Research & Forecast Report | OFFICE Q1 2019

Houston’s office market makes small gains in Q1

Lisa Bridges Director of Market Research | Houston

Houston’s office market continues to slowly improve, filling vacant space emptied during the energy downturn. In Q1 2019, the market Market Indicators Annual Quarterly Quarterly posted positive absorption of 724,000 SF, a substantial increase Relative to prior period Change Change Forecast* from the negative 1.2 million SF of absorption recorded one year ago. Leasing activity decreased over the quarter from 5.1M SF to VACANCY 2.8M SF. Houston’s overall vacancy rate fell slightly from 19.8% NET ABSORPTION to 19.5% over the quarter, but is still well above Houston’s pre- downturn average vacancy rate in 2014 of 11.6%. NEW CONSTRUCTION UNDER CONSTRUCTION Construction activity remained the same at 2.5M SF as developers continue to show constraint by holding off on proposed projects. *Projected Only 100,000 SF delivered during Q1 2019 and only 50,000 SF is in the pipeline scheduled to deliver next quarter.

Houston’s job growth increased by 2.4% over the year, according to recent data released by the U.S. Bureau of Labor Statistics. The Houston MSA created 72,600 jobs (not seasonally adjusted) between February 2018 and February 2019, growing faster than the U.S. during the same time period. Employment sectors with the Summary Statistics most substantial growth include support activities for mining which Houston Office Market Q1 2018 Q4 2018 Q1 2019 grew by 9.0% over the year, durable goods manufacturing up by Vacancy Rate 19.9% 19.8% 19.5% 7.6% and construction which increased by 7.1% over the year. Net Absorption (Million Square Feet) -1.2 1.7 0.7 New Construction (Million Square Feet) 0.4 0.8 0.1

Under Construction (Million Square Feet) 1.6 2.5 2.5

Class A Vacancy Rate CBD 19.0% 18.7% 18.7% Suburban 22.6% 21.7% 21.3%

Asking Rents Per Square Foot Per Year

Houston Class A $34.80 $34.77 $35.59 CBD Class A $44.23 $45.27 $45.76 Suburban Class A $32.24 $31.89 $32.29

Share or view online at colliers.com/houston Vacancy & Availability Job Growth & Unemployment (not seasonally adjusted) Houston’s citywide vacancy rate decreased 30 basis points from 19.8% to 19.5% over the quarter. The average suburban vacancy rate decreased 70 basis points UNEMPLOYMENT 2/18 2/19 from 19.8% to 19.1% and the average CBD vacancy rate fell 30 basis points from 21.4% to 21.1% between quarters. HOUSTON 4.7% 4.2%

The average Class A vacancy rate in the CBD remained stable over the quarter at 4.1% 3.9% 18.7%, and the average Class B vacancy rate in the CBD fell from 31.6% to 30.3%. U.S. 4.4% 4.1% The average suburban Class A vacancy rate decreased 40 basis points from 21.7% to 21.3% between quarters, while the average suburban Class B vacancy decreased 80 basis points from 18.7% to 17.9%. Annual # of Jobs JOB GROWTH Change Added

Of the 1,704 existing office buildings in our survey, 79 buildings have 100,000 SF HOUSTON 2.4% 72.6K or more contiguous space available for lease or sublease. Of these, 26 buildings 2.2% 273.2K have contiguous space of 200,000 SF or more available. Citywide, available TEXAS sublease space decreased over the quarter from 7.8 million SF to 7.4 million U.S. 1.7% 2.5M SF. Available space differs from vacant space in that it includes space that is currently being marketed for lease, but may be occupied with a future availability date. In contrast, unoccupied is truly vacant and is available immediately. CBD vs. Suburban CLASS A OFFICE VACANCY HISTORICAL AVAILABLE SUBLEASE SPACE 25.0%

12,000,000

10,000,000 20.0%

8,000,000

6,000,000 15.0%

4,000,000

2,000,000 10.0%

0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 5.0% Class A Class B Houston Total

0.0%

AVAILABLE SUBLEASE SPACE - 125,000 SF OR GREATER CBD Vacancy Suburban Vacancy

(Total available in building and/or complex) Large Sublease Availabilities CLASS A OFFICE RENTS

BUILDING TENANT SUBMARKET SF $50.00

5 Oxy Greenway Plaza 746,070 $45.00 Four WestLake Park BP Katy Freeway 454,487 $40.00 Energy Tower II KTI Corporation (Technip) Katy Freeway 297,919 $35.00 1500 Post Oak Blvd BHP Billiton Petroleum West Loop 273,127 $30.00 Shell Oil CBD 252,075 $25.00 NRG Tower Reliant Energy Retail CBD 237,994 $20.00 Three WestLake Park Phillips 66 Katy Freeway 221,723 $15.00 Hess Corporation CBD 215,887 $10.00 Westway III GE Oil & Gas West Belt 182,004 $5.00 1100 Louisiana Enbridge CBD 179,694 $0.00 Source: CoStar

CBD Rents Suburban Rents

2 Houston Research & Forecast Report | Q1 2019 | Office | Colliers International Absorption & Demand

Houston’s office market posted 724,000 SF of positive net absorption in Q1 2019, a 58% decrease from the previous quarter. Suburban Class A space recorded the largest gain, posting 606,639 SF of positive net absorption. A few of the tenants that relocated during the first quarter include American Bureau of Shipping (moving into 303,000 SF in CityPlace 2 in The Woodlands submarket), Asurion (moving into 129,000 SF in Legacy at Fallbrook in the West Belt submarket) and Houston Forensic Science Center (occupying 83,000 SF in Jefferson Towers at located in the CBD submarket).

Rental Rates

Houston’s average asking rental rate increased over the quarter from $29.04 per SF to $29.20 per SF. The Class A average asking rental rate rose over the quarter from $34.80 per SF to $35.59 per SF, and the average CBD Class A rental rate also rose from $45.27 to $45.76 per SF. The Suburban Class A average asking rental rate increased from $31.89 to $32.29 per SF.

Leasing Activity

Houston’s office leasing activity decreased over the quarter from 5.1M SF to 2.8M SF. Leasing activity includes new/direct, sublet, renewals, expansions in existing buildings and pre-leasing in proposed buildings. Some of the more notable transactions are noted in the table below.

Q1 2019 Select Office Lease Transactions BUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE CBD 204,210 Deloitte2 Jan-19 Loop Central II Bellaire 113,600 UniversalPegausus International2 Jan-19 Sam Houston Crossing II West Belt 108,639 Forum Energy Technologies2 Jan-19 2 CBD 105,578 Direct Energy1 Mar-19 17000 Katy Freeway Katy Freeway 59,220 CAM Integrated Solutions1 Feb-19 609 Main at Texas CBD 57,139 EnVen Energy Corp1 Feb-19 2 Houston Center CBD 45,000 Gensler Architecture1 Mar-19 Lake Front North The Woodlands 26,103 ExxonMobil1,3 Jan-19

1New/Direct 2Renewal 3Colliers International Transaction

Sales Activity

Houston’s office investment sales volume decreased over the quarter by 37.8% to 371.5M from 597.2M in Q1 2019. The average sales price per square foot trended up from $170 to $187 per SF over the quarter. Houston’s average cap rate of 7.3% is higher than the average U.S. cap rate of 6.6%.

AVERAGE OFFICE SALES PRICE PER SF AVERAGE OFFICE CAP RATE

United States Houston, TX United States Houston, TX 7.8% $300 7.6% $250 7.4%

$200 7.2% 7.0% $150 6.8%

$100 6.6% 6.4% $50 6.2%

$0 6.0%

Sources: CoStar and Real Capital Analytics

3 Houston Research & Forecast Report | Q1 2019 | Office | Colliers International Houston Office Market Summary (CBD, Suburban, & Overall)

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

# OF RATE RATE TOTAL AVG CLASS TOTAL (SF) (SF) (SF) Q1-2019 Q4-2018 Q1-2019 Q4-2018 BLDGS. (%) (%) (SF) ($/SF) CBD A 35 32,862,991 5,262,317 16.0% 872,623 0.0% 6,134,940 18.7% 18.7% 9,687 219,116 $45.76 B 30 9,713,710 2,852,027 29.4% 95,086 0.0% 2,947,113 30.3% 31.6% 122,347 6,004 $30.65 C 13 900,419 76,500 8.5% 0 0.0% 76,500 8.5% 8.5% 0 0 $20.15 Total 78 43,477,120 8,190,844 18.8% 967,709 2.2% 9,158,553 21.1% 21.4% 132,034 225,120 $38.03 SUBURBAN A 388 95,675,625 17,646,456 18.4% 2,753,154 2.9% 20,399,610 21.3% 21.7% 606,639 1,212,401 $32.29 B 953 78,573,381 13,663,840 17.4% 417,619 0.5% 14,081,459 17.9% 18.7% 44,711 255,694 $20.69 C 285 12,058,042 1,118,268 9.3% 27,724 0.2% 1,145,992 9.5% 9.1% -59,384 48,048 $18.02 Total 1626 186,307,048 32,428,564 17.4% 3,198,497 1.7% 35,627,061 19.1% 19.8% 591,966 1,516,143 $27.05 OVERALL A 423 128,538,616 22,908,773 17.8% 3,625,777 2.8% 26,534,550 20.6% 21.0% 616,326 1,431,517 $35.59 B 983 88,287,091 16,515,867 18.7% 512,705 0.6% 17,028,572 19.3% 19.5% 167,058 261,698 $22.41 C 298 12,958,461 1,194,768 9.2% 27,724 0.2% 1,222,492 9.4% 9.0% -59,384 48,048 $18.16 Total 1704 229,784,168 40,619,408 17.7% 4,166,206 1.8% 44,785,614 19.5% 19.8% 724,000 1,741,263 $30.47

Houston Suburban Office Market Summary

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

# OF RATE RATE TOTAL AVG CLASS TOTAL (SF) (SF) (SF) Q1-2019 Q4-2018 Q1-2019 Q4-2018 BLDGS. (%) (%) (SF) ($/SF) ALLEN PARKWAY (MIDTOWN) A 8 2,284,619 376,663 16.5% 2,459 0.1% 379,122 16.6% 16.1% -11,990 4,903 $33.71 B 34 2,452,908 264,559 10.8% 5,637 0.0% 270,196 11.0% 10.0% -25,965 -8,465 $27.33 C 13 403,219 102,926 25.5% 0 0.0% 102,926 25.5% 25.5% 0 1,100 $27.01 Total 55 5,140,746 744,148 14.5% 8,096 0.2% 752,244 14.6% 12.8% -37,955 -2,462 $30.52 BAYTOWN B 3 186,005 5,861 3.2% 0 0.0% 5,861 3.2% 4.6% 2,679 0 $21.45 C 3 81,481 10,513 12.9% 0 0.0% 10,513 12.9% 3.1% -8,013 0 - Total 6 267,486 16,374 6.1% 0 0.0% 16,374 6.1% 4.1% -5,334 0 $21.45 BELLAIRE A 7 1,375,713 132,108 9.6% 13,982 1.0% 146,090 10.6% 12.4% 24,505 -11,040 $29.26 B 19 2,451,213 499,174 20.4% 15,406 0.6% 514,580 21.0% 20.8% -4,110 7,402 $23.38 C 6 344,785 37,303 10.8% 0 0.0% 37,303 10.8% 10.6% -732 -2,053 $17.94 Total 32 4,171,711 668,585 16.0% 29,388 0.7% 697,973 16.7% 8.4% 19,663 -5,691 $24.24 CONROE AND OUTLYING MONTGOMERY CO A 2 88,449 28,449 32.2% 0 0.0% 28,449 32.2% 32.2% 0 0 $23.53 B 9 365,415 21,952 6.0% 0 0.0% 21,952 6.0% 6.4% 1,474 0 $18.00 C 7 287,369 17,961 6.3% 0 0.0% 17,961 6.3% 6.2% -106 -3,087 $15.47 Total 18 741,233 68,362 9.2% 0 0.0% 68,362 9.2% 1.8% 1,368 -3,087 $9.84 E. FORT BEND CO SUGAR LAND A 17 3,399,208 204,998 6.0% 92,409 2.7% 297,407 8.7% 8.5% -8,496 60,205 $32.16 B 40 2,411,540 342,286 14.2% 8,231 0.3% 350,517 14.5% 14.2% -8,119 -49,192 $23.88 C 5 146,524 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $13.02 Total 62 5,957,272 547,284 9.2% 100,640 1.7% 647,924 10.9% 10.3% -16,615 11,013 $26.98

4 Houston Research & Forecast Report | Q1 2019 | Office | Colliers International Houston Suburban Office Market Summary - Continued

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

# OF TOTAL RATE RATE TOTAL AVG CLASS (SF) (SF) Q1-2019 Q4-2018 Q1-2019 Q4-2018 BLDGS. (SF) (%) (%) (SF) ($/SF) FM 1960 A 13 2,968,984 349,617 11.8% 23,539 0.8% 373,156 12.6% 12.2% -10,243 7,162 $27.65 B 69 4,244,236 737,375 17.4% 34,761 0.8% 772,136 18.2% 19.4% 50,459 -4,232 $16.56 C 22 786,531 62,238 7.9% 2,058 0.3% 64,296 8.2% 7.9% -2,012 12,243 $14.76 Total 104 7,999,751 1,149,230 14.4% 60,358 0.8% 1,209,588 15.1% 16.8% 38,204 15,173 $19.84 GREENWAY PLAZA A 21 7,429,743 1,239,812 16.7% 66,116 0.9% 1,305,928 17.6% 18.1% 42,107 24,962 $38.84 B 31 3,105,092 321,077 10.3% 0 0.0% 321,077 10.3% 9.2% -35,675 86,933 $27.05 C 13 433,479 36,135 8.3% 0 0.0% 36,135 8.3% 7.9% -1,932 1,357 $21.44 Total 65 10,968,314 1,597,024 14.6% 66,116 0.6% 1,663,140 15.2% 17.5% 4,500 113,252 $36.08 GULF FREEWAY PASADENA A 2 105,782 29,975 28.3% 0 0.0% 29,975 28.3% 28.3% 0 0 - B 45 2,538,092 238,591 9.4% 2,398 0.1% 240,989 9.5% 9.5% 729 28,710 $21.63 C 25 953,742 132,075 13.8% 0 0.0% 132,075 13.8% 13.8% -450 -26,740 $23.53 Total 72 3,597,616 400,641 11.1% 2,398 0.1% 403,039 11.2% 14.6% 279 1,970 $22.25 I-10 EAST B 6 427,851 59,967 14.0% 0 0.0% 59,967 14.0% 14.8% 3,368 11,181 $17.17 C 6 302,414 0 0.0% 0 0.0% 0 0.0% 0.0% 0 13,000 $20.83 Total 12 730,265 59,967 8.2% 0 0.0% 59,967 8.2% 16.3% 3,368 24,181 $17.17 KATY FREEWAY A 94 23,211,900 3,957,606 17.0% 1,073,519 4.6% 5,031,125 21.7% 22.1% 108,843 425,866 $36.76 B 101 9,298,004 2,140,511 23.0% 50,065 0.5% 2,190,576 23.6% 23.3% -27,634 38,746 $22.50 C 29 1,363,282 106,743 7.8% 2,666 0.2% 109,409 8.0% 8.4% 4,978 4,517 $20.29 Total 224 33,873,186 6,204,860 18.3% 1,126,250 3.3% 7,331,110 21.6% 22.0% 86,187 469,129 $31.56 KATY GRAND PARKWAY A 17 1,629,940 181,037 11.1% 8,302 0.5% 189,339 11.6% 14.3% 43,866 40,482 $27.00 B 16 1,042,328 10,270 100.0% 0 0.0% 10,270 100.0% 2.9% 20,337 -5,143 $23.02 C 2 149,262 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - Total 35 2,821,530 191,307 6.8% 8,302 0.3% 199,609 7.1% 10.1% 64,203 35,339 $26.83 KINGWOOD HUMBLE B 20 1,313,659 75,972 5.8% 0 0.0% 75,972 5.8% 6.5% 9,148 15,896 $21.63 C 4 131,139 240 20.0% 0 0.0% 240 20.0% 20.0% 0 -25 $19.43 Total 24 1,444,798 76,212 5.3% 0 0.0% 76,212 5.3% 6.2% 9,148 15,871 $21.62 NASA CLEAR LAKE A 12 1,778,721 170,381 9.6% 2,390 0.1% 172,771 9.7% 10.7% 17,222 -18,894 $26.68 B 44 3,023,876 810,972 26.8% 0 0.0% 810,972 26.8% 26.2% -17,302 -19,266 $19.97 C 18 582,500 69,412 11.9% 0 0.0% 69,412 11.9% 11.4% -2,815 8,694 $16.98 Total 74 5,385,097 1,050,765 19.5% 2,390 0.0% 1,053,155 19.6% 22.9% -2,895 -29,466 $20.86 NORTH BELT GREENSPOINT A 25 5,520,879 3,266,528 59.2% 11,628 0.2% 3,278,156 59.4% 60.6% 69,406 48,097 $22.02 B 57 5,910,207 1,853,924 31.4% 14,484 0.2% 1,868,408 31.6% 30.0% -95,443 8,007 $15.07 C 21 1,373,108 186,808 13.6% 0 0.0% 186,808 13.6% 13.2% -5,040 -19,472 $12.18 Total 103 12,804,194 5,307,260 41.4% 26,112 0.2% 5,333,372 41.7% 44.3% -31,077 36,632 $19.25 NORTHEAST NEAR AND OUTLIER A 3 642,223 21,702 3.4% 6355 1.0% 28,057 4.4% 3.4% -6,355 0 - B 5 219,799 12,282 5.6% 8,000 3.6% 20,282 9.2% 15.4% 13,656 -15,430 $20.54 C 2 56,562 16,778 29.7% 0 0.0% 16,778 29.7% 28.0% -935 -3,808 $15.00 Total 10 918,584 50,762 5.5% 14,355 1.6% 65,117 7.1% 6.3% 6,366 -19,238 $18.33

5 Houston Research & Forecast Report | Q1 2019 | Office | Colliers International Houston Suburban Office Market Summary - Continued

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

# OF TOTAL RATE RATE TOTAL AVG CLASS (SF) (SF) Q1-2019 Q4-2018 Q1-2019 Q4-2018 BLDGS. (SF) (%) (%) (SF) ($/SF) NORTHWEST AND NORTHWEST OUTLIER A 9 1,985,781 837,875 42.2% 1,203 0.1% 839,078 42.3% 42.3% 269 10,516 $23.08 B 75 5,887,544 1,010,428 17.2% 1,705 0.0% 1,012,133 17.2% 16.0% -71,690 30,885 $19.24 C 30 1,226,857 64,668 5.3% 3000 0.2% 67,668 5.5% 5.8% 3,716 1,854 $15.62 Total 114 9,100,182 1,912,971 21.0% 5,908 0.1% 1,918,879 21.1% 20.0% -67,705 43,255 $20.80 RICHMOND FOUNTAINVIEW B 15 915,674 101,723 11.1% 0 0.0% 101,723 11.1% 9.9% -10,685 23,073 $16.97 C 10 392,300 22,919 5.8% 0 0.0% 22,919 5.8% 6.8% 3,936 5,180 $16.85 Total 25 1,307,974 124,642 9.5% 0 0.0% 124,642 9.5% 12.7% -6,749 28,253 $16.95 SAN FELIPE VOSS A 3 1,720,793 395,056 23.0% 21,661 1.3% 416,717 24.2% 24.9% 11,782 67,681 $36.89 B 30 3,158,351 580,501 18.4% 39,657 1.3% 620,158 19.6% 18.0% -51,158 -26,201 $24.84 Total 33 4,879,144 975,557 20.0% 61,318 1.3% 1,036,875 21.3% 22.0% -39,376 41,480 $29.72 SOUTH B 12 358,303 29,412 8.2% 0 0.0% 29,412 8.2% 6.8% -5,108 1,525 $24.43 C 5 195,387 31,650 16.2% 0 0.0% 31,650 16.2% 13.4% -5,550 0 $27.83 Total 17 553,690 61,062 11.0% 0 0.0% 61,062 11.0% 8.0% -10,658 1,525 $27.26 SOUTH MAIN MEDICAL CENTER A 1 485,000 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 - B 12 829,793 101,190 12.2% 0 0.0% 101,190 12.2% 11.0% -9,602 2,581 $18.42 C 7 286,418 61,119 21.3% 0 0.0% 61,119 21.3% 20.7% -1,780 156 $19.71 Total 20 1,601,211 162,309 10.1% 0 0.0% 162,309 10.1% 9.7% -11,382 2,737 $18.92 SOUTHEAST B 17 1,271,884 62,665 4.9% 0 0.0% 62,665 4.9% 4.5% -5,712 5,903 $17.86 C 2 118,209 0 0.0% 0 0.0% 0 0.0% 0.0% 0 22,233 - Total 19 1,390,093 62,665 4.5% 0 0.0% 62,665 4.5% 8.1% -5,712 28,136 $17.86 SOUTHWEST A 6 1,580,642 450,388 28.5% 0 0.0% 450,388 28.5% 27.0% -23,217 -36,161 $17.28 B 63 6,119,094 1,281,774 20.9% 62,634 1.0% 1,344,408 22.0% 23.4% 85,923 -54,197 $16.40 C 34 1,714,348 129,690 7.6% 0 0.0% 129,690 7.6% 5.7% -31,420 44,366 $14.32 Total 103 9,414,084 1,861,852 19.8% 62,634 0.7% 1,924,486 20.4% 19.3% 31,286 -45,992 $16.47 SOUTHWEST FAR AND OUTLIER A 2 158,720 19,737 12.4% 0 0.0% 19,737 12.4% 12.4% 0 0 - B 12 924,340 58,750 6.4% 0 0.0% 58,750 6.4% 23.0% 153,631 20,954 $12.00 C 3 91,661 7,000 7.6% 0 0.0% 7,000 7.6% 7.6% 0 0 $15.60 Total 17 1,174,721 85,487 7.3% 0 0.0% 85,487 7.3% 22.9% 153,631 20,954 $12.38 WEST BELT A 29 3,731,839 746,909 20.0% 228,308 6.1% 975,217 26.1% 27.6% 56,146 29,414 $28.68 B 37 2,106,925 344,867 16.4% 75,954 3.6% 420,821 20.0% 19.7% -4,802 25,548 $22.15 C 4 112,629 0 0.0% 20000 17.8% 20,000 17.8% 8.9% -10,000 -10,000 - Total 70 5,951,393 1,091,776 18.3% 324,262 5.4% 1,416,038 23.8% 28.8% 41,344 44,962 $26.62 WEST LOOP A 50 18,014,110 3,089,172 17.1% 391,945 2.2% 3,481,117 19.3% 19.1% -48,191 195,790 $38.56 B 53 6,037,326 825,704 13.7% 49,168 0.8% 874,872 14.5% 15.1% 34,458 28,802 $27.43 C 4 216,268 11,897 5.5% 0 0.0% 11,897 5.5% 3.5% -4,379 -4,575 $21.48 Total 107 24,267,704 3,926,773 16.2% 441,113 1.8% 4,367,886 18.0% 18.9% -18,112 220,017 $36.17

6 Houston Research & Forecast Report | Q1 2019 | Office | Colliers International Houston Suburban Office Market Summary - Continued

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

# OF TOTAL RATE RATE TOTAL AVG CLASS (SF) (SF) Q1-2019 Q4-2018 Q1-2019 Q4-2018 BLDGS. (SF) (%) (%) (SF) ($/SF) WESTCHASE A 34 10,002,462 2,019,433 20.2% 757,195 7.6% 2,776,628 27.8% 26.9% -88,714 -62,803 $33.93 B 62 7,611,290 1,435,303 18.9% 25,823 0.3% 1,461,126 19.2% 19.9% 55,703 151,889 $21.91 C 5 176,872 10,193 5.8% 0 0.0% 10,193 5.8% 5.8% 0 0 $15.00 Total 101 17,790,624 3,464,929 19.5% 783,018 4.4% 4,247,947 23.9% 19.8% -33,011 89,086 $28.65 THE WOODLANDS A 53 12,594,743 929,015 7.4% 75,682 0.6% 1,004,697 8.0% 11.1% 396,239 397,222 $35.84 B 66 4,362,632 436,750 10.0% 23,696 0.5% 460,446 10.6% 10.2% -13,849 -50,215 $24.92 C 5 131,696 0 0.0% 0 0.0% 0 0.0% 2.4% 3,150 3,108 $18.87 Total 124 17,089,071 1,365,765 8.0% 99,378 0.6% 1,465,143 8.6% 9.2% 385,540 350,115 $32.35

Office Development Pipeline

2.5 million SF of office space is under construction, all of which is spec development and 41.6% is pre-leased. The table below includes office buildings under construction with an RBA of 100,000 SF or more.

PRE- EST. BUILDING NAME ADDRESS SUBMARKET SF DEVELOPER/CONTRACTOR LEASED DELIVERY 801 Texas 801 Texas Ave CBD 1,110,220 32.8% Hines Securities, Inc. Oct-21 Capitol Tower 800 Capitol St CBD 778,344 79.6% SCD Acquisitions LLC Jun-19 Park Place | River Oaks 4200 Westheimer West Loop 207,202 0% Stonelake Capital Partners Mar-20 Chasewood Crossing Three 19350 State Highway 249 FM 1960 156,000 3.0% Greenwood Properties Aug-19 CityPlace 1 1700 City Plaza Dr The Woodlands 149,500 18.0% Patrinely Group, LLC Jun-19 City Place 1401 Lake Plaza Dr The Woodlands 48,840 45.2% Patrinely Group, LLC May-19 Buffalo Heights 3663 Washington Ave Midtown 35,363 0% SG Interests Sep-19 Cross Creek Ranch Office Cross Creek Ranch Bvd Southwest Outlier 27,000 57.3% The Marcel Group Mar-20

Skylines | Now Available Online at colliers.com/houston

A skyline view of available space for nine of Houston’s Class A office submarkets including the CBD, Galleria, Energy Corridor, Greenway Plaza, NASA/Clear Lake, North Belt, Sugar Land, The Woodlands and Westchase, is now available online.

75 CLASS A OFFICE BUILDINGS 75 CLASS A OFFICE BUILDINGS

70 CENTRAL BUSINESS DISTRICT HOUSTON, TEXAS 70 CENTRAL BUSINESS DISTRICT HOUSTON, TEXAS APRIL 2019 65 65 APRIL 2019 AVAILABLE* SUBLEASE* AVAILABLE* SUBLEASE* 60 60

55 55

50 50

45 45 2 40 40 19 3 6 35 35 1 7 8 20 4 5 30 30 21 25 22 9 25 25 18 23 26 17 14 10 11 12 30 24 16 20 20 32 33 15 15 15 31 Available June 2019 27 147,986 SF 13 10 10 29 5 5 28

1 2 3 4 5 6 7 8 9 10 11 12 13 27 28 29 30 31 32 33 BUILDING NAME 717 TEXAS 600 TRAVIS BANK OF AMERICA CENTER NORTH BLDG SOUTH BLDG 811 LOUISIANA ONE SHELL PLAZA 609 MAIN at TEXAS 811 MAIN STREET 2 HOUSTON CENTER LYONDELLBASELL TOWER FULBRIGHT TOWER 5 HOUSTON CENTER BUILDING NAME HESS TOWER GreenStreet 1301 FANNIN OFFICE TOWER 1400 SMITH WEDGE INT’L TOWER 1600 SMITH 1500 LOUISIANA ADDRESS 717 Texas Avenue 600 Travis Street 700 Louisiana Street 700 Milam Street 711 Louisiana Street 811 Louisiana Street 910 Louisiana Street 609 Main Street 811 Main Street 909 Fannin Street 1221 McKinney Street 1301 McKinney Street 1401 McKinney Street ADDRESS 1501 McKinney Street 1201 Fannin Street 1301 Fannin Street 1415 Louisiana Street RBA / AVG FLOOR / # OF FLOORS 696,228 / 27,500 / 33 1,656,529 / 22,575 / 75 1,268,480 / 25,000 / 56 679,337 / 20,523 / 36 664,940 / 20,000 / 34 588,423 / 31,500 / 26 1,228,923 / 24,572 / 50 1,056,658 / 28,000 / 48 972,474 / 27,000 / 46 1,024,956 / 25,624 / 40 1,065,215 / 24,000 / 46 1,247,061 / 24,452 / 51 580,875 / 29,649 / 27 RBA / AVG FLOOR / # OF FLOORS 844,763 / 30,500 /29 275,223 / 25,020 / 11 784,143 / 26,000 / 24 1,250,677 / 25,013 / 50 520,475 / 18,000 / 43 1,098,399 / 23,000 /51 1,157,690 / 25,263 / 40 % LEASED 52.7% 83.7% 87.9% 64.7% 79.3% 52.9% 88.3% 78.8% 94.5% 75.1% 91.0% 75.0% 93.0% % LEASED 100% 100% 90.3% 100% 47.1% 53.8% 100% TOTAL AVAILABLE SF 321,149 584,772 394,629 232,193 298,812 274,524 403,085 217,385 136,329 286,503 192,016 467,167 198,764 TOTAL AVAILABLE SF 215,887 249,997 115,233 0 290,666 508,039 0 MAX CONTIGUOUS SF 300,969 192,461 86,435 142,954 204,281 220,529 158,813 142,410 133,441 70,144 94,080 75,376 147,986 MAX CONTIGUOUS SF 215,887 249,997 52,544 0 119,708 351,741 0 QUOTED RATE** $45.75 $43.40 $44.49 $44.95 $44.95 $41.93 $45.24 $52.00 $51.91 $43.93 $45.20 $45.19 $50.00 QUOTED RATE** N/A N/A $38.63 N/A $32.74 $37.97 N/A 3.0 3.0 2.0 0.3 1.7 1.2 1.0 1.0 1.0 2.0 PARKING RATIO 1.3 1.0 2.0 PARKING RATIO 1.7 1.5 1.0 N/A 2.7 1.0 1.1 Metropolis Investment Metropolis Investment Busycon Properties LLC Busycon Properties LLC Hines Invesco Advisers, Inc. Brook˜eld Asset Brook˜eld Asset Brook˜eld Asset Spear Street Capital OWNER Hines Texas Tower Ltd M-M Properties OWNER H&R REIT Midway Companies/ Netrality Properties Chevron Corporation Wedge Commercial Oracle Corporation ChevronTexaco Corp. Holdings Inc. Holdings Inc. Management Inc. Management Inc. Management Inc. Lionstone Investments Properties 75

70

65

60

55

50 Available Sublease Space Available Direct Space Cass Renta Rate an aan erentae aabe Subease Sae Q1 2019 aabe Dret Sae Q1 2019 45 Centra Busness Dstrt Centra Busness Dstrt ustn Centra Busness Dstrt Class A: 1,488,042 SF or 4.3% Class A: 8,671,738 SF or 25.0% CBD Cass Rents CBD Cass aan Class B: 260,538 SF or 2.7% Class B: 2,944,898 SF or 30.3% $4.00 22.0 40 Cass Cass B Cass Cass B $4.00 2,500,000 20.0 9,000,000 $44.00 35 $42.00 8,000,000 1.0 $40.00 393,634 SF 2,000,000 7,000,000 $3.00 1.0 30 $3.00 Available 6,000,000 14.0 1,500,000 $34.00 5,000,000 25 Nov 2021 $32.00 12.0 4,000,000 $30.00 1,000,000 $2.00 10.0 3,000,000 20 $2.00 .0 2,000,000 $24.00 500,000 $22.00 .0 15 1,000,000 0 0 10 187,693 SF aan erentae nues ret an subease sae. 5 Available Jan 2021

14 15 16 17 18 19 20 21 22 23 24 25 26 BUILDING NAME 1001 FANNIN ONE CITY CENTRE HILCORP ENERGY TOWER KINDER MORGAN BLDG. WELLS FARGO PLAZA HERITAGE PLAZA 1100 LOUISIANA CENTERPOINT ENERGY ONE THREE ALLEN CENTER TWO ALLEN CENTER ADDRESS 1001 Fannin Street 1021 Main Street 1111 Main Street 1000 Main Street 1001 Louisiana Street 1000 Louisiana Street 1111 Bagby Street 1100 Louisiana Street 1111 Louisiana Street 500 Dallas Street 1201 Louisiana Street 333 Clay Street 1200 Smith Street RBA / AVG FLOOR / # OF FLOORS 1,385,212 / 27,210 / 49 608,660 / 21,266 / 29 406,600 / 17,678 / 23 837,161 / 23,333 / 36 937,003 / 28,510 / 32 1,721,242 / 25,000 / 71 1,212,895 / 26,652 / 51 1,327,882 / 23,060 / 55 1,081,251 / 22,968 / 47 993,297 / 29,214 / 34 843,533 / 24,600 / 35 1,194,719 / 25,000 /50 995,623 / 26,613 / 36 % LEASED 95.3% 77.0% 95.7% 80.2% 100% 75.7% 100% 99.7% 100% 84.6% 98.5% 92.4% 92.2% TOTAL AVAILABLE SF 617,826 416,580 0 204,952 124,600 531,048 29,295 324,527 0 160,617 36,898 297,843 435,122 *Gold and white indicators are approximate only at the time of printing and are presented to show approximate percentage of available MAX CONTIGUOUS SF 393,634 187,693 0 144,394 124,600 101,773 29,295 225,487 0 70,171 8,867 25,303 171,358 space by oor/building. All indicators are left-to-right and are not meant to show location of available space. COLLIERS INTERNATIONAL QUOTED RATE** $44.51 $30.09 N/A $52.06 N/A $49.65 $52.76 $43.36 N/A $46.53 $41.80 $46.17 $44.97 PARKING RATIO 1.0 2.3 N/A 2.0 1.0 1.7 2.4 1.8 2.5 1.0 1.0 1.0 1.0 **Rental rates listed are net + operating expenses. 1233 West Loop South, Suite 900 OWNER JMB Financial Advisors Accesso Partners, LLC Hilcorp Ventures Inc. Union Investment EPEC Property Holdings New York State Common Brook˜eld Ošce Enterprise Products CenterPoint Energy, Inc. Brook˜eld Ošce Brook˜eld Ošce Brook˜eld Ošce Brook˜eld Ošce Houston, TX 77027 Real Estate Retirement Fund Properties, Inc. Partners L.P. Properties, Inc. Properties, Inc. Properties, Inc. Properties, Inc. www.colliers.com/texas

7 Houston Research & Forecast Report | Q1 2019 | Office | Colliers International Quoted gross rental rates for existing top performing office buildings YEAR % AVAIL. RENT BUILDING NAME ADDRESS SUBMARKET RBA (SF) OWNER BUILT LEASED SF ($/SF) 609 Main at Texas 609 Main St CBD 1,056,658 2017 78.8% 217,385 $52.00 Hines Securities, Inc. 1000 Main 1000 Main St CBD 837,161 2003 80.2% 204,952 $52.00 Union Investment Real Estate Kirby Grove 2925 Richmond Ave Greenway Plaza 248,275 2015 91.4% 53,832 $47.33 Midway Companies CityCentre Five 825 Town & Country Blvd Katy Freeway 227,063 2015 92.8% 11,990 $47.58 Midway Companies Town Centre One 750 Town & Country Blvd Katy Freeway 253,714 2015 86.6% 33,993 $43.09 Moody Rambin 3009 Post Oak 3009 Post Oak Blvd West Loop/Galleria 303,008 2013 86.6% 59,249 $45.46 Post Oak Building LLC BBVA Compass Plaza 2200 Post Oak Blvd West Loop/Galleria 326,200 2013 96.6% 60,441 $50.84 Corporacion Masaveu S. A. CityWestPlace 4 2103 CityWest Blvd Westchase 518,907 2000 87.9% 138,407 $45.48 Parkway Realty Management LLC Two Hughes Landing 1790 Hughes Landing Blvd The Woodlands 197,696 2014 95.5% 13,899 $44.47- The Woodlands Development $50.47 Company, L.P.

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

Q1 2019 Houston Office Highlights

TOTAL OFFICE 229.8M SF AVAILABLE INVENTORY SUBLEASE SPACE Q1 2019 7.4M SF 5% Q4 2018 7.8M SF 128.5M SF 88.3M SF QUARTERLY Q3 2018 8.2M SF 20% ANNUALLY Q2 2018 9.3M SF 13.0M SF Q1 2018 9.2M SF TOTAL INVENTORY BY CLASS CLASS A: 56% CLASS B: 38% CLASS C: 6% LEASING 8.0M SF ACTIVITY 45% 19.5% 0.7M SF QUARTERLY VACANCY NET ABSORPTION 15%

CURRENT 2.8M SF ANNUALLY

FOR MORE INFORMATION Lisa Bridges, CPRC Beth Staggs CPRC, CPMC Colliers statistical criteria Director of Market Research | Houston Research Coordinator | Houston includes all general purpose multi +1 713 830 2125 +1 713 830 2130 and single tenant office buildings [email protected] [email protected] 20,000 SF or greater.

Colliers International | MarketHouston 0001233 Address,West Loop Suite South, # Suite 900 000Houston, Address, Texas Suite 77027 # +1 000713 222 000 2111 0000 Copyright © 20152019 Colliers International. The information contained herein has been obtained from sources deemed reliable. While colliers.com/<>colliers.com/houston 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 professional8 advisorsNorth priorAmerican to acting onResearch any of the material & Forecast contained Report in this report. | Q4 2014 | Office Market Outlook | Colliers International ADVANTAGE

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