tenant advisor - houston office market review 4q-10

8/8/2019 Tenant Advisor - Houston Office Market Review 4Q-10

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Houston Office Market ReviewHouston Office Market Review

Year End 2010Year End 2010

The Tenant AdvisorThe Tenant Advisor

CCOYOY DDAVIDSONAVIDSONSSENIORENIOR VVICEICE PPRESIDENTRESIDENT

CCOLLIERSOLLIERS IINTERNATIONALNTERNATIONAL | H| HOUSTONOUSTON


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The Tenant Advisor

Table of Contents

Market Highlights

Market Summary Market Indicators

- Rental Rates

- Vacancy

- Net Absorption

Submarket Profiles Sales Activity

Development Pipeline

Houston Office Market Review | 4Q 2010


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Market Highlights

On average Houston office building owners saw posit ive absorption in the 4th quarter of2010 with suburban markets outperforming the CBD. As a result of the year-endpush, vacancy rates decreased slightly with the year - over - year occupancy rate increasingfrom 83.5% to 84.0% citywide.

Houston registered 548,000 square feet of positive net absorption in 2010 as a result of thestrong 4th quarter when 618,000 square feet of positive absorption occurred.

Despite the overall net absorption gain, tenants were still able to take advantage of declining rents. Class A buildings in the CBD experienced a 7.9% drop in average quotedrents to $34.60/SF from $37.30/SF a year ago. During the same period, Suburban Class Arates decreased by 0.6% to $27.11.

Houston Office Market

Houstons office leasing activity reached 3.0 million square feet in the 4th quarter, compared to 3.6 million square feet in the samequarter last year. Leasing activity is still below levels prior to the economic downturn, and an increasing number of office tenants arerenewing lease commitments with better concession packages or relocating to buildings/submarkets offering more attractive terms.

The most significant new office lease signed in the fourth quarter in the CBD was the British Gas lease of 354,000 SF in Hines newpre-certified Platinum LEED development, MainPlace. The new lease includes naming rights to the building, BG Place, which willbe ready for occupancy in February 2011. BG Group will be relocating from their existing Galleria area space in mid to late 2011.

The largest off ice lease renewal signed in fourth quarter was Invescos renewal of 400,000 square feet in 11 Greenway Plazalocated in the Greenway submarket.

Brookfield Properties acquisition of the 1.2M-square-foot Heritage Plaza from Goddard Investment Group for $322 million ($280 persquare foot) in the CBD submarket was completed in December in what was the second highest sales price paid for an officebuilding in Houston history.

4th Quarter Highlights


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Market Summary

Class TotalInventory

Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate

SubleaseVacantSq. Ft.

TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010 NetAbsorption

Sq. Ft.

WeightedAvg. QuotedGross Rate

Central Business District

A 26,670,173 2,190,951 8.2% 591,284 2,782,235 10.4% (123,616) (559,488) $34.61

B 9,426,890 1,996,855 21.2% 31,850 2,028,705 21.5% 6,997 (54,218) $23.95

C 1,416,525 772,229 54.5% 0 772,229 54.5% 9,718 20,839 $18.07

Total 37,513,588 4,960,035 13.2% 623,134 5,583,169 14.9% (106,901) (592,867) $30.01

Suburban

A 69,047,289 11,451,671 16.6% 668,537 12,120,308 17.6% 664,035 748,190 $27.11

B 69,063,451 10,650,454 15.4% 624,500 11,274,954 16.3% 12,433 191,253 $17.71

C 19,281,248 2,137,111 11.1% 23,568 2,160,679 11.2% 48,296 129,203 $14.69

Total 157,391,988 24,239,236 15.4% 1,316,605 25,555,941 16.2% 724,764 1,068,646 $21.74

Citywide

A 95,717,462 13,642,622 14.3% 1,259,821 14,902,543 15.6% 540,419 188,702 $28.63

B 78,490,341 12,647,309 16.1% 656,350 13,303,659 16.9% 19,430 137,035 $18.50

C 20,697,773 2,909,340 14.1% 23,568 2,932,908 14.2% 58,014 150,042 $15.07

Total 194,905,576 29,199,271 15.0% 1,939,739 31,139,110 16.0% 617,863 475,779 $23.08

CBD | Suburban | Citywide


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Rental Rates

Rental Rates

Citywide rental rates have declined throughout the year.

On a year-over-year basis, CBD Class A average quoted rental rates dropped by 7.9 % to $34.61 per square foot (from$37.36), while suburban Class A rates decreased 0.6 % to $27.11 per square foot. CBD Class B rates increased by 0.2 % to$23.95 per square foot (from $23.91), while suburban Class B rates fell 5.7 % to $17.11 per square foot on a full-servicebasis.

$38.41 $37.36$34.61

$27.88 $27.26 $27.11

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

4Q 08 4Q 09 4Q 10

CBD

Suburban

Class A Rental RatesIs the market improving?

There is a natural sequence of events in a marketrecovery. The first sign of a recovery will be pushback from Landlords in terms of the incentives or concessions packages (tenant improvementallowance, free rent, abated parking charges) offeredto attract new tenants and even more so to retainexisting tenants. We are seeing early signs of this in

specific submarket where demand has been stronger.The second sequence will be compression in terms ofthe initial quoted rental rates and where dealsactually get signed.

Finally as the market continues recovery and thesetwo phases occur, then we will begin to see upwardmovement in quoted rental rates. Until demandoutpaces supply, the current office tenants market isexpected to continue through the end of the year.


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Rental Rates

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

1Q

06

2Q

06

3Q

06

4Q

06

1Q

07

2Q

07

3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

CBD

Suburban

Period CBD Suburban

1Q 06 $ 20.15 $ 20.00

2Q 06 $ 20.89 $ 20.45

3Q 06 $ 22.68 $ 20.24

4Q 06 $ 23.90 $ 22.381Q 07 $ 27.70 $ 23.13

2Q 07 $ 32.50 $ 24.41

3Q 07 $ 35.76 $ 25.08

4Q 07 $ 36.42 $ 26.61

1Q 08 $ 38.51 $ 27.33

2Q 08 $ 38.18 $ 27.76

3Q 08 $ 38.35 $ 28.70

4Q 08 $ 38.41 $ 27.88

1Q 09 $ 38.87 $ 28.85

2Q 09 $ 38.78 $ 27.59

3Q 09 $ 37.45 $ 27.31

4Q 09 $ 37.36 $ 27.36

1Q 10 $ 35.57 $ 27.88

2Q 10 $ 35.86 $ 27.35

3Q 10 $ 35.16 $ 27.30

4Q 10 $ 34.61 $ 27.11

5 Year Trend | Class A

AVERAGEASKING RENTAL RATE


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Rental Rates

$34.61

$29.82 $29.50 $29.48 $29.21 $29.13 $29.06$27.95 $27.78 $27.49 $27.00 $26.17 $26.14 $25.33

$22.97 $22.65

$19.61

$15.05

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

4Q 2010 | Average Asking Rental Rate

Rental Rates | Class A

By: Submarket


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Rental Rates

Rental Rates | Class B

By: Submarket

$23.95 $23.36

$21.24 $21.24$20.14 $20.07 $19.67 $19.49 $19.32 $19.15 $18.93 $18.56 $18.49

$17.54$15.94 $15.45 $15.30 $15.17

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

4Q 2010 | Average Asking Rental Rate


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Vacancy

Vacancy & Availability

Vacancy levels were down overall for suburbanproperties and up slightly overall for CBD properties.Houstons citywide office vacancy for all propertyclasses averaged 16.0% in the fourth quarter, comparedto 16.6% this time last year.

In the CBD, top-tier properties resilience wanedbetween quarters, staying in the double-digits, withClass A vacancy at 10.4%, compared to 8.4% one yearago. CBD Class B properties posted 21.5%vacancy, down from 22.8% 12 months earlier.

While the overall suburban vacancy rate remained indouble-digits, Class A suburban vacancy actuallydropped between quarters to 17.6% from 19.3%. By

comparison, suburban Class B vacancy remainedunchanged at 16.3%.

Citywide, a total of 53 office properties had a minimum of 100,000 square feet available for lease in both direct andsublease space16 of those properties have over 200,000 square feet availableat the end of the fourth quarter.Sublease space totaled 4.3 million square feet, including 2.0 million square feet of vacant space and 2.3 million squarefeet of subleases available for occupancy over the next 12 months. The largest sublease space being marketed is DevonEnergys space, 281,755 square feet in Two Allen Center and 120,551 square feet in Three Allen Center (available foroccupancy 4/2011) in the CBD. In Westchase, 3600 Briarpark has the largest suburban sublease spaceavailable, 160,000 square feet.

15

33

73

119

-

20

40

60

80

100

120

140

< 200,000 SF < 100,000 SF < 50,000 SF < 20,000 SF

Available Contiguous Blocks by Size

Class A Office Space


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Vacancy

Vacancy Rate | All ClassesCitywide

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

OVERALL VACANCY RATE


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Vacancy

Vacancy Rate | Class ACBD & Suburban

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

CBD

Suburban


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Vacancy

Vacancy Rate | All ClassesCBD & Suburban

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

CBD

Suburban


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Vacancy

14,902,54313,303,659

2,932,908

163,766,466

Class A

Class B

Class C

Occupied

A aila le pace y Class


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Absorption

Net Absorption

5,734,3676,089,042

2,159,016

(2,263,025)

475,779

(3,000,000)

(2,000,000)

(1,000,000)

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Y 2006 Y 2007 Y 2008 Y 2009 Y 2010

Houston recorded positive net absorption of 617,863 square feet in the fourth quarter, compared to 45,967 square feetnegative net absorption at the same time last year. City-wide year-end net absorption was positive 475,779 square feetwith suburban Class A space contributing most of that total with year-end positive net absorption of 748,190 squarefeet, followed by suburban Class B space with positive net absorption at 191,253 square feet. In contrast, CBD Class Aand Class B space both reported negative net year-end absorption of 559,488 and 54,218 square feet, respectively.


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Absorption

Net Absorption | Quarterly

(1,500,000)

(1,000,000)

(500,000)

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10


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Absorption

700,549

271,470

154,869127,801 127,784

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Katy Freeway Westchase Woodlands Galleria Northwest

Top Performing Submarkets

Net Absorption 2010


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Submarket Profile

Central Business District


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 26,670,173 2,190,951 8.2% 591,284 2,782,235 10.4% (123,616) (543,318) $34.61

B 9,426,890 1,996,855 21.2% 31,580 2,028,705 21.5% 6,997 138,921 $23.95

C 1,416,525 722,229 54.5% 0 772,229 54.5% 9,718 20,839 $18.07Total 37,513,588 4,960,035 13.2% 623,134 5.583,169 14.9% (106,901) (383,558) $30.01

WEIGHTED AVERAGE QUOTED GROSS RENTAL RATE

$34.61

$23.95

$18.07

$30.01

$-

$5.00

$10.00

$15.00

$20.00

$25.00$30.00

$35.00

$40.00

Class A Class B Class C Total

Q4 09 Q4 10

Class A Rent $37.36 $34.61

Class B Rent $23.91 $23.95

Class A Vacancy 8.4% 10.4%

Class B Vacancy 22.8% 21.5%

Total Vacancy 12.8% 14.9%

YEAR OVERYEAR TREND


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Submarket Profile

Galleria | West Loop


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 16,194,891 1,551,172 9.6% 129,635 1,680,807 10.4% 39,833 86,637 $29.06

B 5,546,693 1,275,999 23.0% 13,517 1,289,476 23.2% (56,899) 18,710 $20.30

C 426,332 940 0.2% 0 940 0.2% 1,504 22,454 $16.50Total 22,167,916 2,828,071 12.8% 143,152 2,971,223 13.4% (15,562) 127,801 $26.26


Q4 09 Q4 10

Class A Rent $28.91 $29.06

Class B Rent $22.09 $20.30




YEAR OVERYEAR TREND

$29.06

$20.30

$16.50

$26.26

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



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Submarket Profile

Bellaire


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 1,389,252 133,752 9.6% 8,169 141,921 10.2% 1,137 (26,787) $22.97

B 952,823 49,499 5.2% 0 49,499 5.2% (5,439) (59,063) $17.54

C 545,303 41,100 7.5% 0 41,100 7.5% 6,492 (8,899) $15.07Total 2,887,378 224,351 7.8% 8,169 232,520 8.1% 2,190 (94,749) $20.59


Q4 09 Q4 10

Class A Rent $23.19 $22.97Class B Rent $17.66 $17.54




YEAR OVERYEAR TREND

$29.06

$20.30

$16.50

$26.26

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



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Submarket Profile

Greenway Plaza


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 6,167,603 907,325 14.7% 136,251 1,043,576 16.9% 68,347 (26,009) $27.00

B 2,574,339 260,963 10.1% 1,459 262,422 10.2% (1,305) (8,983) $21.24

C 873,877 244,814 28.0% 0 244,814 28.0% 150 (15,065) $17.09Total 9,615,819 1,413,102 14.7% 137,710 1,550,812 16.1% 67,192 1,961 $24.71

WEIGHTED AVERAGE QUOTED GROSS RENTAL RATE YEAR OVERYEAR TREND

Q4 09 Q4 10





$27.00

$21.24

$17.09

$24.71

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00



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Submarket Profile

Allen Parkway | Midtown


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 1,217,048 211,890 17.4% 100,977 312,867 25.7% 19,900 36,724 $26.17

B 3,082,567 219,451 7.1% 1,864 221,315 7.2% (759) (36,961) $23.36

C 1,163,150 437,099 37.6% 0 437,099 37.6% 2,934 15,497 $19.48

Total 5,462,765 868,440 15.9% 102,841 977,281 17.8% 22,075 15,260 $24.45


Q4 09 Q4 10

Class A Rent$24.06 $26.17

Class B Rent $20.63 $23.36




YEAR OVERYEAR TREND

$26.17$23.36

$19.48

$24.45

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00



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Submarket Profile

San Felipe | Voss


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 1,737,712 280,354 16.1% 2,688 283,042 16.3% (7,423) (33,953) $29.21

B 3,271,828 302,753 9.3% 24,580 327,333 10.0% (828) 7,469 $19.49

C 161,393 23,588 14.6% 0 23,588 14.6% (2,185) 1,688 $17.61

Total 5,170,933 606,695 11.7% 27,268 633,963 12.3% (10,436) (28,172) $22.87


Q4 09 Q4 10





YEAR OVERYEAR TREND

$29.21

$19.49$17.61

$22.87

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



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Submarket Profile

Katy Freeway | Energy Corridor


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 11,070,152 2,336,839 21.1% 26,936 2,363,775 21.4% 105,857 377,396 $27.95

B 6,902,590 840,476 12.2% 61,175 901,651 13.1% (16,127) 285,099 $18.56

C 1,813,421 170,370 9.4% 1,522 171,892 9.5% 19,578 38,054 $14.84

Total 19,786,163 3,347,685 16.9% 89,633 3,437,318 17.4% 109,308 700,549 $23.74


Q4 09 Q4 10

Class A Rent $28.30 $27.95

Class B Rent $19.07 $18.56




YEAR OVERYEAR TREND

$27.95

$18.56$14.84

$23.74

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00



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Submarket Profile

Westchase


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 7,794,880 1,314,104 16.9% 80,598 1,394,702 17.9% 140,718 249,301 $29.82

B 5,141,521 744,868 14.5% 62,469 807,337 15.7% 31,578 21,694 $18.49

C 441,936 53,425 12.1% 0 53,425 12.1% 0 475 $15.16

Total 13,378,337 2,112,397 15.8% 143,067 2,255,464 16.9% 172,296 271,470 $25.05


Q4 09 Q4 10

Class A Rent $27.56 $29.82

Class B Rent $19.70 $18.49




YEAR OVERYEAR TREND

$29.82

$18.49$15.16

$25.05

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



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28/38

Submarket Profile

Sugar Land | East Fort Bend County


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 3,535,437 994,811 28.1% 11,669 1,006,480 28.5% 42,581 (410,187) $27.49

B 1,911,468 198,611 10.4% 2,999 201,610 10.5% 29,096 34,199 $18.93

C 142,013 3,255 2.3% 0 3,255 2.3% (435) 4,837 $17.50

Total 5,588,918 1,196,677 21.4% 14,668 1,211,345 21.7% 71,242 (371,151) $24.43


Q4 09 Q4 10

Class A Rent $27.88 $27.49

Class B Rent $18.74 $18.93




YEAR OVERYEAR TREND

$27.49

$18.43 $17.50

$24.43

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00



29/38


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31/38

Submarket Profile

FM 1960


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 2,272,886 886,250 39.0% 9,474 895,824 39.4% (30,324) 3,176 $26.14

B 4,590,795 923,650 20.1% 63,522 987,172 21.5% 25,440 65,030 $15.30

C 762,145 65,506 8.6% 2,463 67,969 8.9% (2,728) 21,818 $14.36

Total 7,625,826 1,875,506 24.6% 75,459 1,950,965 25.6% (7,612) 90,024 $19.16


Q4 09 Q4 10

Class A Rent $26.96 $26.14

Class B Rent $16.14 $15.30




YEAR OVERYEAR TREND

$26.14

$15.30 $14.36

$19.16

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00



32/38

Submarket Profile

The Woodlands


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 2,248,600 451,110 20.1% 44,531 495,641 22.0% 66,061 108,603 $29.48

B 3,002,096 402,334 13.4% 73,500 475,834 15.9% 46,538 38,020 $19.32

C 145,914 33,867 23.2% 0 33,867 23.2% 8,845 (8,790) -

Total 5,396,610 887,311 16.4% 118,031 1,005,342 18.6% 136,547 154,869 $23.86


Q4 09 Q4 10

Class A Rent $28.75 $29.48

Class B Rent $20.39 $19.32




YEAR OVERYEAR TREND

$29.48

$19.32

$-

$23.86

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



33/38

Submarket Profile

South Main | Medical Center


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 3,916,577 301,209 7.7% 0 301,209 7.7% 62,128 49,819 $29.13

B 3,776,316 324,283 8.6% 4,800 329,083 8.7% 4,064 (97,223) $20.14

C 2,694,296 107,757 4.0% 0 107,757 4.0% 5,159 20,523 $17.06

Total 10,387,189 733,249 7.1% 4,800 738,049 7.1% 71,351 (26,881) $23.45


Q4 09 Q4 10

Class A Rent $30.98 $29.13

Class B Rent $20.45 $20.14




YEAR OVERYEAR TREND

$29.13

$20.14$17.06

$23.45

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



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Submarket Profile

Gulf Freeway | Pasadena


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 75,066 22,183 29.6% 6,273 28,456 37.9% 1,231 1,778 $27.78

B 1,737,860 191,571 11.0% 6,870 198,441 11.4% 10,141 12,892 $19.15

C 1,121,270 90,076 8.0% 3,590 93,666 8.4% 10,141 17,513 $14.29

Total 2,934,196 303,830 10.4% 16,733 320,563 10.9% 43,254 53,924 $18.43


Q4 09 Q4 10

Class A Rent $16.50 $27.78

Class B Rent $18.48 $19.15




YEAR OVERYEAR TREND

$27.78

$19.15

$14.29

$18.43

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00



35/38

Submarket Profile

NASA | Clear Lake


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 809,372 89,330 11.0% 6,214 95,544 11.8% (7,512) (3,798) $22.65

B 3,083,055 225,108 7.3% 18,132 243,240 7.9% (17,813) 16,089 $19.67

C 1,228,410 165,927 13.5% 0 165,927 13.5% 16,823 10,142 $15.34

Total 5,120,837 480,365 9.4% 24,346 504,711 9.9% (8,502) 22,433 $19.15


Q4 09 Q4 10

Class A Rent $24.06 $22.65

Class B Rent $20.63 $19.67




YEAR OVERYEAR TREND

$22.65

$19.67

$15.34

$19.15

$-

$5.00

$10.00

$15.00

$20.00

$25.00



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Submarket Profile

Kingwood | Humble


Sq. Ft.

DirectVacantSq. Ft.

DirectVacancy

Rate


TotalVacantSq. Ft.

Q4Vacancy

Rate

Q4 NetAbsorption

Sq. Ft.

2010Absorption

Sq. Ft.


A 158,640 25,904 16.3% 0 25,904 16.3% 0 4,800 $29.50

B 1,798,683 185,136 10.3% 1,421 186,557 10.4% 2,041 37,406 $20.07

C 669,712 28,852 4.3% 0 28,852 4.3% (1,244) (594) $15.94

Total 2,627,035 239,892 9.1% 1,421 241,313 9.2% 797 41,612 $19.68


Q4 09 Q4 10

Class A Rent $27.15 $29.50

Class B Rent $19.71 $20.07




YEAR OVERYEAR TREND

$29.50

$20.07

$15.94

$19.68

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00



37/38

New Construction

Submarket Building Name Building Address SquareFeet

PercentLeased

Developer EstimatedDelivery

CBD Main Place 811 Main Street 972,474 27% Hines Holdings Feb-2010

CBD Hess Tower 1501 McKinney Street 844,763 100% TCC Development Aug-2010

FM 1960 Chasewood Crossing II 19450 State Highway 249 156,000 0 Greenwood Corporation Apr-2011

NASA / Clear Lake Nassau Bay Town Square 18050 Saturn Lane 102,000 60% Griffin Partners Nov-2011

Office Development Pipeline

Houstons development activity remained slow during the 4th quarter, with only GriffinPartners four-story 102,000 SF Nassau Bay Town Square office building being added tothe list of office buildings already under construction. Located in the NASA/Clear Lakesubmarket, this pre-certified LEED silver office building is scheduled to come on line60% pre-leased with Hamilton Sundstrand Corporation as the lead tenant. Also includedin the 2.0 million square feet under construction is Greenwoods corporations 156,000SF Chasewood Crossing II in the FM 1960-Highway 249 submarket. (scheduled forcompletion in April 2011).

Two CBD office projects-Hines 972,000 square-foot BG Group Place slated for deliveryby February 2011) and Trammell Crow Companys Hess Tower, scheduled for completion by January 2011-continue to be the sole high-profile buildings underconstruction at the end of the 4th quarter. Notably, both downtown projects beganconstruction before the economic downturn of late 2008.


38/38

The Tenant AdvisorThe Tenant Advisor

Colliers International | HoustonColliers International | Houston

713.830.2128713.830.2128

[email protected]@colliers.com

www.coydavidson.comwww.coydavidson.com

tenant advisor - houston office market review 4q-10

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