Q4 2019

HOUSTONMARKET REPORT

OFFICE & INDUSTRIAL

2900 Weslayan Street, Ste 620 Houston, TX 77027.

info@oxfordcres.com713-647-6400

PAGE 1

CONTENTS OFFICE MARKET REPORT

2 OVERVIEW

3 LEASING

6 RENT

8 SALES

9 PAST SOLD SUMMARY

10 HOUSTON OFFICE SUBMARKETS MAP

INDUSTRIAL MARKET REPORT

14 OVERVIEW

15 LEASING

17 RENT

19 SALES

20 PAST SOLD SUMMARY

21 HOUSTON INDUSTRIAL SUBMARKETS MAP

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

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OFFICE MARKET REPORT

Given the sea changes facing the energy industry in terms of lower oil prices, automation, new technologies, and demand for reduced carbon emissions, there is a very real threat that Houston’s office market may not grow as it has in years past. Nevertheless, there are bright spots. Tenants and investors are capitalizing on a trend towards a flight to quality. And the city remains a hotbed for institutional capital.

The recent building boom has put pressure on older assets. As in other markets that experienced a large amount new construction this cycle, CoStar expects a wave of renovations here as older assets try to compete.

However, the new supply should satisfy key occupiers that are driven by quality buildings as part of their strategy to attract and retain talent in the midst of a tight national labor market.

The largest cluster of energy companies and the largest medical center in the world should keep large employers in Houston for the foreseeable future, even if growth moving forward is projected to be slower than in the recent oil boom years. Meanwhile, the planned TMC3 collaborative research campus and The Ion innovation hub in Midtown Houston both offer the promise of a burgeoning tech scene.

2.5 M12 Mo Deliveries in SF

16.6%Vacancy Rate

1.1%12 Mo Rent Growth

206 K12 Mo Net Absorption in SF

OVERVIEW

KEY INDICATORS

Current Quarter RBA Vacancy RateMarket

RentAvailability

RateNet Absorption

SFDeliveries

SFUnder

Construction

4 & 5 Star 147,925,809 18.1% $34.24 24.1% (204,297) 36,663 3,432,975

3 Star 134,898,870 17.2% $24.60 19.5% 101,625 114,798 1,158,579

1 & 2 Star 48,964,394 10.2% $21.07 12.1% 186,859 3,584 39,045

Market 331,789,073 16.6% $28.42 20.5% 84,187 155,045 4,630,599

Annual Trends 12 MonthHistorical

Avg.Forecast

Avg.Peak When Trough When

Vacancy Change (YOY) 0.5% 13.1% 15.1% 16.9% 2019 Q3 8.9% 1999 Q1

Net Absorption SF 206 K 2,884,001 3,027,302 9,426,290 2006 Q4 (4,578,597) 2017 Q3

Deliveries SF 2.5 M 5,124,006 3,027,302 13,302,030 2015 Q4 1,287,703 2010 Q4

Rent Growth 1.1% 1.7% 1.1% 12.6% 2008 Q1 -5.6% 2004 Q1

Sales Volume $2.8 B $1.8B N/A $5.0B 2013 Q3 $253.0M 2009 Q4

PAGE 3

LEASINGA return to hiring in Houston unfortunately has not translated into broad-based gains in the office sector. Houston’s vacancy rate compressed from 16.7% in 18Q2 to 16% by 19Q1. However, significant move-outs in the second half of last year caused Houston’s vacancy rate to return to 16.6% by 20Q1, ushering in a sense of renewed caution. Net absorption amounted to about 84,000 SF last quarter and just 210,000 SF over the past year.

Office tenants in Houston have bountiful options for new space, as Houston has the highest vacancy rate in the country. In this tenants’ market, landlords must offer significant amenities and compete in terms of price.

Houston is also experiencing a tremendous flight to quality, a trend also seen at the national level. Of the 100 largest new office leases signed last year, over 70% were for 4 Star space, and nearly 20% were for 5 Star space.

Some major occupancies helped move the needle in Houston last year.

In one of the largest moves, Bank of America moved into 210,000 SF at its new eponymous building in Downtown Houston in mid-2019. This represented a significant expansion, as the firm vacated about 135,000 SF at their prior location.

Late in the year, McDermott International moved into about 70% of the space it leased at Energy Center V in Katy Freeway West. It was then announced in 20Q1 that the firm would declare Chapter 11 bankruptcy, although it was unclear how this would affect its lease at Energy Center.

BHP Billiton (now BHP) landed tenants to fill a significant amount of its sublease space at Four Oaks Place in the Galleria/Uptown area, bringing the 500,000-SF building to nearly full occupancy from total vacancy within one year. Stewart Title moved into approximately 156,000 SF in the tower mid-year after vacating its space in Two Post Oak Central. Engie followed Stewart Tile and moved into 110,000 SF later in the year, after vacating its space at Three Post Oak Central.

Overall, leasing volume remains healthy. As new leasing activity is down significantly from the peak of the shale boom, the majority of leases were renewals.

Underscoring this point, Burns & McDonnell renewed nearly 160,000 SF at 1700 West Loop South in the Galleria/Uptown area. The building, which is owned by Lingerfelt Commonwealth Partners, is undergoing a renovation as a condition of the renewal.

Alight Solutions leased 180,000 SF at 8770 New Trails Drive in The Woodlands. The property is being developed by The Howard Hughes Corporation and is expected to deliver in early 2020.

Kiewit Engineering leased 157,000 SF at Energy Center I in Katy Freeway West for an estimated $22/SF triple net. Kiewit Engineering, which is expected to move in mid- 2020, will occupy space in the property that sat empty for nearly four years.

CoStar forecasts a gradual improvement in Houston’s office vacancy rate to under 15% by 2024. But absent a resurgent energy sector or other office-using industries to bridge that demand, there is no guarantee of that happening. And at least over the past five years, both of those have remained elusive.

And CoStar’s forecast calls for Houston’s vacancy rate to be one of the few to compress over the next few years, as it is one of the only U.S. markets to have corrected. However, a continued slowdown in the energy sector and a potential late-cycle weakening of the global economy pose downside risks to Houston’s relatively flat office outlook over the next few years.

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VACANCY RATE

NET ABSORPTION, NET DELIVERIES & VACANCY

PAGE 5

AVAILABILITY RATE

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RENTHouston office rents, even for 4 & 5 Star space, are being offered at a deep discount to both the U.S. average and coastal metros, an attractive proposition for companies looking to relocate to an affordable, large U.S. metro.

Rent growth over the past year was strongest inside the Loop, the area that is seeing the most new development and absorption activity. West Houston submarkets located in and near the Energy Corridor trail just slightly behind, a result of resurgent leasing activity in the area.

Despite the observable flight to quality trend, vacancy rates for 3 and 4 & 5 Star office properties, which make up 85% of the inventory, remain sky-high. This continues to place pressure on landlords to keep rents low to attract space. As a result, rent growth for all but 1 & 2 Star properties has been generally negative or flat since 2015.

A forecast of flat rent growth over the next few years is not a promising sign for Houston office tenants. As a result, Houston office investors may need to look to compression in the exit cap to derive real value from office buildings with otherwise tepid income growth.

MARKET RENT GROWTH (YOY)

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MARKET RENT PER SQUARE FOOT

PAGE 8

SALESHouston once again ranked in the top 15 U.S. markets for office transaction volume last year.

And the city’s office transaction volume of $4.7 billion remained robust in 2019.

In December 2019, The Howard Hughes Corporation announced that it would spend $565 million to buy 2.8 million SF in the Houston area from the combined Occidental and Anadarko real estate portfolio in the wake of its August 2019 merger. This will include a 1.4-million- SF campus in The Woodlands and a vacant 1.3-million- SF campus in the Energy Corridor. Howard Hughes plans to sell the Energy Corridor campus and occupy the smaller of the two Anadarko Woodlands towers for its world headquarters, leasing back the taller Woodlands tower to Occidental for 13 years.

The Howard Hughes Corporation purchased the properties for $565 million from Occidental Petroleum Corporation.

In October 2019, Cerberus Capital and Hines acquired the iconic JP Morgan Chase Tower at 600 Travis, which is the tallest building in Texas, and the adjacent 601 Travis from the Hariri family. This was the first trophy office asset to trade in Houston since the Masaveu family acquired BBVA Plaza in the Galleria/Uptown area in late 2015 for a

record price at the time of $527/SF. Cerberus Capital and Hines purchased the two properties for an estimated $627 million ($304/SF) at a 6.9% cap.

And in December 2019, Skanska reported that it sold a 90% interest in the new Bank of America Tower to Beacon Capital Partners for $373 million, or approximately $530/SF, at an estimated 6.9% cap. This set the record for the highest non-medical office sales price per SF in Houston.

At an average cap rate of 7.4%, Houston could still be considered underpriced relative to the 6.7% national average cap rate.

And while CoStar forecasts cap rate expansion for all top 30 markets over the next five years, Houston’s market cap rate is only expected to expand by about 15 basis points, which would be right in line with the U.S. average.

This paints Houston as a relative safe harbor in the near term, at least in comparison with some of the fastergrowing and more volatile Sun Belt and markets.

CoStar also estimates that Houston’s average sales price per SF and cap rates were relatively flat last year. Transaction pricing fell by about 30 basis points, and cap rates compressed 10 basis points.

SALES VOLUME & MARKET SALE PRICE PER SF

PAGE 9

PAST SOLD SUMMARY

774Sale Comparables

$233Avg. Price/SF

17.9%Avg. Vacancy At Sale

7.8%Avg. Cap Rate

SALE COMPARABLE LOCATIONS

KEY INDICATORS

Sales Attributes Low Average Median High

Sale Price $68,000 $19,340,270 $1,688,056 $535,004,514

Price Per SF $1.82 $233 $168 $589

Cap Rate 3.3% 7.8% 8.0% 12.5%

Time Since Sale in Months 0.0 6.0 5.9 12.0

Property Attributes Low Average Median High

Building SF 482 37,464 5,958 1,656,529

Stories 1 3 1 75

Typical Floor SF 812 9,785 4,865 68,500

Vacancy Rate At Sale 0% 17.9% 0% 100%

Year Built 1900 1983 1982 2020

Star Rating 2.5

PAGE 10

HOUSTON MAP OFFICE SUBMARKETS

PAGE 11

Inventory 12 Month Deliveries Under Construction

No. Submarket Bldgs SF (000) % Market Rank Bldgs SF (000) Percent Rank Bldgs SF (000) Percent Rank

1 Austin County 47 271 0.1% 44 0 0 0% - 0 - - -2 Baytown 140 1,905 0.6% 35 0 0 0% - 1 6 0.3% 253 Bellaire 91 5,083 1.5% 21 1 5 0.1% 21 1 53 1.0% 164 CBD 161 51,354 15.5% 1 1 780 1.5% 1 2 1,252 2.4% 15 Conroe 262 2,764 0.8% 30 1 4 0.1% 22 2 17 0.6% 21

6E Fort Bend Co/Sugar Land

429 10,142 3.1% 11 20 156 1.5% 6 15 260 2.6% 7

7 FM 1960/Champions 262 4,402 1.3% 23 0 0 0% - 0 - - -8 FM 1960/Hwy 249 451 9,333 2.8% 13 16 320 3.4% 2 23 188 2.0% 99 FM 1960/I-45 North 112 2,504 0.8% 31 0 0 0% - 0 - - -10 Galleria/Uptown 66 16,848 5.1% 5 0 0 0% - 1 133 0.8% 1111 Greenspoint/IAH 57 3,355 1.0% 27 0 0 0% - 0 - - -12 Greenspoint/N Belt West 116 10,844 3.3% 9 0 0 0% - 0 - - -13 Greenway Plaza 273 12,667 3.8% 7 0 0 0% - 0 - - -14 Gulf Freeway/Pasadena 648 8,067 2.4% 14 0 0 0% - 0 - - -15 I-10 East 138 1,384 0.4% 40 0 0 0% - 1 31 2.2% 1816 Katy Freeway East 262 11,694 3.5% 8 3 121 1.0% 8 3 461 3.9% 217 Katy Freeway West 259 27,872 8.4% 2 2 126 0.5% 7 1 15 0.1% 2318 Katy/Grand Parkway West 463 6,326 1.9% 16 18 171 2.7% 5 4 289 4.6% 619 Kingwood/Humble 237 3,692 1.1% 26 2 16 0.4% 14 4 321 8.7% 520 Liberty County 77 450 0.1% 43 0 0 0% - 0 - - -21 Midtown 582 9,969 3.0% 12 3 42 0.4% 11 3 359 3.6% 322 NASA/Clear Lake 537 10,284 3.1% 10 3 18 0.2% 12 3 127 1.2% 1223 North Loop West 361 6,188 1.9% 18 1 5 0.1% 20 6 144 2.3% 1024 Northeast Near 148 2,263 0.7% 32 0 0 0% - 0 - - -25 Northeast Outlier 90 954 0.3% 41 1 8 0.8% 17 1 13 1.4% 2426 Northwest Far 132 4,396 1.3% 24 0 0 0% - 0 - - -27 Northwest Near 59 1,551 0.5% 37 1 9 0.6% 15 1 16 1.0% 2228 Northwest Outlier 285 2,026 0.6% 34 13 189 9.3% 4 6 105 5.2% 14

29Outlying Chambers County

25 171 0.1% 45 1 7 4.4% 18 0 - - -

30Outlying Montgomery Cnty

216 1,490 0.4% 38 2 18 1.2% 13 3 30 2.0% 19

31 Outlying Waller County 23 117 0% 46 0 0 0% - 0 - - -32 Post Oak Park 44 4,607 1.4% 22 0 0 0% - 1 207 4.5% 833 Richmond/Fountainview 119 2,196 0.7% 33 0 0 0% - 0 - - -34 Riverway 24 3,099 0.9% 29 0 0 0% - 0 - - -35 San Felipe/Voss 50 5,346 1.6% 19 0 0 0% - 0 - - -36 South 271 3,269 1.0% 28 4 109 3.3% 9 4 43 1.3% 1737 South Hwy 35 160 862 0.3% 42 1 8 0.9% 16 1 3 0.3% 28

38South Main/Medical Center

243 13,105 3.9% 6 0 0 0% - 1 5 0% 26

39 Southeast Outlier 354 4,250 1.3% 25 1 7 0.2% 19 8 108 2.6% 1340 Southwest Beltway 8 193 7,467 2.3% 15 0 0 0% - 0 - - -41 Southwest Far 93 1,458 0.4% 39 0 0 0% - 1 20 1.3% 2042 Southwest Outlier 232 1,894 0.6% 36 6 48 2.5% 10 4 63 3.3% 1543 Southwest/Hillcroft 110 5,341 1.6% 20 0 0 0% - 0 - - -44 The Woodlands 656 23,276 7.0% 3 11 308 1.3% 3 6 358 1.5% 445 West Belt 113 6,317 1.9% 17 0 0 0% - 1 4 0.1% 2746 Westchase 140 18,935 5.7% 4 0 0 0% - 0 - - -

SUBMARKET INVENTORY

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SUBMARKET RENT

Gross Asking Rents 12 Month Asking Rent Annualized Quarterly RentNo. Market Per SF Rank Growth Rank Growth Rank1 Austin County $20.76 35 1.7% 9 4.8% 102 Baytown $22.19 32 1.5% 12 5.4% 73 Bellaire $25.65 18 0.8% 32 3.1% 224 CBD $36.98 1 3.1% 2 2.0% 255 Conroe $22.37 31 1.0% 24 3.5% 196 E Fort Bend Co/Sugar Land $27.54 12 1.2% 17 -1.3% 387 FM 1960/Champions $19.18 43 2.0% 6 5.6% 58 FM 1960/Hwy 249 $25.41 19 0% 40 -1.6% 409 FM 1960/I-45 North $20.36 37 0.3% 36 1.7% 2610 Galleria/Uptown $31.61 4 -1.9% 46 -6.7% 4611 Greenspoint/IAH $19.42 42 -0.3% 41 2.9% 2312 Greenspoint/N Belt West $18.55 44 -0.9% 44 0% 3313 Greenway Plaza $30.38 8 0.5% 34 -1.2% 3714 Gulf Freeway/Pasadena $22.06 33 1.6% 11 3.8% 1715 I-10 East $20.71 36 1.9% 8 4.4% 1516 Katy Freeway East $31.08 5 1.5% 13 0.7% 3017 Katy Freeway West $30.75 6 1.0% 21 -0.7% 3418 Katy/Grand Parkway West $29.07 9 0.8% 31 -0.7% 3519 Kingwood/Humble $25.02 21 0.9% 28 -1.0% 3620 Liberty County $21.98 34 2.0% 7 5.1% 821 Midtown $30.65 7 3.6% 1 1.3% 2822 NASA/Clear Lake $24.10 24 0.8% 30 1.4% 2723 North Loop West $23.50 26 1.0% 22 3.3% 2124 Northeast Near $24.45 22 0.9% 27 -1.8% 4125 Northeast Outlier $24.38 23 1.0% 25 2.0% 2426 Northwest Far $19.90 39 1.0% 23 4.6% 1327 Northwest Near $19.97 38 1.1% 20 5.9% 428 Northwest Outlier $25.09 20 1.2% 18 4.8% 929 Outlying Chambers County $26.52 16 1.4% 14 5.5% 630 Outlying Montgomery Cnty $22.74 28 1.3% 15 3.6% 1831 Outlying Waller County $22.56 29 2.9% 3 4.7% 1232 Post Oak Park $32.04 3 0.3% 37 0.1% 3133 Richmond/Fountainview $19.56 41 2.8% 4 6.9% 234 Riverway $27.45 13 -0.4% 43 -2.2% 4235 San Felipe/Voss $26.60 15 0.1% 39 -5.4% 4536 South $26.44 17 0.7% 33 0.8% 2937 South Hwy 35 $19.84 40 2.7% 5 4.7% 1138 South Main/Medical Center $28.41 10 0.9% 29 -1.6% 3939 Southeast Outlier $22.47 30 1.1% 19 4.4% 1440 Southwest Beltway 8 $18.11 45 0.4% 35 12.6% 141 Southwest Far $23.90 25 0.9% 26 4.0% 1642 Southwest Outlier $23.25 27 1.2% 16 3.3% 2043 Southwest/Hillcroft $17.37 46 -0.4% 42 6.1% 344 The Woodlands $32.30 2 -1.4% 45 -4.3% 4445 West Belt $28.16 11 0.3% 38 0.1% 3246 Westchase $27.37 14 1.6% 10 -2.2% 43

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SUBMARKET VACANCY & NET ABSORPTION

Vacancy 12 Month Absorption

No. Submarket SF Percent Rank SF % of Inv RankConstrct.

Ratio1 Austin County 19,879 7.3% 10 (13,723) -5.1% 29 -2 Baytown 78,721 4.1% 4 25,232 1.3% 14 -3 Bellaire 633,367 12.5% 24 96,736 1.9% 6 0.14 CBD 9,939,599 19.4% 37 265,676 0.5% 2 2.95 Conroe 274,123 9.9% 16 (22,312) -0.8% 31 -6 E Fort Bend Co/Sugar Land 1,188,240 11.7% 20 (66,322) -0.7% 35 -7 FM 1960/Champions 614,491 14.0% 26 12,615 0.3% 19 -8 FM 1960/Hwy 249 1,487,883 15.9% 30 (300,078) -3.2% 46 -9 FM 1960/I-45 North 667,015 26.6% 45 (85,849) -3.4% 37 -10 Galleria/Uptown 2,809,782 16.7% 32 (161,687) -1.0% 43 -11 Greenspoint/IAH 806,160 24.0% 43 37,525 1.1% 11 -12 Greenspoint/N Belt West 4,712,513 43.5% 46 63,659 0.6% 9 -13 Greenway Plaza 2,031,411 16.0% 31 (224,819) -1.8% 45 -14 Gulf Freeway/Pasadena 965,246 12.0% 21 (125,098) -1.6% 40 -15 I-10 East 118,271 8.5% 12 (39,036) -2.8% 33 -16 Katy Freeway East 1,081,067 9.2% 13 190,845 1.6% 3 0.517 Katy Freeway West 6,072,251 21.8% 39 804,911 2.9% 1 0.218 Katy/Grand Parkway West 761,504 12.0% 22 11,005 0.2% 20 13.519 Kingwood/Humble 377,124 10.2% 18 26,705 0.7% 13 0.520 Liberty County 11,614 2.6% 3 (4,402) -1.0% 26 -21 Midtown 998,647 10.0% 17 (72,969) -0.7% 36 -22 NASA/Clear Lake 1,454,552 14.1% 27 18,831 0.2% 17 0.823 North Loop West 972,976 15.7% 29 39,451 0.6% 10 -24 Northeast Near 151,483 6.7% 8 4,486 0.2% 23 -25 Northeast Outlier 50,385 5.3% 5 7,205 0.8% 21 1.126 Northwest Far 774,082 17.6% 33 28,250 0.6% 12 -27 Northwest Near 193,004 12.4% 23 799 0.1% 24 11.028 Northwest Outlier 303,538 15.0% 28 140,904 7.0% 4 1.029 Outlying Chambers County 2,339 1.4% 1 5,082 3.0% 22 1.530 Outlying Montgomery Cnty 155,574 10.4% 19 (10,410) -0.7% 28 -31 Outlying Waller County 2,200 1.9% 2 (1,185) -1.0% 25 -32 Post Oak Park 1,138,348 24.7% 44 (102,381) -2.2% 38 -33 Richmond/Fountainview 215,055 9.8% 15 (45,666) -2.1% 34 -34 Riverway 689,626 22.3% 40 (144,689) -4.7% 41 -35 San Felipe/Voss 1,125,106 21.0% 38 (121,550) -2.3% 39 -36 South 265,821 8.1% 11 82,025 2.5% 7 1.337 South Hwy 35 46,027 5.3% 6 (15,655) -1.8% 30 -38 South Main/Medical Center 803,422 6.1% 7 (161,165) -1.2% 42 -39 Southeast Outlier 302,042 7.1% 9 18,491 0.4% 18 -40 Southwest Beltway 8 1,327,055 17.8% 34 23,559 0.3% 15 -41 Southwest Far 266,325 18.3% 35 (10,318) -0.7% 27 -42 Southwest Outlier 248,109 13.1% 25 22,417 1.2% 16 2.043 Southwest/Hillcroft 987,738 18.5% 36 (27,334) -0.5% 32 -44 The Woodlands 2,252,901 9.7% 14 113,096 0.5% 5 2.545 West Belt 1,416,258 22.4% 41 (174,333) -2.8% 44 -46 Westchase 4,277,006 22.6% 42 63,934 0.3% 8 -

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INDUSTRIAL MARKET REPORT

The amount of new industrial space under construction in Houston today has reached unprecedented levels, which should give some pause for concern, if not for the significant amount of build-to-suits underway.

Yet absorption levels remain high and vacancies low, which should help Houston industrial weather any potential storm, although new spec development remains an area of concern.

19.4 M12 Mo Deliveries in SF

7.2%Vacancy Rate

1.0%12 Mo Rent Growth

5.8 M12 Mo Net Absorption in SF

OVERVIEW

KEY INDICATORS

Current Quarter RBA Vacancy RateMarket

RentAvailability

RateNet Absorption

SFDeliveries

SFUnder

Construction

Logistics 483,438,667 7.8% $6.90 12.9% (396,379) 1,532,784 23,426,143

Specialized Industrial 112,942,056 3.2% $7.96 5.0% (471,923) 40,200 2,027,064

Flex 52,870,175 9.8% $10.48 13.0% (156,969) 0 312,964

Market 649,250,898 7.2% $7.36 11.5% (1,025,271) 1,572,984 25,766,171

Annual Trends 12 Month Historical Avg.

Forecast Avg. Peak When Trough When

Vacancy Change (YOY) 1.7% 6.3% 8.3% 9.2% 2004 Q1 4.2% 1999 Q1

Net Absorption SF 5.8 M 8,365,464 11,897,109 19,819,736 2005 Q2 (564,387) 2001 Q2

Deliveries SF 19.4 M 10,902,290 17,374,797 19,369,864 2019 Q4 3,525,866 2011 Q1

Rent Growth 1.0% 2.1% 0.9% 9.2% 2000 Q2 -2.1% 2010 Q3

Sales Volume $1.6 B $534.5M N/A $1.8B 2019 Q3 $126.5M 1999 Q4

PAGE 15

LEASINGHouston has the third-most industrial space under construction in the U.S. after Dallas-Fort Worth and the Inland Empire. And the metro ranked third for new deliveries last year.

The good news is that Houston leasing activity remains near-record highs, and the metro ranked fifth last year for net absorption. Trade, transportation, and utilities tenants comprised more than two-thirds of leasing activity last year, suggesting that population-driven, ecommerce and logistics activities drove demand in the market.

New build-to-suits moved the needle in terms of leasing activity in 2019, while the largest move-outs were generally from older-generation space.

Among the largest, Home Depot leased 770,000 SF for 20 years at its new Hines build-to-suit in northwest Houston.

Rooms To Go renewed a 375,000-SF lease at its buildto- suit in Brookshire on the south side of I-10, which is owned by Exeter Property Group.

Transportation company Eugene B. Smith & Co. leased 345,000 SF at the 3 Star warehouse at 411 Brisbane St.,

which is owned by Auburndale Properties, in the South Hwy 35 Submarket.

Among the largest move-ins, Grocers Supply occupied 727,000 SF at its build-to-suit in the North Hardy Toll Road Submarket, which was developed and is owned by Liberty Property Trust.

Costco Wholesale moved into its 550,000-SF build-tosuit in Brookshire on the north side of I-10 at the beginning of this year; the property was developed by Jackson Dean Construction and is owned by the tenant.

Plastic Bagging & Packaging moved into its 520,000-SF build-to-suit in Baytown, which was developed by E.E. Reed Construction and is owned by Artis REIT.

Houston’s industrial vacancy rate has risen from sub-5% in 2014 to nearly 7.2% today. CoStar forecasts the vacancy rate to stabilize around 8% over the next five years. To put 8% vacancy into perspective, Houstonis tied with Phoenix for the highest industrial vacancy rate out of the 25 largest U.S. cities.

NET ABSORPTION, NET DELIVERIES & VACANCY

PAGE 16

VACANCY RATE

AVAILABILITY RATE

PAGE 17

RENTRent growth, albeit positive over the past year for many Houston submarkets, appears to be slowing, given the onslaught of new spec supply.

The submarkets boasting the highest rent growth are areas where a lot of new speculative supply has come on line in recent years. This is due to the fact that landlords are generally able to charge higher rents for new product, and vacancies continue to remain low.

Rent growth for Houston industrial briefly decelerated during the oil downturn but never went negative. And rents quickly recovered, thanks to strong population,

ecommerce, and petrochemical growth. However, with the recent petrochemical boom having mostly run its course, and given the significant amount of new supply coming on line, rents have fallen a bit over the past year.

That said, CoStar still forecasts positive rent growth over the next few years, albeit at lower levels than in recent years. Downside risks to this forecast include the possibility of sudden U.S. or global recession and the economic uncertainty that comes with a U.S. election year.

MARKET RENT GROWTH (YOY)

PAGE 18

MARKET RENT PER SQUARE FOOT

PAGE 19

SALESCapital investment into Houston industrial has been expanding in recent years, tracking the national trend, and this trend shows no signs of letting up.

The metro still ranked in the top 15 U.S. markets for transaction activity last year, with an estimated volume of $2.2 billion. Note that CoStar is estimating a price for trades that didn’t report one—a common problem in nondisclosure states like Texas. This is occurring despite the myriad of challenges that Houston industrial faces, a testament to the positive impacts of population growth and growing institutional allocation to industrial.

Last year was yet again marked by large portfolio trades, a trend also experienced nationally. This is mostly the result of large institutional investors chasing the sector’s general e-commerce-driven outperformance this cycle.

In September, Blackstone acquired 17 urban infill logistics properties in Houston totaling nearly 2.9 million SF from Global Logistics Properties. This occurred as part of the largest combined private real estate transaction in history, when Blackstone Real Estate Partners Fund acquired 115 million SF for $13.4 billion and Blackstone Real Estate Income Trust acquired 64 million SF for $5.3 billion.

And in January of last year, Ivanhoé Cambridge entered into a 50-50 joint venture with Oxford Property Group for the IDI Logistics portfolio. Ivanhoe Cambridge had acquired the portfolio two months prior from a Brookfieldsponsored real estate fund. This acquisition represented Oxford’s first logistics acquisition in the United States and included 10 properties in Houston totaling over 1.8 million SF.

The Houston properties traded for an allocated value of approximately $70 million ($96/SF) and a 6.3% cap at full value. The overall portfolio totaled 31 million SF and sold for $3.5 billion, of which Oxford took half (about $1.7 billion).

With high investor demand for industrial properties in large U.S. markets, cap rates on Houston industrial transactions have compressed to a near record low of 6.7% on average, although this figure has expanded a bit from 6.4% in 2017.

SALES VOLUME & MARKET SALE PRICE PER SF

PAGE 20

PAST SOLD SUMMARY

1,236Sale Comparables

$91Avg. Price/SF

10.0%Avg. Vacancy At Sale

7.2%Avg. Cap Rate

SALE COMPARABLE LOCATIONS

KEY INDICATORS

Sales Attributes Low Average Median High

Sale Price $25,000 $5,083,743 $1,838,398 $94,000,000

Price Per SF $11 $91 $88 $593

Cap Rate 4.0% 7.2% 7.0% 16.8%

Time Since Sale in Months 0.0 6.0 5.9 12.0

Property Attributes Low Average Median High

Building SF 95 36,290 12,872 1,500,596

Ceiling Height 8’ 19’10” 19’3” 69’4”

Docks 0 6 0 330

Vacancy Rate At Sale 0% 10.0% 0% 100%

Year Built 1900 1988 1984 2020

Star Rating 2.2

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HOUSTON MAP INDUSTRIAL SUBMARKETS

PAGE 22

Inventory 12 Month Deliveries Under Construction

No. Submarket Bldgs SF (000) % Market Rank Bldgs SF (000) Percent Rank Bldgs SF (000) Percent Rank

1 Austin County 40 2,154 0.3% 27 1 128 5.9% 16 0 - - -2 CBD-NW Inner Loop 519 12,681 2.0% 22 0 0 0% - 0 - - -3 Downtown Houston 911 31,924 4.9% 5 0 0 0% - 0 - - -4 East I-10 Outer Loop 229 13,946 2.1% 19 0 0 0% - 1 2 0% 165 East-Southeast Far 2,292 80,191 12.4% 1 39 4,692 5.9% 1 30 5,257 6.6% 16 Hwy 290/Tomball Pky 679 25,836 4.0% 10 8 697 2.7% 8 16 3,132 12.1% 37 Hwy 59/Hwy 90 (Alt) 1,059 26,462 4.1% 9 17 425 1.6% 10 18 1,681 6.4% 68 Liberty County 69 1,422 0.2% 29 0 0 0% - 0 - - -9 North Fwy/Tomball Pky 983 31,213 4.8% 6 16 1,907 6.1% 4 23 2,248 7.2% 510 North Hardy Toll Road 887 38,826 6.0% 4 36 3,125 8.0% 2 9 1,100 2.8% 1011 North Inner Loop 201 5,523 0.9% 25 0 0 0% - 0 - - -12 North Outer Loop 1,103 25,505 3.9% 11 3 394 1.5% 12 1 524 2.1% 1213 Northeast Hwy 321 116 1,891 0.3% 28 0 0 0% - 0 - - -14 Northeast Hwy 90 674 22,311 3.4% 14 13 1,358 6.1% 6 9 1,662 7.5% 815 Northeast I-10 173 4,475 0.7% 26 1 11 0.2% 19 2 669 14.9% 1116 Northeast Inner Loop 193 12,329 1.9% 23 0 0 0% - 0 - - -17 Northwest Hwy 6 461 13,542 2.1% 20 28 409 3.0% 11 10 98 0.7% 1518 Northwest Inner Loop 1,797 63,805 9.8% 2 6 142 0.2% 15 2 180 0.3% 1419 Northwest Near 836 20,079 3.1% 15 5 53 0.3% 18 0 - - -20 Northwest Outliers 691 30,658 4.7% 7 54 2,619 8.5% 3 24 3,246 10.6% 221 South Hwy 35 1,814 40,284 6.2% 3 4 100 0.2% 17 8 378 0.9% 1322 South Inner Loop 410 13,229 2.0% 21 0 0 0% - 0 - - -23 Southeast Outer Loop 433 18,086 2.8% 16 2 702 3.9% 7 0 - - -24 Southwest Far 639 16,606 2.6% 17 15 1,622 9.8% 5 23 1,672 10.1% 725 Southwest Inner Loop 446 7,059 1.1% 24 0 0 0% - 0 - - -26 Southwest Outer Loop 699 14,890 2.3% 18 2 9 0.1% 20 1 2 0% 1727 Sugar Land 529 23,181 3.6% 12 7 472 2.0% 9 17 2,681 11.6% 428 The Woodlands/Conroe 1,209 22,982 3.5% 13 33 340 1.5% 13 29 1,233 5.4% 929 West Outer Loop 846 28,161 4.3% 8 10 170 0.6% 14 0 - - -

SUBMARKET INVENTORY

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SUBMARKET RENT

Gross Asking Rents 12 Month Asking Rent Annualized Quarterly RentNo. Market Per SF Rank Growth Rank Growth Rank1 Austin County $8.28 7 -1.4% 29 3.2% 182 CBD-NW Inner Loop $7.91 10 1.3% 5 3.3% 173 Downtown Houston $5.49 27 0.8% 14 3.5% 114 East I-10 Outer Loop $6.01 25 -0.1% 28 3.3% 165 East-Southeast Far $7.27 16 1.2% 8 4.0% 46 Hwy 290/Tomball Pky $7.57 14 1.2% 7 3.9% 77 Hwy 59/Hwy 90 (Alt) $7.73 12 1.0% 10 3.1% 228 Liberty County $7.14 19 0.4% 25 3.4% 129 North Fwy/Tomball Pky $7.81 11 0.8% 15 3.2% 1910 North Hardy Toll Road $7.41 15 1.5% 2 4.0% 511 North Inner Loop $5.62 26 0.5% 22 3.1% 2312 North Outer Loop $6.87 21 0.9% 12 4.0% 613 Northeast Hwy 321 $9.58 2 0.4% 24 0.9% 2914 Northeast Hwy 90 $7.17 18 0.2% 26 3.7% 915 Northeast I-10 $6.64 23 0.5% 21 3.5% 1016 Northeast Inner Loop $5.21 29 0.5% 23 2.9% 2717 Northwest Hwy 6 $8.80 5 -0.1% 27 3.2% 2118 Northwest Inner Loop $7.24 17 1.4% 4 3.3% 1519 Northwest Near $7.05 20 1.9% 1 10.6% 120 Northwest Outliers $8.37 6 1.0% 11 4.2% 321 South Hwy 35 $6.80 22 0.6% 20 2.6% 2822 South Inner Loop $6.25 24 0.7% 19 3.3% 1423 Southeast Outer Loop $5.43 28 0.7% 17 3.8% 824 Southwest Far $8.02 8 1.1% 9 3.2% 2025 Southwest Inner Loop $9.61 1 0.9% 13 2.9% 2526 Southwest Outer Loop $9.30 4 1.2% 6 2.9% 2427 Sugar Land $7.91 9 1.5% 3 6.6% 228 The Woodlands/Conroe $9.48 3 0.7% 18 2.9% 2629 West Outer Loop $7.72 13 0.7% 16 3.3% 13

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SUBMARKET VACANCY & NET ABSORPTION

Vacancy 12 Month Absorption

No. Submarket SF Percent Rank SF % of Inv RankConstrct.

Ratio1 Austin County 29,954 1.4% 2 436,851 20.3% 5 0.32 CBD-NW Inner Loop 905,814 7.1% 19 (392,793) -3.1% 26 -3 Downtown Houston 1,249,908 3.9% 8 (305,939) -1.0% 25 -4 East I-10 Outer Loop 598,162 4.3% 9 (209,544) -1.5% 23 -5 East-Southeast Far 6,782,259 8.5% 24 2,702,391 3.4% 1 1.56 Hwy 290/Tomball Pky 2,592,772 10.0% 26 (133,147) -0.5% 22 -7 Hwy 59/Hwy 90 (Alt) 1,515,243 5.7% 14 110,328 0.4% 14 3.98 Liberty County 98,240 6.9% 17 (32,282) -2.3% 18 -9 North Fwy/Tomball Pky 4,123,011 13.2% 29 208,448 0.7% 9 8.710 North Hardy Toll Road 3,632,045 9.4% 25 1,435,730 3.7% 3 2.111 North Inner Loop 158,247 2.9% 3 215,883 3.9% 8 -12 North Outer Loop 1,481,033 5.8% 15 19,856 0.1% 16 19.813 Northeast Hwy 321 58,140 3.1% 4 (37,946) -2.0% 19 -14 Northeast Hwy 90 1,798,777 8.1% 22 363,162 1.6% 6 3.115 Northeast I-10 61,762 1.4% 1 186,298 4.2% 11 0.116 Northeast Inner Loop 465,556 3.8% 7 161,352 1.3% 12 -17 Northwest Hwy 6 1,365,511 10.1% 27 196,570 1.5% 10 2.018 Northwest Inner Loop 5,011,035 7.9% 21 (799,699) -1.3% 28 -19 Northwest Near 978,286 4.9% 10 23,943 0.1% 15 2.220 Northwest Outliers 2,183,957 7.1% 18 2,404,021 7.8% 2 0.921 South Hwy 35 2,268,432 5.6% 13 (871,283) -2.2% 29 -22 South Inner Loop 695,875 5.3% 12 (104,928) -0.8% 21 -23 Southeast Outer Loop 1,241,655 6.9% 16 (87,094) -0.5% 20 -24 Southwest Far 1,804,110 10.9% 28 636,790 3.8% 4 2.525 Southwest Inner Loop 265,712 3.8% 6 (488,853) -6.9% 27 -26 Southwest Outer Loop 1,106,153 7.4% 20 (245,308) -1.6% 24 -27 Sugar Land 832,859 3.6% 5 300,988 1.3% 7 1.7 -28 The Woodlands/Conroe 1,880,199 8.2% 23 128,330 0.6% 13 2.429 West Outer Loop 1,472,112 5.2% 11 11,560 0% 17 13.3