53,157 416,741 $29.73 A 21 6,208,844 420,992 6.8% 78,380 1.3% 499,372 8.0% 8.0% -3,331 38,931 $34.31 B 48 5,570,723 648,686 11.6% 19,461 0.3% 668,147 12.0% 12.4% 24,898 19,023 $19.05 C 10 686,419 55,120 8.0% 0 0.0% 55,120 8.0% 8.7% 4,374 966 $15.24 Total 79 12,465,986 1,124,798 9.0% 97,841 0.8% 1,222,639 9.8% 10.0% 25,941 58,920 $27.04 A 16 3,406,739 250,080 7.3% 51,758 1.5% 301,838 8.9% 2.6% 270,228 454,750 $36.81 B 42 2,723,049 299,804 11.0% 34,172 1.3% 333,976 12.3% 10.0% -41,484 -39,513 $22.29 C 1 24,080 2,000 8.3% 0 0.0% 2,000 8.3% 8.3% 0 1,500 $19.20 Total 59 6,153,868 551,884 9.0% 85,930 1.4% 637,814 10.4% 6.1% 228,744 416,737 $28.86 West Loop/Galleria Westchase The Woodlands Inventory Direct Vacancy Sublease Vacancy Vacancy Rate (%) Net Absorption (SF) Building Name Address Submarket SF Pre-Leased Developer Est. Delivery ExxonMobil North Campus I-45 & Springwoods Village Woodlands 3,000,000 100.0% ExxonMobil (Gilbane Building Jun-14 Anadarko Tower 2 1201 Lake Robbins Dr Woodlands 550,000 100.0% Patrinely Group Inc Apr-14 Energy Center Three 935 N Eldridge Pky Katy Freeway 546,604 100.0% Trammell Crow Company May-15 Noble Energy Center II SH 249 & Louetta Rd FM 1960/Hwy 249 456,000 100.0% Trammell Crow Company Jun-15 Energy Tower III 11740 Katy Fwy Katy Freeway 428,831 100.0% Mac Haik Realty LLC Jan-14 Energy Tower IV 11750 Katy Fwy Katy Freeway 428,831 100.0% Mac Haik Realty LLC Jan-14 Two BriarLake Plaza 2050 W Sam Houston Pky S Westchase 331,689 50.8% Cassidy Turley Apr-14 West Memorial Place 15375 Memorial Dr Katy Freeway 334,147 36.6% Skanska Commercial Development Jan-15 Energy Crossing II 15011 Katy Fwy Katy Freeway 321,508 87.5% Opus Corporation Feb-14 Granite Briarpark Green 3151 Briarpark Dr Westchase 302,515 21.2% Granite Properties Nov-13 Westchase Park 3600 W Sam Houston Pky S Westchase 300,000 0.0% PM Realty Group Dec-14 Shell Woodcreek 11910 Katy Fwy Katy Freeway 284,178 100.0% Hines Nov-13 Shell Woodcreek 200 N Dairy Ashford Rd Katy Freeway 263,835 100.0% Hines Feb-14 Town Centre I Queensbury Ln and Town & Country Blvd. Katy Freeway 254,489 0.0% Moody Rambin Nov-14 Westgate I 17220 Katy Fwy Katy Freeway 248,500 67.7% Transwestern Dec-13 Mustang Engineering 17325 Park Row Katy Freeway 225,885 100.0% Transwestern Jul-14 The Offices at Greenhouse 18918 Katy Fwy Katy Freeway 203,149 67.1% Stream Realty Partners Jul-14 Building 5 - Repsol 2455 Technology Forest Blvd Woodlands 200,000 100.0% Warmack Investments May-14 Two Hughes Landing Hughes Landing Blvd Woodlands 197,719 0.5% The Woodlands Development Company, L.P. May-14 Westgate II 17320 Katy Fwy Katy Freeway 186,375 100.0% Transwestern Dec-13 Jacobs Plaza 12140 Wickchester Ln Katy Freeway 168,050 45.4% PM Realty Group Jun-14 Texas Instruments 13905 University Blvd E Fort Bend Co/Sugar Land 160,000 100.0% Planned Community Developers Apr-14 Sierra Pines II 1575 Sawdust Rd The Woodlands 153,810 0.0% Stream Realty Partners Aug-14
  8. 8. RESEARCH & FORECAST REPORT | Q3 2013 | HOUSTON OFFICE MARKET Accelerating success. COLLIERS INTERNATIONAL 1223 W. Loop South Suite 900 Houston, Texas 77027 Main +1 713 222 2111 LISA R. BRIDGES Director of Market Research | Houston Direct +1 713 830 2125 Fax +1 713 830 2118 lisa.bridges@colliers.com The Colliers Advantage Enterprising Culture Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. When you choose to work with Colliers, you choose to work with the best. In addition to being highly skilled experts in their field, our people are passionate about what they do. And they know we are invested in their success just as much as we are in our clients’ success. This is evident throughout our platform—from Colliers University, our proprietary education and professional development platform, to our client engagement strategy that encourages cross-functional service integration, to our culture of caring. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. That’s why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also been recognized as one of the “best places to work” by top business organizations in many of our markets across the globe. Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, national and international basis. COLLIERS INTERNATIONAL | P. 8

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