2009 3q houston office market report

8/14/2019 2009 3Q Houston Office Market Report

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HOUSTON OFFICE THIRD QUARTER 2009

Office MarketMARKET RESEARCH | THIRD QUARTER | 2009

HOUSTON

Our Knowledgeis your Pro


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COLLIERS INTERNATIONAL | HOUSTON

ce ar etMARKET RESEARCH | THIRD QUARTER | 2009

Houston Office Market Challenged by Job Losses

Houstons office market indicators continued to slip on both a quarterly and year-over-year

as demand for office space eroded against the deepening effects of the global economic rece

With falling occupancy and rising negative net absorption, the $0.12 (less than 1%) incre

Houstons overall quoted rental rate was not driven by increased demand but rathe

artificially inflated suburban Class C quoted rental rates up $0.70 (4.7%) from this time las

Suburban Class C landlords may (unrealistically) be hedging their bets before being forc

lower rates in a market that has et to hit bottom. For all other property classes, quoted MARKET INDICATORS

Q3-08 Q3-09

Quarterly Net Absorption

86,933 SF (764,481) SF

Overall Vacancy

13.2% 16.1%

rates decreased in the third quarter, with final negotiated rental rates even lower as builandlords aggressively increased generous lease concessions to both attract and retain tenant

climate where incentivizing clients is a hard sell.

With commercial real estate a lagging indicator, office market fundamentals are expect

continue weakening in subsequent quarters even as some economists see a bottoming out o

global economic recession. For Houston, the end is not in sight as business industries acro

Overall Gross Quoted Rental Rate*

$22.83 psf $22.95 psf

Class A Gross Quoted Rental Rate

CBD $38.35 psf $37.45 psf

burban $27.70 psf $27.31 psf

Class A Vacancy

oar , nc u ng energy g an s, ree rom e e ec s o curren uns a e us ness con o

early October, ConocoPhillips announced plans to cut capital spending an additional 12

2010, following a sharp 37% decrease to $12.5 billion in 2009. As the third largest oil com

following ExxonMobil and Chevron, Houston-based ConocoPhillips outlook is indicative

prevailing sentiment among business leaders that continued contractions are prudent give

uncertainty regarding the duration of the current global economic recession.

The primary challenge to the local office market remains Houstons dismal job sector,CBD 7.2% 8.5%

Suburban 12.5% 17.5%

OB GROWTH & UNEMPLOYMENT

95,100 jobs lost in the twelve months ending in August 2009, and the unemployment rate

to 8.4%, representing severe losses that do not bode well for the markets recovery. The pu

from businesses across key industries has dealt a major blow to Houstons office market di

impacting rising vacancy and sublease space the latter up to 4.6 million sq. ft. from 2.5 m

sq. ft. in the third quarter last year both of which are expected to continue increasing ov

next twelve months.

e opening paragraph and page 2 for commentary

office rental rates

9%

11%

13%

15%

17%

500,000

1,000,000

1,500,000

2,000,000

2,500,000

ABSORPTION, NEW SUPP LY & VACANCY RATES

ug- ug-

OUSTON -3.6% Job Growth95,100 jobs lost

nemployment 5.2% 8.4%

XAS -2.8% Job Growth

295,400 jobs lost


5%

7%

-1,000,000

-500,000

Absorption New Supply Vacancy

COLLIERS INTERNATIONAL

www.collierstexa

Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-0 8 Q1-0 9 Q2-0 9 Q3-09

S. -4.4% Job Growth

6,047,000 jobs lost



3/10


Occupancy& Availability

Absorption & Demand

Hess Cor oration

2009 TOP OFFICE LEASES

to be challenged by weak market

conditions and a bleak employment

outlook as Houstons job losses

deepened through September 2009.Citywide, occupancy for all property

classes stood at 83.9% in the third

quarter, falling from 86.8% at this time

764,481 sq. ft. of negative n

absorption citywide in the thir

quarter, accounting for almost half o

the 1.5 million sq. ft. of negative nabsorption recorded year-to-date. Wi

weak market fundamentals and

battered employment sector expected t

Hess Tower (formerly Discovery Twr), CBD

Jan-09 844,763 SF

Locke Lord Bissell & Liddell*

Chase Tower, CBD

Aug-09 246,381 SF

ast year. t oug t e com ne

Class A office properties maintained

occupancy above 90 percent, the

current 91.5% occupancy marked a

decrease from 92.8% recorded twelve

months earlier. CBD Class B office

occupancy, in contrast, remained low

at 78.2% (from 78.9%).

,

likely post the highest negativ

absorption losses since 2002 when th

market recorded 2.0 million sq. ft. o

negative net absorption.

Citywide, the largest losses in occupie

space continued to be in suburba

exas

Houston Pavilions, CBD

Jun-09 232,962 SF

Tax Masters

Dairy Ashford Plaza, Energy Corridor

Aug-09 107,890 SF

By comparison, suburban Class A

office properties dropped to 82.5%

occupancy marking the largest

decline of all property classes citywide

on a year-over-year basis from 87.5%

one year ago. Suburban class B office

buildings also recorded a significant

ass o ce propert es w t

combined 1.6 million sq. ft. of negativ

net absorption year-to-date. The CB

recorded year-to-date negative n

absorption of 203,935 sq. ft. for a

classes combined, compared to th

combined suburban submarkets for a

classes at negative net absorption of 1

King & Spalding*

1100 Louisiana, CBD

Jul-09 105,151 SF

Southwestern Energy

One Commerce Green, North Belt

May-09 101,330 SF

decrease to 82.4% from 85.3% in the

third quarter last year.

Sublet space continued to increase in

the third quarter with a total of 4.6

million sq. ft. on the market, including

2.4 million sq. ft. of vacant space and

an additional 2.2 million sq. ft. of

mi ion sq. t.

Rental Rates

Year-over-year office rental r

decreases prevailed citywide in the thir

quarter for all property classes, with th

Washington Group International

Richmond Park, Westchase

Feb-09 96,225 SF

ABB

3700 W. Sam Houston Pkwy, Westchase

Jan-09 85,748 SF

subleases available at a later date. The

largest sublease being marketed is the

403,231 sq. ft. at RRI Energy Plaza

(1000 Main, CBD), available for

occupancy in October 2010. Outside

the CBD, major sublease assignments

include the 129,000 sq. ft. at 2103

Cit West (Westchase); 107,000 s . ft.

only exception being the combine

suburban Class C rental rate. I

addition to falling quoted rental rate

property landlords are aggressive

offering generous lease concessions

both attract and retain tenants.

CBD Class A average quoted rentCBD VS. SUBURBAN

Class A Office Vacancy & Rents

Linebarger Goggan Blair & Sampson*

Travis Tower, CBD

Sep-09 58,178 SF

Renewal

at 9700 Bissonnet (Southwest) available

in the fourth quarter 2009; and 89,000sq. ft. at 9009 West Loop South

(Galleria/West Loop) offered fully

furnished at rental rates well below the

quoted market average.

As ob losses continue to mount direct

rates fell 2.3% to $37.45 per sq. f

(from $38.35), while suburban Class rental rates slipped 1.4% to $27.31 pe

sq. ft. (from $27.70). In contrast, CB

Class B average quoted rental rat

plummeted 15.6% to $23.62 per sq. f

(from $28.00), while suburban Class

rates fell 0.9% to 18.33 er s . f$28$30

$32

$34

$36

$38

$40

$42

and sublease office vacant space is

expected to increase in subsequent

quarters as tenants continue to face

challenging economic conditions.

(from $18.49) on a full-service basi

Weak tenant demand for office space

expected to continue exertin

downward pressure on rental rates.


$22

$24

$26

3Q-08 4Q-08 1Q-09 2Q-09 3Q-09

CBD Vacancy Suburban Vacancy

CBD Rents Suburban Rents


4/10


TOP PERFORMING OFFICE BUILDINGS

Wells Fargo Plaz

1000 Louisiana

CBD

RBA: 1,721,242

Built: 1983

Leased: 84.7%

Bank of America Center

700 Louisiana

CBD

RBA: 1,268,480 sf

Built: 1983

Leased: 89.0%

Five Houston Center

1401 McKinney Street

CBD

RBA: 580,875 sf

Built: 2002

Leased: 91.0%

va a e ,

Rents: $42.95 ps

Owner:

Metropolitan Lif

Insurance Comp

va a e: 1 ,1 s

Rents: $42.25 psf

Owner:

The Novati Group

,

Rents: $45.27 psf

Owner:

Wells REIT II

Five Post Oak Par

4400 Post Oak Pk

Wells Fargo Tower

1300 Post Oak Blvd.

Marathon Oil Tower

5555 San Felipe

Galleria/West Loo

RBA: 567,396 sf

Built: 1982

Leased: 89.5%

Available: 59,434

Rents: $37.50 psf

Owner:

Galleria/West Loop

RBA: 491,254 sf

Built: 1983

Leased: 93.8%

Available: 30,411 sf

Rents: $36.05 psf

Owner:

Galleria/West Loop

RBA: 1,070,209 sf

Built: 1982

Leased: 85.0%


Rents: $27.51 psf

Owner:

Shorenstein CompTIAA-CREFHanover Real Estate

Partners

The Plaza at Enclave

1254 Enclave ParkwayEnergy Corridor

One Eldridge Place.

777 N. Eldridge Parkway

Energy Corridor

One BriarLake Pl

2000 W. Sam HoWestchase

: , 1 s

Built: 2008

Leased: 82.5%


Rents: $32.00 psf

Owner:

Core Real Estate

,

Built: 1985/2001

Leased: 92.1%


Rents: $31.22 psf

Owner:

Behringer Harvard

: , 1 s

Built: 2000

Leased: 92.8%

Available: 36,027

Rents: $40.50 psf

Owner:

Behringer Harvar

Offices at Kensing

1600 Highway 6

Sugar Land/E. For

RBA: 85,218 sf

Built: 1998

Leased: 88.3%

Waterway Plaza I

10003 Woodloch Forest

Woodlands

RBA: 223,483 sf

Built: 2000

Leased: 98.4%

11 Greenway Place11 Greenway

Greenway

RBA: 745,956 sf

Built: 1979

Leased: 90.3%


Available: 9,993 s

Rents: $25.00 psf

Owner:

KBS Real Estate In

Trust

Available: 3,557 sf

Rents: $33.50 psf

Owner:

Triple Net Properties


Rents: $32.50 psf

Owner:

Crescent RE Equities


5/10


Leasing Activity

Houstons office leasing activity reached

Sales Activity

Houstons office investment sales. mi ion sq. t. in t e t ir quarter

2009, compared to 4.8 million sq. ft. in

the third quarter last year. Despite the

slowdown from twelve months earlier,

the Houston market posted seven officeleases signed year-to-date through the

third quarter over 85,000 sq. ft.

activity remaine e ow ast year s eve s

with the contraction in the financial

sector continuing to challenge the

market. Twelve office transactions with

a combined 1.1 million sq. ft. traded inthe third quarter, bringing the year-to-

date number of transactions to 51 with

a total dollar volume of $106.6 million,

dgestone I*

0 N. Loop Freeway

thwest Submarket

Significant non-renewal office leases

signed through the third quarter

included: Hess 844,763-sq. ft. lease at

Hess Tower (formerly Discovery Tower,

Central Business District); NRG Texas

232,962-sq. ft. lease at Houston

Pavilions (Central Business District);

Tax Masters 107,890-sq. ft. lease at

averaging $60.95 per sq. ft. and an

average 9.0% capitalization rate.

Although transactions less than 50,000

sq. ft. predominated, several significant

transactions over 100,000 sq. ft. closed

in the third quarter 2009 including:

RBA: 135,400 SF

Built: 1976

Buyer: Fuller Realty Partners

Seller: CHRISTUS Health

Sale Date: February 2009

Dairy Ashford Plaza (Katy Freeway); Washington Group International

96,225-sq. ft. lease at Richmond Park

Westchase (Westchase); and ABBs

85,748-sq. ft. lease at 3700 W. Sam

Houston Parkway (Westchase).

Ke office lease renewals si ned to date

Hariri Interests purchased the 424,276-sq. ft. Chase Center located at 601

Travis (Central Business District) for an

undisclosed amount from JP Morgan

Chase. The property sale included a

450,000-sq. ft. garage with 1,200 parking

spaces.

this year included Locke Lord Bissell &

Liddells 246,381-sq. ft. lease at Chase

Tower (Central Business District); King

& Spaldings 105,151-sq. ft. at 1100

Louisiana (Central Business District);and Linebarger Goggan Blair &

Sampsons 58,178-sq. ft. lease at Travis

Tower Central Business District . For

Hartman Income REIT purchased a

two-property office portfolio from KBS

Realty Advisors for approximately $7.0

million or $34 per sq. ft. The FM 1960

submarket properties included the134,720-sq. ft. 14550 Torrey Chase

Boulevard office building and the

-

st Pointe Center*

0 W. Sam Houston Parkway

thwest Submarket

RBA: 170,823 SF

Built: 2009

Buyer: Undisclosed

Seller: White Rock Commercial

more office lease transactions signed this

year, please see the list noted on page 3.

, . .

building that were 90.0% and 92.0%

leased, respectively, at the time of sale.

HOUSTON OFFICE MARKET SUMMARYCBD, SUBURBAN, CITYWIDE

lliers International sales transaction

R

Class

Total

Inventory

Direct

Vacant

Direct

Vacancy

Sublease

Vacant

Sublease

Vacancy

Total

VacantQ3 Vacancy Q2 Vacancy

Q3 Net

Absorption

YTD Net

Absorption

W gt

Qu

Existing Properties Absorption

Sq. Ft. Sq. Ft. Rate Sq. Ft. Rate Sq. Ft. Sq. Ft. Sq. Ft. R

NT RAL BUSINESS DISTRICT

A 27,837,503 1,972,583 7.1% 397,770 1.4% 2,370,353 8.5% 8.5% (13,697) (120,173)

B 8,451,302 1,755,709 20.8% 86,025 1.0% 1,841,734 21.8% 21.7% (9,684) (128,103)

C 1,521,580 737,812 48.5% 0 0.0% 737,812 48.5% 51.1% 39,851 44,341

Total 37,810,385 4,466,104 11.8% 483,795 1.3% 4,949,899 13.1% 13.1% 16,470 (203,935)

BURBAN TOT AL

A 67,299,628 10,656,488 15.8% 1,117,439 1.7% 11,773,927 17.5% 15.7% (346,952) 180,451

B 69,588,763 11,480,952 16.5% 765,839 1.1% 12,246,791 17.6% 16.9% (466,629) (1,600,316)


, , , , . , . , , . . , ,

Total 156,979,416 24,572,040 15.7% 1,928,378 1.2% 26,500,418 16.9% 15.8% (780,951) (1,338,687)

AND TOTAL

A 95,137,131 12,629,071 13.3% 1,515,209 1.6% 14,144,280 14.9% 13.6% (360,649) 60,278

B 78,040,065 13,236,661 17.0% 851,864 1.1% 14,088,525 18.1% 17.4% (476,313) (1,728,419)

C 21,612,605 3,172,412 14.7% 45,100 0.2% 3,217,512 14.9% 15.2% 72,481 125,519

Total 194,789,801 29,038,144 14.9% 2,412,173 1.2% 31,450,317 16.1% 15.3% (764,481) (1,542,622)


6/10


HOUSTON SUBURBAN OFFICE MARKET

Rent

Total Direct Direct Sublease Sublease Total

3 Net TD Net W td. Av

Absorption

Class Inventory

Sq. Ft.

Vacant

Sq. Ft.

Vacancy

Rate

Vacant

Sq. Ft.

Vacancy

Rate

Vacant

Sq. Ft.

Q3 Vacancy

Rate

Absorption

Sq. Ft.

Absorption

Sq. Ft.

Quoted

Gross Ra

Suburban Total

A 67,299,628 10,656,488 15.8% 1,117,439 1.7% 11,773,927 17.5% (346,952) 180,451 $27.

B 69,588,763 11,480,952 16.5% 765,839 1.1% 12,246,791 17.6% (466,629) (1,600,316) $18.C 20,091,025 2,434,600 12.1% 45,100 0.2% 2,479,700 12.3% 32,630 81,178 $15.5

Total 156,979,416 24,572,040 15.7% 1,928,378 1.2% 26,500,418 16.9% (780,951) (1,338,687) 21.$

Baytown

, , . . , .

C 60,396 3,747 6.2% 0 0.0% 3,747 6.2% 0 (621) $15.

Total 585,940 9,147 1.6% 0 0.0% 9,147 1.6% 0 (1,471) 16.$

Bellaire

A 1,314,475 106,996 8.1% 19,110 1.5% 126,106 9.6% 17,330 (34,895) $23.

B 1,020,904 85,353 8.4% 0 0.0% 85,353 8.4% (2,620) (24,614) $19.

C 567,560 24,579 4.3% 0 0.0% 24,579 4.3% 10,603 9,017 $15.2

Total 2,902,939 216,928 7.5% 19,110 0.7% 236,038 8.1% 25,313 (50,492) 20.$

Conroe

A 60,000 0 0.0% 0 0.0% 0 0.0% 0 0 -

B 287,739 23,736 8.2% 0 0.0% 23,736 8.2% 1,864 (5,660) $15.2

, . . .

Total 505,074 23,736 4.7% 0 0.0% 23,736 4.7% 1,864 (5,660) 15.$

E.Fort Bend/Sugarland

A 2,867,640 508,513 17.7% 13,022 0.5% 521,535 18.2% (20,668) 42,434 $26.

B 1,904,437 285,504 15.0% 5,661 0.3% 291,165 15.3% 30,742 26,541 $19.

C 174,013 2,173 1.2% 0 0.0% 2,173 1.2% (1,669) (1,373) $15.

Total 4,946,090 796,190 16.1% 18,683 0.4% 814,873 16.5% 8,405 67,602 24.$

FM 1960

A 2,532,986 1,715,537 67.7% 23,511 0.9% 1,739,048 68.7% 45,009 27,354 $27.

B 5,131,459 1,671,285 32.6% 80,132 1.6% 1,751,417 34.1% 6,337 (82,043) $16.

C 828,120 90,531 10.9% 13,619 1.6% 104,150 12.6% 11,077 17,838 $14.

Total 8,492,565 3,477,353 40.9% 117,262 1.4% 3,594,615 42.3% 62,423 (36,851) 21.$

Greenway

A 6,083,022 908,682 14.9% 202,736 3.3% 1,111,418 18.3% (36,489) (143,173) $30.2

B 2,746,088 303,501 11.1% 0 0.0% 303,501 11.1% (37,929) (36,495) $20.

C 1,008,816 240,287 23.8% 1,287 0.1% 241,574 23.9% 4,498 32,902 $16.

Total 9,837,926 1,452,470 14.8% 204,023 2.1% 1,656,493 16.8% (69,920) (146,766) 25.$

Gulf Freeway/Pasadena

B 1,558,337 215,008 13.8% 13,584 0.9% 228,592 14.7% (14,441) (38,809) $18.

C 1,144,329 136,646 11.9% 6,564 0.6% 143,210 12.5% (10,121) (35,962) $14.

Total 2,702,666 351,654 13.0% 20,148 0.7% 371,802 13.8% (24,562) (74,771) 17.$

I-10 East

B 318,516 90,474 28.4% 0 0.0% 90,474 28.4% 3,320 14,787 $15.2

C 165,473 16,748 10.1% 0 0.0% 16,748 10.1% 0 0 $8.

Total 483,989 107,222 22.2% 0 0.0% 107,222 22.2% 3,320 14,787 14.$

Katy Freeway

A 10,918,165 1,873,966 17.2% 138,729 1.3% 2,012,695 18.4% 29,469 1,007,762 $26.

B 6,926,044 1,051,031 15.2% 80,347 1.2% 1,131,378 16.3% (94,709) (230,964) $19.

C 1,811,831 214,306 11.8% 2,575 0.1% 216,881 12.0% (10,785) (34,413) $14.

Total 19,656,040 3,139,303 16.0% 221,651 1.1% 3,360,954 17.1% (76,025) 742,385 23.$

Kingwood/Humble

A 134,000 25,904 19.3% 0 0.0% 25,904 19.3% 0 0 $27.5

B 2 469 522 217 118 8 8% 4 659 0 2% 221 777 9 0% 845 13 410 19 , , , . , . , . ,

C 716,101 21,246 3.0% 0 0.0% 21,246 3.0% 106 10,112 $17.

Total 3,319,623 264,268 8.0% 4,659 0.1% 268,927 8.1% 951 (3,298) 20.$NASA/Clear Lake

A 699,707 29,515 4.2% 9,152 1.3% 38,667 5.5% 9,827 (9,895) $23.

B 3,102,159 297,906 9.6% 16,879 0.5% 314,785 10.1% (8,172) (12,646) $20.

C 1,262,946 150,465 11.9% 0 0.0% 150,465 11.9% 16,508 (10,431) $14.

Total 5,064,812 477,886 9.4% 26,031 0.5% 503,917 9.9% 18,163 (32,972) 18.$

Neartown/Allen Parkway

A 1,613,358 253,992 15.7% 130,867 8.1% 384,859 23.9% (146,603) (183,859) $24.

B 2,528,793 125,221 5.0% 37,159 1.5% 162,380 6.4% 10,627 101,510 $20.


, , , . . , . , ,

Total 5,333,696 753,613 14.1% 168,026 3.2% 921,639 17.3% (171,976) (137,595) 21.$

Greenspoint/North Belt

A 4,883,886 328,104 6.7% 115,161 2.4% 443,265 9.1% (96,497) (72,412) $21.

B 4,960,119 1,124,213 22.7% 108,675 2.2% 1,232,888 24.9% (254,636) (369,841) $16.

C 1,416,929 254,002 17.9% 6,977 0.5% 260,979 18.4% (15,506) 30,526 $13.2

Total 11,260,934 1,706,319 15.2% 230,813 2.0% 1,937,132 17.2% (366,639) (411,727) 17.$


7/10


HOUSTON SUBURBAN OFFICE MARKET

Rent

Absorption

Class Inventory

Sq. Ft.

Vacant

Sq. Ft.

Vacancy

Rate

Vacant

Sq. Ft.

Vacancy

Rate

Vacant

Sq. Ft.

Q3 Vacancy

Rate

Absorption

Sq. Ft.

Absorption

Sq. Ft.

.

Quote

Gross Ra

Northeast

A 0 0 #DIV/0! 0 #DIV/0! 0 #DIV/0! 0 0 $0

B 291,773 50,291 17.2% 0 0.0% 50,291 17.2% 10,484 4,612 $17C 143,647 17,047 11.9% 0 0.0% 17,047 11.9% 26,489 34,976 $11

Total 435,420 67,338 15.5% 0 0.0% 67,338 15.5% 36,973 39,588 15$

Northwest

A 3,233,211 1,103,733 34.1% 32,543 1.0% 1,136,276 35.1% (13,081) 112,289 $23

B 6,330,687 1,323,434 20.9% 50,930 0.8% 1,374,364 21.7% (128,752) (271,792) $16

C 1,584,361 126,412 8.0% 0 0.0% 126,412 8.0% 28,925 (2,986) $13

Total 11,148,259 2,553,579 22.9% 83,473 0.7% 2,637,052 23.7% (112,908) (162,489) 19$

Northwest Outlier

A 89,750 0 0.0% 0 0.0% 0 0.0% 0 89,750

B 135,457 10,848 8.0% 0 0.0% 10,848 8.0% (1,594) (5,788) $13

C 0 0 0 0 0 0

Total 225,207 10,848 4.8% 0 0.0% 10,848 4.8% (1,594) 83,962 $13

Richmond/Fountainview

A 0 0 0.0% 0 0.0% 0 0.0% 0 0 $0

B 642,245 71,069 11.1% 0 0.0% 71,069 11.1% (4,668) 10,823 $13

C 693,259 71,515 10.3% 0 0.0% 71,515 10.3% 0 (8,484) $12Total 1,335,504 142,584 10.7% 0 0.0% 142,584 10.7% (4,668) 2,339 13$

San Felipe/Voss

A 1,741,228 211,796 12.2% 31,733 1.8% 243,529 14.0% (51,940) (65,821) $31

B 3,264,838 305,978 9.4% 27,602 0.8% 333,580 10.2% (20,176) (57,927) $20

C 319,861 37,477 11.7% 0 0.0% 37,477 11.7% (7,859) (8,653) $17

Total 5,325,927 555,251 10.4% 59,335 1.1% 614,586 11.5% (79,975) (132,401) 24$

South

A 25,000 25,000 100.0% 0 0.0% 25,000 100.0% 0 0 $30

B 370,101 41,850 11.3% 0 0.0% 41,850 11.3% 5,366 (20,684) $24

C 223 029 36 220 16 2% 0 0 0% 36 220 16 2% 7 150 13 942 16 , , . . , . , ,

Total 618,130 103,070 16.7% 0 0.0% 103,070 16.7% 12,516 (6,742) 23$

South Main/Med Center

A 4,287,933 386,363 9.0% 0 0.0% 386,363 9.0% 18,445 153,135 $31

B 3,771,688 213,066 5.6% 4,800 0.1% 217,866 5.8% 40,823 77,365 $20

C 2,745,096 218,670 8.0% 0 0.0% 218,670 8.0% (26,395) (6,358) $18

Total 10,804,717 818,099 7.6% 4,800 0.0% 822,899 7.6% 32,873 224,142 25$

Southeast/OutlierA 159,304 0 0.0% 0 0.0% 0 0.0% 0 0

B 461,945 71,479 15.5% 0 0.0% 71,479 15.5% (7,800) (10,492) $23

C 22,783 9,036 39.7% 0 0.0% 9,036 39.7% 0 0 $15

o a , , . . , . , ,

Southwest

A 726,310 195,535 26.9% 20,719 2.9% 216,254 29.8% (53,578) (155,044) $18

B 6,936,026 1,521,243 21.9% 105,234 1.5% 1,626,477 23.4% (80,938) (171,975) $15

C 2,595,669 269,723 10.4% 0 0.0% 269,723 10.4% 25,231 130,961 $13

Total 10,258,005 1,986,501 19.4% 125,953 1.2% 2,112,454 20.6% (109,285) (196,058) 15$

Southwest Outlier

A 87,710 20,693 23.6% 0 0.0% 20,693 23.6% 3,680 (1,381) $27

B 372,488 59,402 15.9% 0 0.0% 59,402 15.9% (9,218) (5,338) $26

C 150,735 5,750 3.8% 0 0.0% 5,750 3.8% 1,700 8,850 $16

Total 610,933 85,845 14.1% 0 0.0% 85,845 14.1% (3,838) 2,131 26$

West Loop

A 16,245,407 1,534,631 9.4% 218,969 1.3% 1,753,600 10.8% (60,061) (463,713) $30B 5,461,113 1,197,088 21.9% 51,415 0.9% 1,248,503 22.9% 26,307 (335,578) $22

C 426,332 23,358 5.5% 0 0.0% 23,358 5.5% 10,110 (17,431) $16

Total 22,132,852 2,755,077 12.4% 270,384 1.2% 3,025,461 13.7% (23,644) (816,722) 26$

Westchase

A 7,540,651 985,277 13.1% 108,843 1.4% 1,094,120 14.5% (4,721) (208,891) $27

B 5,004,398 759,996 15.2% 67,770 1.4% 827,766 16.5% 33,449 (173,518) $20

C 509,063 65,185 12.8% 14,078 2.8% 79,263 15.6% (4,426) (22,223) $15

Total 13,054,112 1,810,458 13.9% 190,691 1.5% 2,001,149 15.3% 24,302 (404,632) 24$

Woodlands


A 2,055,885 442,251 21.5% 52,344 2.5% 494,595 24.1% 12,926 86,811 $26

B 3,066,343 359,458 11.7% 110,992 3.6% 470,450 15.3% 28,860 32,470 $20

C 171,796 25,077 14.6% 0 0.0% 25,077 14.6% 2,994 (3,765) $19

Total 5,294,024 826,786 15.6% 163,336 3.1% 990,122 18.7% 44,780 115,516 23$


8/10


OFFICE DEVELOPMENT PIPELINE

Houstons development activity slowed significantly by the end of the third quarter with 2.1 million sq. ft. of new office space

added in the past three months (bringing the year-to-date total to 4.2 million sq. ft.) and an additional 2.5 million sq. ft. under

construction. Even while the majority of activity continued to be centered in historically strong market areas, lease-up of the mostly

speculative projects is expected to be slow given the prevailing weak office market fundamentals and dismal employment conditionsprojected to extend into 2010.

Houstons Energy Corridor/Katy Freeway submarket continued to dominate the development pipeline accounting for 48% of the

. m on s . . o new o ce space a e s year. e arges ve o ce u ngs e vere year- o- a e are n e nergy

Corridor, including three buildings completed in the third quarter MacHaiks 428,831-sq. ft. Energy Tower II (11720 Katy

Freeway), Transwesterns 350,000-sq. ft. Eldridge Oaks (1080 Eldridge Parkway), and Behringer Harvards 305,528-sq. ft. Three

Eldridge Place (737 Eldridge Parkway). Outside the Energy Corridor, two new office buildings over 100,000 sq. ft. were completed

in the third quarter including Simmons Vedder Partners 270,000-sq. ft. 3700 W. Sam Houston Parkway office building in the

Westchase submarket and Stream Realtys 180,000-sq. ft. The Reserve at Sierra Pines in The Woodlands submarket.

Of the 2.5 million sq. ft. of office space under construction at the end of the third quarter, only one project The Woodlands

SELECT UNDER CONSTRUCTION OFFICE BUILDINGS

eve opment ompany s , -sq. t. ater quare is sc e u e or e ivery e ore year s en . t e six remaining projects

underway, five suburban office buildings with a combined 1.3 million sq. ft. are scheduled for completion in 2010, with one new

building in the CBD Hines 972,474-sq. ft. Main Place slated for delivery in 2011. With the notable exception of Trammell

Crow Companys Hess Tower (formerly Discovery Tower) 100% preleased to Hess Corporation, the majority of speculative office

projects underway have reported little to no preleasing activity.

Submarket Building Name Building Address Sq. Ft. % Leased Developer

Estimate

DeliveryCBD MainPlace 811 Main St 972,474 11.2 Hines Holdings Inc. Feb-

CBD Hess Tower 1501 McKinney St 844,763 100 TCC Development May-

The Woodlands Waterway Square 4 Waterway Square 232,364 23.97 The Woodlands Development Co. Dec-

E. Fort Bend Co/Sugar Land Sugar Land Town Center 2245 Texas Dr 157,619 0 Planned Community Developers Mar-

E. Fort Bend Co/Sugar Land Eco Centre at Lake Pointe 16750 Creek Bend Dr 152,619 0 Midway Companies Feb-

Northwest Two Westway 11025 Equity Dr 95,269 0 Opus Corporation Jan-Galleria/West Loop High Street 4410 Westheimer Rd 78,966 0 Trademark Property Oct-

Total office properties under construction listed above 2,534,074

Grand total office properties under construction over 20,000 sq. ft. 2,534,074

SELECT YEAR-TO-DATE OFFICE BUILDING DELIVERIES

Submarket Building Name Building Address Sq. Ft. % Leased Developer DeliveredKaty Freeway Energy Tower II 11720 Katy Freeway 428,831 87.9 MacHaik Management Aug-

Katy Freeway Eldridge Oaks 1080 Eldridge Parkway 350,000 0 Transwestern Commercial Services Sep-

Katy Freeway Cemex Center 920 Memorial City Way 336,000 63.2 MetroNational Sep-

Katy Freeway Energy Center II 575 N. Dairy Ashford 305,585 73.8 Trammell Crow Company Jan-

Katy Freeway Three Eldridge Place 737 Eldridge Parkway 305,528 0 Behringer Harvard Sep-

Westchase Westchase Park 3700 W. Sam Houston Pkwy 270,000 38.4 Simmons Vedder Partners Sep-

Northwest DNA Westway II 4424 W. Sam Houston Pkwy 250,000 68.0 Dienna Nelson Augustine Company Feb-

The Woodlands US Oncology HQ 10101 Woodloch Forest Place 196,000 100 The Woodlands Land Development Feb-The Woodlands The Reserve at Sierra Pines 1585 Sawdust Road 180,000 2.8 Stream Realty Partners, L.P. Jul-

Northwest West Pointe Center 9420 W. Sam Houston Pkwy 170,823 100 White Rock Commercial Apr-

Northwest Beltway Lakes II 5875 N. Sam Houston Pkwy 162,416 0 The Radler Limited Partnership Apr-

Westchase One Oak Park 6002 Rogerdale Road 154,205 37.7 MK Equity Partners Apr-

Katy Freeway The Reserve at Park Ten I 15721 Park Ten Place 150,000 0 Yancey-Hausman Jun-

Katy Freeway CityCentre Two 811 Town & Country Way 129,200 56.3 Midway Companies Apr-

Northwest Det Norkse Veritas 22535 Colonial Parkway 89,750 100 Duke Realty Mar-

Gulf Freeway/Pasadena Deerwood Glen Office Park 4400 Highway 225 88,000 50.0 Clay Development & Construction Sep-

South Shadow Creek Business Center 11233 Shadow Creek Pkwy 80,000 0 Wallace Bajjali Development Aug-

Westchase 3131 Briarpark Office Building 3131 Briarpark Drive 69,000 75.4 PGAL Jun-


The Woodlands Woodlands 45 Corporate Center 24624 I-45 North 64,822 59.5 PHA/Houston LLC Mar-

Greenspoint/North Belt 15109 Heathrow Office Bldg. 15109 Heathrow Forest Pkwy 63,621 0 Transwestern Jun-

FM 1960 Wortham Green 13100 Wortham Center 63,218 20.8 Panattoni Mar-

FM 1960 Stress Engineering Office Bldg. 13606 Westland East Blvd. 55,468 100 Westfair East Ltd. Jul-

Total office properties delivered year-to-date listed above 3,962,467

Grand total delivered year-to-date (including properties below 50,000 sq. ft. not listed above) 4,166,013


9/10


Colliers International has 294 Offices Worldwide

133 Americas

94 USA

22 Canada17 Latin America

64 Asia/Pacific

61 Countries

on 6 Continents

97 Europe/Middle East/Afri

NORTH AMERICA

EUROPE AND

MIDDLE EASTAFRICA

HAWAII

SOUTH

AMERICA

$1.6 Billion in Global Revenu

1.1 Billion Square Feet under

Management

12,700 Professionals

AUSTRALIA

ASIA PACIFIC

Colliers International office locations

are indicated by yellow dots on the map.

COLLIERS INTERNATIONA

1300 Post Oak Blvd, 2nd Floo

Houston, Texas 7705

Main: 713.222.21

Fax: 713.830.21

www.collierstexas.co



10/10


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2009 3q houston office market report

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