This document provides an overview and analysis of the mid-year 2010 Houston office market. It includes statistics on employment, inventory, construction, leasing, and sales activity. Key metrics like availability rates, absorption, rental rates, and capitalization rates are analyzed for the overall market and various submarkets. Development trends are also examined through maps and profiles of select properties.

1. The CoStar
Office Report
M I D - Y E A R 2 0 1 0
Houston Office Market

2. MID-YEAR 2010 – HOUSTON
Houston Office Market
Table of Contents
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B
Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C
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
Analysis of Individual CoStar Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Select Same Building Sales
Select Land Sales
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
Woodlands Market
©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A

3. HOUSTON – MID-YEAR 2010
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 71.7 billion square feet of coverage in 3 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
B THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.

4. MID-YEAR 2010 – HOUSTON
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)
©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C

5. HOUSTON – MID-YEAR 2010
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.
D THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.

6. MID-YEAR 2010 – HOUSTON
Houston Office Market
OVERVIEW
Houston’s Vacancy Increases to 14.2%
Net Absorption Negative (311,935) SF in the Quarter
T
he Houston Office market ended the second quarter the third quarter 2009.
2010 with a vacancy rate of 14.2%. The vacancy rate The Class-B office market recorded net absorption of posi-
was up over the previous quarter, with net absorption tive 170,010 square feet in the second quarter 2010, compared
totaling negative (311,935) square feet in the second quarter. to positive 275,369 square feet in the first quarter 2010, positive
Vacant sublease space decreased in the quarter, ending the quarter 140,779 in the fourth quarter 2009, and positive 156,105 in the
at 2,228,545 square feet. Rental rates ended the second quarter third quarter 2009.
at $23.07, a decrease over the previous quarter. A total of five The Class-C office market recorded net absorption of posi-
buildings delivered to the market in the quarter totaling 78,828 tive 27,356 square feet in the second quarter 2010 compared to
square feet, with 2,334,122 square feet still under construction at positive 126,812 square feet in the first quarter 2010, positive
the end of the quarter. 84,765 in the fourth quarter 2009, and positive 131,943 in the
third quarter 2009.
Absorption
Net absorption for Houston’s central business district was
Net absorption for the overall Houston office market was
negative (33,470) square feet in the second quarter 2010. That
negative (311,935) square feet in the second quarter 2010. That
compares to negative (221,150) square feet in the first quarter
compares to positive 505,004 square feet in the first quarter 2010,
2010, positive 138,950 in the fourth quarter 2009, and negative
positive 105,274 square feet in the fourth quarter 2009, and posi-
(1,590) in the third quarter 2009.
tive 84,514 square feet in the third quarter 2009.
Net absorption for the suburban markets was negative
Tenants moving out of large blocks of space in 2010 include:
(278,465) square feet in the second quarter 2010. That compares
Fluor Enterprises moving out of 187,908 square feet at The Lake
to positive 726,154 square feet in first quarter 2010, negative
Corporate Center; and Sverdrup Technology moving out of
(33,676) in the fourth quarter 2009, and positive 86,104 in the
170,576 square feet at 2224 Bay Area Blvd.
third quarter 2009.
Tenants moving into large blocks of space in 2010 include:
Tax Masters, Inc. moving into 107,890 square feet at Dairy Vacancy
Ashford Plaza; CyrusOne moving into 92,420 square feet at The office vacancy rate in the Houston market arean
5150 Westway Park Blvd; and NRG moving into 84,644 square increased to 14.2% at the end of the second quarter 2010. The
feet at 1300 Main St. vacancy rate was 14.0% at the end of the first quarter 2010,
The Class-A office market recorded net absorption of nega- 14.2% at the end of the fourth quarter 2009, and 14.0% at the
tive (509,301) square feet in the second quarter 2010, compared end of the third quarter 2009.
to positive 102,823 square feet in the first quarter 2010, negative Class-A projects reported a vacancy rate of 15.6% at the
(120,270) in the fourth quarter 2009, and negative (203,534) in end of the second quarter 2010, 15.1% at the end of the first
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®
Absorption & Deliveries
©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT
U.S. Vacancy Comparison 1
Past 8 Quarters Past 8 Quarters

7. HOUSTON – MID-YEAR 2010
Houston Office Market
OVERVIEW
quarter 2010, 15.2% at the end of the fourth quarter 2009, and of the third quarter 2009.
14.7% at the end of the third quarter 2009. Houston’s Class-A projects reported vacant sublease space of
Class-B projects reported a vacancy rate of 14.0% at the end 1,274,699 square feet at the end of second quarter 2010, up from
of the second quarter 2010, 14.1% at the end of the first quarter the 1,269,173 square feet reported at the end of the first quarter
2010, 14.3% at the end of the fourth quarter 2009, and 14.4% 2010. There were 1,264,833 square feet of sublease space vacant
at the end of the third quarter 2009. at the end of the fourth quarter 2009, and 1,358,951 square feet
Class-C projects reported a vacancy rate of 10.9% at the at the end of the third quarter 2009.
end of the second quarter 2010, 10.9% at the end of first quarter Class-B projects reported vacant sublease space of 920,896
2010, 11.2% at the end of the fourth quarter 2009, and 11.4% square feet at the end of the second quarter 2010, down from the
at the end of the third quarter 2009. 944,627 square feet reported at the end of the first quarter 2010.
The overall vacancy rate in Houston’s central business dis- At the end of the fourth quarter 2009 there were 979,829 square
trict at the end of the second quarter 2010 increased to 11.6%. feet, and at the end of the third quarter 2009 there were 871,711
The vacancy rate was 11.5% at the end of the first quarter 2010, square feet vacant.
11.0% at the end of the fourth quarter 2009, and 11.3% at the Class-C projects reported decreased vacant sublease space
end of the third quarter 2009. from the first quarter 2010 to the second quarter 2010. Sublease
The vacancy rate in the suburban markets increased to vacancy went from 46,242 square feet to 32,950 square feet dur-
14.8% in the second quarter 2010. The vacancy rate was 14.6% ing that time. There was 27,378 square feet at the end of the
at the end of the first quarter 2010, 14.9% at the end of the fourth fourth quarter 2009, and 55,031 square feet at the end of the
B Cquarter 2009, and 14.6% at the end of the third quarter 2009.
Total Market third quarter 2009.
Sublease vacancy in Houston’s central business district stood
Largest Lease Signings
at 493,501 square feet at the end of the second quarter 2010.
The largest lease signings occurring in 2010 included: the
It was 507,653 square feet at the end of the first quarter 2010,
695,800-square-foot lease signed by Kellogg Brown & Root Llc
414,389 square feet at the end of the fourth quarter 2009, and
at KBR Tower in the Downtown market; the 291,536-square-foot
471,445 square feet at the end of the third quarter 2009.
deal signed by Kellogg Brown & Root at 500 Jefferson Bldg in
Sublease vacancy in the suburban markets ended the second
the Downtown market; and the 182,687-square-foot lease signed
quarter 2010 at 1,735,044 square feet. At the end of the first
by Kellogg Brown & Root Llc at KBR Tower in the Downtown
quarter 2010 sublease vacancy was 1,752,389 square feet, was
market. Two of the three deals were renewals.
1,857,651 square feet at the end of the fourth quarter 2009, and
Sublease Vacancy was 1,814,248 square feet at the end of the third quarter 2009.
The amount of vacant sublease space in the Houston mar-
Rental Rates
ket decreased to 2,228,545 square feet by the end of the second
The average quoted asking rental rate for available office
004 2004 quarter 2010, from 2,260,042 square feet2009 the end of the first
2005 2005 2006 2006 2007 2007 2008 2008 at 2009 2010
space, all classes, was $23.07 per square foot per year at the end
1q 3q quarter 2010. There was 2,272,040 square1q vacant at the end
1q 3q 1q 3q 1q 3q 1q 3q feet 3q 1q
of the second quarter 2010 in the Houston market area. This
of the fourth quarter 2009 and 2,285,693 square feet at the end
represented a 0.7% decrease in quoted rental rates from the end
of the first quarter 2010, when rents were reported at $23.23 per
U.S. Vacancy Comparison square foot.
Past 8 Quarters The average quoted rate within the Class-A sector was
$29.06 at the end of the second quarter 2010, while Class-B rates
Houston United States
16.0% stood at $19.04, and Class-C rates at $15.40. At the end of the
first quarter 2010, Class-A rates were $29.08 per square foot,
14.0%
Class-B rates were $19.24, and Class-C rates were $15.59.
12.0%
The average quoted asking rental rate in Houston’s CBD
was $29.79 at the end of the second quarter 2010, and $21.79 in
Vacancy Rate
10.0%
8.0%
the suburban markets. In the first quarter 2010, quoted rates were
$30.38 in the CBD and $21.90 in the suburbs.
6.0%
Deliveries and Construction
4.0%
During the second quarter 2010, five buildings totaling
2.0%
78,828 square feet were completed in the Houston market area.
0.0% This compares to eight buildings totaling 138,049 square feet
2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q that were completed in the first quarter 2010, 10 buildings total-
Source: CoStar Property• ing 623,027 square feet completed in the fourth quarter 2009,
2 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.

8. 4%
2%
MID-YEAR 2010 – HOUSTON
0%
Houston Office Market
1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 20
1q 3q 1q 3q 1q 3q 1q 3q 1q 3q 1q 3
OVERVIEW Source: CoStar Property®
and 2,397,305 square feet in 23 buildings completed in the third
quarter 2009.
Absorption & Deliveries
Past 8 Quarters
There were 2,334,122 square feet of office space under con-
Net Absorption Deliveries
struction at the end of the second quarter 2010. 3.0
Some of the notable 2010 deliveries include: 1111 Medical 2.40
Plaza Dr, a 30,000-square-foot facility that delivered in first quar- 2.5
2.13
ter 2010 and is now 85% occupied, and 1235 Lake Pointe Pky, 2.0
1.88
1.57
a 26,594-square-foot building that delivered in first quarter 2010 1.5
1.41
Millions SF
and is now 8% occupied. 1.12
1.0
The largest projects underway at the end of second quarter 0.62
0.51
0.46
2010 were MainPlace, a 972,474-square-foot building with 10% 0.5
0.11 0.14
0.03 0.08 0.08
of its space pre-leased, and Hess Tower, an 844,763-square-foot 0.0
facility that is 100% pre-leased.
(0.5) (0.31)
Inventory (1.0)
(0.56)
Total office inventory in the Houston market area amounted 2008 3q 2008 4q 2009 1q 2009 2q 2009 3q 2009 4q 2010 1q 2010 2q
to 260,394,918 square feet in 4,924 buildings as of the end of Source: CoStar Property•
the second quarter 2010. The Class-A office sector consisted of
108,155,936 square feet in 351 projects. There were 2,120 Class- office sales transactions with a total volume of $112,350,000.
B buildings totaling 111,567,709 square feet, and the Class-C The price per square foot averaged $147.43. In the same first
sector consisted of 40,671,273 square feet in 2,453 buildings. three months of 2009, the market posted two transactions with a
Within the Office market there were 415 owner-occupied build- total volume of $5,500,000. The price per square foot averaged
ings accounting for 24,279,700 square feet of office space. $49.08.
Sales Activity One of the largest transactions that has occurred within the
Tallying office building sales of 15,000 square feet or larger, last four quarters in the Houston market is the sale of Anadarko
Houston office sales figures fell during the first quarter 2010 in Tower in The Woodlands. This 807,586-square-foot office build-
terms of dollar volume compared to the fourth quarter of 2009. ing sold for $166,000,000, or $205.55 per square foot. The prop-
In the first quarter, five office transactions closed with a erty sold on 12/28/2009.
total volume of $63,350,000. The five buildings totaled 518,596
square feet and the average price per square foot equated to Reports compiled by: Alfredo Negron CoStar Research Manager,
$114,63 per square foot. That compares to five transactions Meghan Drennan, Leslie Kon and Elizabeth Wilkinson, CoStar Research
totaling $63,950,000 in the fourth quarter 2009. The total square Associates.
footage in the fourth quarter was 548,912 square feet for an aver-
age price per square foot of $96.90.
Total office building sales activity in 2010 was up compared
to 2009. In the first three months of 2010, the market saw six
©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3

9. HOUSTON – MID-YEAR 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.

10. MID-YEAR 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
4% 9% Mining 5.0%
Construction
4.0%
Manufacturing
15% 3.0%
Trade, Transportation &
Utilities 2.0%
20% Information
Percent Growth
1.0%
Financial Activities
4% 0.0%
Professional & Business
Services -1.0%
Education & Health
1% Services -2.0%
9% Leisure & Hospitality
-3.0%
5%
Other Services
-4.0%
Government
12% -5.0%
14%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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 -9.80% 5.80% -15.60% 5.0%
4.0%
Boston -3.50% 2.30% -5.80%
3.0%
Chicago -10.50% 3.30% -13.80%
2.0%
Percent Growth
Dallas/Ft Worth -0.80% 6.10% -6.90% 1.0%
0.0%
Denver -3.70% 4.30% -8.00%
-1.0%
Los Angeles -10.00% 2.60% -12.60%
-2.0%
New York City -3.00% 1.30% -4.30% -3.0%
-4.0%
Seattle/Puget Sound -2.40% 8.10% -10.50%
-5.0%
Tampa/St Petersburg -12.70% 6.00% -18.70%
-6.0%
Washington -2.60% 6.80% -9.40% -7.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Houston -1.70% 6.90% -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%
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
Source: Department of Labor, Bureau of Labor Statistics.
©2010 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5

11. HOUSTON – MID-YEAR 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 3.9%
50,000-74,999 SF 1.4%
2015 11.1%
25,000-49,999 SF 3.7%
2014 11.4%
10,000-24,999 SF 11.4%
2013 12.5%
5,000-9,999 SF 13.9%
2012 12.0%
2,500-4,999 SF 20.4%
Up to 2,499 SF 46.8% 2011 13.6%
0% 10% 20% 30% 40% 50% 0% 2% 4% 6% 8% 10% 12% 14% 16%
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 426.6
Finance/Ins/RE 15.8% Retailers/Wholes 363.8
Manufacturing 9.1% Services 333.1
Retailers/Wholes 8.9% Agri/Mining/Util 330.0
Business-Service 8.5% Transportation 301.6
Law Firms 8.4% Finance/Ins/RE 285.6
Services 7.9% Business-Service 263.7
Engineers/Archit 7.2% Communications 254.4
Medical 6.6% Engineers/Archit 254.3
Government 2.2% Government 253.0
Transportation 2.1% Accountants 245.6
Communications 1.9% Manufacturing 244.9
Accountants 1.5% Medical 175.7
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.

12. MID-YEAR 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

13. HOUSTON – MID-YEAR 2010
Houston Office Market
INVENTORY & DEVELOPMENT
Historical Deliveries 1982 - 2010
Deliveries Average Delivered SF
30.0
24.8
25.0 23.2
20.0
Millions of SF
14.1
15.0
10.0
6.2 6.7
5.7 5.7
4.7 4.7
5.0 3.9 3.4 3.4 3.8
3.0 3.0 2.7
1.4 1.7 2.0 1.5 1.7
0.9 1.0 1.1 0.9 1.3
0.6 0.4 0.6
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 1,817,237 942,010 51.8% 106,879 908,618
FM 1960 2 179,000 23,000 12.8% 26,494 89,500
E Fort Bend Co/Sugar Land 1 152,619 0 0.0% 29,939 152,619
Katy Freeway 1 80,977 29,961 37.0% 68,846 80,977
Woodlands 2 75,011 0 0.0% 32,630 37,505
NASA/Clear Lake 2 19,632 0 0.0% 30,485 9,816
South Main/Medical Center 1 9,646 5,402 56.0% 56,081 9,646
San Jacinto County 0 0 0 0.0% 2,882 0
Bellaire 0 0 0 0.0% 74,610 0
Greenway Plaza 0 0 0 0.0% 56,814 0
All Other 0 0 0 0.0% 50,847 0
Totals 11 2,334,122 1,000,373 42.9% 52,883 212,193
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
8.0 1,200
7.0
1,000
6.0
800 T
Thousands of SF
Millions of SF
5.0
4.0 600
3.0
400
2.0
200
1.0
0.0 0
2006 2007 2008 2009 2010 2010 3q 2010 4q 2011 1q 2011 2q
Source: CoStar Property® Source: CoStar Property®
8 THE COSTAR OFFICE REPORT ©2010 COSTAR GROUP, INC.

14. MID-YEAR 2010 – HOUSTON
Houston Office Market
INVENTORY & DEVELOPMENT
Historical Construction Starts & Deliveries
Square Footage Per Quarter Starting and Completing Construction
Construction Starts Deliveries
3.0
2.5 2.40
2.09 2.09 2.11 2.07 2.13
2.0 1.88
1.74 1.75
Millions of SF
1.51 1.57
1.49
1.40 1.41
1.5
1.17
0.95
1.0
0.70 0.70
0.62
0.5 0.34
0.26
0.20 0.16 0.14 0.16
0.11 0.08
0.04
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 2010 2q
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 13 216,877 108,117 49.9% $26.17 0 216,877
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% 18%
0%
36%
42%
64% 42%
100% 82%
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