Houston’s office market weakens over the quarter and ... · 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% CBD Vacancy Suburban Vacancy 2 Houston Research Forecast Report Q1 2020 O1ce Colliers

Houston’s office market weakens over the quarter and braces itself moving forward amid $20 oil

Research & Forecast Report

HOUSTON | OFFICEQ1 2020

Lisa Bridges Director of Market Research | Houston

Commentary by Patrick Duffy MCR

Colliers generally uses this space to discuss the trends we see in market data and in conversations we have with our clients, prospects and friendly competitors. We take that data and attempt to project activity going forward. The bulk of the first quarter was, for all practical purposes, pre-COVID. Net “move-in” data, as well as new leases signed, were likely unimpacted for Q1 based on the virus or only marginally impacted. Our industry has a lead time of at least 4-6 months before a lease is signed or space made ready for occupancy. The real impact of this COVID crisis will not present in the data until later in Q2. Inertia will carry us for a few more weeks.

The world is focused on the COVID driven economic slowdown. Houston has two issues to watch – COVID and a collapse in oil prices. The oil issue is driven by Saudi Arabia and Russia failing to reach an agreement on production and by the severe decline of oil and gas demand driven by the COVID shutdown. Oil has been in the low 20’s since the collision of these two events. The Energy Information Administration is projecting that supply will continue to outpace demand for the balance of this year by approximately 10MM barrels per day. If that projection holds, all land-based storage (3.3B barrels) will be full by mid-May. We will likely not see much relief in oil prices for at least 18-24 months, which means the upstream and midstream companies and the companies that support them will be under a great deal of pressure to trim costs.

Houston has diversified its economy and is far less reliant on just oil and gas to drive its economy. However, when it comes to the office market, we are still very dependent on oil and gas companies, both directly in the space or businesses that are dependent on oil and gas companies as clients. These are the big space user companies historically.

If we optimistically assume that the virus-driven economic shutdown recovers quickly once the all-clear is given, Houston will still have a significant oil slow down to cope with. Most of the energy companies had already leaned up their workforces since the 2014 price crash. There is not a great deal of fat left in these

Summary Statistics Houston Office Market Q1 2019 Q4 2019 Q1 2020

Vacancy Rate 19.4% 19.8% 20.0%

Net Absorption 417,937 837,872 -177,916

Deliveries 73,773 0 251,672

Under Construction 2,779,924 3,898,804 4,343,232

Class A Vacancy Rate CBD Suburban

19.5%20.8%

19.3%21.3%

20.2%20.4%

Asking Rents Per Square Foot Per Year

Houston Class A $35.26 $35.60 $35.08

CBD Class A $45.89 $46.04 $44.09

Suburban Class A $32.11 $32.45 $32.21

Market IndicatorsRelative to prior period

AnnualChange

Quarterly Change

Quarterly Forecast*

VACANCY

NET ABSORPTION

DELIVERIES

UNDER CONSTRUCTION

*Projected

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10.0%

15.0%

20.0%

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CBD Vacancy Suburban Vacancy

2 Houston Research & Forecast Report | Q1 2020 | Office | Colliers International

Commentary - continued

players to trim. The ultimate impact on the office market will likely be a factor of a lack of new space acquisition vs. a significant increase in sublease space, which we saw after the 2014 price crash. We hope that overall occupancy will not substantially decline on a net basis by year-end. We are currently projecting less than a 2-5% decline in occupancy by year-end from Q1 2020 levels based on these assumptions. This marginal move would increase the overall vacancy rate by about 250 – 400 bps.

Another issue to watch is the tenants unable to make rent payments or to make reduced rent payments if possible and the impact on the owners of office buildings. There is a potential domino scenario where rent payments are delayed or lost altogether. Owners are then unable to cover their debt, and a loss of liquidity is created that could easily translate into owners being unable to fund tenant improvements and commissions for new leases. It is a little too early to tell how significant an impact this scenario will have.

If the US economy, followed by the global economy, recovers relatively quickly, Houston will get back to work. The energy sector will lag this recovery and will not help the Houston real estate market much in the next two years.

Large Sublease Availabilities (Total available in building and/or complex)

BUILDING TENANT SUBMARKET SFNoble Energy Center II Noble Energy FM 1960 437,793

Energy Tower II KTI Corporation (Technip) Katy Freeway 297,919

Twelve Greenway Plaza CPL Energy Greenway Plaza 201,554

GreenStreet Tower Reliant Energy Retail CBD 194,768

Westway Plaza GE Oil & Gas West Belt 171,016

One Shell Plaza Shell Oil CBD 191,043

1100 Louisiana Enbridge CBD 179,694

919 Milam St SNC-Lavalin Group Inc CBD 154,863

10000 Richmond Ave National Oilwell Varco Westchase 118,215

1500 Post Oak Blvd BHP Billiton Petroleum West Loop 113,565

Source: CoStar

Of the 1,662 existing office buildings in our survey, 79 buildings have 100,000 SF or more contiguous space available for lease or sublease. There are 23 options with 200,000 SF available for lease or sublease. Citywide, 5.5 million SF of sublease space is listed as available and 2.6 million SF of the space is vacant.

0

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4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Q12015

Q32015

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Q32017

Q12018

Q32018

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Q32019

Q12020

Class A Class B Houston Total

Job Growth & Unemployment(not seasonally adjusted)

UNEMPLOYMENT 2/19 2/20

HOUSTON 4.2% 3.9%

TEXAS 3.7% 3.6%

U.S. 4.1% 3.8%

JOB GROWTHAnnual Change

# of Jobs Added

HOUSTON 2.2% 68.9K

TEXAS 2.4% 306.5K

U.S. 1.6% 2.4M

CBD vs. SuburbanCLASS A OFFICE VACANCY

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

CBD Rents Suburban Rents

CLASS A OFFICE RENTS

HISTORICAL AVAILABLE SUBLEASE SPACE

AVAILABLE SUBLEASE SPACE - 100,000 SF OR GREATER


Absorption & Demand

Houston’s office market posted negative net absorption of 177,916 SF in the first quarter, a huge decrease from the 837,872 SF of positive net absorption posted in the fourth quarter of 2019. Suburban Class A space recorded the largest gain, posting 463,878 SF of positive net absorption, while suburban Class B space reported the largest loss, posting 330,799 SF of negative net absorption. Since tenants typically do not move into lease space immediately after signing a lease, absorption lags and can occur at anytime after. We believe absorption numbers will trail even longer than usual in the short-term due to the “stay-at-home” orders amid COVID-19, so absorption will more than likely remain negative moving into Q2 2020.

Rental Rates

Houston’s average asking rental rate decreased over the quarter from $29.78 per SF to $29.62 per SF, primarily due to the average CBD asking rate dropping from $40.52 per SF to $39.57 per SF. Houston’s average suburban rental rate remained relatively flat, dropping only $0.04 to $27.00 per SF. Overall, rental rates only decreased by 0.5% on a quarterly basis and by 0.3% on an annual basis. CBD Class A rates posted the largest quarterly percentage decrease of 4.2%.

Leasing Activity

Houston’s office leasing activity increased slightly over the quarter from 3.4M SF to 3.6M SF, and decreased 31% on an annual basis. Leasing activity includes new/direct, sublet, renewals, expansions in existing buildings and pre-leasing in proposed buildings. Some of the more notable transactions are listed in the table below.

Q1 2020 Select Office Lease TransactionsBUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE

The Woodlands Tower at Waterway The Woodlands 133,948 Western Midstream Partners1 Mar-20

10451 Clay Rd Katy Freeway 97,293 TGS-Nopec Geophysical Co.3 Feb-20

1501 McKinney St CBD 92,523 EDP Renewables2 Jan-20

BHP Petroleum-1500 Post Oak Blvd West Loop/Galleria 68,139 SEMPRA LNG2 Jan-20

5555 San Felipe West Loop/Galleria 28,331 Serendipity Labs1 Jan-20

Westway Plaza West Belt 27,900 EXP2 Feb-201New/Direct 2Sublease 3Renewal or Expansion

Sales Activity

Houston’s office investment sales volume decreased over the year from $704 million in Q1 2019 to $414 million in Q1 2020. The average sales price per square foot trended up from $189 to $279 per SF annually and Houston’s average office cap rate moved from 7.6% to 6.8%..

Sources: CoStar and Real Capital Analytics

$0

$50

$100

$150

$200

$250

$300

$350United States Houston

AVERAGE OFFICE SALES PRICE PER SF

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

United States Houston

AVERAGE OFFICE CAP RATE


Houston Office Market Summary (CBD, Suburban, & Overall)

INVENTORY DIRECT VACANCY SUBLEASE VACANCY VACANCY VACANCY RATE (%) NET ABSORPTION

(SF)RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q1-2020 Q4-2019 Q1-2020 Q4-2019 AVG

($/SF)

CBD

A 36 33,862,459 5,853,754 17.3% 975,241 2.9% 6,828,995 20.2% 19.3% -281,669 349,218 $44.09

B 30 8,537,257 2,893,844 33.9% 154,398 1.8% 3,048,242 35.7% 35.0% -37,178 -48,933 $31.02

C 9 569,543 78,560 13.8% 0 0.0% 78,560 13.8% 16.2% 13,591 -13,591 $17.61

Total 75 42,969,259 8,826,158 20.5% 1,129,639 2.6% 9,955,797 23.2% 22.4% -305,256 286,694 $39.57

SUBURBAN

A 400 97,893,033 18,318,791 18.7% 1,672,863 1.7% 19,991,654 20.4% 21.3% 463,878 404,332 $32.21

B 920 76,589,445 14,330,373 18.7% 451,011 0.6% 14,781,384 19.3% 18.6% -330,799 116,288 $20.86

C 267 11,352,798 928,664 8.2% 27,969 0.2% 956,633 8.4% 8.4% -5,739 3,376 $19.04

Total 1587 185,835,276 33,577,828 18.1% 2,151,843 1.2% 35,729,671 19.2% 19.2% 127,340 523,996 $27.00

OVERALL

A 436 131,755,492 24,172,545 18.3% 2,648,104 2.0% 26,820,649 20.4% 20.4% 182,209 753,550 $35.08

B 950 85,126,702 17,224,217 20.2% 605,409 0.7% 17,829,626 20.9% 20.4% -367,977 67,355 $22.57

C 276 11,922,341 1,007,224 8.4% 27,969 0.2% 1,035,193 8.7% 8.6% 7,852 16,967 $18.92

Total 1662 228,804,535 42,403,986 18.5% 3,281,482 1.4% 45,685,468 20.0% 19.8% -177,916 837,872 $29.62


(SF)RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q1-2020 Q4-2019 Q1-2020 Q4-2019 AVG

($/SF)

ALLEN PARKWAY (MIDTOWN)

A 10 2,497,830 333,370 13.3% 0 0.0% 333,370 13.3% 12.5% -21,909 94,543 $35.70

B 34 2,584,163 320,478 12.4% 5,401 0.2% 325,879 12.6% 12.7% 1,125 -55,917 $25.40

C 12 385,055 91,179 23.7% 0 0.0% 91,179 23.7% 26.8% 11,872 -98 $30.15

Total 56 5,467,048 745,027 13.6% 5,401 0.1% 750,428 13.7% 12.8% -8,912 38,528 $30.59

BAYTOWN

B 2 114,474 11,285 9.9% 0 0.0% 11,285 9.9% 9.9% 0 383 $22.95

C 2 41,208 10,513 25.5% 0 0.0% 10,513 25.5% 25.5% 0 0 $0.00

Total 4 155,682 21,798 14.0% 0 0.0% 21,798 14.0% 4.1% 0 383 $21.45

BELLAIRE

A 6 1,173,781 89,541 7.6% 18,070 1.5% 107,611 9.2% 8.8% -4,261 52,247 $29.32

B 15 1,739,507 156,883 9.0% 0 0.0% 156,883 9.0% 4.9% -71,217 -3,075 $22.61

C 5 283,569 29,094 10.3% 0 0.0% 29,094 10.3% 10.4% 284 -1,074 $18.09

Total 26 3,196,857 275,518 8.6% 18,070 0.6% 293,588 9.2% 8.4% -75,194 48,098 $24.31

CONROE AND OUTLYING MONTGOMERY CO

A 2 84,913 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00

B 9 364,423 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00

C 6 247,634 4,500 1.8% 0 0.0% 4,500 1.8% 2.4% 1,410 0 $0.00

Total 17 696,970 4,500 0.6% 0 0.0% 4,500 0.6% 1.8% 1,410 0 $0.00

E. FORT BEND CO SUGAR LAND

A 18 3,555,980 351,678 9.9% 62,831 1.8% 414,509 11.7% 10.9% -25,399 -22,305 $33.64

B 35 1,962,975 175,743 9.0% 13,907 0.7% 189,650 9.7% 12.9% 64,361 12,017 $25.62

C 2 46,239 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00

Total 55 5,565,194 527,421 9.5% 76,738 1.4% 604,159 10.9% 11.8% 38,962 -10,288 $30.97

Houston Suburban Office Market Summary


Houston Suburban Office Market Summary - Continued


(SF)RENTAL

RATE

CLASS # OF BLDGS.

TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q1-2020 Q4-2019 Q1-2020 Q4-2019 AVG

($/SF)

FM 1960 A 14 3,115,309 501,359 16.1% 38,142 1.2% 539,501 17.3% 16.5% -24,656 24,832 $27.29B 68 4,591,517 1,192,911 26.0% 18,116 0.4% 1,211,027 26.4% 26.7% 12,683 -22,053 $16.89C 25 874,085 64,203 7.3% 0 0.0% 64,203 7.3% 6.0% -11,580 9,068 $16.88Total 107 8,580,911 1,758,473 20.5% 56,258 0.5% 1,814,731 21.1% 16.8% -23,553 11,847 $19.85GREENWAY PLAZAA 19 6,688,440 1,229,055 18.4% 108,097 1.6% 1,337,152 20.0% 21.1% 72,383 -271,192 $37.98B 33 3,608,497 453,322 12.6% 24,096 0.7% 477,418 13.2% 12.5% -25,863 1,161 $29.94C 10 350,055 34,883 10.0% 1,700 0.5% 36,583 10.5% 9.8% -2,107 2,391 $26.60Total 62 10,646,992 1,717,260 16.1% 133,893 0.5% 1,851,153 17.4% 17.5% 44,413 -267,640 $35.63GULF FREEWAY PASADENA A 2 105,782 1,295 1.2% 0 0.0% 1,295 1.2% 1.2% 0 0 $32.03B 41 2,309,502 249,509 10.8% 52,883 2.3% 302,392 13.1% 14.3% 27,741 -20,923 $20.50C 22 789,888 111,938 14.2% 0 0.0% 111,938 14.2% 14.2% 0 -13,404 $24.44Total 65 3,205,172 362,742 11.3% 52,883 1.6% 415,625 13.0% 14.6% 27,741 -34,327 $21.21I-10 EASTB 6 427,851 69,160 16.2% 0 0.0% 69,160 16.2% 13.8% -10,116 2,033 $18.48C 4 150,124 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00Total 10 577,975 69,160 12.0% 0 0.0% 69,160 12.0% 16.3% -10,116 2,033 $18.48KATY FREEWAYA 85 21,936,756 3,384,264 15.4% 554,437 2.5% 3,938,701 18.0% 19.5% 331,781 418,316 $36.29B 108 9,868,965 2,261,024 22.9% 67,500 0.7% 2,328,524 23.6% 24.3% 64,706 66,472 $22.84C 28 1,242,343 61,614 5.0% 4,769 0.4% 66,383 5.3% 4.4% -11,775 -699 $20.23Total 221 33,048,064 5,706,902 17.3% 626,706 1.9% 6,333,608 19.2% 22.0% 384,712 484,089 $30.79KATY GRAND PARKWAYA 16 1,657,394 275,008 16.6% 42,848 2.6% 317,856 19.2% 19.4% 3,666 -35,269 $29.25B 17 1,140,506 28,508 2.5% 0 0.0% 28,508 2.5% 1.8% -7,712 -13,568 $30.72C 2 149,262 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00Total 35 2,947,162 303,516 10.3% 42,848 1.5% 346,364 11.8% 10.1% -4,046 -48,837 $29.39KINGWOOD HUMBLEB 16 1,235,229 80,337 6.5% 0 0.0% 80,337 6.5% 6.4% -711 -7,169 $22.19C 5 153,601 4,175 2.7% 0 0.0% 4,175 2.7% 1.4% -2,047 1,265 $22.86Total 21 1,388,830 84,512 6.1% 0 0.0% 84,512 6.1% 6.2% -2,758 -5,904 $22.22NASA CLEAR LAKE A 10 1,601,484 186,740 11.7% 27,661 1.7% 214,401 13.4% 12.9% -7,232 -11,302 $26.06B 43 2,819,129 605,080 21.5% 1,185 0.0% 606,265 21.5% 21.1% 5,917 15,455 $19.36C 15 440,364 54,131 12.3% 0 0.0% 54,131 12.3% 13.0% 3,183 3,014 $17.70Total 68 4,860,977 845,951 17.4% 28,846 1.4% 874,797 18.0% 22.9% 1,868 7,167 $20.73NORTH BELT GREENSPOINT

A 24 5,419,685 3,172,766 58.5% 4,287 0.1% 3,177,053 58.6% 58.6% 1,131 19,849 $21.21B 54 5,538,945 1,905,022 34.4% 3,551 0.1% 1,908,573 34.5% 34.8% 21,185 2,679 $15.16C 22 1,196,594 104,734 8.8% 0 0.0% 104,734 8.8% 8.2% -6,785 16,835 $11.46Total 100 12,155,224 5,182,522 42.6% 7,838 1.4% 5,190,360 42.7% 44.3% 15,531 39,363 $18.79NORTHEAST NEAR AND OUTLIERA 3 642,223 14,025 2.2% 0 0.0% 14,025 2.2% 2.2% 0 6,355 $0.00B 4 183,158 29,661 16.2% 4,000 2.2% 33,661 18.4% 10.1% -15,169 4,101 $20.95C 2 56,562 26,538 46.9% 0 0.0% 26,538 46.9% 29.3% -9,960 -628 $15.00Total 9 881,943 70,224 8.0% 4,000 0.5% 74,224 8.4% 6.3% -25,129 9,828 $14.52




(SF)RENTAL

RATE

CLASS # OF BLDGS.


(%) (SF) RATE (%)

TOTAL (SF) Q1-2020 Q4-2019 Q1-2020 Q4-2019 AVG

($/SF)

NORTHWEST AND NORTHWEST OUTLIERA 9 1,986,421 609,634 30.7% 7,233 0.4% 616,867 31.1% 33.7% 53,112 79,220 $25.45B 72 5,504,708 862,223 15.7% 10,567 0.2% 872,790 15.9% 16.9% 58,388 11,944 $19.57C 32 1,295,439 43,326 3.3% 0 0.0% 43,326 3.3% 3.7% 4,901 0 $13.06Total 113 8,786,568 1,515,183 17.2% 17,800 0.2% 1,532,983 17.4% 20.0% 116,401 91,164 $21.75RICHMOND FOUNTAINVIEWB 14 852,602 118,853 13.9% 0 0.0% 118,853 13.9% 15.2% 10,529 -285 $17.09C 9 314,300 3,582 1.1% 0 0.0% 3,582 1.1% 1.6% 1,357 -4,775 $15.59Total 23 1,166,902 122,435 10.5% 0 0.0% 122,435 10.5% 12.7% 11,886 -5,060 $17.05SAN FELIPE VOSSA 3 1,720,793 371,331 21.6% 19,222 1.1% 390,553 22.7% 23.4% 12,825 -36,115 $34.85B 33 3,395,344 656,146 19.3% 5,933 0.2% 662,079 19.5% 18.5% -34,795 34,671 $23.96Total 36 5,116,137 1,027,477 20.1% 25,155 0.5% 1,052,632 20.6% 22.0% -21,970 -1,444 $27.90SOUTH B 11 331,493 38,492 11.6% 0 0.0% 38,492 11.6% 11.3% -1,087 -7,871 $26.75C 4 165,387 23,477 14.2% 0 0.0% 23,477 14.2% 14.2% 73 0 $28.20Total 15 496,880 61,969 12.5% 0 0.0% 61,969 12.5% 8.0% -1,014 -7,871 $27.26SOUTH MAIN MEDICAL CENTERB 10 842,173 137,967 16.4% 1,500 0.2% 139,467 16.6% 19.7% 26,383 3,950 $20.05C 10 842,173 137,967 16.4% 1,500 0.2% 139,467 16.6% 19.7% 26,383 3,950 $20.05Total 20 1,684,346 275,934 16.4% 3,000 0.2% 278,934 16.6% 9.7% 52,766 7,900 $16.65SOUTHEASTB 14 1,137,999 26,375 2.3% 0 0.0% 26,375 2.3% 2.2% -1,201 -880 $15.80C 2 322,220 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00Total 16 1,460,219 26,375 1.8% 0 0.0% 26,375 1.8% 8.1% -1,201 -880 $15.91SOUTHWESTA 6 1,586,913 441,137 27.8% 0 0.0% 441,137 27.8% 30.2% 38,584 14,724 $17.72B 59 5,890,803 1,146,422 19.5% 80,120 1.4% 1,226,542 20.8% 20.8% -2,448 79,307 $16.03C 28 1,332,136 95,045 7.1% 0 0.0% 95,045 7.1% 6.4% -9,382 -12,969 $13.31Total 93 8,809,852 1,682,604 19.1% 80,120 0.9% 1,762,724 20.0% 19.3% 26,754 81,062 $16.32

SOUTHWEST FAR AND OUTLIER A 2 158,720 40,681 25.6% 0 0.0% 40,681 25.6% 25.6% 0 0 $0.00B 13 926,040 218,589 23.6% 0 0.0% 218,589 23.6% 23.9% 40,647 0 $0.00C 3 91,661 2,500 2.7% 0 0.0% 2,500 2.7% 7.6% 4,500 0 $0.00Total 18 1,176,421 261,770 22.3% 0 0.0% 261,770 22.3% 22.9% 45,147 0 $26.23THE WOODLANDS A 57 13,033,408 950,759 7.3% 97,556 0.7% 1,048,315 8.0% 8.9% 277,596 79,704 $38.58B 62 4,231,965 785,057 18.6% 44,018 1.0% 829,075 19.6% 10.3% -391,360 35,556 $32.18C 6 169,558 2,220 1.3% 0 0.0% 2,220 1.3% 0.0% -2,220 500 $19.29Total 125 17,434,931 1,738,036 10.0% 141,574 0.8% 1,879,610 10.8% 9.8% -115,984 115,760 $35.66WEST BELTA 29 3,732,820 700,094 18.8% 173,756 4.7% 873,850 23.4% 19.7% -138,347 -80,817 $27.52B 37 2,038,552 350,035 17.2% 75,954 3.7% 425,989 20.9% 20.8% -2,078 -21,909 $21.63C 4 112,629 0 0.0% 20000 17.8% 20,000 17.8% 17.8% 0 0 $0.00Total 70 5,884,001 1,050,129 17.8% 269,710 4.6% 1,319,839 22.4% 28.8% -140,425 -102,726 $25.56

7 Houston Research & Forecast Report | Q1 2020 | Office | Colliers International7

Office Development Pipeline

4.3 million SF of office space is under construction and approximately 57% is pre-leased. 2.5 million SF is spec development of which 27% is pre-leased. Below is a summary of the office buildings under construction with a GBA of 150,000 SF or greater.

BUILDING NAME ADDRESS SUBMARKET SF PRE-LEASED DEVELOPER/CONTRACTOR EST.

DELIVERY

Texas Tower 845 Texas Ave CBD 1,101,856 39.1% Hines Securities, Inc. Oct-21

Marathon Oil 990 Town & Country Blvd Katy Freeway 440,000 94.9% Hines Dec-21

Crown Castle International 8020 Katy Freeway Katy Freeway 420,000 100% Excel Commercial Jan-21

Insperity Campus Bldg 5 US-59 N & Kingwood Dr. Kingwood/Humble 270,000 100% Insperity with D E Harvey Cleary Jun-20

Park Place | River Oaks 4200 Westheimer West Loop 207,202 28.8% Stonelake Capital Partners May-20

9753 Katy Fwy 9753 Katy Freeway Katy Freeway 190,000 15.1% MetroNational Corporation Jun-21

Katy Ranch Phase II 24279 Katy Freeway Katy/Grand Pkwy West 150,900 0% Freeway Properties Sep-20

Village Tower II 9655 Katy Freeway Katy Freeway 150,000 0% Moody National Companies Mar-21

Village Tower I 9655 Katy Freeway Katy Freeway 150,000 90% Moody National Companies Jun-20

Post Houston 401 Franklin St CBD 150,000 19.3% Lovett Commercial Feb-21



(SF)RENTAL

RATE

CLASS # OF BLDGS.


(%) (SF) RATE (%)

TOTAL (SF) Q1-2020 Q4-2019 Q1-2020 Q4-2019 AVG

($/SF)

WEST LOOPA 52 17,427,019 3,260,964 18.7% 231,831 1.3% 3,492,795 20.0% 20.2% 32,370 131,513 $38.09B 48 5,304,199 745,920 14.1% 33,414 0.6% 779,334 14.7% 14.7% 1,078 81,981 $26.39C 3 153,712 13,034 8.5% 0 0.0% 13,034 8.5% 8.6% 129 0 $19.50Total 103 22,884,930 4,019,918 17.6% 265,245 1.2% 4,285,163 18.7% 18.9% 33,577 213,494 $35.86WESTCHASEA 33 9,767,362 2,405,090 24.6% 286,892 2.9% 2,691,982 27.6% 26.2% -137,766 -59,971 $34.84B 62 7,644,726 1,705,371 22.3% 8,866 0.1% 1,714,237 22.4% 21.1% -101,785 -81,772 $21.76C 4 147,000 10,011 6.8% 0 0.0% 10,011 6.8% 4.1% -3,975 0 $14.50Total 99 17,559,088 4,120,472 23.5% 295,758 1.7% 4,416,230 25.2% 19.8% -243,526 -141,743 $28.65

31600 TRAVIS

600 Travis Street1,656,529 / 22,575 / 75

80.5%484,772192,461$45.37

1.0Hines

717 TEXAS717 Texas Avenue

697,541 / 21,127 / 3356.5%

303,126273,174$45.30

2.1Hines

TC ENERGY CENTER700 Louisiana Street

1,268,480 / 25,000 / 5675.4%

349,54183,381$45.81

2.0M-M Properties

2TEXAS TOWER

845 Texas Avenue1,101,856 / 30,700 / 47

39.1%671,342671,342$65.00

1.5Hines

BUILDING NAMEADDRESS

RBA / AVG FLOOR / # OF FLOORS% LEASED

TOTAL AVAILABLE SFMAX CONTIGUOUS SF

QUOTED RATE**PARKING RATIO

OWNER

AVAILABLE* SUBLEASE*

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

1100 LOUISIANA1100 Louisiana Street

1,327,882 / 23,060 / 5598.0%489,471181,718$43.70

1.8Enterprise Products

Partners L.P.

HERITAGE PLAZA1111 Bagby Street

1,149,635 / 26,652 / 51100%

104,47087,000$53.85

2.4AEW CapitalManagement

CENTERPOINT ENERGY1111 Louisiana Street

1,081,251 / 22,968 / 47100%

00

N/A2.5

CenterPoint Energy, Inc.

ONE ALLEN CENTER500 Dallas Street

993,297 / 29,229 / 3486.3%

234,72070,171

$46.501.0

Brook�eld O�ceProperties, Inc.

KINDER MORGAN BLDG.1001 Louisiana Street937,003 / 28,510 / 32

100%124,600124,600

N/A1.0

Kinder Morgan, Inc.

2120 25242322WELLS FARGO PLAZA1000 Louisiana Street1,721,242 / 24,243 / 71

73.6%480,777101,773$47.86

1.7New York State Common

Retirement Fund





OWNER

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

811 MAIN STREET811 Main Street

972,474 / 27,000 / 46100%74,65974,659$53.00

1.2Invesco Advisers, Inc.

ONE SHELL PLAZA910 Louisiana Street

1,228,923 / 24,572 / 5088.8%153,572125,887$43.65

0.3Busycon Properties LLC

NORTH BLDG700 Milam Street

694,021 / 20,523 / 3670.2%

199,066149,954$44.95

3.0Metropolis Investment

Holdings Inc.

2 HOUSTON CENTER909 Fannin Street

1,024,956 / 25,624 / 4074.7%

276,90868,043$43.83

1.0Brook�eld Asset Management Inc.

LYONDELLBASELL TOWER1221 McKinney Street

1,065,215 / 24,000 / 4688.9%212,07194,080$45.79



588,423 / 31,500 / 2660.0%231,532114,504$47.46

2.0Busycon Properties LLC

SOUTH BLDG711 Louisiana Street

666,762 / 20,000 / 3462.9%

298,491207,758$44.95

3.0Metropolis Investment

Holdings Inc.

FULBRIGHT TOWER1301 McKinney Street

1,247,061 / 24,452 / 5169.3%

489,02775,376$49.68


5 HOUSTON CENTER1401 McKinney Street580,875 / 29,649 / 27

65.0%206,046124,756$49.40

2.0Spear Street Capital

1211

15

134 5 106PENNZOIL PLACE609 MAIN AT TEXAS

609 Main Street1,057,237 / 28,000 / 48

94.5%109,08339,144

$58.001.7

Hines

9

ONE CITY CENTRE1021 Main Street

608,660 / 21,266 / 2976.9%512,351187,693$30.61

2.3Accesso Partners, LLC

1000 MAIN1000 Main Street

837,161 / 23,333 / 3678.8%

204,079144,394$49.72

1.71000 Main Llc

1001 FANNIN1001 Fannin Street

1,385,212 / 27,210 / 4997.1%

568,516393,634$44.97

1.0JMB Financial Advisors

191716HILCORP ENERGY TOWER

1111 Main Street406,600 / 17,678 / 23

95.7%00

N/AN/A

Hilcorp Ventures Inc.

18

CLASS A OFFICE BUILDINGSCENTRAL BUSINESS DISTRICT HOUSTON, TEXAS

FEBRUARY 2020

393,634 SFAvailable

March 2022

187,693 SFAvailable

January 2021

87,000 SFAvailable

December 2020

Under Construction Delivering

10/21

14

Bank of America Tower800 Capitol St

780,341 / 31,402 / 3585.1%96,34431,750

$39.00 NNN2.0

Busycon Properties LLC

7 8

0

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Available Sublease SpaceCentral Business District

Class A Class B

Available Sublease SpaceQ4 2019

Class A: 1,381,239 SF or 3.9%Class B: 238,252 SF or 2.8%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

$22.00$24.00$26.00$28.00$30.00$32.00$34.00$36.00$38.00$40.00$42.00$44.00$46.00$48.00

Class A Rental Rate and Vacancy Percentage Central Business District - Houston, TX

CBD Class A Rents CBD Class A Vacancy

*Vacancy percentage includes direct and sublease space.

AVAILABLE* SUBLEASE*





OWNER


1,157,690 / 25,263 / 40100%

00

N/A1.1

ChevronTexaco Corp.

1301 FANNIN OFFICE TOWER1301 Fannin Street

784,143 / 26,000 / 2477.0%121,81667,544$38.63

1.0Netrality Properties

1400 SMITH1400 Smith Street

1,250,677 / 25,013 / 50100%

00

N/AN/A

Chevron Corporation

1600 SMITH1600 Smith Street

1,098,399 / 23,000 /5157.9%

462,788304.302$38.94

1.0Brook�eld O�ce Properties, Inc.

WEDGE INT’L TOWER1415 Louisiana Street520,475 / 18,000 / 43

53.9%265,471119,708$34.11

2.7Wedge Group, Inc.

HESS TOWER1501 McKinney Street844,763 / 30,500 /29

100%61,68261,682N/A1.5

H&R REIT

GreenStreet1201 Fannin Street

275,223 / 25,020 / 1196.6%

252,919194,768

N/A1.5

Midway Companies/Lionstone Investments

31 3229 3330 34 35

TWO ALLEN CENTER1200 Smith Street

995,623 / 26,613 / 3668.4%

407,377171,358$45.62

1.0Brook�eld O�ceProperties, Inc.

THREE ALLEN CENTER333 Clay Street

1,194,719 / 25,000 /5087.3%

193,20492,453$46.74

1.0Brook�eld O�ceProperties, Inc.

TOTAL PLAZA1201 Louisiana Street

843,533 / 24,600 / 3596.6%28,4268,867

$43.371.0

Brook�eld O�ceProperties, Inc.

2826 27

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75 CLASS A OFFICE BUILDINGSCENTRAL BUSINESS DISTRICT HOUSTON, TEXAS

FEBRUARY 2020

*Gold and white indicators are approximate only at the time of printing and are presented to show approximatepercentage of available space by �oor/building. All indicators are left-to-right and are not meant to show locationof available space.

**Rental rates listed are net + operating expenses.

196,770 SF Sublease thru 12/2020

Direct after 12/2020

COLLIERS INTERNATIONAL1233 West Loop South, Suite 900

Houston, TX 77027www.colliers.com/texas

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Available Direct SpaceCentral Business District

Class A Class B

Available Direct SpaceQ4 2019

Class A: 8,044,696 SF or 22.9%Class B: 3,181,043 SF or 37.2%

28

3

4

56

1

12

11

9

8

10

29

19

1817

16

27 2322

31

2628

21

1420

15

13

2425

32

3334

35

30

7

2

Skylines | Now Available Online at colliers.com/houstonA skyline view of available space for ten of Houston’s Class A office submarkets including the CBD, Galleria, Energy Corridor, Greenway Plaza, NASA/Clear Lake, North Belt, Sugar Land, The Woodlands, West Belt and Westchase, is now available online.

https://www2.colliers.com/en/United-States/Cities/Houston



8 North American Research & Forecast Report | Q4 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.

Colliers International | Market000 Address, Suite # 000 Address, Suite #+1 000 000 0000colliers.com/<<market>>

8 North American Research & Forecast Report | Q4 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 | Houston1233 West Loop South, Suite 900 Houston, Texas 77027+1 713 222 2111colliers.com/houston

FOR MORE INFORMATIONLisa Bridges CPRCDirector of Market Research | Houston+1 713 830 [email protected]

Colliers statistical criteria includes all general purpose multi and single tenant office buildings 20,000 SF or greater.

Patrick Duffy MCRPresident | Houston+1 713 830 [email protected]

Quoted gross rental rates for existing top performing office buildings

BUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR BUILT

% LEASED

AVAIL. SF

RENT($/SF) OWNER

San Felipe Place 2229 San Felipe Allen Parkway/Midtown

167,562 2015 94.0% 8,594 $49.63 Hines

1100 Louisiana 1100 Louisiana St CBD 1,327,882 1980/2019

98.0% 489,471 $43.70 Enterprise Products Partners L.P.

609 Main at Texas 609 Main St CBD 1,057,237 2017 94.4% 68,243 $56.00 Hines Securities, Inc.

Kirby Grove 2925 Richmond Ave Greenway Plaza 248,275 2015 96.2% 35,609 $47.33 Midway Companies

CityCentre Four 840 W Sam Houston Pky Katy Freeway 120,052 2013 97.6% 5,511 $50.00 Midway

Town Centre One 750 Town & Country Blvd Katy Freeway 253,714 2015 98.9% 11,450 $45.59 Moody Rambin

Williams Tower 2800 Post Oak Blvd West Loop/Galleria 1,476,973 1983 92.6% 344,263 $45.00 Invesco Real Estate

Two BriarLake Plaza 2050 W Sam Houston Pky S Westchase 333,100 2000 88.1% 54,119 $45.47 Cousins Properties Inc.

Theww Hughes Landing 1780 Hughes Landing Blvd The Woodlands 320,815 2015 89.0% 35,342 $42.94-$45.44

The Howard Hughes Corporation

Note: Available SF includes direct and sublet space as well as any future available space currently listed. Source: CoStar Property

Q1 2020 Houston Office Highlights

20% -177,916 SFVACANCY QUARTERLY ABSORPTION

CLASS A: 58% CLASS B: 37% CLASS C: 5%TOTAL INVENTORY BY CLASS

CURR

ENT

131.8M SF 85.1M SF

11.9M SF

TOTAL OFFICEINVENTORY 228.8M SF

8.0M SF4.0M SF

LEASINGACTIVITY

-31%ANNUALDECREASE

UNDERCONSTRUCTION 4.3M SF

NEWCONSTRUCTION(DELIVERIES)251,672 SF

http://colliers.com/texas/houstonoffice

https://www.facebook.com/colliersintlhouston

https://www.linkedin.com/company/5227

https://twitter.com/colliers_hou

Our philosophyrevolves around the fact

that the bestpossible results come

from linking our globalenterprise with

local advisors whounderstand your

business, your market,and how to

integrate real estateinto a successfulbusiness strategy.

C O L L I E R S I N T E R N A T I O N A L G L O B A L L O C A T I O N S

COMMERCIAL REAL ESTATE SECTORS REPRESENTED

OFF

ICE

IND

US

TR

IAL

LAN

D

RE

TAIL

HE

ALT

HC

AR

E

MU

LTIF

AM

ILY

HO

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$127BTRANSACTION VALUE

2BSF UNDER MANAGEMENT

$3.3BIN REVENUE

438OFFICES

17,300PROFESSIONALS

340ACCREDITED MEMBERS

68COUNTRIES

SIOR

ADVANTAGEColliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including a�liates), with more than $26 billion of assets under management.

Colliers professionals think di�erently, share great ideas and o�er thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing �rms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services �rm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

PROPERTY POSITIONING

& MARKETINGREAL ESTATEINVESTMENT

VALUATION &

ADVISORYCORP

ORAT

E

SOLU

TIONS

MANAGEMENT

REAL ESTATE

REPRESENTATION

LANDLORDREPRESENTATION

TENANT

LOCAT

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INTE

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MARKET

RESE

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MAR

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PROJECT

MANAGEM

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COLLIERSSPECIALIZATIONS

andREAL ESTATE SERVICE

REPRESENTATION

DATA

CEN

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HEA

LTHCARE

HOTELS & HOSPITALITY SERVICES INDUSTRIAL LAND

HOUSING & MULTIFAMILY SERVICES MARINA, LEISURE & GOLF COURSE

OFFICE R

ETAI

L

SP

ECIA

L PU

RPOS

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Documents

Houston’s office market weakens over the quarter and ... · 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% CBD Vacancy Suburban Vacancy 2 Houston Research Forecast Report Q1 2020 O1ce Colliers