OFFICE & INDUSTRIAL MARKET REPORT YEAR END 2020

2900 Weslayan Street, 713-647-6400 [email protected] Ste 620 Houston, TX 77027. CONTENTS

OFFICE MARKET REPORT

2 OVERVIEW

3 LEASING

8 RENT

10 CONSTRUCTION

12 UNDER CONSTRUCTION PROPERTIES

13 SALES

15 SALES PAST 12 MONTHS

17 HOUSTON OFFICE SUBMARKETS MAP

INDUSTRIAL MARKET REPORT

21 OVERVIEW

23 LEASING

28 RENT

30 CONSTRUCTION

31 UNDER CONSTRUCTION PROPERTIES

32 SALES

34 SALES PAST 12 MONTHS

36 HOUSTON INDUSTRIAL SUBMARKETS MAP

NOTE: The data provided within this report is sourced from CoStar Group, Inc.

PAGE 1 OFFICE MARKET REPORT

OVERVIEW

12 Mo Deliveries in SF 12 Mo Net Absorption in SF Vacancy Rate 12 Mo Rent Growth 2.5 M (4.3 M) 18.2% -0.9%

While some positives are beginning to emerge, it continues The energy industry faced challenges prior to the pandemic, to be tough sledding for Houston’s office market. Lower including lower oil prices and a general retreat in capital from oil prices and the pandemic have caused tenants to delay Wall Street last year following several years of lackluster leasing decisions this year, and the market has been earnings. plagued by large energy tenant move outs. Sales volume is also down considerably over the same period last year, as The longer-term outlook also offers some hope. Beyond the the market remains in a period of price discovery. Yet that pent-up demand, pandemics tend to leave a sharp recovery may be ending, as a few landmark transactions closed in the in the wake of a steep decline in economic activity. The fourth quarter. Developers and investors alike continue to recovery should help at least half of Houston’s economy in eye the best locations in Houston along with select pockets the nation’s fifth-largest metropolitan area. of opportunity. Investor confidence in large, value-add redevelopment plays As of the fourth quarter, high-frequency data showed that shows a belief in the vibrant city’s ability to turn around less than 40% of Houston’s office workers were physically following the pandemic. After all, Houston ranks as one back in the office, which was surprisingly one of the highest of the nation’s major cities that has lost the least number rates in the country. New coronavirus cases in Houston had of jobs this year. It also continues to lead the nation in begun to tick up again at the beginning of the fourth quarter population growth, along with Dallas and Phoenix. Moreover, after several months of decline, calling into question the nascent commercial life sciences and tech industries offer metro’s nascent recovery. hope for the city’s future economic viability.

KEY INDICATORS

Market Availability Net Absorption Deliveries Under Current Quarter RBA Vacancy Rate Rent Rate SF SF Construction 4 & 5 Star 1451,616,697 20.5% $34.47 25.5% (39,697) 0 4,985,084 3 Star 137,878,871 18.3% $24.70 21.0% (229,430) 0 931,459 1 & 2 Star 49,245,409 11.1% $21.01 13.3% (8,597) 0 6,285 Market 338,740,977 18.2% $28.61 21.9% (277,724) 0 5,922,828

Historical Forecast Annual Trends 12 Month Peak When Trough When Avg. Avg. Vacancy Change (YOY) 1.8% 13.2% 17.1% 18.2% 2021 Q1 8.9% 1999 Q1 Net Absorption SF (4.3 M) 2,759,296 4,096,984 9,721,975 2014 Q2 (4,065,182) 2020 Q4 Deliveries SF 2.5 M 5,140,302 4.022,249 13,474,386 2015 Q4 1,250,218 2010 Q4 Rent Growth -0.9% 1.6% 2.4% 14.5% 2008 Q1 -6.3% 2009 Q4 Sales Volume $726 M $1.8B N/A $4.9B 2013 Q3 $258.7M 2009 Q4

PAGE 2 LEASING

Leasing volume is down more than a third this year And consulting firm EAG Services leased 9,000 SF at 1415 compared with the same period last year. The energy Louisiana in October. This will nearly double its existing industry faced challenges prior to the pandemic, including footprint in the building, which it moved to in 2018 from lower oil prices and a general retreat in capital from Wall 19 Briar Hollow Lane in Post Oak Park. The 15-year-old Street late last year following several years of lackluster women-led enterprise specializes in technology and services earnings. Yet the real falloff in leasing activity this year change management for upstream and midstream oil and came after the onset of the pandemic. And with prevailing gas businesses. uncertainty about when most of Houston’s office workers will return to office buildings, leasing activity may continue to be Year to date, Houston’s office market has experienced -4.3 slow in subsequent quarters. million SF of negative net absorption, the worst year in the past two decades and more than double the move outs Speaking to the current stagnation in Houston’s office during the trough of the shale bust in 2017. A vacancy rate market, the four largest leases last quarter were all under of 18.2% today is among the highest out of all markets that 50,000 SF, including two 9,000-SF leases. Yet they all CoStar tracks. Only New York, L.A., and San Francisco saw represent Houston’s dominant economic drivers: the energy office tenants shed more space this year. Other markets with and healthcare industries and the Port of Houston. heavy exposure to the oil and gas industry both here and abroad, including Dallas, Calgary, and Aberdeen, also have Yang Ming leased 35,000 SF at the Reserve at Westchase some of the highest vacancy rates. in October. The major Taiwanese shipping line is relocating from 3 Sugar Creek in Sugar Land. Asking rents at the The largest move-in during the fourth quarter involved Reserve at Westchase, which is home to the largest block Harris Health System occupying 305,000 SF at the former of contiguous available slab space in the Westchase Chevron/Texaco building in Bellaire. This move follows Submarket, are being offered at a 25% to 40% discount to 3 Methodist Health System backfilling 100,000 SF at the Sugar Creek. building in March 2020. In doing so, SLS, which purchased the property from Chevron in late 2018, has proven the Digital healthcare company Preventice Solutions leased viability of continuing to convert corporate office buildings in 20,000 SF for one year at Greens Crossing in November in Bellaire into medical/healthcare uses. order to accommodate COVID-19-related social distancing requirements. The company is a leader in digital healthcare Additionally, Waste Management relocated and consolidated solutions and remote cardiac monitoring services powered into 285,000 SF at the new Tower in by cloud, deep learning, AI, and data analytics. And Houston . is home to one of the company’s two national Medicare Independent Diagnostic Testing Facilities at nearby 1717 Yet move-outs since the third quarter clearly exceeded any North Sam Houston Pkwy. West. positive absorption activity. Houston has been plagued by several sizable move-outs. There are eight companies that Laparoscopic Consultants leased 9,000 SF at the new vacated more than 80,000 SF each since July, including Museo Plaza office building in November, which is expected AT&T, Waste Management, BHP Billiton Petroleum, KBR, to deliver in the third quarter of 2021. The practice will move Oasis Petroleum, ExxonMobil, W&T Offshore, and Deloitte. from nearby 1200 Binz, which was built in 1985. The move also shows that medical tenants are willing to pay more The aforementioned Waste Management vacated 330,000 for high-quality medical office space in the Texas Medical SF since July across two buildings, and Center area, where new medical office space is in short 1001 Fannin, as part of its move to the new Bank of America supply. Tower downtown. As part of the consolidation, Waste Management vacated a net of 45,000 SF in downtown.

PAGE 3 BHP Billiton Petroleum, which sold its U.S. unconventional than half of BHP’s resulting sublease space was backfilled assets to BP in 2018 for $10.5 billion, vacated 230,000 SF at by tenants such as Sempra LNG and Sumitomo’s U.S. 1500 Post Oak since July, even though the company retained unconventional oil and gas operations, rebranded as Summit its conventional oil and gas operations. Meanwhile, more Discovery Resources.

NET ABSORPTION, NET DELIVERIES & VACANCY

VACANCY RATE

PAGE 4 AVAILABILITY RATE

PAGE 5 12 MONTH NET ABSORPTION SF IN SELECTED BUILDINGS

Net Absorption SF Building Name/Address Submarket Bldg SF Vacant SF 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 12 Month 4800 Fournace Pl Bellaire 452,370 0 0 0 0 0 391,452 Bank of America Tower CBD 780,341 84,240 0 0 0 0 342,823 Energy Center (1) Katy Freeway West 524,399 0 0 0 0 0 165,844 CBD 1,228,923 135,545 0 0 0 0 163,150 Alight Solutions The Woodlands 180,000 0 0 0 0 0 153,999 15150 Memorial Dr Katy Freeway West 155,175 0 0 0 0 0 132,760 Village Tower I Katy Freeway East 150,000 21,813 0 0 0 0 128,187 Energy Center (2) Katy Freeway West 332,000 160,907 0 0 0 0 120,935 Westchase Park Westchase 293,135 23,168 51,246 0 0 0 115,011 Imperial 20 Greenspoint/N Belt... 112,138 0 0 0 0 0 105,710 Kirby Collection 246,989 0 0 0 0 0 105,692 CBD 844,763 61,682 0 0 0 0 92,523 Gallaria/Uptown 496,608 62,244 0 0 0 0 87,954 CityWestPlace Westchase 443,551 0 0 0 0 0 86,718 Memorial 6 Center Katy Freeway West 156,034 2,237 96,592 0 0 0 86,548 Deerwood Glen Business Park Gulf Freeway/Pasad.. 98,230 12,517 0 0 0 0 80,613 717 Texas CBD 697,1955 241,637 0 0 0 0 78,632 Subtotal Primary Competitors 7,191,851 805,244 147,838 0 0 0 2,438,551

Remaining Houston Market 331,549,126 60,930,511 (425,562) 0 0 0 (6,729,579)

Total Houston Market 338,740,977 61,735 (277,724) 0 0 0 (4,291,028)

PAGE 6 TOP OFFICE LEASES PAST 12 MONTHS

Building Name/Address Submarket Leased SF Qtr Tenant Name Tenant Rep Compa… Leasing Rep Company Greenway Plaza * Greenway Plaza 801,967 Q2 20 Occidental - Parkway Realty Manag…

TC Energy Center * CBD 320,788 Q4 20 TC PipeLines, LP JLL CBRE

JP Morgan Chase Tower CBD 255,886 Q3 20 JP Morgan Chase & Co CBRE Cushman & Wakefield

The Woodlands Towers at The Wate… The Woodlands 106,781 Q1 20 Western Midstream Partn… Cushman & Wakefield Colliers International

Westchase Park Westchase 102,492 Q4 20 Vroom JLL Transwestern Real Est…

15415 Katy Fwy Katy Freeway West 98,000 Q4 20 Diamond Offshore Drilling… - Fuller Realty Partners,…

Greenway Plaza Greenway Plaza 97,714 Q1 20 Occidental Petroleum CBRE Parkway Realty Manag…

Spring Shadow Business Park * Katy Freeway East 97,293 Q1 20 TGS-Nopec Geophysical… NAI Partners Transwestern Real Est…

Park Towers South Post Oak Park 82,215 Q4 20 Cadence Bank CBRE Transwestern Real Est… Stonelake Capital Park Place River Oaks Post Oak Park 81,999 Q4 20 JLL JLL Partn… Deerwood Glen Business Park Gulf Freeway/Pasadena 80,613 Q2 20 Universal plant services - Newmark Knight Frank

Montrose Collective Midtown 75,000 Q1 20 Live Nation - -

Greenway Plaza * Greenway Plaza 72,994 Q2 20 Occidental Petroleum - Parkway Realty Manag…

CityNorth Greenspoint/N Belt West 70,035 Q2 20 US Immigration - Lincoln Property Comp…

Park Towers North Post Oak Park 66,750 Q3 20 Ryan, LLC - Transwestern Real Est…

601 Travis CBD 62,261 Q1 20 EP Energy Corporation CBRE JLL

The Ion Midtown 58,000 Q4 20 CommonDesk - Savills

5556 Gasmer Dr Southwest Beltway 8 56,320 Q3 20 Dynamic Service Solution… Transwestern Real… Avison Young

Linde Plaza Katy Freeway West 50,380 Q2 20 Rimkus Consulting Group,… Fritsche Anderson R… CBRE

Village Tower I Katy Freeway East 48,130 Q2 20 2nd.MD - Moody National Realty…

Briarpark Green Westchase 46,478 Q3 20 Bristow - -

5718 Westheimer San Felipe/Voss 46,380 Q1 20 W&T Offshore Inc. - CBRE

CityWestPlace Westchase 46,047 Q1 20 Honeywell - Parkway Realty Manag…

JP Morgan Chase Tower * CBD 45,125 Q3 20 Indigo Minerals LLC Newmark Knight Frank Cushman & Wakefield

American General Center Midtown 45,063 Q2 20 BDO - CBRE

One Riverway Riverway 41,556 Q3 20 Northwestern Mutual - Stream Realty Partners…

2222 Bay Area Blvd NASA/Clear Lake 41,108 Q1 20 Jacobs Cushman & Wakefield Zann Commercial Brok…

717 Texas CBD 41,102 Q3 20 Rockcliff Energy LLC - Cushman & Wakefield

5005 Mitchelldale St * Northwest Near 38,582 Q3 20 Endurance International G… JLL Transwestern Real Est…

Haute Harwin Fashion Center Southwest/Hillcroft 38,337 Q1 21 - - Lee & Associates

5757 Woodway * San Felipe/Voss 37,952 Q4 20 First Investors Financial S… NAI Partners Braun Enterprises

Granite Tower at 290 * Northwest Far 37,403 Q3 20 IDS Engineering Group Burnett & Curry Real… Granite Properties, Inc.

West Belt Office Center Southwest Beltway 8 34,852 Q3 20 Sourcepoint Colliers International… JLL

Reserve at Westchase Westchase 34,510 Q4 20 Yang Ming Marine Transp… JLL Transwestern Real Est…

Grandway West * Katy/Grand Parkway West 33,464 Q3 20 LJA Engineering Avison Young Transwestern Real Est…

Pennzoil Place CBD 33,127 Q1 20 Cheniere Energy, Inc. - Transwestern Real Est…

Bank of America Tower CBD 31,750 Q2 20 Waste Management - CBRE

Hercules II NASA/Clear Lake 31,327 Q2 20 Axiom Space Savills Transwestern Real Est…

Sugar Creek on the Lake E Fort Bend Co/Sugar Land 29,419 Q2 20 TDECU - JLL

CityNorth Greenspoint/N Belt West 28,521 Q2 20 DHL Express CBRE Lincoln Property Comp…

Renewal

PAGE 7 RENT

Houston office rents have basically stagnated since oil prices The submarkets that are seeing positive rent growth are crashed in late 2014 and have yet to return to their late 2014 typically smaller submarkets that have not experienced peak. In Houston, office asking rents are highly correlated much new supply nor large-scale move-outs. Conversely, with oil price volatility, and oil prices have traded in a narrow the submarkets seeing the biggest rent declines are mostly and lower band over the past six years. the larger, institutional submarkets that have seen a recent wave of new supply and energy tenant departures, with few Rent growth once again turned negative the past two exceptions And very generous concession packages are quarters – during a period that temporarily saw negative also accompanying the rent discounts for any tenant willing $40-per-barrel West Texas Intermediate Crude oil prices. As to make a large commitment right now. of this update in 20Q4, oil prices had recovered to the mid- $40s-per-barrel. But they still have a way to go towards the $60-per-barrel that most producers need to drill new wells profitably. Rents have also trended downward in each of the past three local economic cycles – not a great sign for Houston office landlords, as owners have had to contend with successive supply waves and waning energy tenant demand.

MARKET RENT GROWTH (YOY)

PAGE 8 MARKET RENT PER SQUARE FOOT

PAGE 9 CONSTRUCTION

Along with slower than normal leasing, the Houston market Houston’s office supply pipeline was already down still has a sizable construction pipeline to contend with. significantly since the recent oil downturn of 2015–17 as the market worked through significant oversupply, prior to the The South Main/Medical Center and Katy Freeway East coronavirus pandemic and recent oil price crash. However, Submarkets are seeing the second- and third-most new there are still a few new projects underway. construction, respectively. The is undergoing a renaissance as it begins to accommodate the Houston, home to the largest medical center in the world at push for a commercial life sciences and biotech hub. the Texas Medical Center, may also soon welcome several million SF of new life science-oriented mixed use projects Meanwhile, the Katy Freeway East Submarket, following along a two-mile stretch of Holcombe Boulevard. These the lead of successful mixed-use projects Memorial City projects could raise Houston’s profile as a burgeoning and City Centre, has emerged as a hot spot for corporate commercial life sciences and tech hub and could inject campuses and spec office buildings along the Katy Freeway. billions into the local economy. It is important to note that each of these submarkets has relatively high barriers to entry for new development in a city Among the proposed life sciences mixed-use projects, Hines with notorious lack of zoning restrictions. Perhaps these and 2ML Real Estate Interests (the Levit family of Grocers barriers to new development make these sites especially Supply Company) recently announced the proposed attractive to developers. development of a 52-acre mixed-use project at the intersection of Holcombe Boulevard and Highway 288. The The CBD, while currently leading new development on a project, which will be dubbed Levit Green, will sit on the site nominal basis by a hair, is seeing much less construction on of a former Grocers Supply distribution facility. The project is a percentage basis. slated to primarily serve a growing demand for life sciences lab and research facilities. The development is also slated to Hines’ 1.1-million-SF Texas Tower is expected to deliver by include multifamily and retail. The project could break ground the end of 2021. This and Lovett Commercial’s mixed-use within the next two years and has been in the concept stage renovation of the downtown post office comprise the new for at least three. development in that submarket. The Texas A&M System also recently announced plans for Hewlett-Packard Enterprise Buildings 3 and 4, totaling the five-acre, $550 million Texas A&M Innovation Plaza, 570,000 SF, are under construction in Springwoods Village. located at intersection of Holcombe Boulevard and Main These are being constructed by a partnership between the Street. The campus will be home to Texas A&M’s unique, Patrinely Group, USAA Real Estate, and CDC Houston, two-year Engineering Medicine (EnMed) program, which will which also developed the nearby HP Inc. build-to-suit in allow students the opportunity to earn a master’s degree Springwoods Village. Before HPE and HPI split, its legacy in engineering from Texas A&M University and a medical Compaq campus along Highway 249 flooded multiple times degree from the Texas A&M College of Medicine. The in recent years. HPE recently announced that it would move mixed-use development includes a renovated 18-story office its headquarters from San Jose, California, to Spring, Texas, building, which was acquired by Texas A&M for $145 million while maintaining a strategic innovation presence in San in 2017 and will be home to the EnMed program. That Jose. building is scheduled to open later this year. Development plans also include a 17-story, 515,000-SF integrated Texas A&M and partner Medistar are under construction medical office building atop a 13-story parking structure with with the 510,000-SF Horizon Tower, a state-of-the-art life retail and dining options and a scenic plaza at grade and sciences building, in the Texas Medical Center. This joins a 19-story, 714-bed student housing tower. Texas A&M’s the 430,000-SF O’Quinn Medical Tower at the new McNair public-private partnership development partner, Medistar Baylor St. Lukes Campus as the largest new developments Corporation, plans to provide an additional $401 million in in the medical center area. investment for the two complementary towers, which may total an additional 1.9 million SF upon completion and are And Hines is also developing a build-to-suit for Marathon Oil expected to break ground in late 2020. in City Centre. Upon completion, Marathon will relocate from 5555 San Felipe in the Galleria/Uptown Submarket.

PAGE 10 DELIVERIES & DEMOLITIONS

PAGE 11 UNDER CONSTRUCTION PROPERTIES

Properties Square Feet Percent of Inventory Preleased 88 5,922,828 1.7% 57.1%

PAGE 12 SALES

As of the fourth quarter of 2020, transaction volumes were An early pioneer in working from home and telecommuting, down by more than half since 2019, although a few key AT&T is undergoing a major national cost-saving initiative as deals closed in the last months of the year. It appears that it consolidates offices and shifts to working from home, a the investors are finally working their way through 2020’s trend accelerated by the pandemic. period of price discovery. The most significant trophy deal to occur so far in 2020 Solana Beach, California-based Brixton Capital acquired a involved Midway Companies’ sale of the 250,000-SF four-property portfolio at the Dow Chemical Texas Innovation office tower at Kirby Grove for $115 million, or $464/ Center in Lake Jackson from New York based Lexington SF, to Chicago-based DWS. The sale included a ground Realty Trust in November. The campus, which was lease, which is owned by the Upper Kirby Redevelopment developed by locally based CORE Real Estate with partner Authority of the City of Houston. The 5 Star, LEED- Lexington Property Trust in 2016, is fully leased to Dow. It is certified building within Midway’s Kirby Grove mixed-use located in an area that was originally developed by Dow as development delivered in 2015 and was 96% occupied at a company town. The campus serves as an R&D center for the time of sale. products manufactured at the nearby Dow Freeport facility, the largest consolidated chemical manufacturing plant in Notably, in April 2020, trophy asset 609 Main fell out of the Western Hemisphere. In 2017, the Dow Administration contract for undisclosed reasons with a prospective buying Building on the campus was sold to Cole Office & Industrial group that included KB Securities, a Korean investment REIT for $260/SF. Thus, this sale represents a nearly $30/SF firm and subsidiary of KB Financial, which was advised increase over the past three years. by South Korean asset management firm JR AMC. A joint venture between Hines and the California Public Employees Locally based Triten Real Estate Partners and New York Retirement System (CalPERS) listed 609 Main on the market based Taconic Capital Advisors acquired 1111 Fannin in last fall. It’s unclear if the building is still for sale and if the downtown Houston in November. JPMorgan’s lease expires sellers are pursuing backup buyers. However, Hines and in September 2021, at which point it will relocate to one of CalPERS recently succeeded in pushing back the maturity its original downtown offices, 600 Travis. The buyers stated date of a $230 million construction loan tied to the property that they decided to acquire the property because it was from March 25 to September 25. Prior to the coronavirus offered well below replacement cost, which could be nearly pandemic, 609 Main was slated to possibly set a per-SF double the estimated sales price. And, in combination with price record for Houston non-medical office. The building is Opportunity Zone tax incentives, it provided an attractive 95% leased to a variety of legal, financial, real estate, and redevelopment opportunity in one of the nation’s key office business services tenants, with United Airlines as an anchor, submarkets. The acquisition represents a vote of confidence and it is significantly under exposed to upstream energy. in downtown Houston, which has seen rising vacancies in recent years. Brookfield, Hines, and other landlords have Since 2010, Houston has been considered attractive to poured hundreds of millions of dollars in recent years into investors because, in addition to being the fifth-largest redeveloping older vintage office buildings downtown in a metropolitan area in the U.S., it was one of the fastest gamble to retain and attract tenants there at attractive rental growing for several years prior to the oil downturn of 2015- rates. 17 in terms of total job and population growth, regularly ranking among a small cohort of cities such as Dallas-Fort Rounding out the top deals last quarter, Austin-based Worth and New York. Population growth continued to Capital Commercial Investments acquired the AT&T Building top the nation, even during the 2015-17 oil downturn and at 6500 West Loop South in Bellaire. It appears the Austin Hurricane Harvey in 2017. And in 2018- 19, Houston’s investor has an appetite for large, value-add campus energy industry mounted enough of a recovery to again redevelopment opportunities. In June, Capital Commercial return Houston to the top of the job and population growth acquired part of the legacy HP/Compaq campus in rankings. northwest Houston, which was recently vacated. AT&T’s lease runs through the third quarter of 2021, and it recently However, Houston’s office sector vacancy never quite vacated 315,000 SF in the building. Going forward, AT&T will recovered from the oil downturn of 2015-17. This has placed retain a 74,000-SF presence on the fourth floor, and the new downward pressure on rents and therefore NOI and prices owner will look to re-tenant the building with an eye towards and slightly increased pressure on cap rates ever since medical office users. Nationally, AT&T has the most sublease 2014. As a result, a mix of private equity, private, REIT/ space listed of any U.S. office tenant, at more than 1 million public, and institutional investors swooped in over the past SF and nearly double the next on the list, Uber. four years to capitalize on value-add and opportunistic plays

PAGE 13 where they could find them, especially portfolio deals of older 4 Star assets in core and core plus locations. Whereas the early years of the shale oil boom, from 2011-13, saw significant REIT/public investment, private equity investors have been more active since 2017.

SALES VOLUME & MARKET SALE PRICE PER SF

PAGE 14 SALES PAST 12 MONTHS

Sale Comparables Avg. Cap Rate Avg. Price/SF Avg. Vacancy At Sale 612 7.5% $192 20.7%

SALE COMPARABLE LOCATIONS

SALE COMPARABLES SUMMARY STATISTICS

Sales Attributes Low Average Median High Sale Price $11,738 $6,479,304 $800,000 $115,000,000 Price/SF $17 $192 $202 $553 Cap Rate 3.4% 7.5% 7.5% 10.1% Time Since Sale in Months 0.0 5.8 5.4 12.0

Property Attributes Low Average Median High Building SF 568 22,224 4,301 546,641 Stories 1 2 1 20 Typical Floor SF 568 8,497 4,000 130,395 Vacancy Rate At Sale 0% 20.7% 0% 100% Year Built 1860 1978 1980 2020 Star Rating 2.4

PAGE 15 RECENT SIGNIFICANT SALES

Property Sale Property Name - Address Rating Yr Built Bldg SF Vacancy Sale Date Price Price/SF Cap Rate MD Anderson The Woodl… 1 2017 208,000 0% 3/16/2020 $115,000,000 $553 - 100 Fellowish Dr Kirby Grove 2 2015 248,275 6.90% 1/24/2020 $115,000,000 $463 - 2925 Richmond Ave The Dow Chemical Com… 3 2016 280,000 0% 11/10/2020 $93,242,697 $333 - 240 Abner Jackson Pky The Dow Chemical Com… 4 2017 278,521 0% 11/10/2020 $81,911,587 $294 - 220 Abner Jackson Pky One Westchase Center 5 1982 466,025 15.00% 8/26/2020 $60,500,000 $130 9.50% 10777 Westheimer Rd Memorial Hermann Orth… 6 2007 99,768 6.60% 5/7/2020 $40,776,000 $409 - 5420 West Loop S 2900 Weslayan St 7 1979 136,698 19.30% 1/29/2020 $25,988,300 $190 -

Woodway Office 8 1982 110,529 11.30% 3/19/2020 $15,624,253 $141 7.10% 7660 Woodway Dr 363 North Belt 9 1982 386,277 64.80% 6/24/2020 $15,225,000 $39 3.80% 363 N Sam Houston Pky E 2950 S Gessner Rd 10 1977 60,532 6.40% 2/19/2020 $14,400,000 $238 -

The Dow Chemical Com… 11 2016 51,194 0% 11/10/2020 $13,132,987 $257 - 270 Abner Jackson Pky 8800 Technology Forest Pl 12 2002 268,950 0% 12/14/2020 $11,900,000 $44 -

13927 S Gessner Rd 13 2008 87,720 0% 2/18/2020 $8,500,000 $97 -

15415 Katy Fwy 14 1983 195,212 35.10% 11/19/2020 $7,500,000 $38 5.50%

1250 Wood Branch Park Dr 15 1982 102,956 78.20% 12/23/2020 $7,402,500 $72 -

9949 W Sam Houston Pk… 16 2006 36,099 50.00% 9/24/2020 $5,300,000 $147 -

Building F-2 17 1980 43,203 19.90% 3/2/2020 $4,189,787 $97 - 8968-8998 Kirby Dr 4909 Bissonnet St 18 1984 20,976 56.30% 2/5/2020 $4,000,000 $191 -

1415 La Concha Ln 19 1979 10,365 0% 3/12/2020 $4,000,000 $386 -

Cornerstone North 20 1984 70,000 100% 1/31/2020 $3,500,000 $50 - 3303 WFM-1960

PAGE 16 HOUSTON MAP OFFICE SUBMARKETS

PAGE 17 SUBMARKET INVENTORY

Inventory 12 Month Deliveries Under Construction SF No. Submarket Bldgs % Market Rank Bldgs SF (000) Percent Rank Bldgs SF (000) Percent Rank (000) 1 Austin County 50 261 0.1% 44 0 0 0% - 0 - - - 2 Baytown 139 1,863 0.5% 37 0 0 0% - 0 - - - 3 Bellaire 93 5,325 1.6% 20 1 53 1.0% 16 0 - - - 4 CBD 164 51,463 15.2% 1 0 0 0% - 2 1,252 2.4% 1 5 Conroe 275 2,755 0.8% 30 2 7 0.3% 23 2 67 2.4% 14 6 E Fort Bend Co/Sugar Land 459 10,465 3.1% 10 31 339 3.2% 2 6 31 0.3% 17 7 FM 1960/Champions 268 4,374 1.3% 23 3 58 1.3% 15 0 - - - 8 FM 1960/Hwy 249 493 9,834 2.9% 13 29 137 1.4% 7 11 238 2.4% 7 9 FM 1960/I-45 North 116 2,480 0.7% 31 0 0 0% - 0 - - - 10 Galleria/Uptown 66 16,851 5.0% 5 0 0 0% - 1 70 0.4% 13 11 Greenspoint/IAH 58 3,283 1.0% 28 0 0 0% - 0 - - - 12 Greenspoint/N Belt West 119 11,078 3.3% 9 0 0 0% - 0 - - - 13 Greenway Plaza 274 12,638 3.7% 7 0 0 0% - 0 - - - 14 Gulf Freeway/Pasadena 671 8,295 2.4% 14 0 0 0% - 2 64 0.8% 15 15 I-10 East 155 1,468 0.4% 40 1 31 2.1% 18 0 - - - 16 Katy Freeway East 269 11,879 3.5% 8 2 167 1.4% 5 4 974 8.2% 3 17 Katy Freeway West 264 28,062 8.3% 2 3 24 0.1% 19 0 - - - 18 Katy/Grand Parkway West 489 6,684 2.0% 16 10 216 3.2% 3 12 77 1.1% 12 19 Kingwood/Humble 253 3,799 1.1% 26 3 95 2.5% 11 1 270 7.1% 6 20 Liberty County 80 459 0.1% 43 0 0 0% - 0 - - - 21 Midtown 603 10,381 3.1% 11 1 64 0.6% 13 3 493 4.8% 5 22 NASA/Clear Lake 547 10,322 3.0% 12 5 92 0.9% 12 2 17 0.2% 20 23 North Loop West 385 6,504 1.9% 17 5 140 2.1% 6 0 - - - 24 Northeast Near 150 2,261 0.7% 32 0 0 0% - 0 - - - 25 Northeast Outlier 93 968 0.3% 41 0 0 0% - 1 15 1.5% 21 26 Northwest Far 132 4,372 1.3% 24 0 0 0% - 0 - - - 27 Northwest Near 63 1,604 0.5% 39 4 46 2.9% 17 1 23 1.4% 18 28 Northwest Outlier 320 2,150 0.6% 34 15 102 4.7% 10 8 110 5.1% 9 29 Outlying Chambers County 28 177 0.1% 45 0 0 0% - 0 - - - 30 Outlying Montgomery Cnty 227 1,710 0.5% 38 5 112 6.5% 9 3 97 5.7% 10 31 Outlying Waller County 26 132 0% 46 1 8 6.1% 21 0 - - - 32 Post Oak Park 45 4,820 1.4% 22 1 206 4.3% 4 1 93 1.9% 11 33 Richmond/Fountainview 122 2,242 0.7% 33 0 0 0% - 0 - - - 34 Riverway 24 3,177 0.9% 29 0 0 0% - 0 - - - 35 San Felipe/Voss 50 5,347 1.6% 19 0 0 0% - 0 - - - 36 South 289 3,437 1.0% 27 7 115 3.4% 8 9 113 3.3% 8 37 South Hwy 35 164 875 0.3% 42 1 3 0.3% 26 0 - - - 38 South Main/Medical Center 244 13,507 4.0% 6 1 5 0% 24 4 1,216 9.0% 2 39 Southeast Outlier 369 4,349 1.3% 25 1 8 0.2% 22 2 15 0.3% 22 40 Southwest Beltway 8 193 7,307 2.2% 15 0 0 0% - 0 - - - 41 Southwest Far 98 2,036 0.6% 36 0 0 0% - 1 20 1.0% 19 42 Southwest Outlier 243 2,112 0.6% 35 6 61 2.9% 14 6 32 1.5% 16 43 Southwest/Hillcroft 111 5,323 1.6% 21 1 5 0.1% 24 0 - - - 44 The Woodlands 679 23,916 7.1% 3 10 343 1.4% 1 6 637 2.7% 4 45 West Belt 115 6,289 1.9% 18 2 17 0.3% 20 0 - - - 46 Westchase 140 20,032 5.9% 4 0 0 0% - 0 - - -

PAGE 18 SUBMARKET RENT

Gross Asking Rents 12 Month Asking Rent Annualized Quarterly Rent No. Market Per SF Rank Growth Rank Growth Rank 1 Austin County $23.39 30 1.1% 4 -15.7% 41 2 Baytown $23.60 29 1.5% 2 -11.0% 38 3 Bellaire $26.07 20 1.2% 3 0.5% 19 4 CBD $36.39 1 -0.5% 27 6.0% 8 5 Conroe $24.00 27 -0.5% 29 -7.7% 33 6 E Fort Bend Co/Sugar Land $28.24 12 -0.4% 20 3.8% 14 7 FM 1960/Champions $18.90 43 0.4% 14 -11.1% 39 8 FM 1960/Hwy 249 $25.84 21 -0.2% 16 5.7% 10 9 FM 1960/I-45 North $20.32 38 -0.4% 22 -4.6% 28 10 Galleria/Uptown $32.62 2 -0.9% 32 7.3% 6 11 Greenspoint/IAH $19.10 42 -1.2% 39 4.4% 13 12 Greenspoint/N Belt West $18.73 44 -0.2% 17 2.0% 17 13 Greenway Plaza $31.39 7 -1.2% 40 5.7% 9 14 Gulf Freeway/Pasadena $22.09 34 -0.5% 30 -11.3% 40 15 I-10 East $21.31 36 0.9% 7 -18.6% 44 16 Katy Freeway East $32.47 4 -1.4% 43 8.5% 3 17 Katy Freeway West $29.38 10 -2.1% 45 8.4% 5 18 Katy/Grand Parkway West $29.46 9 -1.0% 37 4.7% 12 19 Kingwood/Humble $25.31 22 -1.2% 41 -4.2% 27 20 Liberty County $22.28 33 1.0% 5 -17.3% 42 21 Midtown $32.09 6 -0.4% 19 -0.8% 21 22 NASA/Clear Lake $23.91 28 -1.4% 44 -1.0% 22 23 North Loop West $22.98 31 -0.5% 26 -4.8% 29 24 Northeast Near $24.69 25 -0.4% 21 -2.9% 24 25 Northeast Outlier $26.16 18 0.5% 12 -5.4% 30 26 Northwest Far $19.58 41 -0.7% 31 -5.5% 31 27 Northwest Near $19.89 40 -0.9% 33 -9.9% 35 28 Northwest Outlier $27.85 14 -0.4% 24 2.4% 16 29 Outlying Chambers County $24.02 26 1.5% 1 -10.1% 37 30 Outlying Montgomery Cnty $25.11 23 0.9% 8 -7.9% 34 31 Outlying Waller County $21.64 35 0.6% 11 -23.9% 46 32 Post Oak Park $32.55 3 0.3% 15 6.2% 7 33 Richmond/Fountainview $20.32 39 1.0% 6 -18.0% 43 34 Riverway $27.00 16 -0.9% 35 5.3% 11 35 San Felipe/Voss $26.32 17 -0.4% 23 2.0% 18 36 South $27.88 13 -1.2% 38 -2.3% 23 37 South Hwy 35 $20.99 37 0.6% 10 -23.3% 45 38 South Main/Medical Center $29.48 8 -1.3% 42 2.7% 15 39 Southeast Outlier $22.77 32 -0.5% 28 -10.1% 36 40 Southwest Beltway 8 $18.21 45 0.4% 13 -3.0% 25 41 Southwest Far $26.08 19 -0.5% 25 -0.8% 20 42 Southwest Outlier $24.93 24 0.8% 9 -7.5% 32 43 Southwest/Hillcroft $17.45 46 -0.3% 18 -4.0% 26 44 The Woodlands $32.41 5 -2.6% 46 8.5% 4 45 West Belt $29.13 11 -0.9% 34 8.6% 2 46 Westchase $27.45 15 -0.9% 36 9.0% 1

PAGE 19 SUBMARKET VACANCY & NET ABSORPTION

Vacancy 12 Month Absorption Constrct. No. Submarket SF Percent Rank SF % of Inv Rank Ratio 1 Austin County 11,869 4.6% 3 10,341 4.0% 13 - 2 Baytown 95,018 5.1% 4 (4,187) -0.2% 21 - 3 Bellaire 561,207 10.5% 13 220,352 4.1% 1 0.2 4 CBD 10,981,365 21.3% 37 (834,501) -1.6% 45 - 5 Conroe 344,345 12.5% 17 (33,827) -1.2% 29 - 6 E Fort Bend Co/Sugar Land 1,344,066 12.8% 20 75,893 0.7% 6 3.6 7 FM 1960/Champions 694,810 15.9% 29 43,230 1.0% 8 0.4 8 FM 1960/Hwy 249 1,570,491 16.0% 31 (23,141) -0.2% 27 - 9 FM 1960/I-45 North 770,802 31.1% 44 (66,902) -2.7% 33 - 10 Galleria/Uptown 3,361,369 19.9% 36 (640,610) -3.8% 44 - 11 Greenspoint/IAH 732,843 22.3% 38 84,383 2.6% 5 - 12 Greenspoint/N Belt West 4,930,678 44.5% 46 126,882 1.1% 2 - 13 Greenway Plaza 2,295,001 18.2% 34 (340,573) -2.7% 42 - 14 Gulf Freeway/Pasadena 1,051,558 12.7% 18 6,514 0.1% 15 - 15 I-10 East 122,375 8.3% 11 (2,539) -0.2% 20 - 16 Katy Freeway East 1,464,669 12.3% 16 (209,866) -1.8% 36 - 17 Katy Freeway West 6,334,237 22.6% 39 (258,400) -0.9% 39 - 18 Katy/Grand Parkway West 936,992 14.0% 24 57,247 0.9% 7 3.2 19 Kingwood/Humble 441,627 11.6% 14 24,932 0.7% 11 1.6 20 Liberty County 11,149 2.4% 2 823 0.2% 18 - 21 Midtown 1,215,945 11.7% 15 (243,770) -2.3% 38 - 22 NASA/Clear Lake 1,364,488 13.2% 22 33,557 0.3% 10 - 23 North Loop West 1,157,490 17.8% 33 1,224 0% 16 108.7 24 Northeast Near 138,522 6.1% 6 (18,372) -0.8% 26 - 25 Northeast Outlier 63,445 6.6% 8 (15,618) -1.6% 25 - 26 Northwest Far 735,020 16.8% 32 12,196 0.3% 12 - 27 Northwest Near 204,546 12.8% 19 41,817 2.6% 9 0.4 28 Northwest Outlier 300,471 14.0% 23 122,368 5.7% 3 0.8 29 Outlying Chambers County 1,536 0.9% 1 1,025 0.6% 17 - 30 Outlying Montgomery Cnty 270,551 15.8% 28 (25,561) -1.5% 28 - 31 Outlying Waller County 10,700 8.1% 10 (818) -0.6% 19 - 32 Post Oak Park 1,580,836 32.8% 45 (158,156) -3.3% 35 - 33 Richmond/Fountainview 230,369 10.3% 12 (36,492) -1.6% 30 - 34 Riverway 765,600 24.1% 41 (50,218) -1.6% 32 - 35 San Felipe/Voss 1,393,442 26.1% 43 (309,775) -5.8% 41 - 36 South 446,500 13.0% 21 (37,059) -1.1% 31 - 37 South Hwy 35 53,403 6.1% 5 (7,631) -0.9% 23 - 38 South Main/Medical Center 956,545 7.1% 9 (241,886) -1.8% 37 - 39 Southeast Outlier 272,224 6.3% 7 10,109 0.2% 14 0.7 40 Southwest Beltway 8 1,427,421 19.5% 35 (77,268) -1.1% 34 - 41 Southwest Far 324,380 15.9% 30 (4,475) -0.2% 22 - 42 Southwest Outlier 300,365 14.2% 25 (11,665) -0.6% 24 - 43 Southwest/Hillcroft 812,715 15.3% 27 95,389 1.8% 4 0.1 44 The Woodlands 3,489,386 14.6% 26 (948,268) -4.0% 46 - 45 West Belt 1,610,305 25.6% 42 (395,009) -6.3% 43 - 46 Westchase 4,553,079 22.7% 40 (262,725) -1.3% 40 -

PAGE 20 INDUSTRIAL MARKET REPORT

OVERVIEW

12 Mo Deliveries in SF 12 Mo Net Absorption in SF Vacancy Rate 12 Mo Rent Growth 30 M 12.2 M 8.9% -0.6%

Houston’s industrial market has undoubtedly felt the impact Houston likely experienced a similar trend. Although, a major of the coronavirus pandemic, yet those negative effects have downside risk here is if stimulus money does not continue been uneven. Leasing volumes have remained surprisingly to flow to U.S. consumers during this contentious election strong, but transaction volume has fallen off a cliff since the period. onset of the pandemic. And while the total weight of goods and commodities Shifting consumer habits towards online shopping and shipped through the Houston-Galveston Customs District discount retail, which began prior to the pandemic, through the first eight months of the year increased more accelerated over the past several months. And, together than 10% year-over-year, the total dollar volume of these with logistics firms, they seem to have more than made goods and commodities fell 16%. This was due to the port’s up for any demand gap left by a falloff in energy industry top import – crude and refined products – declining in value demand, as the energy industry has generally been mired in by more than a third. lower oil prices since late 2014. Also, since the downstream petrochemical construction boom began to wind down in Industrial should continue to fare best among major property 2017. types, particularly as the surge in online ordering and home delivery makes last-mile distribution and logistics Moreover, historically low interest rates are supporting home- space all the more valued. Yet Houston also has a near- buying activity in one of the nation’s fastest- growing cities record-breaking amount of industrial spec product under – at a time when millennials are also entering their prime construction. Even prior to the coronavirus pandemic and home-buying years. This is also supporting local industrial lower oil prices, CoStar forecasted a significant near-term demand. rise in vacancies due to the supply wave.

Nationally, retail sales are back above pre-pandemic levels, led by a more than 20% surge in online shopping.

PAGE 21 KEY INDICATORS

Market Availability Net Absorption Deliveries Under Current Quarter RBA Vacancy Rate Rent Rate SF SF Construction Logistics 517,758,494 9.9% $6.90 13.8% (1,821,040) 187,446 7,152,646 Specialized Industrial 116,420,549 3.7% $8.05 6.8% (3,050) 0 815,263 Flex 53,809,525 9.6% $10.48 13.4% (97,802) 18,688 194,184 Market 687,988,568 8.9% $7.37 12.5% (1,921,892) 206,134 8,162,093

Historical Forecast Annual Trends 12 Month Peak When Trough When Avg. Avg. Vacancy Change (YOY) 2.2% 6.4% 9.1% 9.1% 2004 Q1 4.2% 1999 Q1 Net Absorption SF 12.2 M 8,850,340 11,526,248 20,003,528 2005 Q2 (318,081) 2001 Q2 Deliveries SF 30 M 12,016,107 14,777,378 31,242,507 2020 Q4 3,730,187 2011 Q1 Rent Growth -0.6% 2.0% 1.7% 9.1% 2000 Q2 -1.9% 2010 Q3 Sales Volume $452 M $583.3M N/A $1.9B 2020 Q1 $126.5M 1999 Q4

PAGE 22 LEASING

Houston’s industrial market absorbed 1.5 million square feet Houston’s vacancy rate stands at 8.9%, up from roughly in the third quarter, dropping it to 15th in the nation from its 6.6% at the end of last year. second quarter ranking of fifth. Among the largest recent move-ins, Amazon occupied Meanwhile, leasing volumes this year have held up 440,000 SF at Park 249, located just north of Beltway 8 and remarkably well. Over two-thirds of the approximately 1,400 249, in August. new leases signed so far in 2020 took place since the pandemic began. More than 500 leases were signed since And Goodman Air Conditioning & Heating moved into more the third quarter began, with over half of those services and than 310,000 SF at 18140 Kickapoo Road in Waller, Texas, logistics firms. in August.

Despite all the talk of a flight to quality in Houston, 94% of Meanwhile, Home Depot vacated 300,000 SF at Prologis the leases signed this year were for 1 to 3 Star product, Park Jersey Village in September as part of its move to a representing more than two-thirds of the square footage of new 770,000-SF build-to-suit facility in March at the Grand signed leases signed this year. National Business Park.

However, on average, the 4 & 5 Star leases are larger – over Packwell also moved out of 210,000 SF at the Bayport 70,000 SF on average for 4 & 5 Star – versus about a tenth North Industrial Park in Pasadena in September. of that size for 1 to 3 Star. CoStar forecasts that vacancies could exceed 9.5% by the Among the largest new leases, logistics firm S.I. end of next year before beginning a brisk recovery. Warehousing Company signed for 250,000 SF at the Monument Business Park in Deer Park in September.

Global residential construction and services firm MiTek leased 155,000 SF at 560 East Richey Road in the North Hardy Toll Road submarket in August.

Logistics firm the Lawless Group leased 140,000 SF at 13323 South Gessner Road in Missouri City in August.

And Beacon Roofing Supply leased 125,000 SF at 1031 Bammel Road in the North Hardy Toll Road Submarket in August.

While net absorption and leasing activity have held up recently, the metro’s vacancy rate continues to rise.

PAGE 23 NET ABSORPTION, NET DELIVERIES & VACANCY

VACANCY RATE

PAGE 24 AVAILABILITY RATE

PAGE 25 12 MONTH NET ABSORPTION SF IN SELECTED BUILDINGS

Net Absorption SF Building Name/Address Submarket Bldg SF Vacant SF 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 12 Month Ross Distribution Center Sugar Land Ind 2,165,000 0 0 0 0 0 2,165,000 Dollar Tree Distribution Center Southwest Far Ind 1,200,000 0 0 0 0 0 1,200,000 Medline Northwest Outliers Ind 1,300,000 390,000 0 0 0 0 910,000 Conroe Park North Industrial Park The Woodlands/Conr… 860,000 0 0 0 0 0 860,000 Pinto Business Park North Fwy/Tomball P… 1,000,000 0 0 0 0 0 855,555 Clay 99 Northwest Outliers Ind 805,601 0 0 0 0 0 805,601 Grand National Business Park Hwy 290/Tomball Pk… 770,640 0 0 0 0 0 659,324 Bldg 6 East-Southeast Far Ind 604,800 0 0 0 0 0 604,800 American Furniture Warehouse Northwest Outliers Ind 498,700 0 0 0 0 0 498,700 Park 249 Hwy 290/Tomball Pk… 443,520 0 0 0 0 0 443,520 Hobby Business Park South Hwy 35 Ind 345,100 0 0 0 0 0 345,100 18140 Kickapoo Rd Northwest Hwy 6 Ind 479,806 0 0 0 0 0 312,640 9700 W Gulf Bank Road Hwy 290/Tomball Pk… 245,319 0 0 0 0 0 245,319 SouthPoint Business Park South Hwy 35 Ind 200,400 0 0 0 0 0 200,400 AmeriPort Industrial Park East-Southeast Far Ind 218,553 0 0 0 0 0 186,984 300 S Sheldon Rd East I-10 Outer Loop… 180,000 0 0 0 0 0 180,000 Deerwood Glen Business Park East-Southeast Far Ind 308,225 102,975 0 0 0 0 175,602 Subtotal Primary Competitors 11,625,664 492,975 0 0 0 0 10,648,545 Remaining Houston Market 676,362,904 60,518,514 (1,921,892) 0 0 0 1,530,031 Total Houston Market 687,988,568 61,011,489 (1,921,892) 0 0 0 12,178,576

PAGE 26 TOP INDUSTRIAL LEASES PAST 12 MONTHS

Leased Tenant Rep Com- Building Name/Address Submarket Qtr Tenant Name Leasing Rep Company SF pany E Industrial Pky The Woodlands/Conroe 1,500,000 Q4 20 Lowe's - -

2303 Hurricane Ln Southwest Far 1,081,292 Q4 20 Amazon - -

22525 Clay Rd Northwest Outliers 805,601 Q1 20 Amazon - -

10629 Red Bluff Rd East-Southeast Far 784,000 Q4 20 Dunavant Distribution Group - Stream Realty Partners…

8800 Citypark Loop * Northeast Hwy 90 663,821 Q1 20 Warehouse Services, Inc. - Colliers International

16225 Tomball Pky Hwy 290/Tomball Pky 443,520 Q1 20 Amazon Cushman & Wakefield Cushman & Wakefield

4600 Underwood Rd East-Southeast Far 402,648 Q4 20 Costway CBRE CBRE

4501 Blalock Rd * Northwest Inner Loop 401,280 Q4 20 H-E-B - JLL

18140 Kickapoo Rd Northwest Hwy 6 312,640 Q1 20 Goodman Air Conditionin… - Sealy & Company

8833 Citypark Loop * Northeast Hwy 90 254,160 Q3 20 DHL - -

625 Independence Pky East-Southeast Far 252,203 Q3 20 S.I. Warehousing Company Cushman & Wakefield Boyd Commercial, LLC…

8711 Citypark Loop Northeast Hwy 90 218,015 Q4 20 - - -

1755 Federal Rd East I-10 Outer Loop 210,000 Q4 20 - - NAI James E. Hanson,…

10507 Ella Blvd North Fwy/Tomball Pky 200,803 Q4 20 PSS Industrial Group JLL Cushman & Wakefield Fuqua & Beltway 8 Southwest Far 186,710 Q4 20 Maxim Auto Corp - Cushman & Wakefield 4300 Malone Dr East-Southeast Far 183,289 Q2 20 China Manufacturers Allia… Stream Realty Partn… Carson Companies

1111-1113 Gillingham Ln * Sugar Land 171,019 Q3 20 Quality Packaging - Stream Realty Partners…

500 Industrial Blvd Sugar Land 163,582 Q4 20 Boise Cascade Building M… - Cushman & Wakefield

10611 Red Bluff Rd East-Southeast Far 160,160 Q4 20 Crown Transportation - Stream Realty Partners…

21803 Cypress Slough Dr North Hardy Toll Road 157,805 Q1 21 - - Colliers International

560 E Richey Rd North Hardy Toll Road 156,505 Q3 20 MiTek - CBRE;Prologis, Inc.

4330 Underwood Rd * East-Southeast Far 144,000 Q4 20 Triton Cargo - CBRE;Prologis, Inc.

13323 S Gessner Rd Hwy 59/Hwy 90 (Alt) 141,440 Q3 20 Lawless Group Cresa Stream Realty Partners…

9400 Telge Rd Northwest Outliers 137,960 Q1 20 Eastern Metal Supply Texas - -

10619 Red Bluff Rd East-Southeast Far 137,280 Q1 20 Dunavant Distribution Group Colliers International Stream Realty Partners… 6500 Brittmoore Rd Northwest Inner Loop 137,200 Q4 20 - - Lee & Associates 703 Logistics Dr S East-Southeast Far 133,333 Q2 20 A & R Logistics Colliers International Colliers International 10101 Bay Area Blvd East-Southeast Far 132,107 Q3 20 Worley Savills The Carson Companies

1031 Bammel Rd North Hardy Toll Road 125,000 Q3 20 Beacon Roofing Supply Inc. Mohr Partners, Inc Black Label Commerci…

8503 Citypark Loop Northeast Hwy 90 114,492 Q2 20 Vee Express Savills CBRE

16605 Air Center Blvd North Hardy Toll Road 114,400 Q2 20 Nacc Disaster Services Colliers International Prologis, Inc.;Stream R…

10619 Red Bluff Rd East-Southeast Far 114,400 Q2 20 Dunavant Distribution Group Colliers International Stream Realty Partners…

301 S Trade Center Pky The Woodlands/Conroe 113,175 Q2 20 Wildcat PPE InSite Commercial R… Lee & Associates

359 Pike Ct East-Southeast Far 113,000 Q1 20 NDS - CBRE

631 Buffalo Lakes Dr Southwest Far 111,540 Q2 20 House Of Spices The Good Omen Te… Boyd Commercial, LLC…

11945 North Fwy North Fwy/Tomball Pky 109,858 Q3 20 - - CBRE

8411 FM 1960 Road * North Hardy Toll Road 108,576 Q1 20 MVP Logistics Colliers International Duke Realty Corporation

8520 S Sam Houston Pky W * Southwest Far 107,390 Q3 20 Niagara Bottling, LLC - Stream Realty Partners…

12202 Cutten Rd North Fwy/Tomball Pky 105,069 Q3 20 ONUS Global Fulfillment… Savills Carson Companies;Str…

30 Esplanade Blvd North Outer Loop 104,860 Q4 20 Enterprise Order Solutions - Cushman & Wakefield;I…

Renewal

PAGE 27 RENT

It is estimated that rents declined over the past two quarters Otherwise, rent growth in Houston had been steady ever for the first time since the Great Recession. In fact, Houston since the global financial crisis and even through the recent was one of the few markets nationally that saw rent declines. oil downturn. This is indicative of how globally and nationally oriented Houston’s economy and particularly its industrial Houston industrial rents declined by 0.5% over the past sector have become. Even in 2016, during the darkest hour year. Out of the 390 markets that CoStar tracks, this ranks of the oil downturn, the U.S. economy was humming along, Houston 384th. This is likely due to the recent surge in new which kept job growth flat instead of drastically negative. construction, which has far outpaced demand over the And, as a result, consumers kept spending. At the same past few quarters. By contrast, industrial rents grew 3.4% time, historically low natural gas prices spurred a boom nationally. in the petrochemical industry. With job losses this year at their worst levels since the Great Depression, this year feels Rent declines were felt across the board in Houston, with different, however. all but five submarkets posting rent declines over the past 12 months. Submarkets that experienced the largest Rent growth, albeit positive over the past year for many rent corrections also experienced a large amount of new Houston submarkets, appeared to be slowing even prior to deliveries and low absorption as a percentage relative to the coronavirus pandemic and recent oil price crash, given their inventory. the onslaught of new spec supply.

MARKET RENT GROWTH (YOY)

PAGE 28 MARKET RENT PER SQUARE FOOT

PAGE 29 CONSTRUCTION

The main reason for Houston’s rising vacancy rate is its Half of Sugar Land’s construction inventory is comprised of surging speculative construction pipeline. About 29.2 million Ross Stores’ 2.2 million-SF distribution center in Brookshire, SF delivered over the past year in Houston, second only to which is expected to deliver by the end of this year. Dallas-Fort Worth. And the metro still has 8.2 million square feet under construction today, which ranks fifth in the U.S. Clay Development & Construction is also finishing work on a 1.3-million-SF distribution facility for Medline in Brookshire Some of the largest developments under construction across Interstate 10 in the Northwest Outliers Submarket. are in Houston’s outlying counties, particularly Waller and Chambers. And of the new projects that delivered or are And Stream Realty will be delivering 1 million SF of spec under construction in 2020, more than three-quarters of distribution space down the street from the Medline facility at them are rated 4 & 5 Star. This raises some concerns, since the Empire West Business Park in three phases through the most of the leasing activity this year has occurred in 1 to end of next year. 3 Star product. Thus, it is likely that developers overshot speculative demand for 4 & 5 Star recently prior to the Hunt Southwest is also developing a 1 million SF spec pandemic. development under one roof at the Cedar Port Industrial Park in Baytown, in the East-Southeast Far Submarket. Most of the new construction is occurring around the Upon completion, it will reportedly be the largest spec Beltway 8 and Grand Parkway loops, much of it in the building under one roof ever to deliver in Houston. Northwest and Southeast.

DELIVERIES & DEMOLITIONS

PAGE 30 UNDER CONSTRUCTION PROPERTIES

Properties Square Feet Percent of Inventory Preleased 107 8,162,093 1.3% 33.2%

PAGE 31 SALES

In the third quarter, large portfolio trades were precariously In February, Prologis acquired Liberty Property Trust for $13 absent in the Houston market. Prior to the pandemic, billion, including the assumption of debt. The acquisition large-scale national trades involving several million square encompassed 70 buildings in Houston, totaling more feet of Houston assets were common. As with the rest than 10.3 million SF. CoStar estimates that the Houston of the country, the coronavirus pandemic has rattled the properties traded for an allocated value of $1.1 billion, at financial markets and added ambiguity when pricing active a weighted $102/SF and a 5.9% cap rate. The portfolio transactions. During past periods of volatility, investors included new build-to-suits for Grocers Supply (728,000 SF) and lenders took pause to reassess pricing. This is likely and Conn’s HomePlus (657,000 SF), along with a variety already the case in Houston, as buyers revise underwriting of 2 to 5 Star warehouse, distribution, and manufacturing assumptions. facilities. Key submarkets included Northwest Inner Loop, North Hardy Toll Road, East-Southeast Far, and Hwy 290/ Houston posted record transaction volume in the first Tomball Pky—along with other properties spanning the quarter – in which an estimated $1.8 billion in trades took metro. The national transaction included the following: a place. Much of this was the result of Houston’s share of 108-million-SF logistics operating portfolio, 4.9 million SF national portfolio deals, like Blackstone’s acquisition of of logistics development in progress, 1,748 acres of land Global Logistic Properties’ U.S. portfolio and Prologis’ for future logistics development with build-out potential of acquisition of Liberty Property Trust, which both featured 20.5 million SF, and a 3.8-million-SF office operating and Houston-based industrial assets. In the subsequent two development portfolio. The portfolio of properties expands quarters, transaction volume fell by more than half over the Prologis’ presence in both the and the United same period last year. Kingdom.

Among the largest trades in the third quarter, Houston- Moreover, Prologis’ acquisition of Industrial Property based Mexcor acquired a 245,000-SF flex building in Trust (IPT), a subsidiary of Black Creek Group, in January September from investor Russell Gordy that was formerly accounted for an additional 23 properties sold in Houston, part of the HP campus in Cypress. While no price was totaling more than 2.7 million SF. These properties sold for disclosed, CoStar estimates that the buyer paid $13.5 an allocated value of $227.6 million. And key submarkets million, or $55/SF, at a 6.8% cap rate. included the Northwest Inner Loop, West Outer Loop, and Northwest Near. The national transaction consisted of 236 And in July, Stonelake Capital Partners acquired a properties located across 24 geographic areas and 37.5 238,000-SF building at the West Ten Business Park from million SF of industrial holdings, which were reported to be Transwestern, which is fully leased to Amazon, for an 96% leased at time of close. undisclosed price. CoStar estimates the buyer paid $14.3 million, or $60/SF, at a 6.3% cap rate. And in September 2019, Blackstone acquired 36 properties in Houston totaling nearly 4.7 million SF from Global In September, Portland, Oregon-based Grid Property Logistics Properties for an estimated price of $345.8 million, Management acquired the four-property Conroe Business or $73.60/SF, at a 6.2% cap rate. This occurred as part Park totaling nearly 190,000 SF from locally based Owen of the largest combined private real estate transaction Properties for an undisclosed price. CoStar estimates the in history, when Blackstone Real Estate Partners Fund buyer paid $16.2 million, or $86/SF at an 8.1% cap rate. acquired 115 million SF for $13.4 billion and Blackstone Real Estate Income Trust acquired 64 million SF for $5.3 Also, in September, locally based Adkisson Development billion. The Houston properties comprised a mix of urban Group acquired a nearly 160,000-SF building at 6500 and suburban distribution, warehouse, and manufacturing Brittmoore Road, near Beltway 8 and 290, from locally facilities ranging in quality from 2 to 4 Star. based Letourneau Technologies Drilling for an undisclosed price. CoStar estimates the buyer paid $9.6 million, or $60/ SF at a 6.5% cap rate.

These were mostly smaller deals between private buyers, which indicates that deals are getting done at the local level even with larger, national players taking a pause.

PAGE 32 SALES VOLUME & MARKET SALE PRICE PER SF

PAGE 33 SALES PAST 12 MONTHS

Sale Comparables Avg. Cap Rate Avg. Price/SF Avg. Vacancy At Sale 1,016 7.4% $87 14.2%

SALE COMPARABLE LOCATIONS

KEY INDICATORS

Sales Attributes Low Average Median High Sale Price $48,262 $3,173,491 $950,000 $72,594,374 Price/SF $12 $87 $90 $252 Cap Rate 2.4% 7.4% 7.9% 11.8% Time Since Sale in Months 0.0 6.3 6.2 12.0

Property Attributes Low Average Median High Building SF 800 37,016 12,000 1,016,000 Ceiling Height 6' 20'3" 19' 60' Docks 0 5 0 162 Vacancy Rate At Sale 0% 14.2% 0% 100% Year Built 1882 1988 1984 2020 Star Rating 2.3

PAGE 34 RECENT SIGNIFICANT SALES

Property Sale Property Name - Address Rating Yr Built Bldg SF Vacancy Sale Date Price Price/SF Cap Rate Home Depot 1 2020 770,640 0% 12/3/2020 $72,594,374 $94 - 7703 Sam Houston Pky W Building II 2 2017 501,020 0% 3/20/2020 $59,262,095 $118 - 4830 Borusan Rd Building I 3 2017 495,462 0% 3/20/2020 $58,604,679 $118 - 4762 Borusan Rd Bayport South Business… 4 2019 248,240 0% 6/25/2020 $20,949,000 $84 - 10565 Red Bluff Rd Building 2 5 1983 133,023 0% 6/16/2020 $15,616,646 $117 - 10700 Telge Rd 10203 Wallisville Rd 6 1998 201,128 0% 2/28/2020 $12,870,706 $67 -

Building 1 7 1998 96,991 47.20% 6/16/2020 $9,883,354 $102 - 10700 Telge Rd 1301 S 16th St 8 2020 109,080 100% 12/21/2020 $8,750,000 $80 -

7441 E Orem Dr 9 2009 80,625 0% 1/31/2020 $8,000,000 $99 -

14000 Vickery Dr 10 2012 110,000 0% 10/20/2020 $7,750,000 $70 8.00%

Building D-1 11 1981 49,822 16.30% 3/2/2020 $6,758,702 $136 - 8901-8933 Interchange Dr Kirby Interchange Buildi… 12 1983 42,694 13.10% 3/2/2020 $5,694,883 $133 - 8900-8928 Kirby Dr 16001 SH 249 13 1978 110,379 0% 3/11/2020 $5,325,000 $48 -

South Live Oak Industria… 14 2006 41,080 0% 4/9/2020 $5,150,000 $125 2.40% 202-204 S Live Oak St Building E 15 1983 69,595 7.50% 3/2/2020 $4,699,417 $68 - 8934-8964 Kirby Dr Kirby Interchange - Build… 16 1980 33,600 44.90% 3/2/2020 $4,519,964 $135 - 8864-8888 Interchange Dr Kirby Interchange Buildi… 17 1981 31,771 16.60% 3/2/2020 $4,400,051 $138 - 8955-8981 Interchange Dr Seismic Equipment Solu… 18 1980 49,100 0% 2/11/2020 $3,998,000 $81 - 10000 W Airport Blvd 10399 Silver Springs Rd 19 1980 218,934 0% 11/30/2020 $3,868,656 $18 -

The Dow Chemical - Cen… 20 2017 54,385 0% 11/10/2020 $3,712,729 $68 - 230 Abner Jackson Pky

PAGE 35 HOUSTON MAP INDUSTRIAL SUBMARKETS

PAGE 36 SUBMARKET INVENTORY

Inventory 12 Month Deliveries Under Construction Per- SF Per- No. Submarket Bldgs SF (000) % Market Rank Bldgs SF (000) Rank Bldgs Rank cent (000) cent 1 Austin County 44 2,364 0.3% 27 0 0 0% - 0 - - - 2 CBD-NW Inner Loop 522 12,493 1.8% 22 0 0 0% - 0 - - - 3 Downtown Houston 902 32,315 4.7% 7 0 0 0% - 0 - - - 4 East I-10 Outer Loop 261 15,009 2.2% 18 2 396 2.6% 14 0 - - - 5 East-Southeast Far 2,404 87,888 12.8% 1 52 5,801 6.6% 1 5 1,085 1.2% 2 6 Hwy 290/Tomball Pky 714 29,672 4.3% 8 21 3,018 10.2% 3 1 141 0.5% 11 7 Hwy 59/Hwy 90 (Alt) 1,081 27,912 4.1% 10 17 1,234 4.4% 9 12 539 1.9% 7 8 Liberty County 76 2,022 0.3% 28 0 0 0% - 0 - - - 9 North Fwy/Tomball Pky 1,044 34,292 5.0% 6 32 2,892 8.4% 4 9 193 0.6% 10 10 North Hardy Toll Road 921 41,234 6.0% 3 21 1,255 3.0% 8 7 641 1.6% 5 11 North Inner Loop 202 5,630 0.8% 25 0 0 0% - 0 - - - 12 North Outer Loop 1,118 26,788 3.9% 11 10 1,025 3.8% 11 1 534 2.0% 8 13 Northeast Hwy 321 119 1,912 0.3% 29 0 0 0% - 0 - - - 14 Northeast Hwy 90 699 23,735 3.4% 14 8 1,146 4.8% 10 0 - - - 15 Northeast I-10 189 4,549 0.7% 26 0 0 0% - 0 - - - 16 Northeast Inner Loop 193 12,246 1.8% 23 0 0 0% - 0 - - - 17 Northwest Hwy 6 532 14,453 2.1% 20 36 551 3.8% 13 16 623 4.3% 6 18 Northwest Inner Loop 1,819 64,101 9.3% 2 3 167 0.3% 16 0 - - - 19 Northwest Near 840 20,141 2.9% 15 0 0 0% - 1 135 0.7% 12 20 Northwest Outliers 753 34,637 5.0% 5 59 4,723 13.6% 2 4 1,061 3.1% 3 21 South Hwy 35 1,868 41,212 6.0% 4 10 561 1.4% 12 4 240 0.6% 9 22 South Inner Loop 418 12,649 1.8% 21 0 0 0% - 0 - - - 23 Southeast Outer Loop 443 18,178 2.6% 17 1 151 0.8% 17 0 - - - 24 Southwest Far 683 19,613 2.9% 16 24 2,716 13.8% 5 2 125 0.6% 13 25 Southwest Inner Loop 439 6,825 1.0% 24 0 0 0% - 0 - - - 26 Southwest Outer Loop 701 14,712 2.1% 19 1 25 0.2% 18 0 - - - 27 Sugar Land 563 26,317 3.8% 13 21 2,691 10.2% 6 26 2,034 7.7% 1 28 The Woodlands/Conroe 1,329 26,319 3.8% 12 35 1,398 5.3% 7 13 743 2.8% 4 29 West Outer Loop 861 28,772 4.2% 9 5 225 0.8% 15 6 68 0.2% 14

PAGE 37 SUBMARKET RENT

Gross Asking Rents 12 Month Asking Rent Annualized Quarterly Rent No. Market Per SF Rank Growth Rank Growth Rank 1 Austin County $6.80 23 -1.0% 16 0.5% 4 2 CBD-NW Inner Loop $7.97 7 -0.6% 3 -0.1% 8 3 Downtown Houston $5.47 28 -1.1% 23 -1.6% 22 4 East I-10 Outer Loop $6.03 25 -1.3% 29 -1.2% 17 5 East-Southeast Far $7.25 16 -1.1% 26 -2.0% 26 6 Hwy 290/Tomball Pky $7.47 13 -1.2% 28 -2.5% 28 7 Hwy 59/Hwy 90 (Alt) $7.68 12 -0.8% 13 -2.8% 29 8 Liberty County $6.85 22 -1.1% 22 0.1% 6 9 North Fwy/Tomball Pky $7.79 10 -1.1% 18 -0.3% 10 10 North Hardy Toll Road $7.38 14 -1.1% 20 -1.9% 24 11 North Inner Loop $5.71 26 -0.7% 8 -0.8% 14 12 North Outer Loop $6.88 21 -0.9% 14 -1.3% 21 13 Northeast Hwy 321 $9.61 2 -0.8% 10 0% 7 14 Northeast Hwy 90 $7.26 15 -1.2% 27 -1.2% 18 15 Northeast I-10 $6.97 19 -0.9% 15 -1.3% 20 16 Northeast Inner Loop $5.19 29 -1.1% 25 -2.4% 27 17 Northwest Hwy 6 $8.81 5 -0.6% 5 -0.2% 9 18 Northwest Inner Loop $7.18 18 -0.8% 12 -0.8% 13 19 Northwest Near $6.93 20 -0.8% 11 -1.2% 19 20 Northwest Outliers $8.26 6 -1.1% 19 -1.9% 25 21 South Hwy 35 $7.25 17 5.2% 1 97.5% 1 22 South Inner Loop $6.24 24 -0.4% 2 0.9% 3 23 Southeast Outer Loop $5.47 27 -1.0% 17 -1.7% 23 24 Southwest Far $7.83 9 -0.6% 4 -0.9% 15 25 Southwest Inner Loop $9.62 1 -0.7% 7 0.2% 5 26 Southwest Outer Loop $9.29 4 -0.8% 9 2.1% 2 27 Sugar Land $7.93 8 -1.1% 24 -1.1% 16 28 The Woodlands/Conroe $9.37 3 -0.7% 6 -0.6% 11 29 West Outer Loop $7.72 11 -1.1% 21 -0.7% 12

PAGE 38 SUBMARKET VACANCY & NET ABSORPTION

Vacancy 12 Month Absorption Constrct. No. Submarket SF Percent Rank SF % of Inv Rank Ratio 1 Austin County 191,000 8.1% 17 4,954 0.2% 15 - 2 CBD-NW Inner Loop 647,388 5.2% 9 (31,733) -0.3% 17 - 3 Downtown Houston 1,629,843 5.0% 8 (481,100) -1.5% 27 - 4 East I-10 Outer Loop 1,466,109 9.8% 20 (597,233) -4.0% 28 - 5 East-Southeast Far 10,532,643 12.0% 26 1,289,908 1.5% 5 3.7 6 Hwy 290/Tomball Pky 4,610,822 15.5% 29 1,197,296 4.0% 7 1.2 7 Hwy 59/Hwy 90 (Alt) 2,227,574 8.0% 16 560,950 2.0% 10 1.0 8 Liberty County 57,000 2.8% 3 50,068 2.5% 14 - 9 North Fwy/Tomball Pky 4,531,784 13.2% 27 1,764,191 5.1% 4 0.8 10 North Hardy Toll Road 4,730,614 11.5% 25 (360,147) -0.9% 25 - 11 North Inner Loop 187,628 3.3% 4 (33,256) -0.6% 18 - 12 North Outer Loop 2,253,640 8.4% 18 368,205 1.4% 11 1.6 13 Northeast Hwy 321 44,180 2.3% 2 (882) 0% 16 - 14 Northeast Hwy 90 2,631,971 11.1% 24 308,424 1.3% 12 3.2 15 Northeast I-10 89,929 2.0% 1 127,991 2.8% 13 - 16 Northeast Inner Loop 724,384 5.9% 10 (189,304) -1.5% 21 - 17 Northwest Hwy 6 1,146,627 7.9% 15 775,726 5.4% 9 0.5 18 Northwest Inner Loop 4,996,142 7.8% 13 (330,046) -0.5% 24 - 19 Northwest Near 978,281 4.9% 7 (134,621) -0.7% 20 - 20 Northwest Outliers 3,699,708 10.7% 23 3,028,465 8.7% 1 1.2 21 South Hwy 35 1,662,646 4.0% 6 1,109,443 2.7% 8 0.4 22 South Inner Loop 1,076,084 8.5% 19 (704,776) -5.6% 29 - 23 Southeast Outer Loop 1,783,444 9.8% 21 (397,983) -2.2% 26 - 24 Southwest Far 2,679,586 13.7% 28 1,849,758 9.4% 3 1.3 25 Southwest Inner Loop 715,345 10.5% 22 (318,557) -4.7% 23 - 26 Southwest Outer Loop 1,159,472 7.9% 14 (84,816) -0.6% 19 - 27 Sugar Land 1,016,043 3.9% 5 2,405,798 9.1% 2 1.0 28 The Woodlands/Conroe 1,804,858 6.9% 12 1,260,594 4.8% 6 0.9 29 West Outer Loop 1,736,744 6.0% 11 (258,737) -0.9% 22 -

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