Houston's industrial market fundamentals continued to strengthen in Q1 2011, with positive net absorption of 531,985 SF and a slight decrease in vacancy to 6.0%. Rents decreased slightly by 0.4% but increased 8.1% year-over-year. Three leases over 100,000 SF were signed, with most leases under 40,000 SF. Construction activity increased, bringing the industrial pipeline to 723,801 SF. The market is expected to improve moderately as the local and national economies recover.

1. Q1 2011 | INDUSTRIAL MARKET
HOUSTON INDUSTRIAL MARKET
RESEARCH & FORECAST REPORT
Houston’s Industrial Vacancy Continues to Shrink
Houston’s industrial market fundamentals continue to strengthen, adding 531,985 SF
of positive net absorption in the first quarter, an improvement from the positive net
absorption of 354,079 SF recorded in fourth quarter 2010. In addition, Houston’s
industrial vacancy decreased slightly by 20 basis points to 6.0% from 6.2% the
previous quarter. The quoted citywide rental rate for industrial space decreased
CITYWIDE MARKET INDICATORS slightly by 0.4% between quarters from $5.33 to $5.31 per SF NNN, but increased by
8.1% on a year-over-year basis from $4.88 per SF NNN. On the leasing front, three
1Q-10 1Q-11 leases over 100,000 SF were signed during the first quarter, with the majority of the
QUARTERLY NET ABSORPTION leases signed for 40,000 SF or less. For several years now developers have shown
restraint due to the economic downturn; however, first quarter 2011 saw increased
1,843,261 SF 531,985 SF
construction activity. Houston’s industrial construction pipeline increased to 723,801
QUOTED RENTAL RATE NNN SF from 207,000 SF the previous reported in the previous quarter.
4.88/SF $5.31/SF
Looking forward, Houston’s industrial sector is expected to improve moderately as key
INDUSTRIAL VACANCY economic drivers move towards recovery. The Port of Houston has been instrumental
in Houston's development as a center of international trade. Over 100 steamship lines
6.6% 6.0%
offer service linking Houston with 1,053 ports in 203 countries. It is also home to a $15
QUARTERLY DELIVERIES billion petrochemical complex, the largest in the nation and second largest worldwide.
1,423,176 SF 185,645 SF
Looking forward, The Port of Houston Authority will host the American Association of
Port Authorities annual convention in 2014, which will coincide with the 100th
UNDER CONSTRUCTION anniversary celebration of the official opening of the Houston Ship Channel.
202,918 SF 723,801 SF
Macro factors driving the absorption of office space ultimately relates to job count.
According to the Texas Labor Market Review, total nonagricultural employment in
Texas rose by 22,700 jobs in February, or 0.2%. Six of the eleven major industries
grew over the month, with Professional and Business Service jobs contributing to more
than half of the job gains. At the local level, Houston’s MSA had the largest monthly
job increase, with 9,600 jobs added in February, followed by Dallas with 7,700 jobs
added. According to the Greater Houston Partnership, Houston has recaptured more
than half of the jobs lost during the recession.
UNEMPLOYMENT 1/11 2/11
HOUSTON 8.8% 8.4%
ABSORPTION, NEW SUPPLY & VACANCY RATES
TEXAS 8.3% 8.2% 5,000,000 8%
ABSORPTION NEW SUPPLY VACANCY
U.S. 9.0% 8.9% 4,000,000 7%
ANNUAL 3,000,000 6%
JOB GROWTH CHANGE 2/11
9.6k 2,000,000 5%
HOUSTON 2.1%
TEXAS 2.3% 22.7k 1,000,000 4%
U.S. 1.8% 192k
0 3%
-1,000,000 2%
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
www.colliers.com/houston

2. RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET
2011 INDUSTRIAL LEASES Vacancy & Availability Absorption & Demand
American Packing & Crating* Houston’s industrial market averaged Houston’s industrial market posted
404 N Witter St 6.0% vacancy in the first quarter, 20 basis positive net absorption of 532K SF in the
Feb-11 140,782SF
points (bps) less than the previous quarter, first quarter, an improvement over the
ASCO and 60 bps below the 6.6% recorded in the positive net absorption of 354K SF in the
Greens Port Industrial Park – 2G same quarter last year. Over the past six previous quarter. This marked the
Jan-11 120,000 SF quarters, Houston’s industrial vacancy has seventh consecutive quarter of gains.
Max Movers** decreased, outperforming all other
1205 North Post Oak Rd. commercial real estate property sectors Among Houston’s major industrial
Feb-11 103,800 SF citywide. corridors, the Northwest and Southeast
outperformed other industrial sectors in
Berlin Packaging
13788 West Rd. At the end of the first quarter, Houston the first quarter. The Northwest posted
Feb-11 80,000 SF posted 29.1M SF of vacant industrial the highest positive net quarterly
space citywide. Among the major absorption with 661K SF, followed by the
Brook Furniture Rental
America Plaza industrial corridors, the Northwest held the Southeast with 360K SF. The Southwest
Feb-11 43,050 SF largest amount of vacant space with 7.2M followed with positive net quarterly
SF (5.4% vacancy), followed by the absorption of 100K SF.
Flexmaster USA**
Southeast with 5.8M SF vacant (6.9%
Pineway Service Center
Feb-11 35,645 SF vacancy), the Southwest with 4.8M SF There were several major tenant move-
vacant (7.2% vacancy), and the North with ins contributing to net absorption gains in
Frank Supply Company** 4.7M SF vacant (6.7% vacancy). the first quarter. Several of those tenants
Main Park Distribution - Bldg H
are: Sysco moved into the former HP
Feb-11 32,670 SF
Houston’s industrial construction pipeline campus on Hwy 290 in Cypress (669,102
Integrated Drive Systems, LLC increased to 723,801 SF from 207,000 SF SF) and American Packing & Crating
6623 Willowbrook Park Dr. the previous reported in the previous moved into 140,782 SF on N Witter St.
Jan-11 26,600 SF
quarter. The largest project under
Dispoz-O Products** construction is a 300,000 SF multi-tenant
Leasing
Claymoore Business Park – Bldg. 5 office/warehouse in the West Outer Loop Houston’s industrial market recorded
Jan-11 22,275 SF
Ind submarket scheduled for delivery April twenty-one (3) leases over 100,000 SF in
Pioneer Drilling 2011. The project is being developed by the first quarter. The majority of the
Northwest Green Bus. Pk. – Bldg. 4 Duke Realty and is pre-leased by Ram leases singed during were less than
Feb-11 20,000 SF 40,000 SF.
Chemical & Supply and Berlin Packaging.
Lee Specialties A list of current properties under
5119 Hitonview Rd. construction can be found in a table on Overall, industrial leasing activity
Nov-10 17,000 SF page 4 or this report. reached 2.6M SF in the first quarter,
2.0M SF less than the previous quarter
Rental Rates and 2.5M SF less than what was
*Colliers International transaction Houston’s average quoted industrial rental recorded in the same quarter last year.
** Renewal
rates decreased slightly by 0.4% between For a select list of Houston’s top
quarters from $5.33 to $5.31 per SF NNN, industrial leases signed to date, please
and increased by 8.1% on a year-over- see the column at left.
year basis from $4.88 per SF NNN. By
property type on a year-over-year basis,
warehouse distribution space is $5.01
NNN/SF (up $0.11/SF) and flex space
stood at $6.95 NNN/SF (down $0.97/SF).
COLLIERS INTERNATIONAL | P. 2

3. RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET
HOUSTON INDUSTRIAL INVESTMENT SALES Sales Activity
Houston’s industrial investment activity remains sluggish with only 14
Q1 2011 sales reported in the first quarter. The most significant transaction was
Granite Properties’ 1.2M SF, 11-property portfolio which sold to Cabot
Total Volume: $80.8M
Properties for an estimated $49 per SF. The properties included in the
# of Properties: 14
transaction are listed in the table below.
Total SF: 1.8M
Average Price/SF: $45
Average Cap: 7.5% Property Submarket RBA (SF) % Leased
Source: Costar Comps Town & Country Business Park 9 Katy Freeway 18,900 100%
Greenbriar Place North 78,745 55.4%
1406 N Sam Houston Pky W North 15,000 100%
Wallisville Industrial Park Northeast 127,744 89.8%
Clay-Campbell Business Park 1 Northwest 228,900 100%
Willowbend Distribution Center Greenbriar Place North West by Northwest Northwest 96,000 80.0%
Granite Plaza Tech Northwest 84,025 0%
Pinemont Service Center Northwest 21,760 66.2%
Post Oak Service Center Northwest 8,050 100%
Plaza Del Oro Business Park South 180,094 79.5%
Willowbend Distribution Center II Southwest 100,800 100%
Town & Country 9 West by Northwest
HOUSTON INDUSTRIAL MARKET SUMMARY
Direct Sublet Total
Direct Sublet Total 1Q 2011 Net 4Q 2010 Net 1Q 2011 4Q 2010 SF Under
Market Rentable Area Vacancy Vacancy Vacancy
Vacant SF Vacant SF Vacant SF Absorption Absorption Completions Completions Construction
Rate Rate Rate
Greater Houston Total 498,295,069 29,130,713 5.8% 917,096 0.2% 30,047,809 6.0% 897,271 354,079 185,645 282,843 723,801
NW Inner Loop 12,704,036 698,100 5.5% 37,000 0.3% 735,100 5.8% 14,707 (28,683) - - -
CBD 34,093,884 1,889,152 5.5% - 0.0% 1,889,152 5.5% (24,604) 262,336 - - -
North Inner Loop 5,661,218 498,639 8.8% - 0.0% 498,639 8.8% - 13,299 - - -
SW Inner Loop 10,032,127 269,037 2.7% - 0.0% 269,037 2.7% (62,653) (4,382) - - -
Total Inner Loop 62,491,265 3,354,928 5.4% 37,000 0.1% 3,391,928 5.4% (72,550) 242,570 - - -
North Fwy/Tomball Pky 14,078,375 1,263,070 9.0% 9,975 0.1% 1,273,045 9.0% (29,266) 32,936 - 10,000 88,362
North Hardy Toll Rd 24,461,512 1,640,951 6.7% 83,521 0.3% 1,724,472 7.0% (64,494) 238,213 52,400 - 68,146
North Outer Loop 17,557,767 972,442 5.5% - 0.0% 972,442 5.5% (106,554) (16,597) 67,250 111,126
The Woodlands/Conroe 14,234,874 753,353 5.3% 21,197 0.1% 774,550 5.4% (37,144) 78,008 - 10,800 -
Total North Corridor 70,332,528 4,629,816 6.6% 114,693 0.2% 4,744,509 6.7% (237,458) 332,560 52,400 88,050 267,634
Northeast Hwy 321 1,375,459 - 0.0% - 0.0% - 0.0% 0 0 - - -
Northeast Hwy 90 16,354,801 568,322 3.5% 214,120 1.3% 782,442 4.8% (135,790) 31,000 - - -
Northeast I-10 4,173,338 148,692 3.6% - 0.0% 148,692 3.6% (53,397) (30,154) - - -
Northeast Inner Loop 11,609,890 1,066,393 9.2% - 0.0% 1,066,393 9.2% (73,475) (25,811) - 148,793 -
Total Northeast Corridor 33,513,488 1,783,407 5.3% 214,120 0.6% 1,997,527 6.0% (262,662) (24,965) - 148,793 -
Hwy 290/Tomball Pky 16,641,215 666,002 4.0% 16,024 0.1% 682,026 4.1% 74,518 67,645 - - 39,700
Northwest Hwy 6 5,470,140 96,646 1.8% - 0.0% 96,646 1.8% 675,800 44,557 -
Northwest Inner Loop 61,252,443 3,537,212 5.8% 232,605 0.4% 3,769,817 6.2% 182,643 (115,712) - - -
Northwest Near 16,977,654 956,600 5.6% 13,550 0.1% 970,150 5.7% (65,730) 58,300 - - -
Northwest Outlier 12,019,056 445,975 3.7% 5,348 0.0% 451,323 3.8% (6,768) (40,768) - - -
West Outer Loop 21,604,713 1,317,287 6.1% - 0.0% 1,317,287 6.1% 165,870 69,547 34,125 - 300,000
Total Northwest Corridor 133,965,221 7,019,722 5.2% 267,527 0.2% 7,287,249 5.4% 1,026,333 83,569 34,125 - 339,700
East I-10 Outer Loop 15,153,987 208,435 1.4% 70,000 0.5% 278,435 1.8% 207,960 2,750 - - -
East-SE Far 48,336,809 4,911,309 10.2% 38,903 0.1% 4,950,212 10.2% 241,511 152,282 27,120 - 30,170
SE Outer Loop 21,582,150 561,786 2.6% 50,000 0.2% 611,786 2.8% (89,412) 6,715 - - -
Total Southeast Corridor 85,072,946 5,681,530 6.7% 158,903 0.2% 5,840,433 6.9% 360,059 161,747 27,120 - 30,170
South Highway 35 31,906,061 1,575,454 4.9% 11,000 0.0% 1,586,454 5.0% (10,680) (17,910) - 26,000 -
South Inner Loop 13,535,789 365,022 2.7% - 0.0% 365,022 2.7% (5,830) (10,554) - - -
Total South Corridor 45,441,850 1,940,476 4.3% 11,000 0.0% 1,951,476 4.3% (16,510) (28,464) - 26,000 -
Highway 59/Highway 90 23,500,999 1,301,527 5.5% 64,871 0.3% 1,366,398 5.8% 28,400 (28,003) - - -
Southwest Far 10,747,027 822,899 7.7% 26,084 0.2% 848,983 7.9% 8,581 21,906 20,000 - 38,797
Southwest Outer Loop 14,911,147 1,167,245 7.8% - 0.0% 1,167,245 7.8% 74,330 (83,897) - - -
Fort Bend County/Sugar Lan 18,318,598 1,429,163 7.8% 22,898 0.1% 1,452,061 7.9% (11,252) (322,944) 52,000 20,000 47,500
Total Southwest Corridor 67,477,771 4,720,834 7.0% 113,853 0.2% 4,834,687 7.2% 100,059 (412,938) 72,000 20,000 86,297
COLLIERS INTERNATIONAL | P. 3

4. RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET
Select Industrial Projects Under Construction
Estimated
Submarket Building Address RBA % Leased Developer Delivery
1 West Outer Loop Ind 13788 West Rd 300,000 73.27 Duke Realty Apr-11
2 North Outer Loop Ind 14555 John F Kennedy Blvd 111,126 100.00 Noble Drilling Llc May-11
3 North Fwy/Tomball Pky Ind 10811 Vinecrest Dr 88,362 0.00 East Properties Jul-11
4 Sugar Land Ind 0 Richmond Gaines Rd 47,500 5.26 Trend Setter Realty May-11
5 North Hardy Toll Road Ind 4540 Kendrick Plaza Dr 43,536 27.75 East Properties Jun-11
6 Hwy 290/Tomball Pky Ind 12606 N Houston Rosslyn Rd 39,700 24.14 2004 Nw Park Ltd Jun-11
7 Southwest Far Ind 425 Summer Park Dr 38,797 100.00 Red Sea Properties Jun-11
8 East-Southeast Far Ind 201 Beltway Green 30,170 0.00 Chrysler Group Realty Co LLC Jun-11
9 North Hardy Toll Road Ind 2437 Peyton Rd 24,610 0.00 Capital Commercial Investme May-11
Total u/c industrial projects listed above 723,801
Select 2011 Industrial Deliveries
Submarket Building Address RBA % Leased Developer Name Delivered
1 North Hardy T oll Road Ind 7902 FM 1960 52,400 0 Inspect Connect Mar-11
2 Sugar Land Ind 15445 Old Richmond Ave 52,000 0 Richards Investment Mar-11
3 Conroe 2000 S Loop 336 W 34,709 100 N/A Mar-11
4 West Outer Loop Ind 11987 FM-529 34,125 100 T exas Development Comp Feb-11
5 East-Southeast Far Ind 5391 Bay Oaks Dr 27,120 0 Clayco-h2o Ltd Feb-11
6 Southwest Far Ind 4314 FM 2218 20,000 100 N/A Jan-11
T otal year-to-date industrial deliveries listed above 220,354
1Q 2011 Houston Industrial Deliveries 1Q 2011 Houston Industrial Under Construction
3
1
9
5
3 2
1 6
4
8
4
2
5
7
6
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5. RESEARCH & FORECAST REPORT | Q1 2011 | HOUSTON INDUSTRIAL MARKET
480 offices in
61 countries on
6 continents
United States: 135
Canada: 39
Latin America: 17
Asia Pacific: 52
EMEA: 95
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