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The Houston Commercial Real Estate Markets: What’s Ahead for 2013

Breakfast Forum

December 5, 2012

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Land Development, Homebuildng & Multi-Family Markets Will Holder Trendmaker Homes

A National Real Estate Anomaly A Free Market Case Study

Out of control, sprawl crazed megalopolis?

Human intuitive, naturally evolving Super City?

OR

-35%

-25%

-15%

-5%

5%

15%

25%

35%

45%

2Q90 2Q92 2Q94 2Q96 2Q98 2Q00 2Q02 2Q04 2Q06 2Q08 2Q10 2Q12

Las Vegas-Paradise, NV Fresno, CA

Riverside-San Bernardino-Ontario, CA Cape Coral-Ft Myers, FL

Houston-Sugar Land-Baytown, TX

Source: FHFA

Houston MSA Residential Building Permits

Number of Dwelling Units -- Thousands

81,500 Net New Jobs vs. 27,285 New Dwelling Units – 2.65 Jobs Per Unit

Houston Existing Home Prices Median Price Prior 12 Month Average

Houston Association of REALTORS®

What Will the Next Five, Ten

Years Look Like for Houston

Real Estate?

Houston MSA Population Forecasts Scenario 2000-2007 Migration

Texas State Data Center Millions

Location, Location, Location?

No!

Location, Jobs, Location, Jobs

Houston MSA Job Numbers

Recession Millions of Jobs

Seasonally-Adjusted

More Jobs Than Ever In

History

MSA Rank- Starts Last 12 Months

Conclusion:

• Houston is a Stable Steady Market • Economy & Population is Going to Grow • Supply & Demand is Moving Toward a Sellers Market • Prices Almost Have to Increase

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Retail Market Jay K. Sears NewQuest Properties

Annual Job Growth

U.S. Consumer Sentiment Index

75

100

125

75

100

125

Rolling 12-mo

average

U.S. Consumer Sentiment Index

502002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: University of Michigan Survey of Consumers

Retail Trade Sales

Source: U.S. Census

Retail Trade Sales

Source: State of Texas Comptroller

2008 Trend 2009 Trend 2010 Trend 2011 Trend Projected 2012 Trend

U.S. 100.00% 92.64% 97.84% 105.57% 114.01%

Texas 100.00% 88.06% 90.93% 98.89% 107.79%

Houston MSA 100.00% 86.63% 89.05% 99.57% 108.54%

Harris County 100.00% 85.54% 87.18% 98.69% 108.56%

Montgomery County 100.00% 91.94% 99.33% 105.29% 111.61%

Fort Bend County 100.00% 84.81% 91.94% 95.67% 110.03%

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

105.00%

110.00%

115.00%

120.00%

Retail Trade Sales By National, State, MSA, and County 2008 2009 2010 2012 2011

2008 Trend 2009 Trend 2010 Trend 2011 Trend Projected 2012 Trend

Katy 100.00% 92.59% 105.85% 121.72% 131.46%

Pearland-Friendswood-League City 100.00% 98.96% 102.43% 115.74% 125.00%

Conroe 100.00% 87.80% 94.60% 108.64% 117.34%

Baytown 100.00% 87.93% 90.13% 101.49% 115.70%

Sugarland-Rosenberg-Missouri City 100.00% 102.29% 97.87% 105.98% 115.52%

Pasadena-Deer Park-La Porte 100.00% 104.12% 105.74% 117.79% 129.57%

Houston 100.00% 85.00% 87.02% 99.06% 107.97%

Humble 100.00% 87.95% 88.15% 95.22% 103.79%

80.00%

90.00%

100.00%

110.00%

120.00%

130.00%

Retail Trade Sales By City

Retail Trade Sales

Source: State of Texas Comptroller

2008 2009 2010 2012 2011

Holiday Sales

“35 million consumers visited stores and Web sites on Thursday, up from 29 million last year.” “Average consumer spent $423 – roughly $25 more than they did last year.” “Total spending increased nearly 13% to an estimated $59.1 billion, according to the NRF.” “89 million consumers, up from 86 million in 2011 shopped on Black Friday.” “Holiday sales are expected to increase 4.1% from 2011,

said NRF.”

Thanksgiving Weekend Sale

Source: www.washingtonpost.com “Thanksgiving weekend sales better than last year”

“Online shopping on Black Friday rose 26% to exceed $1 billion for the first time.” “Online sales advanced 16% in the first 23 days of November to $13.7 billion, with sales on Thanksgiving Day increasing 32% to $633 million.” “Total spending increased nearly 13% to an estimated $59.1 billion, according to the NRF.”

Online Shopping “Traffic to retail sites on Black Friday rose to 24% from 14.3%, and the mobile share of sales hit 16%, up from 9.8% a year ago.” “Nielsen in September reported 55.5% of U.S. mobile subscribers had smartphones as of July, up from 41% a year earlier.” “The data all points to a larger addressable market for mobile sales and promotions during the holiday season.”

Mobile Shopping

Source: www.bloomberg.com “Retailers Keep Deals Flowing on 13% Holiday-Sales Jump”

Source: www.mediapost.com “Mobile Becomes Major Shopping Player”

Best Buy Annual Sales

Source: Business Insider

Same Store Sales at

Source: www.investors.Best Buy.com

Kroger 3rd Quarter Highlights

Kroger's adjusted earnings per diluted share was a record $0.46 for the quarter.

Identical supermarket sales growth, without fuel, was 3.2% in the third quarter.

Achieved 36(th) consecutive quarter of positive identical supermarket sales

Reports Record Third Quarter Earnings Per Share

Source: PRNewswire

Population Growth

5,946,800

6,127,645

6,280,138

6,435,268

6,593,498

6,754,896

5,400,000

5,600,000

5,800,000

6,000,000

6,200,000

6,400,000

6,600,000

6,800,000

7,000,000

2010 2011 2012 2013 2014 2015

Houston MSA Population Growth

Source: State of Texas Years

Popu

latio

n

-5,000

5,000

15,000

25,000

35,000

45,000

55,000

65,000

75,000

85,000

95,000

105,000

115,000

School Enrollment 2008-2009

2009-2010

2010-2011

2011-2012

School Enrollment Growth

Source: Texas Education Agency

Districts

Stud

ents

Enrollment Increases

District 2008-2012

Houston ISD 1.4%

Katy ISD 9.8%

Fort Bend ISD 1.1%

Spring ISD 9.9%

Cypress-Fairbanks ISD 6.9%

Humble ISD 7.9%

Klein ISD 5.2%

Conroe ISD 8.4%

Aldine ISD 3.9%

Clear Lake ISD 5.0%

Alvin ISD 12.6%

198,500199,000199,500200,000200,500201,000201,500202,000202,500203,000203,500204,000

Houston ISD

Houston’s Retail Market

in Texas City

in the Heights

at Hwy 249 & Smiling Wood

in Sienna Plantation

in Fairfield Market

& in Cinco Ranch

New Shopping Centers in 2012

Grocery Anchored Developments Openings 2012

25.0% market share

24.8% market share

22.2 % market share

Houston – area Market Leaders

Source: The Shelby Report of the Southwest; October 2012

2012 Store

Openings

Planned Grocery Anchored Developments 2013 & Future

25.0% market share

24.8% market share

22.2 % market share

Houston – area Market Leaders

Source: The Shelby Report of the Southwest; October 2012

2013 & Beyond Store Openings

New Shopping Centers Projects Planned

Project / Anchor Developer Location Projected Opening

Grand Lakes Marketplace

Fry & Grand Pkwy

Jan. 2013

Village at Northpark

Northpark & US 59

2nd Qtr 2013

Spring Marketplace

Rayford & Kuykendahl

1st Qtr 2014

Spring Town Center

Kuykendahl & FM 2920

Summer 2013

Blvd. Place

Post Oak & San Felipe

Spring 2014

Vintage Marketplace

Louetta & Cutten Rd

Summer 2014

Fountainview & San Felipe

2014

Development

Loop 306 & Hwy 105

2013

FOR LEASING: CALL 281-477-4300

Spring Town Center Brazos Town Center Sam Houston Town Center

NEC & SEC of FM 2920 & Kuykendahl Houston, Texas

Project Size:

Anchors: 354,559 SF

Retail: 153,845 SF Pad Sites: 27 Total; 7 Available

Tenants:

NWC & SWC of US 59 & FM 762 Rosenberg, Texas

Project Size:

550.00 acres (1.8 million SF of retail)

Tenants:

NWC of I-45 & FM 1097 Willis, Texas

Project Size:

Kroger Market Place: 123,000 SF Retail: 27,407 SF Pad Sites: 6 Available

Tenants:

OPENING MAY 2013 12 SCREEN

NOW OPEN COMING SOON

New to Houston’s Market

• California base specialty Grocery • 3 new stores

• Limited assortment grocery with over 1,000 stores nationwide • 9 new stores in Houston out of 30 planned

• Phoenix based healthy foods/ organic grocery store • 3 new stores

• North Carolina based gourmet grocery store • 4 new stores taking over Rice Epicurean locations

• 2 sites under contract Hwy 59 & University Grand Pkwy & I-10

• Same company as Bed Bath & Beyond • 1st store in Webster, TX

• Discount soft goods • Family-owned, family- oriented company

• New pet store concept • Looking for 7,000 – 9,000 sq. ft.

• 5,000 sq. ft. Petco store • Grocery anchored & urban markets • No live animals • Organic foods

• 1st store Baybrook Mall 20,500 sq. ft. • 2nd store Willowbrook Mall 25,000 sq. ft.

• California-based clothing company • 6,000 sq. ft. at First Colony Mall

• New store coming soon in Texas City

• New concept 30,000 sq. ft.

• New size 40,000 sq. ft.

• 1st location located in downtown Houston

Rent Growth Rate & Forecast

Construction / Absorption and Vacancy

Houston Sales Comps 2012

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Office Market Robert S. Parsley Colliers International

Houston’s Most Active Office Submarkets R

obus

t Eco

nom

y

Central Business District O

ppor

tuni

ty o

r Con

cern

Galleria C

ompa

ny E

xpan

sion

s

West Houston E

nerg

y &

Con

stru

ctio

n

Woodlands/Greenspoint

A Ta

le o

f Tw

o C

ities

What to expect in 2013

• Houston’s economy is a magnet for business!

• Even with concerns over the U.S. economy of the “Fiscal Cliff”, expect that office leasing activity will continue to be robust!

• Continued growth in the suburban markets - Woodlands and Energy Corridor.

• Greenspoint will be active, but due to exodus of companies relocating to other submarkets.

• 1M SF available in Allen Center (CBD) will attract a large tenant or tenants - it is an Opportunity!

• Thankful to be in Houston! Continued Growth

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Industrial Market Welcome W. Wilson, Jr. GSL Welcome Group

December 5, 2012

2013 INDUSTRIAL

FORECAST

Welcome Wilson, Jr.

Houston…A force to be reckoned with

2011

507.9 million SF

1.977 million SF

under construction

2012

843 million SF

2.156 million SF

under construction

HOUSTON INDUSTRIAL

MARKET TOTALS

VACANCY RATES BY BUILDING TYPE

5.3% HOUSTON AVERAGE

Vacancy Rates

U.S. - VS - HOUSTON

Rental Rates

INVESTMENT SALES

Ameriport 2 - Update

DiMare Fresh, Inc. - Update

JOB GROWTH

Fuels

ENERGY

The

Economy

ExxonMobil - Update

Trade and the Panama Canal

HOUSTON SHIP CHANNEL

Exxon/Qatar Proposal

Exxon Mobil Corp. and Qatar Petroleum

International are teaming up on a proposal

to export liquid natural gas from Golden Pass

terminal near the Houston ship channel.

Driving

Energy

&

Producing

Jobs

Eagle Ford Shale

GAME ON!