RELATIONSHIPS IN REAL ESTATE 4Q2020 HOUSTON QUARTERLY OFFICE MARKET OUTLOOK 2 Fourth Quarter 2020 Houston Office Market Report Houston Economic Facts & Office Market Figures Historical Net Absorption Fast Facts 1500000 1000000 500000 0 -500000 -1000000 -1500000 Through the CARES act Paycheck Protection -2000000 Program (PPP), Houston businesses received more 2015 2016 2017 2018 2019 2020 than $9.4 billion in financial assistance. The Greater Houston Partnership estimates this supported more than 700,000 jobs in the region. Historical Average Gross Rental Rates $30.00 $29.40 $28.80 $28.20 $27.60 $27.00 The Institute for Supply Management’s Purchasing $26.40 Managers’ Index (PMI) registered 53.2 in October for $25.80 Houston PMI, the third consecutive reading above $25.20 50, thus another sign the local manufacturing $24.60 sector is on the mend. $24.00 2015 2016 2017 2018 2019 2020 Historical Occupancy 90% 89% 88% Two transportation sub-sectors benefited from the 87% pandemic—warehousing/storage and messenger/ 86% courier services. They added 3,300 and 660 jobs, 85% respectively, during April and May. Ecommerce 84% drove those gains. 83% 82% 81% 80% 2015 2016 2017 2018 2019 2020 Greater Houston Partnerships Houston Employment Forecast 2021 Houston Office Market Report Fourth Quarter 2020 3 Recent Market Activity Noteworthy fourth quarter office transactions in the Houston Office Market Hewlett Packard Enterprises to Leave Sillicon Valley Largest Move in the Fourth Quarter - Harris County for Houston - Hewlett Packard Enterprises (HPE), the multi- Health System, occupying 305,000 square feet at the former national, Fortune 500 technology powerhouse, is moving their Chevron/Texaco office building in Bellaire, with the help of headquarters from the Silicon Valley to Houston. Construction Methodist Health System, accounts for the largest move on the 440,000 square foot two office buildings are set to during the fourth quarter, as reported by CoStar. In March, complete in the spring of 2022. The development is in the Methodist Health Systems backfilled 100,000 square feet in CityPlace center of Springwoods Village, a 2,000-acre master the building. planned community in North Houston, close to Interstate 45. There is no word on how many employees HPE will bring Fortune 500 Company Consolidates and Relocates to Houston, but nonetheless, the relocation is a significant - Waste Management consolidated into 285,000 square feet advancement for Houston’s economic development. at the new Bank of America Tower in the Central Business District. The company relocation came with 330,000 square Candence Bank Relocates to Park Towers - Cadence feet of vacated space across two buildings, One City Centre Bank will relocate its headquarters to 1333 West Loop South, and 1001 Fannin. In total, Waste Management vacated a net one of the twin 18 story towers at Loop 610 and Post Oak of 45,000 square feet in the Central Business District, CoStar Boulevard, from Williams Tower. The bank signed a long-term reports. lease for 82,215 square feet, allowing for their name on the building. Yang Ming Marine Transport Corp. Signs New Lease in Westchase - Large Taiwanese shipping company, Yang Investors Purchase Office Tower in Houston’s Central Ming Marine Transport Corporation, signed a 35,000 square Business District - 1111 Fannin, the 17 story, 426,600 square foot lease at the Reserve at Westchase set to commence on foot office tower in Downtown Houston, was purchased April 1, 2021. The Reserve at Westchase is home to the largest by Triten Real Estate Partners and Taconic Capital Advisors. block of contiguous slab space in the Westchase submarket, The redevelopment is set to include cosmetic interior according to CoStar. Yang Ming Marine Transport Corporation improvements. is relocating from 3 Sugar Creek. Energy Company Renews in Downtown - TC Energy, Realty.com Acquires Oxley Leasing - Privately held the Canadian pipeline company formerly called TransCanada, Realty.com, acquired the entire commercial real estate extended its 320,000 square foot lease at 700 Louisiana Street portfolio of Oxley Leasing. The deal includes roughly one in downtown Houston. The lease expires in 2030, according to million square feet of office space in Houston and Dallas. CoStar data. According to Connect Media, Realty.com will also be launching its VIP Office Space program to begin incentivizing brokers New Luxury Lodging - China-based Blossom Holding Group with commissions and bonuses for bringing tenants to their is currently undergoing completion of their first U.S. project, buildings. The company plans to renovate all buildings into The Blossom Hotel – Houston. The 16 story lodging project Class A spaces with amenities like restaurants, gyms, arcades will feature over 400,000 square feet of amenities ranging from and more. chef inspired restaurants to long-term storage. Located in Microsoft to Innovation Hub - Tech giant Microsoft the Texas Medical Center at 7118 Bertner Avenue, the project signed a lease for 25,000 square feet in the Innovation Hub is reportedly the closest luxury hotel to NRG Stadium, and is in Midtown. scheduled to open in April 2021, according to Connect Media. 4 Fourth Quarter 2020 Houston Office Market Report Under Total Total SF Total Direct Sublease (SF) YTD Net Avg. Gross Submarket Construction Inventory Available Vacancy (%) Available Absorption Rate ($/PSF) SF Houston Citywide 338,687,603 75,496,342 81.9% 7,298,656 -506,959 6,134,328 $29.57 Class A 151,312,562 41,291,820 78.6% 5,531,563 -686,146 4,557,857 $35.06 Class B 144,912,823 30,475,955 82.1% 1,698,145 176,184 1,576,471 $23.43 Class C 42,101,723 3,673,635 92.8% 68,948 21,246 0 $19.64 Bellaire 5,324,736 1,164,549 89.6% 89,475 263,395 0 $25.85 Class A 1,655,252 338,759 86.2% 83,279 -22,892 0 $28.94 Class B 2,970,241 732,605 92.0% 6,196 284,925 0 $25.57 Class C 697,243 93,185 87.4% 0 1,362 0 $18.56 CBD 51,463,478 13,445,710 78.8% 1,384,768 -219,546 1,251,856 $40.96 Class A 35,548,458 9,610,132 79.0% 1,103,076 -120,163 1,251,856 $43.52 Class B 14,147,475 3,774,127 76.2% 281,692 -99,383 0 $30.59 Class C 1,767,545 61,451 94.2% 0 0 $21.36 Ft. Bend/Sugar Land 10,455,476 1,734,125 87.3% 108,536 20,619 31,396 $29.94 Class A 4,030,300 836,202 86.5% 82,858 -84,998 0 $35.43 Class B 5,742,817 820,564 87.3% 25,678 109,731 31,396 $25.15 Class C 680,737 75,737 92.2% 0 -4,114 0 $23.83 FM 1960 16,666,642 4,068,092 81.8% 540,829 25,541 238,254 $21.07 Class A 4,353,735 1,102,421 86.2% 485,497 19,510 0 $27.48 Class B 9,172,218 2,485,306 77.8% 45,186 4,210 238,254 $19.58 Class C 2,921,264 471,345 86.9% 10,146 4,321 0 $20.60 Greenway Plaza 12,638,079 2,682,715 81.9% 365,255 -249,076 0 $35.35 Class A 6,736,690 1,860,799 76.0% 302,417 -237,788 0 $37.63 Class B 4,501,379 752,315 86.0% 55,638 -11,969 0 $30.64 Class C 1,400,010 69,601 96.8% 7,200 681 0 $24.11 Katy Fwy E & W 39,940,762 9,887,716 80.6% 1,860,279 -138,862 1,200,000 $27.37 Class A 24,090,705 6,257,157 80.4% 1,442,688 -134,793 1,200,000 $33.30 Class B 13,121,826 3,413,323 78.5% 416,722 -13,058 0 $21.16 Class C 2,722,231 217,236 93.0% 869 8,989 0 $20.88 Energy Corridor 28,061,853 7,817,351 77.1% 1,629,657 -133,516 0 $26.53 Class A 17,783,648 4,916,285 78.2% 1,247,295 -127,616 0 $32.01 Class B 9,651,375 2,844,382 74.4% 382,362 -7,967 0 $21.10 Class C 620,830 56,684 89.7% 0 2,067 0 $19.18 Kingwood/Humble 3,777,575 531,646 88.7% 32,408 9,292 270,000 $25.56 Class A 358,342 130,462 63.6% 0 8,502 270,000 $27.54 Class B 2,480,281 296,175 91.4% 32,408 4,591 0 $25.74 Class C 935,212 105,009 91.1% 0 -3,801 0 $20.61 Midtown 10,373,256 1,759,429 88.3% 63,481 -47,190 493,400 $36.99 Class A 2,926,419 700,107 87.1% 15,694 -8,014 493,400 $40.29 Class B 4,970,449 779,127 87.6% 45,647 -32,358 0 $35.66 Class C 2,471,684 278,469 91.2% 2,140 -7,246 0 $27.69 Houston Office Market Report Fourth Quarter 2020 5 Under Total Total SF Total Direct Sublease (SF) YTD Net Avg. Gross Submarket Construction Inventory Available Vacancy (%) Available Absorption Rate ($/PSF) SF Houston Citywide 338,687,603 75,496,342 81.9% 7,298,656 -506,959 6,134,328 $29.57 Class A 151,312,562 41,291,820 78.6% 5,531,563 -686,146 4,557,857 $35.06 Class B 144,912,823 30,475,955 82.1% 1,698,145 176,184 1,576,471 $23.43 Class C 42,101,723 3,673,635 92.8% 68,948 21,246 0 $19.64 NASA/Clear Lake 10,321,647 1,577,289 86.8% 73,897 -22,441 17,200 $21.77 Class A 2,463,806 445,812 86.4% 60,363 -3,208 0 $26.03 Class B 5,982,353 965,570 85.2% 13,534 1,030 17,200 $20.25 Class C 1,856,195 162,459 92.5% 0 -19,263 0 $19.46 North Belt 14,361,309 6,076,637 60.3% 72,886 -34,240 0 $18.51 Class A 5,660,589 3,497,582 39.7% 27,025 1,450 0 $20.53 Class B 7,073,512 2,350,119 70.7% 45,861 -22,697 0 $15.74 Class C 1,627,208 228,936 86.7% 0 -12,993 0 $11.27 Northwest 12,476,884 2,373,152 83.1% 74,616 14,020 23,200 $21.28 Class A 2,286,361 771,714 70.5% 42,300 25,528 0 $24.66 Class B 7,145,356 1,317,084 83.0% 32,316 -18,757 23,200 $19.46 Class C 3,031,581 272,977 93.1% 0 10,689 0 $17.48 San Felipe/Voss 5,346,729 1,506,084 75.6% 97,217 -29,265 0 $29.56 Class A 1,714,911 525,009 68.8% 34,293 8,128 0 $35.24 Class B 3,544,696 973,575 78.3% 62,924 -37,393 0 $25.54 Class C 87,122 7,500 100.0% 0 0 0 $24.76 S.