Apr 22, 2015 - West Houston accounted for 59% of the deliveries this past quarter with Katy Freeway/Energy Corridor cont
Quarterly Market Overview First Quarter 2015 FOR IMMEDIATE RELEASE
For more information, please contact: David Mendel, Public Relations Manager Phone: 713.629.1900 ext. 258 E‐mail:
[email protected]
HOUSTON’S FIRST QUARTER COMMERCIAL ACTIVITY SLOWER BUT STEADY AS MARKET ADJUSTS HOUSTON — (April 22, 2015) — Houston’s commercial real estate activity is slower but steady as the market adjusts to the energy downturn, slower job growth and the relocations of energy-related firms to campus facilities, according to quarterly market research compiled by Commercial Gateway, the commercial division of the Houston Association of Realtors. The first quarter reported office net absorption of 405,058 square feet, representing the 16th consecutive quarter of positive absorption, to start off the year on a positive note despite low oil prices and slower job growth. The same quarter last year reported 1.1 million square feet. As in previous years, Class A properties represent the bulk of the growth, 861,555 square feet of positive absorption, offset by Class B properties reporting a negative 640,574 square feet; Class C properties reported 184,077 square feet of positive absorption. The market activity is clearly tied to job growth, substantiated by the Greater Houston Partnership’s (GHP) just-released employment numbers: The Houston-The Woodlands-Sugar Land metro created 82,500 jobs in the 12 months ending March 2015, according to the Texas Workforce Commission (TWC). Every major employment sector in the Houston metro area reported job growth over the past 12 months, the GHP reported; “however, the March employment report tells a more sobering story when looking at monthly changes. The impact of the decline in oil prices is reflected in several energy-related sectors with mining and logging, which in Houston is mainly oil and gas, losing 700 jobs.” For the quarter, 11 properties with 16 new buildings were completed, adding almost 3.7 million square feet to the market. The new buildings, including three owner-occupied or singletenant, contributed almost 2.2 million square feet of absorption. Upon completion, the new properties collectively were almost 61.8% leased with rental rates averaging $35.93, higher than the Class A overall rate of $32.49. Contributing heavily to the first quarter’s absorption were 1 million square feet attributed to ExxonMobil’s Phase II of occupied space in its new campus south of The Woodlands,
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640,000 square feet for CyrusOne’s data center in the West along with Academy’s 200,000 square feet in its expansion building in Katy, also in the West. The largest multi-tenant building to be completed this quarter was Energy Tower IV at 450,552 square feet, which recorded almost 141,000 square feet of move-ins with Technip’s 103,987 square feet leading the way. The second largest multi-tenant building to be completed this quarter was Skanska’s West Memorial Place at 330,000 square feet; its largest tenant move-in was Petroleum Geo-Services (PGS) with 122,000 square feet. Two other larger multi-tenant projects, Westchase Park Building 2 at 300,000 square feet and Beltway Lakes Building 4 at 270,000 square feet, came onto the market without preleasing. Construction starts continued during the fourth quarter, but at a slower pace. Overall, the Houston under-construction office market boasts 47 properties with buildings totaling almost 14.1 million square feet. Collectively, the buildings are 56.6% preleased, with 34 buildings classified as multi-tenant. The multi-tenant properties represent about 7.9 million square feet or 56.1% of the under-construction total and are currently reporting 23% preleased space. The largest project under construction is Phillips 66’s 1.2 million-square-foot campus in the Westchase area, while the largest spec building under construction with the largest availability remains Hines’ 609 Main at Texas building with1.05 million square feet. New spec starts this quarter included Havenwood Office Park in the north sector with 240,470 square feet. Amegy Bank officially started construction on its new 350,000-square-foot headquarters off 610 Loop in the Galleria/Uptown submarket; Amegy plans to occupy all but 97,912 square feet, which is up for lease. The Greater Houston Partnership also broke ground on its new, 110,000-square-foot building near the George R. Brown Convention Center. Few new office projects have been announced this year, and a variety of proposed projects set to break ground late last year have been placed on hold pending a major tenant commitment. The current 12.6% vacancy rate is an increase from the 11.2% vacancy recorded last quarter, and the 11.1% during the same quarter a year ago. Class A space overall is at 10.5% vacancy, with the North/The Woodlands/Conroe submarket showing the lowest Class A vacancy of 5.6% followed by the Westchase submarket at 7.4% and the Inner Loop submarket at 7.7%. The West submarket is recording the lowest overall vacancy of all submarkets at 7.3%. Seven of the 13 submarkets are recording single-digit vacancies in Class A space, with five of the 13 boasting single-digit vacancies overall.
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Rental rates represent a 5.9% increase during the past year with the current overall averaged weighted rental rate of $26.18. Class A rates, now at $32.49 citywide and at $39.07 in the CBD, experienced a slight increase from the same quarter last year. CBD’s Class A rates increased 4.0% in the CBD from the same quarter last year. Rates overall have shown increases due to new space with higher rents entering the market along with increased operating expenses due to tax jumps. Concessions are reportedly being offered to entice some tenants, but none are being offered across the board. Overall sublease space has increased 25% from the same quarter last year. Almost 3.5 million square feet of sublease is available today; additional listings being marketed and available at a future date total another 2.3 million square feet. Sublease space has gradually increased over the last two years as tenants expand into newly built space and leave their old space in addition to other firms just trying to reduce their bottom lines as their workforce is also reduced. If this trend continues, firms will be able to take advantage of possible reduced rates with limited terms while the market continues to adjust. Commercial Gateway Member/Broker Comments on the Houston Office Market: Mario A. Arriaga, First Group “The Houston area’s commercial real estate market is starting to experience a few negative effects of the energy market downturn, with slower job growth and, subsequently, reduced absorption in the office market. In my specific area north of the city, it is difficult for us to acknowledge the slowdown today as we watch the thousands of ExxonMobil employees relocating and requiring places to live and shop. The company reportedly has about two-thirds of its 10,000-person workforce in place, and those people are joining the many other corporate employees who have recently relocated to Southwestern Energy’s new headquarters building just south of The Woodlands along with other companies who have relocated to properties in the north. “Development in some areas is slowing, primarily in the office sector, but demand in the retail and residential markets is still very strong. A few developments have been put on hold waiting for the completion of infrastructure improvements, including both the Grand Parkway and the extension of the Interstate 45 HOV from FM 1960 south of The Woodlands to the South Loop/Texas 336 in Conroe, along with other road improvements surrounding the area. These infrastructure improvements will open up the area to even more development.”
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David Baker, Executive Vice President, Houston Operations, Transwestern “The Houston office market saw some big leases signed in the first quarter, but overall activity has slowed as tenants exercise caution in the current energy climate. Net absorption was high due to a large volume of preleased deliveries; however, we anticipate absorption will slow, and in some cases, sublease space will be added through 2015.” Matt Gaby, Associate, NAI Partners “We have seen many changes in the Houston office market. The downturn in the energy industry has led to some staggering levels of sublease availability, which is at the highest it has been over the last 10 years. Over 13% of the total available space (class A and B) is now sublease space. That number represents a 9.5% increase since the fourth quarter of 2014. ”During the first quarter we have seen a rise in concessions from landlords in all submarkets. However, the decrease in asking rents has not been drastic yet, although we expect this to change by the end of the second quarter. We anticipate rental rates to drop slightly in light of the large amount of available sublease space citywide and the continued softening demand. Some companies are deciding to postpone relocations and renewals with the anticipation of possible better deals in the near future. “Net absorption for the quarter was negative, down a bit more than 50% from last quarter. The current market conditions in the energy industry have had a large influence on this number because over 2 million square feet of office space was leased throughout the city. Occupancy remains strong for many landlords, which explains why we have not yet seen rent reductions despite what seems to be a softening market.” John Spafford, Executive Vice President, Director of Leasing, PM Realty Group “After just over four years of robust office space demand resulting in 16.7 million square feet of direct net absorption, Houston’s office leasing market has experienced slower growth in recent months as a result of the uncertainty in the energy markets. A significant factor contributing to the slower office market growth has been new supply and corporate office space users – such as ExxonMobil, Shell Oil, Halliburton, Southwestern Energy relocating from just over 2.1 million square feet of leased space into new corporateowned office space developed within the past six months. Nevertheless, Houston’s office leasing market still managed to post modest absorption gains totaling 24,923 square feet during the first quarter, bringing the trailing 12-month absorption tally to just under 2.4 million square feet.
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“Houston continues to lead the nation with just under 15.5 million square feet under construction – including corporate-owned projects – with 64.3% of this space either preleased or committed by an owner-user. Within the competitive leasing market, developers delivered nine new office buildings totaling nearly 1.9 million square feet, which was already 31% pre-leased. West Houston accounted for 59% of the deliveries this past quarter with Katy Freeway/Energy Corridor contributing 1.1 million square feet. This submarket, which has absorbed 629,473 square feet. over the prior 12 months, remained one of the top performing submarkets in the city with 265,901 square feet of direct space absorbed during the quarter. The largest move-ins during the quarter involved Petroleum Geo-Services, Technip and Spectrum Geo all occupying newly delivered space. “With slower employment growth anticipated on the horizon, Houston’s office market should experience reduced direct absorption growth in 2015 – but should still exceed the 20-year historical average of 2.5 million square feet per year. Houston’s office market is scheduled to deliver nearly 8.7 million square feet of new lease space in 2015, excluding corporate-owned projects. As a result of the new deliveries, office leasing volume and direct occupancy levels will slightly decline in 2015 but not enough to significantly impact rents. However, increased sublease space availability could cause concessions to slightly rise as energy companies that tied up space anticipating future growth look to right-size in the short-term.” Houston Industrial Market Houston’s industrial market continues to expand with positive net absorption of almost 1.4 million square feet during the first quarter of 2015, according to statistics released by Commercial Gateway. This quarter’s absorption represents the 21st consecutive quarter – five years – of positive absorption, with 16 quarters recording more than 1 million square feet each. This absorption is considerably less than the same quarter last year and any quarter during the previous two years but is a positive sign in today’s marketplace of energy layoffs and cutbacks. Major deals recorded during the quarter include Professional Packaging Systems’ 171,000 square feet and Woodfield Distribution’s 48,600 square feet in Sugar Land Interchange Distribution Center in the southwest sector along with three deals to fill up DCT’s Northwest
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Crossroad’s Logistics Centre Phase I: Lenox International’s 190,000 square feet, Rittal’s 171,000 square feet and Hesselbein Tire’s 73,000 square feet. The Hardy Distribution Center also reported a 144,000-square-foot deal with Texas Tissue Converting during the first quarter. Net absorption was shared by all industrial types during the first quarter with warehouse/ distribution properties accounting for 479,460 square feet of absorption, or 35.6% of the total. High tech/R&D reached a high of 422,098 square feet, or 31.4% of the total. Flex/service center space represented 352,081 square feet of absorption, or 26.2% of the total. Vacancy marginally increased to 6.0% from 5.9% last quarter but below the 6.4% of the same quarter a year ago. This could be attributed in part to 1.2 million square feet of finished, vacant product entering the market along with a marketwide slowdown. Vacancy for warehouse/distribution space citywide is 6.2% with manufacturing space at 4.1%. Houston is still considered one of the healthiest industrial markets nationwide due to its balance of supply and demand. More than 1.7 million square feet in 24 buildings came online during the first quarter. Collectively, the new buildings are currently 28.3% leased and represent about 476,000 square feet of absorption, or 35.4% recorded for the quarter. The largest spec buildings completed during the first quarter and without preleasing include Building 7 in Beltway Crossing Northwest at 441,000 square feet in the Northwest and Building One in Beltway North Commerce Center at 352,680 square feet in the Greenspoint area. Completed owner-occupied space includes Data Foundry’s new data center of 350,000 square feet also in Greenspoint and Mitsubishi’s new 100,000-square-foot project in Pearland. All other completed spec buildings were smaller than 100,000 square feet with 14 buildings less than 20,000 square feet. Construction activity is still setting records. Currently, 120 buildings are underway in 73 projects representing more than 7.8 million square feet. Major spec projects without major preleasing include Fallbrook Pines’ 709,045 square feet, Mason Ranch Industrial Park’s 656,740 square feet and Fallbrook 1 Pinto Business Park’s 500,400 square feet. Proposed industrial buildings are continuing to be announced.
On the west side, Daikin Industries announced plans in January for a major expansion, a 3- to 4-million square foot manufacturing/R&D facility on 90 acres in Northwest Harris County. Parkside Capital is looking at building expansions in West 10 Business Park.
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In the north, Duke Realty is expanding the Point North Cargo facility, and KTR Capital has announced plans for over 400,000 square feet of planned space. New buildings have also been announced in Pinto Business Park, including a recent build-to-suit for Alfa Laval, Inc., which will include both office and manufacturing space for the U.S. subsidiary of Alfa Laval AB.
The southwest corridor around Beltway 8, Highway 90 and Highway 288 will be a hotbed of new activity in the coming months if even some of the proposed space breaks ground. Trammell Crow and Artis REIT are gearing up for Park 8Ninety, which could offer up to 1.75 million square feet, and NAI Partners just announced the first groundbreaking in Gateway Southwest with plans for more than 400,000 square feet. The Levey Group has also announced plans for 5 Corners Business Center, a potential 750,000 square-foot project, and CRESA has started marketing its 500,000+-square-foot project called the Lower Kirby District off 288. Rental rates increased steadily during the past year and currently average $7.85 per
square foot per year citywide, representing an 18.1% increase from the same quarter last year. More importantly, rents quoted for all new space completed in the first quarter averaged $10.23 per square feet. Rental rates quoted are grossed up and weighted and averaged based on available space. Most new buildings are now quoting net rents and passing on the increased taxes and operating costs. Sublease space increased 7.2% from last quarter to more than 1.6 million square feet. This quarter’s total is an increase of 20.6% from the same quarter a year ago, but is still below square footage totals in 2013 and back through 2010. Commercial Gateway Member/Broker Comments on the Houston Industrial Market: Michael B. Keegan, Vice President, NAI Partners “As the price of oil appears to stabilize around $50 per barrel, the crane-served manufacturing building market remains very quiet. On the other hand, the bulk distribution front-, rear- and cross-dock loading product has seen big surges in activity in every major Houston market, especially in the east and southeast sides of Houston. “While the pullback in oil is having some impacts on the industrial market, there are other areas that are booming. Indeed, Houston's economy varies with oil, but it is one of and possibly the fourth largest economies in the U.S. that is diversified beyond upstream oil. For example, expansion of the Port of Houston is projected to contribute to key
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economic growth of the Houston region. Houston's port is the number one import and export in tonnage in the U.S. and is the leading container port on the Gulf Coast. This means significant growth for Baytown, Channelview, Deer Park, Galena Park, Jacinto City, La Porte and many other east and southeast markets of Houston. “The east side of Houston is currently undergoing a huge expansion in its already large petrochemical industry. This area’s complex facilities produce nearly a quarter of the nation's fuel. So, while Houston is experiencing a pullback in the upstream oil industry on the west and northwest sides of Houston, it is simultaneously experiencing great growth on the east side in downstream refining, petrochemical business, and construction. Those petrochemical manufacturers take natural gas and turn them into consumer goods, such as plastics, textiles, rubbers, adhesives, and other everyday items that we all use. Thus, the drop in activity in upstream oil on the west and northwest sides of Houston is being offset on the east and southeast sides of the downstream side associated with the Port region and petrochemical markets.” Mark G. Nicholas, SIOR, Executive Vice President and National Director, JLL Houston “The industrial market in Houston continues to be very busy. We are seeing a lot of consolidations due to the many mergers and acquisitions happening, but our market has been resilient, and we are still closing lots of transactions. “Many of the mergers and acquisitions in the oilfield service sector are having to determine which of the duplicate facilities to keep operating and which to sell off. “Brokers are being asked to consult a lot more with clients, being more thorough and looking at every angle of the deal in order for it to be the most cost effective for the company. But deals are still happening, and activity levels remain high. “Becoming more cost effective has made firms look more closely at the bottom line as they examine cutting both costs and even square footage 25% to 30%. Overall costs have gone up so most companies are making sure they are getting exactly what they need in the deals they are making. Landlords are also asking tenants to put more into the deal due to the increased costs which include operating expenses, which have jumped 30% in some places.
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“Investors are also still very active in Houston, and we are seeing both foreign and domestic players shopping for deals in the market. I’m currently working with clients from many different areas including Korea, China and Asia.” Founded in 2001, Commercial Gateway, the commercial division of the Houston Association of Realtors (HAR), is a commercial information exchange of commercial real estate professionals engaged in every aspect of property sales and leasing, appraisal, property management and counseling.
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Houston-Area Office Market Summary 2015 First Quarter No. Class Bldgs * A 34 Central Business District
(10,160)
(10,160)
0
$28.60
60,998
C
9
770,896
138,327
17.9 %
1,983
1,983
0
$18.97
0
70
40,337,042
3,752,868
9.3 %
(411,266)
(411,266)
1,635,000
$36.33
915,913
A
40
12,690,178
1,111,907
8.8 %
194,267
194,267
2,684,804
$29.22
233,220
B
55
5,349,787
738,613
13.8 %
(202,937)
(202,937)
0
$24.19
310,263
C
8
393,192
11,850
3.0 %
(6,332)
(6,332)
0
$24.85
0
103
18,433,157
1,862,370
10.1 %
(15,002)
(15,002)
2,684,804
$27.20
543,483
A
39
4,077,565
372,853
9.1 %
13,672
13,672
133,500
$28.50
24,761
B
21
1,434,592
150,135
10.5 %
9,987
9,987
20,879
$21.99
79,566
C
1
91,000
26,528
29.2 %
3,852
3,852
0
$16.50
0
61
5,603,157
549,516
9.8 %
27,511
27,511
154,379
$26.14
104,327
A
31
4,962,137
1,244,975
25.1 %
(405,180)
(405,180)
0
$24.94
130,500
B
42
4,684,819
1,478,309
31.6 %
(253,296)
(253,296)
0
$18.44
60,121
C
28
2,167,820
498,124
23.0 %
39,986
39,986
0
$12.40
0
101
11,814,776
3,221,408
27.3 %
(618,490)
(618,490)
0
$20.02
190,621
A
37
10,983,629
847,611
7.7 %
(207,061)
(207,061)
1,025,151
$31.76
134,237
B
100
9,641,923
1,333,895
13.8 %
(219,845)
(219,845)
0
$26.09
28,021
C
77
4,455,894
383,305
8.6 %
10,477
10,477
0
$17.72
8,915
214
25,081,446
2,564,811
10.2 %
(416,429)
(416,429)
1,025,151
$26.71
171,173
A
72
9,861,183
553,648
5.6 %
1,046,413
1,046,413
2,391,707
$31.74
143,163
B
76
4,672,072
808,825
17.3 %
(28,985)
(28,985)
0
$17.58
19,941
C
32
1,136,292
166,542
14.7 %
17,046
17,046
0
$12.36
0
180
15,669,547
1,529,015
9.8 %
1,034,474
1,034,474
2,391,707
$22.14
163,104
A
6
51,670
7,630
14.8 %
0
0
360,000
$25.50
0
B
17
732,310
73,300
10.0 %
5,923
5,923
0
$18.27
1,211
C
6
243,603
69,025
28.3 %
0
0
0
$13.25
0
29
1,027,583
149,955
14.6 %
5,923
5,923
360,000
$16.33
1,211
A
39
4,150,962
1,032,002
24.9 %
(8,964)
(8,964)
803,559
$30.11
116,611
B
62
5,625,397
1,212,087
21.5 %
(71,383)
(71,383)
0
$20.29
100,480
C
22
831,022
143,475
17.3 %
0
0
0
$18.89
0
123
10,607,381
2,387,564
22.5 %
(80,347)
(80,347)
803,559
$24.45
217,091
North/The Woodlands/Conroe Subtotal
Northeast
Northeast Subtotal
Northwest
Northwest Subtotal
Wted Avg Sublease Rent *** Avail $39.07 854,915
8.9 %
Inner Loop Subtotal
North/The Woodlands/Conroe
Under Construction 1,635,000
715,410
Greenspoint Subtotal
Inner Loop
Net Absorption Current YTD (403,089) (403,089)
8,016,377
Fort Bend County Subtotal
Greenspoint
Vacancy Rate 9.2 %
27
Energy Corridor Subtotal
Fort Bend County
Vacant SF 2,899,131
B
Central Business District Subtotal
Energy Corridor
Bldg SF ** 31,549,769
© Copyright 2015 Commercial Gateway, the Commercial Division of the Houston Association of REALTORS ® This information has been compiled from various sources and is provided without guarantee or warranty.
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Houston-Area Office Market Summary 2015 First Quarter No. Class Bldgs * A 20 Southeast
(48,986)
(48,986)
0
$18.60
2,622
C
47
2,011,292
359,208
17.9 %
33,211
33,211
0
$17.04
0
121
7,658,474
1,315,700
17.2 %
(76,055)
(76,055)
0
$20.51
19,686
A
5
1,227,586
406,149
33.1 %
24,821
24,821
0
$19.64
16,168
B
52
6,008,695
1,595,202
26.5 %
19,149
19,149
0
$17.72
1,711
C
82
4,936,096
616,260
12.5 %
48,700
48,700
0
$13.53
8,168
139
12,172,377
2,617,611
21.5 %
92,670
92,670
0
$17.03
26,047
A
48
18,069,584
2,080,226
11.5 %
(19,427)
(19,427)
1,447,955
$35.88
348,062
B
76
9,659,305
1,156,415
12.0 %
(124,739)
(124,739)
0
$25.68
310,485
C
18
1,133,574
105,665
9.3 %
8,469
8,469
0
$17.24
0
142
28,862,463
3,342,306
11.6 %
(135,697)
(135,697)
1,447,955
$31.76
658,547
A
45
7,249,275
637,257
8.8 %
684,594
684,594
2,026,488
$27.84
69,083
B
40
3,403,821
245,804
7.2 %
183,807
183,807
0
$17.76
77,009
C
39
2,588,814
81,108
3.1 %
5,532
5,532
0
$15.31
1,440
124
13,241,910
964,169
7.3 %
873,933
873,933
2,026,488
$24.21
147,532
A
33
8,954,144
660,279
7.4 %
1,789
1,789
1,517,000
$35.94
140,596
B
51
6,836,887
944,017
13.8 %
100,891
100,891
0
$22.47
151,362
C
19
833,492
154,013
18.5 %
21,153
21,153
0
$18.40
0
103
16,624,523
1,758,309
10.6 %
123,833
123,833
1,517,000
$27.17
291,958
A
415
84,524,838
9,329,757
11.0 %
1,264,644
1,264,644
12,390,164
$30.45
1,373,465
B
646
61,449,865 10,317,874
16.8 %
(630,414)
(630,414)
20,879
$21.10
1,142,792
C
379
20,822,091
2,615,103
12.6 %
182,094
182,094
0
$15.20
18,523
1,440
166,796,794 22,262,734
13.3 %
816,324
816,324
12,411,043
$24.33
2,534,780
A
449
116,074,607 12,228,888
10.5 %
861,555
861,555
14,025,164
$32.49
2,228,380
B
673
69,466,242 11,033,284
15.9 %
(640,574)
(640,574)
20,879
$21.59
1,203,790
C
388
21,592,987
2,753,430
12.8 %
184,077
184,077
0
$15.39
18,523
207,133,836 26,015,602
12.6 %
405,058
405,058
14,046,043
$26.18
3,450,693
Suburban Subtotal
Houston-Area
Houston-Area Total
0
Wted Avg Sublease Rent *** Avail $26.78 17,064
17.1 %
Westchase Subtotal
Suburban
Under Construction
581,272
West Subtotal
Westchase
Net Absorption Current YTD (60,280) (60,280)
3,400,257
Uptown Subtotal
West
Vacancy Rate 16.7 %
54
Southwest Subtotal
Uptown
Vacant SF 375,220
B
Southeast Subtotal
Southwest
Bldg SF ** 2,246,925
1,510
* Number of buildings calculated on specific buildings at each property address. ** Includes all general-purpose existing office buildings 20,000 square feet or larger. *** Rental rates weighted and averaged based on available space.
© Copyright 2015 Commercial Gateway, the Commercial Division of the Houston Association of REALTORS ® This information has been compiled from various sources and is provided without guarantee or warranty.
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Houston-Area Office Statistical Summary No. of Period
Office SF
Bldgs
Vacant SF Direct
Sublease
Vacancy Rate Total
Direct
Sublease
Net Absorption Total
Direct
Sublease
Avg* Gross Rent Total
Direct
Sublease
2015 Q1
207,133,836
1,510 26,015,602
3,450,693 29,466,295
12.6 %
1.7 %
14.2 %
405,058
(255,489)
149,569
$26.18
$28.30
2014 Q4
203,069,986
1,484 22,802,149
3,195,204 25,997,353
11.2 %
1.6 %
12.8 %
1,712,330
(152,487)
1,559,843
$25.26
$26.34
2014 Q3
201,032,258
1,467 22,130,530
3,042,717 25,173,247
11.0 %
1.5 %
12.5 %
919,950
84,296
1,004,246
$25.04
$26.83
2014 Q2
199,702,442
1,458 21,746,160
3,127,013 24,873,173
10.9 %
1.6 %
12.5 %
2,115,885
(375,772)
1,740,113
$24.96
$25.88
2014 Q1
197,991,304
1,449 22,056,941
2,751,241 24,808,182
11.1 %
1.4 %
12.5 %
1,102,240
(241,993)
860,247
$24.73
$23.45
2013 Q4
196,801,300
1,445 22,165,177
2,616,113 24,781,290
11.3 %
1.3 %
12.6 %
799,788
(316,361)
483,427
$24.13
$24.62
2013 Q3
195,754,637
1,438 22,437,411
2,299,752 24,737,163
11.5 %
1.2 %
12.6 %
1,798,414
(264,946)
1,533,468
$24.14
$24.76
2013 Q2
193,211,330
1,424 21,582,681
2,034,806 23,617,487
11.2 %
1.1 %
12.2 %
574,856
(295,404)
279,452
$23.44
$21.01
2013 Q1
192,533,951
1,420 21,742,541
1,681,604 23,424,145
11.3 %
0.9 %
12.2 %
393,869
(49,559)
344,310
$23.26
$21.22
2012 Q4
192,476,753
1,419 22,199,664
1,632,045 23,831,709
11.5 %
0.8 %
12.4 %
1,120,277
37,432
1,157,709
$23.10
$21.63
2012 Q3
192,022,406
1,417 22,705,314
1,669,477 24,374,791
11.8 %
0.9 %
12.7 %
454,212
204,364
658,576
$22.92
$21.68
2012 Q2
192,217,396
1,416 23,182,916
1,873,841 25,056,757
12.1 %
1.0 %
13.0 %
1,158,213
346,625
1,504,838
$22.79
$22.74
2012 Q1
192,178,256
1,415 23,741,633
2,220,466 25,962,099
12.4 %
1.2 %
13.5 %
820,860
287,689
1,108,549
$22.73
$23.86
2011 Q4
191,960,321
1,408 25,461,914
2,508,155 27,970,069
13.3 %
1.3 %
14.6 %
942,031
496,847
1,438,878
$22.87
$24.15
2011 Q3
191,343,071
1,401 25,993,360
3,005,002 28,998,362
13.6 %
1.6 %
15.2 %
1,270,142
(222,073)
1,048,069
$22.68
$23.78
2011 Q2
190,576,026
1,398 26,627,679
2,782,929 29,410,608
14.0 %
1.5 %
15.4 %
78,544
71,935
150,479
$22.98
$23.50
2011 Q1
189,880,624
1,396 26,198,187
2,827,526 29,025,713
13.8 %
1.5 %
15.3 %
(208,556)
350,061
141,505
$23.22
$22.36
2010 Q4
188,903,287
1,394 25,530,782
3,177,587 28,708,369
13.5 %
1.7 %
15.2 %
(44,809)
422,532
377,723
$22.73
$22.35
2010 Q3
188,452,334
1,394 25,811,014
3,394,705 29,205,719
13.7 %
1.8 %
15.5 %
(148,926)
(175,513)
(324,439)
$23.06
$22.86
2010 Q2
188,452,334
1,394 25,577,963
3,220,668 28,798,631
13.6 %
1.7 %
15.3 %
689,745
557,095
1,246,840
$23.39
$23.51
2010 Q1
187,981,968
1,390 26,100,149
3,777,763 29,877,912
13.9 %
2.0 %
15.9 %
(1,346,348)
(94,915)
(1,441,263)
$23.94
$25.00
* Rental rates are averaged and weighted based on available space. © 2015 HRIS. All information is deemed reliable but not guaranteed. Page 12
Houston-Area Office Absorption by Class by Quarter
Class A 2015
Q1
861,555
2014
Q4 Q3
2013
2012
2011
2010
Class B
Class C
All Classes
(640,574)
184,077
405,058
1,447,953
268,774
(4,397)
1,712,330
955,886
(133,200)
97,264
919,950
Q2
1,948,587
171,026
(3,728)
2,115,885
Q1
987,099
165,203
(50,062)
1,102,240
Q4
608,883
272,608
(81,703)
799,788
Q3
1,809,844
78,677
(90,107)
1,798,414
Q2
836,376
(82,036)
(179,484)
574,856
Q1
229,455
235,552
(71,138)
393,869
Q4
566,957
639,219
(85,899)
1,120,277
Q3
405,430
18,446
30,336
454,212
Q2
1,066,677
63,081
28,455
1,158,213
Q1
43,439
643,622
133,799
820,860
Q4
793,753
65,449
82,829
942,031
Q3
1,457,485
(222,599)
35,256
1,270,142
Q2
218,266
(130,246)
(9,476)
78,544
Q1
195,659
(428,686)
24,471
(208,556)
Q4
416,133
(337,040)
(123,902)
(44,809)
Q3
526,692
(724,927)
49,309
(148,926)
Q2
524,438
136,335
28,972
689,745
Q1
(224,705)
(960,759)
(160,884)
(1,346,348)
Absorption square footage includes only net absorption for direct space; sublease space is excluded. © 2015 HRIS. All rights reserved. All information is deemed reliable but is not guaranteed. Page 13
Houston-Area Office Vacancy and Rental Rates* by Quarter
* Gross rental rates are averaged and weighted based on available space. © 2015 HRIS. All rights reserved. All information is deemed reliable but is not guaranteed. Page 14
Houston-Area Industrial Market Summary 2015 First Quarter
Market Area
Type Warehouse/Distribution Flex/Service Center
Inner Loop
4,711,061
135,932
2.9 %
(19,826)
(19,826)
0
$13.76
39,617
1,883,663
37,000
2.0 %
0
0
0
$4.32
0
HighTech/R&D
5
169,011
0
0.0 %
0
0
0
N/A
0
743
24,080,545
875,305
3.6 %
(119,852)
(119,852)
48,892
$7.86
92,583
Warehouse/Distribution
396
8,410,141
342,028
4.1 %
255,716
255,716
498,265
$8.96
4,800
Flex/Service Center
130
2,492,046
308,798
12.4 %
(69,815)
(69,815)
0
$12.39
18,000
60
1,317,590
117,943
9.0 %
(97,000)
(97,000)
0
N/A
0
Manufacturing
Warehouse/Distribution
(612)
(612)
0
$16.80
10,432
6.1 %
88,289
88,289
498,265
$10.66
33,232
4,760,657
9.0 %
353,110
353,110
1,505,126
$7.40
396,708
8,345,371
844,091
10.1 %
371,385
371,385
0
$8.48
54,474
Manufacturing
245
9,283,951
320,350
3.5 %
40,664
40,664
745,800
$6.67
103,714
HighTech/R&D
13
540,915
168,810
31.2 %
0
0
0
$12.00
0
1,761
70,998,140
6,093,908
8.6 %
765,159
765,159
2,250,926
$7.64
554,896
2,468
97,493,111
6,292,531
6.5 %
371,330
371,330
2,852,724
$8.06
410,212
Flex/Service Center
750
18,371,833
1,086,647
5.9 %
30,254
30,254
0
$10.76
121,017
Manufacturing
512
18,812,021
899,473
4.8 %
27,125
27,125
0
$5.55
100,810
HighTech/R&D
37
2,093,013
24,150
1.2 %
32,110
32,110
0
N/A
5,442
3,767
136,769,978
8,302,801
6.1 %
460,819
460,819
2,852,724
$8.14
637,481
Warehouse/Distribution
698
22,626,778
543,416
2.4 %
(30,505)
(30,505)
12,000
$5.43
39,041
Flex/Service Center
134
2,737,236
172,800
6.3 %
(23,115)
(23,115)
0
$8.74
0
Manufacturing
151
5,976,845
174,700
2.9 %
141,781
141,781
0
$4.21
180,410
HighTech/R&D
Warehouse/Distribution
13
342,024
0
0.0 %
0
0
0
N/A
0
996
31,682,883
890,916
2.8 %
88,161
88,161
12,000
$5.83
219,451
1,449
67,045,940
4,118,471
6.1 %
(396,565)
(396,565)
1,018,157
$5.74
33,280
Flex/Service Center
268
4,915,793
200,962
4.1 %
43,126
43,126
312,560
$10.13
0
Manufacturing
213
9,041,263
166,620
1.8 %
(38,660)
(38,660)
0
$9.15
5,585
HighTech/R&D
15
445,973
66,967
15.0 %
0
0
0
$14.78
0
Southeast Subtotal
1,945
81,448,969
4,553,020
5.6 %
(392,099)
(392,099)
1,330,717
$6.19
38,865
Warehouse/Distribution
835
33,717,291
1,779,105
5.3 %
26,400
26,400
852,426
$8.57
35,006
Flex/Service Center
477
14,266,897
831,698
5.8 %
20,072
20,072
0
$13.53
32,950
Manufacturing
108
3,416,291
340,045
10.0 %
18,000
18,000
111,600
$5.52
0
HighTech/R&D
13
948,730
64,595
6.8 %
390,600
390,600
0
$29.60
0
Southwest Subtotal
1,433
52,349,209
3,015,443
5.8 %
455,072
455,072
964,026
$10.04
67,956
Warehouse/Distribution
7,530
299,475,174
18,538,581
6.2 %
479,460
479,460
6,787,590
$7.32
972,013
Flex/Service Center
2,267
55,840,237
3,580,928
6.4 %
352,081
352,081
312,560
$10.99
266,058
Manufacturing
1,340
49,731,624
2,056,131
4.1 %
91,910
91,910
857,400
$5.89
390,519
$16.42
15,874
HighTech/R&D Houston-Area Total
1.5 %
52,827,903
South Subtotal
Houston-Area
7,956 776,725
322
Northwest Subtotal
Southwest
526,612 12,746,389
1,181
Warehouse/Distribution
Southeast
14 600
Flex/Service Center
Northeast Subtotal
South
Net Absorption Under Wted Avg Sublease Current YTD Construction Rent *** Avail (100,026) (100,026) 48,892 $6.90 52,966
51
HighTech/R&D
Northwest
Vacant Vacancy SF Rate 702,373 4.1 %
186
North Subtotal
Northeast
Bldg SF ** 17,316,810
Manufacturing
Inner Loop Subtotal
North
No. Bldgs * 501
110
5,066,278
332,478
6.6 %
422,098
422,098
0
11,247
410,113,313
24,508,118
6.0 %
1,345,549
1,345,549
7,957,550
$7.85 1,644,464
* Number of buildings calculated on specific buildings at each property address. ** Includes all general-purpose existing industrial buildings 10,000 square feet or larger. *** Rental rates are weighted and averaged based on available space.
© Copyright 2015 Commercial Gateway, the Commercial Division of the Houston Association of REALTORS ® This information has been compiled from various sources and is provided without guarantee or warranty.
Page 15
Houston-Area Industrial Statistical Summary No. of Period
Building SF
Bldgs
Vacant SF Direct
Sublease
Vacancy Rate Total
Direct
Sublease
Net Absorption Total
Direct
Sublease
Avg* Gross Total
Direct Rent
2015 Q1
410,058,682
11,244
24,463,478
1,644,464
26,107,942
6.0 %
0.4 %
6.4 %
1,345,549
74,465
1,420,014
$7.85
2014 Q4
407,009,261
11,162
23,723,788
1,533,554
25,257,342
5.8 %
0.4 %
6.2 %
3,438,921
(138,893)
3,300,028
$7.74
2014 Q3
403,641,219
11,103
25,386,647
1,378,661
26,765,308
6.3 %
0.3 %
6.6 %
1,838,712
120,501
1,959,213
$7.36
2014 Q2
401,026,467
11,062
25,620,011
1,484,062
27,104,073
6.4 %
0.4 %
6.8 %
1,614,486
(88,457)
1,526,029
$7.10
2014 Q1
398,250,752
11,026
25,541,064
1,363,465
26,904,529
6.4 %
0.3 %
6.8 %
2,076,199
148,511
2,224,710
$6.64
2013 Q4
395,636,623
10,983
27,829,835
1,941,510
29,771,345
7.0 %
0.5 %
7.5 %
3,130,396
199,060
2,909,456
$6.60
2013 Q3
393,031,489
10,945
28,709,585
2,249,174
30,958,759
7.3 %
0.6 %
7.9 %
1,406,045
85,252
1,491,297
$6.55
2013 Q2
389,943,582
10,888
27,310,889
2,174,211
29,485,100
7.0 %
0.6 %
7.6 %
1,425,939
(448,240)
977,699
$6.36
2013 Q1
387,925,057
10,856
27,749,911
1,686,838
29,436,749
7.2 %
0.4 %
7.6 %
1,332,284
27,475
1,359,759
$5.94
2012 Q4
385,627,668
10,800
26,166,605
1,714,313
27,880,918
6.8 %
0.4 %
7.2 %
2,253,851
259,860
2,513,711
$5.79
2012 Q3
384,229,572
10,775
27,843,788
1,674,442
29,518,230
7.2 %
0.4 %
7.7 %
1,386,122
8,362
1,394,484
$5.73
2012 Q2
383,666,505
10,755
29,027,944
1,682,804
30,710,748
7.6 %
0.4 %
8.0 %
1,577,285
33,946
1,611,231
$5.61
2012 Q1
382,145,332
10,732
28,771,468
1,946,440
30,717,908
7.5 %
0.5 %
8.0 %
1,389,666
335,275
1,724,941
$5.58
2011 Q4
380,629,193
10,701
29,102,208
1,939,455
31,041,663
7.6 %
0.5 %
8.2 %
2,243,257
160,320
2,403,577
$5.53
2011 Q3
379,498,117
10,679
30,566,218
2,099,775
32,665,993
8.1 %
0.6 %
8.6 %
1,639,397
68,870
1,708,267
$5.46
2011 Q2
379,345,230
10,668
32,506,898
2,094,562
34,601,460
8.6 %
0.6 %
9.1 %
96,281
(59,701)
36,580
$5.37
2011 Q1
376,655,327
10,556
31,762,112
2,013,861
33,775,973
8.4 %
0.5 %
9.0 %
337,590
(134,971)
202,619
$5.59
2010 Q4
376,381,298
10,547
31,947,762
1,878,890
33,826,652
8.5 %
0.5 %
9.0 %
497,855
(14,162)
483,693
$5.47
2010 Q3
375,047,766
10,494
32,440,351
1,853,478
34,293,829
8.6 %
0.5 %
9.1 %
314,689
585,710
900,399
$5.48
2010 Q2
374,632,104
10,488
32,617,472
2,406,522
35,023,994
8.7 %
0.6 %
9.3 %
2,901,893
147,783
3,049,676
$5.64
2010 Q1
373,651,278
10,478
34,225,364
2,534,105
36,759,469
9.2 %
0.7 %
9.8 %
1,946,252
(202,279)
1,743,973
$5.45
Rental rates are averaged and weighted based on available space. © 2015 HRIS. All rights reserved. All information is deemed reliable but is not guaranteed and should be independently verified. Page 16
Houston-Area Industrial Absorption by Type by Quarter
2015 2014
2013
2012
2011
2010
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Flex/ Manufacturing Service Center 352,081 91,910 376,040 (102,754) 125,904 427,926 95,668 252,390 169,999 454,750 (201,531) 51,980 235,712 65,704 (45,859) (63,405) 85,507 294,045 144,932 268,394 490,925 202,257 153,636 80,346 51,967 337,516 (48,612) 537,804 (146,515) 90,211 (367,424) 52,971 123,407 (46,076) 188,845 (126,114) 227,652 (113,250) 293,402 362,699 (12,387) 42,018
Warehouse/ HighTech/R&D Distribution 479,460 422,098 3,154,366 11,269 1,278,932 5,950 1,297,741 (31,313) 1,429,444 22,006 3,284,777 (4,830) 1,085,203 19,426 1,698,435 (163,232) 945,439 7,293 1,696,686 143,839 885,820 (192,880) 1,481,565 (138,262) 994,685 5,498 1,909,691 (155,626) 1,694,551 1,150 515,173 (104,439) 109,659 150,600 170,965 264,159 199,496 791 2,279,339 (33,547) 1,898,796 17,825
All Types 1,345,549 3,438,921 1,838,712 1,614,486 2,076,199 3,130,396 1,406,045 1,425,939 1,332,284 2,253,851 1,386,122 1,577,285 1,389,666 2,243,257 1,639,397 96,281 337,590 497,855 314,689 2,901,893 1,946,252
Absorption square footage includes only net absorption for direct space; sublease space is excluded. © 2015 HRIS. All rights reserved. All information is deemed reliable but is not guaranteed and should be independently verified. Page 17
Houston-Area Industrial Vacancy and Rental Rates* by Quarter
* Gross rental rates are averaged and weighted based on available space. © 2015 HRIS. All rights reserved. All information is deemed reliable but is not guaranteed and should be independently verified. Page 18