Industrial Market

September, 2009

Houston’s

Keynote Speaker: Mark Nicholas, SIORSenior Vice President

Houston Industrial Market: Then and Now

Topic 2007 2009

Job Growth 70,000 - 95,100

Demand (SF) 2,800,000 -4,106

Land Prices

Small Tracts ( 3 -10 acres) $3.25 - $3.50 / SF $3.00 - $3.25 / SF

Large Tracts ( > 20 acres ) $2.85 / SF $2.50 - $2.75 / SF

Improved Industrial Properties Cap Rates - Free Standing

8% - 9% 9.5% - 11.5%

Houston Industrial Market: Then and Now

Topic 2007 2009

Port Activity Strong Slowing

Energy Sector Strong Slowing

Leasing Market Strong Weak

User Sales Strong Weak

Spec. Development Slowing None

Commercial Real Estate Lending Outlook

Equity 25 - 40%Rate Prime + points

3.25% +1.25 %4.50%

Amortization 15-yr ; 5-yr call

•Not all banks are lending - must speak with many

•Will still do non-recourse but will require a higher down payment; rate will be from 6.5 – 8.0%

•Subject to financial strength of client

•All banks want long-term relationship – business, real estate, FFE, etc.

Houston Industrial Real Estate Outlook• Asking rents continue to fall• The gap between asking rents and effective rents is widening• With demand weak through at least the end of the year, concession packages will continue to be

lucrative• Tenants can relocate from a Class B to a Class A building for the same rate

- Good credit- Longer term commitment (i.e. 7-10 years)

• 2010 (2nd half) will likely show increase in activity for Build-to-Suits and Design-Builds for reasons as follows:

- Pent up demand from 4th Quarter 2008 - 1st Quarter 2010- Lack of existing product that meets long-term needs of credit companies- Developers with 'shovel ready' sites are well positioned to deliver inside 9-10 months

• Energy Service Companies: - 225,000/SF Under Construction in West Houston- 165,000/sf Completed Lease transaction in May 2009 in East Houston- 77,000/Sf Build To Suit Completed September 2009 in North Houston