The document discusses how the COVID-19 pandemic has negatively impacted Houston's healthcare real estate market. Healthcare systems have seen their bottom lines impacted by the cancellation of profitable elective surgeries and costs associated with treating COVID-19 patients. As a result, previously planned expansions have been put on hold or scaled back as healthcare providers reduce expenses and medical office leasing activity has slowed. Some construction projects are still moving forward but larger, more ambitious capital projects have been delayed until the effects of the pandemic subside.

1. COVID-19 applies pressure to otherwise healthy
Houston healthcare real estate market
Healthcare Trends Commentary by Coy Davidson
Research &
Forecast Report
HOUSTON | HEALTHCARE
Mid-Year 2020
Houston’s Healthcare real estate market expected to have another
solid year of growth as we began the year. Unfortunately, a global
pandemic arrived in late February, placing financial stress on
Houston’s healthcare systems.
Houston’s largest healthcare systems and smaller independent
healthcare providers as well have had their bottom line impacted
by COVID-19 with profitable elective surgeries placed on hold, and
unforeseen costs associated with treating the coronavirus. As
a result, with pressure to reduce expenses and a stagnant local
economy, healthcare systems are tapping the brakes on previously
planned expansions and exploring ways to streamline how they
deliver care to consumers.
Some pre-pandemic planned construction projects and lease
transactions are moving forward. The more ambitious capital
projects have been put on hold as health systems confront the
realities of shoring up their operating margins. As a result, the
leasing activity in the medical office and retail market has slowed
to a trickle as healthcare providers have shown apprehension
in making long-term lease commitments until the fallout from
COVID-19 subsides. Renewal of existing leases at current locations
is the norm versus establishing new locations in Houston’s rapidly
growing suburbs to expand market share, which was prevalent pre-
pandemic.
New MOB Construction
Currently, there are thirteen (13) medical office buildings under
construction in the Houston Metro totaling 706,286 square feet.
Some of the more notable projects include:
• Houston Methodist is currently under construction with a
150,000 square foot MOB at its Clear Lake Hospital Campus in
Nassau Bay.
• Testa Rossa Properties is presently under construction with the
160,000 square foot Museo Plaza Medical Office Building at 5115
Fannin Street.
Lisa Bridges Director of Market Research | Houston
Summary Statistics
Houston Medical Office Market
Mid-Year
2019
Year-End
2019
Mid-Year
2020
Vacancy Rate 14.9% 15.2% 16.0%
Net Absorption -141,140 85,533 -65,839
Deliveries 226,936 324,551 297,399
Under Construction* 619,288 479,422 706,286
Average Asking Rent $25.49 $25.40 $25.32
Class A Average Asking Rent $32.08 $31.24 $30.22
Class B Average Asking Rent $23.40 $23.55 $23.86
*Under Construction excludes hospitals, but includes the medical office buildings within the hospital
complex
Mid-Year Stats include Q1 and Q2
Year-End Stats include Q3 and Q4
Market Indicators
Relative to prior period
Annual
Change
Semi-Annual
Change
Semi-Annual
Forecast*
VACANCY
NET ABSORPTION
DELIVERIES
UNDER CONSTRUCTION
AVERAGE ASKING RENT
*Projected

2. $1,200,000,000
$1,000,000,000
$800,000,000
$600,000,000
$400,000,000
$200,000,000
$0
Rolling 4-Quarter Volume Quarterly Volume
$0
$100
$200
$300
$400
$500
$600
U.S. Houston
Mid-Year 2020
NO. OF PROPERTIES: 9
TOTAL SF: 790,690
MEDIAN $/SF: $336
MEDIAN CAP RATE: 6.7%
Sales By Total ($)
Average Price Per SF
Sales Activity
Source: Real Capital Analytics
`
18.5%
5.8%
12.1%
63.8%
4.1%
76.5%
29.5%
54.7%
27.6%
41.2%
2.3%
41.9%
2.0%
69.3%
25.9%
24.4%
35.0%
33.9%
50.7%
20.6%
1.3% 0.9%
40.3%
9.6%
2.7% 0.8%
2014 2015 2016 2017 2018 2019 2020 YTD
CCrroossss--BBoorrddeerr IInnssttiittuuttiioonnaall RREEIITT//LLiisstteedd PPrriivvaattee UUsseerr//OOtthheerr
Buyer Composition
2 Houston Research & Forecast Report | Mid-Year 2020 | Healthcare | Colliers International
New MOB Construction - continued
• Jacob White Construction is under construction with the
53,000 square foot Bissonnet Medical Plaza at 4660 Bissonnet
Street.
• California-based Healthpeak Properties Inc. is developing the
five-story, 116,500 square foot medical office building at 7500
Fannin Street.
Investment Sales
MOB transaction volume has slowed nationally, particularly in Q2
primarily as a result of the disruption in the capital markets due
to COVID-19, and this trend applies to the Houston Metro as well.
There were nine (9) MOB investment transactions in the first half of
2020 in the Houston metro, with two sales recorded in the second
quarter. Some of the more notable MOB investment transactions in
the first half of 2020 include:
• Harrison Street Realty Capital’s acquisition of the 208,000
square foot M.D. Anderson Cancer Center in The Woodlands.
• INVESCO’s acquisition of the 126,000 square foot Physician
Specialty Center at 1900 North Loop West.
• MB Real Estate’s acquisition of the 99,768 square foot
Foundation Medical Tower in Bellaire.
• Altera Development Company acquired the 63,848 square foot
Kimberly Lane Medical. Center in West Houston.
Leasing Activity and Trends
Healthcare and MOB leasing activity slowed in March as stay-at-
home orders from employers and local government officials as a
result of the pandemic stymied leasing activity. However, recent
sentiment from healthcare leasing agents indicates that leasing
activity has begun to accelerate as we enter the third quarter. Some
notable lease transactions in the Houston Metro in the first half of
2020 include.
• Harris Health System leased 305,000 square feet at 4800
Fournace Place in Bellaire, consolidating all of the systems’ non-
clinical administrative functions into one location.
• Houston Methodist Hospital leased 7,711 square feet at 505
S. Friendswood Drive in Friendswood and an additional 6,920
square feet at 9090 Katy Freeway in West Houston, expanding
their presence in the Spring Valley location to 26,147 square feet.
• Houston Women Care Associates renewed its lease of 22,984
square feet at 7400 Fannin Street in the Texas Medical Center.
• Texas Eye Institute renewed its lease of 16,001 square feet at
7710 Beechnut in Southwest Houston.

3. Job Growth & Unemployment
(not seasonally adjusted)
UNEMPLOYMENT 6/19 6/20
HOUSTON 4.0% 9.9%
TEXAS 3.8% 8.9%
U.S. 3.7% 11.2%
JOB GROWTH
Annual
Change
# of Jobs
Added
HOUSTON -5.6% -175K
TEXAS -5.3% -682K
U.S. -8.7% -17.7M
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
$24.00
$25.00
$26.00
$27.00
$28.00
$29.00
$30.00
$31.00
$32.00
$33.00
$34.00
Class A Rents Class A Vacancy
*Vacancy percentage includes direct and sublease space..
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
$20.00
$22.00
$24.00
$26.00
Class B Rents Class B Vacancy
*Vacancy percentage includes direct and sublease space..
Medical Office
CLASS A RENTS AND VACANCY
CLASS B RENTS AND VACANCY
3 Houston Research & Forecast Report | Mid-Year 2020 | Healthcare | Colliers International3
Leasing Activity and Trends - continued
The retailization of Healthcare is not a new trend as the shift to
outpatient and off-campus locations have prompted providers to
increasingly look to repurpose space in suburban retail centers
providing more convenient locations for consumers. COVID-19
has had a devastating effect on retailers, which will likely create
historically elevated vacancies in well-located shopping centers
and free-standing facilities in both desirable urban and suburban
locations, providing new occupancy opportunities for healthcare
providers.
Life Sciences Sector
A flurry of planned investment and construction activity in the Life
Sciences sector in The Texas Medical Center, the largest in the
world is poised to elevate Houston in the same strata as some of
the other major Life Sciences Hubs in the United States.
Construction on the TMC3 project is set to begin late-2020. Plans
for the project include 250,000 square feet of core labs and
amenities, including 138,000 square feet of commercial and retail
space and 112,000 square feet of shared research facilities.
The Texas A&M system recently announced its plans to build the
five-acre, $540 million Texas A&M Innovation Plaza, which will be
located at the intersection of Holcombe and Main. The development
includes a renovated 18-story office building that was acquired
by Texas A&M for $145 million in 2017. Medistar Corp. will break
ground this year on Horizon Tower, a 30-story, 485,000-SF life
sciences building. The Horizon Tower, 6929 Main Street, will be
part of the Texas A&M Innovation Plaza
Hines and 2ML Real Estate Interests, the Levit family of Grocers
Supply Co., in June unveiled plans for a 52-acre mixed-use project
at the intersection of Holcombe and Highway 288 that will include
life sciences lab and research facilities.

4. 4
Member Institutions
4 Houston Research & Forecast Report | Mid-Year 2020 | Healthcare | Colliers International4
Texas Medical Center
The Texas Medical Center (TMC) – the world’s largest medical
center – represents one of Houston’s major economic drivers and
core industries with an estimated regional annual economic impact
of $25 billion. TMC is also one of Houston’s largest employers with
106,000 employees, including physicians, scientists, researchers
and other advanced degree professionals in the life sciences. The
internationally-renowned 1,345-acre TMC is the world’s largest
medical complex of member institutions, including leading medical,
academic and research institutions, all of which are non-profit
and dedicated to the highest standards of research, education and
patient preventive care. Over 50,000 students, including more than
20,000 international students, are affiliated with TMC, including
college and health profession graduate programs. More than 10
million patients visit TMC each year, including approximately 16,000
international patient visits.
Overall, the complex covers over 18 miles of public and private
streets and roadways, with 50M SF of existing patient, education
and research space. TMC has continued to grow and expand over
the past several decades with the majority of growth occurring in
the past ten years. The Center is located in the 110-acre University
of Texas Research Park, a joint effort between the University of
Texas Health Science Center, M.D. Anderson and General Electric
Healthcare. TMC spends billions of dollars on research and charity
care annually.
KATY
GALLERIA
BELLAIRE
RICHMOND
SUGAR LAND
PASADENA
LEAGUE CITY
IAH
HOU
EFD
CBD
H
610
290
249
90
59
59
610
288
225
146
I-45
I-45
I-10
I-10
8
8
8
8
SHIP
CHANNEL
GAL
BAY
6
The University of Texas M.D. Anderson Cancer
Center in the Texas Medical Center, ranked
#1 in U.S. News & World Reports “America’s
Best Hospitals 2020-2021” for cancer care.
Texas Medical Center
> World’s Largest Medical Complex (1,345 Acres & 50M
Developed SF)
> 8th Largest Business District in the U.S.
> 106,000 Employees
> 10M Patients Annually
> 9,200 Patient Beds
> 180,000+ Annual Surgeries
> 13,600+ Annual Heart Surgeries
Houston MSA Health Care
> 128 Hospitals
> 9,200 Patient Beds
> 16,070 Licensed Physicians
> 336,600 Health Care & Social Assistance jobs
> 2.3% Annual Employment Growth between 2018-2019
TEXAS MEDICAL CENTER LOCATION
> Baylor College of Medicine
> CHI St. Luke’s Health
> Children’s Memorial Hermann
> City of Houston Department of Health and Human
Services
> Coleman HCC College for Health Services
> DePelchin Children’s Center
> Gulf Coast Regional Blood Center
> Harris Health System
> Health Science Center Texas A&M University
> Houston Academy of Medicine
> Houston Hospice
> Houston Methodist
> Institute for Spirituality and Health
> LifeGift
> MD Anderson Cancer Center - World’s largest cancer
center
> Memorial Hermann
> Menninger Clinic
> Michael E. Debakey High School for Health
Professions
> Michael E. Debakey Veterans Affairs Medical Center
> Nora’s Home
> Prairie View A&M University
> Rice University
> Ronald McDonald House Houston
> Sabin Vaccine Institute
> Shriners Hospital for Children
> St. Dominic Village
> Texas Children’s Hospital - World’s largest children’s
hospital and #1 in U.S. News & World Reports
“Americas Best Hospitals 2018-2019” for Pediatric
Cardiology & Heart Surgery
> Texas Heart Institute
> Texas Medical Center YMCA
> Texas Southern University
> Texas Women’s University
> John P. McGovern Museum of Health and Medical
Science
> The Texas Medical Center Library
> Thermal Energy Corporation (TECO)
> TIRR Memorial Hermann
> University of Houston
> University of St. Thomas
> UT Health
> UTMB Health

5. 5 North American Research & Forecast Report | 2014 | Office Market Outlook | Colliers International
Copyright © 2015 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
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5 North American Research & Forecast Report | 2014 | Office Market Outlook | Colliers International
Copyright © 2020 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
Colliers International | Houston
1233 West Loop South, Suite 900
Houston, Texas 77027
+1 713 222 2111
colliers.com/houstonhealthcareservices
Class A (29%) Class B (58%) Class C (13%)
11.9M SF
23.9M SF
FOR MORE INFORMATION
Lisa Bridges CPRC
Director of Market Research | Houston
+1 713 830 2125
lisa.bridges@colliers.com
CONTRIBUTOR
Coy Davidson
Senior Vice President | Houston
+1 713 830 2128
coy.davidson@colliers.com
0.7M SF
5.6M SF
Houston’s healthcare and social assistance job
growth decreased in the first half of 2020 and
has increased 3.2% in three years.
12-Month Percent Change June to June
2019 – 2020 -0.5%
2018 – 2019 1.9%
2017 – 2018 1.8%
41.4M SF
Total Inventory
-65.8K SF
Net Absorption
16.0%
Vacancy
Houston Healthcare Industry
In The News
US News & World Report ranks Houston hospitals among top in Texas,
nationwide - July 2020
Houston Methodist Hospital — No. 1 in Houston, No. 1 in Texas, No. 20 nationwide
Baylor St. Luke’s Medical Center — No. 2 in Houston, No. 3 in Texas
Memorial Hermann - Texas Medical Center — No. 3 in Houston, No. 5 in Texas
Houston Methodist Sugar Land Hospital — No. 4 in Houston, No. 6 in Texas (tie)
Memorial Hermann Greater Heights Hospital — No. 5 in Houston, No. 9 in Texas
Memorial Hermann Memorial City Medical Center — No. 6 in Houston, No. 10 in Texas

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