Research & Forecast ReportMarket+… · 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% CBD Vacancy Suburban Vacancy 2 Houston Research Forecast Report Q3 2019 O1ce Colliers International see leasing

Houston’s office market continues to see expansion in the co-working niche

Research & Forecast Report

HOUSTON | OFFICEQ3 2019

Lisa Bridges Director of Market Research | Houston

Commentary by Taylor Wright

“Co-working” and, more specifically, WeWork continue to dominate the CRE news cycle. With billion-dollar annual losses, the recent withdrawal of their initial stock offering, the removal of the founder as CEO and seemingly a different executive vacating every day, both your average newsreader and our commercial real estate colleagues are questioning the viability of WeWork specifically and co-working in general. After meeting with different well-known flex space operators and talking to landlord’s who lease space to various co-working companies (not necessarily WeWork), our view is a little more positive. The concept of co-working is nothing new, but the way people and companies today are viewing their workspace occupancy has definitely changed.

The total co-working footprint is miniscule in Houston’s overall office occupancy (an estimated 1.3 million square feet out of 230.7 million total square feet). We believe co-working has a place in occupancy solutions, albeit a relatively small one.

When discussing flex space operators with landlords, we hear that they serve as a valuable building amenity. For example, in the instances where tenants face a time crunch between vacating their previous space and when a new space will be ready, co-working space can serve as an effective stop-gap solution. When a company has to staff up quickly for a short-term project, but does not want to commit to long term space, co-working can meet those requirements. Co-working space is also an effective solution for employees who cannot justify a commute to the corporate office 5 days a week. These are just three examples of how co-working space may be utilized. The concern and focus on WeWork may be more of financial viability versus the core underlying offering. In a booming economy, this niche should be enjoying financial success. The concern has historically been what happens to these operators in a downturn where “flex” space is the first to go. Every co-working operator has filed bankruptcy at some point in their history. WeWork made a huge splash entering the world market; let’s hope that after the splash – they float.

With regards to the more traditional office market in Houston, we

Summary Statistics Houston Office Market Q3 2018 Q2 2019 Q3 2019

Vacancy Rate 19.8% 19.9% 20.2%

Net Absorption 845,983 -919,041 -135,127

New Inventory 52,562 1,143,267 264,433

Under Construction 3,485,669 2,397,805 2,619,230

Class A Vacancy Rate CBD Suburban

22.1%19.3%

19.6%21.4%

19.4%20.9%

Asking Rents Per Square Foot Per Year

Houston Class A $35.74 $35.36 $35.07

CBD Class A $46.04 $46.01 $45.64

Suburban Class A $31.50 $31.99 $31.83

Market IndicatorsRelative to prior period

AnnualChange

Quarterly Change

Quarterly Forecast*

VACANCY

NET ABSORPTION

NEW INVENTORY

UNDER CONSTRUCTION

*Projected

Share or view online at colliers.com/houston

https://www.facebook.com/colliersintlhouston

https://www.linkedin.com/company/5227

https://twitter.com/colliers_hou

http://colliers.com/texas/houstonoffice

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

CBD Vacancy Suburban Vacancy

2 Houston Research & Forecast Report | Q3 2019 | Office | Colliers International

see leasing activity concentrated in “pockets.” The Central Business District reported minor positive absorption again in Q3, with 18,544 square feet absorbed. Q2 recorded a much healthier 229,836 square feet absorbed Downtown.

Suburban Office (everything outside of Downtown) posted negative absorption for the second straight quarter with -153,671 square feet following Q2’s negative absorption of -1,148,877 square feet. The citywide vacancy has increased slightly to 20.2%, as opposed to 19.9% in Q2. Asking rental rates for all classes has remained relatively unchanged. Landlords continue to offer attractive tenant improvement allowances and other concessions to maintain face rates.

The strategy that most of the Class A landlords have embraced is to upgrade the older Class A product in order to slow the “flight to quality” that has tenants embracing new construction and moving to the newer assets. This massive capital investment should result in better occupancy, but we believe that there will be very little upward pressure on lease rates in most submarkets. The Woodlands and Sugar Land are the outliers in terms of market occupancy with vacancy rates in the low teens. Tenants in those markets will see slightly less aggressive positions from the landlord community, but in all markets, the tenant has the near-term leverage.

Of the 1,672 existing office buildings in our survey, 80 buildings have 100,000 SF or more contiguous space available for lease or sublease. Citywide, 6.8 million SF

Large Sublease Availabilities (Total available in building and/or complex)

BUILDING TENANT SUBMARKET SF5 Greenway Plaza Oxy Greenway Plaza 746,070

Energy Tower II KTI Corporation (Technip) Katy Freeway 297,919

Hess Tower Hess Corporation CBD 215,887

Four WestLake Park BP Katy Freeway 212,626

Noble Energy Center II Noble Energy FM 1960 204,480

1500 Post Oak Blvd BHP Billiton Petroleum West Loop 204,417

Twelve Greenway Plaza CPL Energy Greenway Plaza 201,554

GreenStreet Tower Reliant Energy Retail CBD 194,768

1100 Louisiana Enbridge CBD 179,694

One Shell Plaza Shell Oil CBD 167,211

Westway Plaza GE Oil & Gas West Belt 131,663

Kinder Morgan Building EP Energy Corporation CBD 124,600

10000 Richmond Ave National Oilwell Varco Westchase 118,215

Source: CoStar

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Q12014

Q32014

Q12015

Q32015

Q12016

Q32016

Q12017

Q32017

Q12018

Q32018

Q12019

Q32019

Class A Class B Houston Total

Job Growth & Unemployment(not seasonally adjusted)

UNEMPLOYMENT 8/18 8/19

HOUSTON 4.4% 3.9%

TEXAS 4.0% 3.6%

U.S. 3.9% 3.8%

JOB GROWTHAnnual Change

# of Jobs Added

HOUSTON 2.7% 81.9K

TEXAS 2.3% 292.2K

U.S. 1.4% 2.1M

CBD vs. SuburbanCLASS A OFFICE VACANCY

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

CBD Rents Suburban Rents

CLASS A OFFICE RENTS

HISTORICAL AVAILABLE SUBLEASE SPACE

AVAILABLE SUBLEASE SPACE - 100,000 SF OR GREATER


Absorption & Demand

Houston’s office market posted negative net absorption of 135,127 SF in the third quarter, a huge improvement from the 919,041 SF of negative net absorption posted in the second quarter. Year-to-date net absorption stands at negative 549,519 SF. Suburban Class A space recorded the largest loss, posting 213,110 SF of negative net absorption, while CBD Class A space reported the largest gain posting 76,454 SF of positive net absorption. The majority of negative absorption was caused by Southwestern Energy placing the South Tower of it’s corporate offices located in Springwoods Village in The Woodlands submarket on the market. Looking forward, our forecast shows positive absorption in the fourth quarter as tenants take possession of spaces leased earlier in the year.

Rental Rates

Houston’s average asking rental rate decreased over the quarter from $29.64 per SF to $29.55 per SF. The average asking rental rate for Class A space decreased over the quarter from $35.36 per SF to $35.07 per SF, and the average CBD Class A rental rate fell from $46.01 to $45.64 per SF. The Suburban average asking rental rate for Class A dropped from $31.99 to $31.83 per SF.

Leasing Activity

Houston’s office leasing activity decreased over the quarter from 4.2M SF to 3.3M 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 listed in the table below.

of sublease space is listed and 3.6 million SF of the space is vacant. The largest available sublease space currently occupied by Occidental Petroleum Corporation may be withdrawn soon as their previous plans to relocate to the Energy Corridor have changed according to a statement by CFO Cedric Burgher. 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.

Q3 2019 Select Office Lease TransactionsBUILDING NAME/ADDRESS SUBMARKET SF TENANT LEASE DATE

Energy Center I Katy Freeway 156,828 Kiewitt Engineering1 Jul-19

BHP Billiton Tower West Loop/Galleria 109,667 Engie1 Jul-19

4800 Fournace Place Bellaire 100,812 Houston Methodist Hospital1,3 Aug-19

BHP Petroleum West Loop/Galleria 68,139 Sumitomo Corp2 Aug-19

910 Louisiana CBD 32,000 Ontellus2 Aug-191New/Direct 2Sublease 3Colliers International Transaction

Sales Activity

Houston’s office investment sales volume decreased over the quarter from $730.9M in Q2 2019 to $274.1M in Q3 2019. The average sales price per square foot trended up from $147 to $162 per SF over the quarter. Houston’s average cap rate of 7.8% lags the average U.S. cap rate of 6.7%.

Sources: CoStar and Real Capital Analytics

$0

$50

$100

$150

$200

$250

$300

$350United States Houston

AVERAGE OFFICE SALES PRICE PER SF

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

United States Houston

AVERAGE OFFICE CAP RATE


Houston Office Market Summary (CBD, Suburban, & Overall)

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

(SF)RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q3-2019 Q2-2019 Q3-2019 Q2-2019 AVG

($/SF)

CBD

A 36 33,862,459 5,792,269 17.1% 783,432 2.3% 6,575,701 19.4% 19.6% 76,454 305,322 $45.64

B 30 8,541,395 2,881,796 33.7% 108,297 1.3% 2,990,093 35.0% 34.3% -57,910 -75,486 $30.95

C 10 684,903 76,500 11.2% 0 0.0% 76,500 11.2% 11.2% 0 0 $17.61

Total 76 43,088,757 8,750,565 20.3% 891,729 2.1% 9,642,294 22.4% 22.4% 18,544 229,836 $40.56

SUBURBAN

A 399 98,124,892 18,949,694 19.3% 2,009,645 2.0% 20,959,339 21.4% 20.9% -213,110 -33,362 $31.83

B 921 76,451,207 13,825,442 18.1% 428,903 0.6% 14,254,345 18.6% 18.6% 22,576 -832,467 $20.48

C 276 13,025,557 1,604,593 12.3% 24,625 0.2% 1,629,218 12.5% 11.7% 36,863 -283,048 $20.68

Total 1596 187,601,656 34,379,729 18.3% 2,463,173 1.3% 36,842,902 19.6% 19.4% -153,671 -1,148,877 $26.75

OVERALL

A 435 131,987,351 24,741,963 18.7% 2,793,077 2.1% 27,535,040 20.9% 20.6% -136,656 271,960 $35.07

B 951 84,992,602 16,707,238 19.7% 537,200 0.6% 17,244,438 20.3% 20.2% -35,334 -907,953 $22.29

C 286 13,710,460 1,681,093 12.3% 24,625 0.2% 1,705,718 12.4% 11.7% 36,863 -283,048 $20.54

Total 1672 230,690,413 43,130,294 18.7% 3,354,902 1.5% 46,485,196 20.2% 19.9% -135,127 -919,041 $29.55


(SF)RENTAL

RATE

CLASS # OF BLDGS. TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q3-2019 Q2-2019 Q3-2019 Q2-2019 AVG

($/SF)

ALLEN PARKWAY (MIDTOWN)

A 9 2,319,982 363,595 15.7% 2,459 0.1% 366,054 15.8% 15.7% 28,042 20,389 $34.13

B 34 2,694,497 319,453 11.9% 20,254 0.8% 339,707 12.6% 14.0% 38,081 -50,054 $26.26

C 12 385,055 102,953 26.7% 0 0.0% 102,953 26.7% 27.5% 2,981 -11,000 $29.54

Total 55 5,399,534 786,001 14.6% 22,713 0.4% 808,714 15.0% 12.8% 69,104 -40,665 $30.33

BAYTOWN

B 2 114,474 11,668 10.2% 0 0.0% 11,668 10.2% 6.0% -4,827 -980 $21.45

C 2 41,208 10,513 25.5% 0 0.0% 10,513 25.5% 25.5% 0 0 -

Total 4 155,682 22,181 14.2% 0 0.0% 22,181 14.2% 4.1% -4,827 -980 $21.45

BELLAIRE

A 6 1,173,781 114,154 9.7% 38,889 3.3% 153,043 13.0% 10.2% -33,826 9,733 $29.09

B 15 1,712,113 61,989 3.6% 0 0.0% 61,989 3.6% 4.1% 7,451 17,156 $23.16

C 5 283,569 28,304 10.0% 0 0.0% 28,304 10.0% 10.0% -72 -480 $18.09

Total 26 3,169,463 204,447 6.5% 38,889 1.2% 243,336 7.7% 8.4% -26,447 26,409 $25.77

CONROE AND OUTLYING MONTGOMERY CO

A 2 107,161 28,449 26.5% 0 0.0% 28,449 26.5% 26.5% 0 0 $23.53

B 9 364,423 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $18.00

C 6 247,634 5,295 2.1% 0 0.0% 5,295 2.1% 2.5% 840 2,407 $21.60

Total 17 719,218 33,744 4.7% 0 0.0% 33,744 4.7% 1.8% 840 2,407 $23.23

E. FORT BEND CO SUGAR LAND

A 17 3,404,208 308,286 9.1% 59,091 1.7% 367,377 10.8% 11.6% 26,598 -96,568 $31.47

B 36 2,123,524 293,783 13.8% 17,157 0.8% 310,940 14.6% 14.3% -7,081 18,989 $24.87

C 3 69,411 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 -

Total 56 5,597,143 602,069 10.8% 76,248 1.4% 678,317 12.1% 10.3% 19,517 -77,579 $28.25

Houston Suburban Office Market Summary


Houston Suburban Office Market Summary - Continued


(SF)RENTAL

RATE

CLASS # OF BLDGS.

TOTAL (SF) (SF) RATE

(%) (SF) RATE (%)

TOTAL (SF) Q3-2019 Q2-2019 Q3-2019 Q2-2019 AVG

($/SF)

FM 1960 A 14 3,086,896 534,130 17.3% 34,889 1.1% 569,019 18.4% 11.4% -79,581 12,107 $27.73B 69 4,422,927 1,118,466 25.3% 38,653 0.9% 1,157,119 26.2% 26.6% 19,272 -386,079 $17.04C 31 2,413,518 711,680 29.5% 0 0.0% 711,680 29.5% 25.0% 8,760 -271,868 $23.04Total 114 9,923,341 2,364,276 23.8% 73,542 0.7% 2,437,818 24.6% 16.8% -51,549 -645,840 $21.26GREENWAY PLAZAA 19 6,684,126 1,049,993 15.7% 65,711 1.0% 1,115,704 16.7% 17.5% 55,127 -1,869 $36.97B 31 3,163,146 325,529 10.3% 19,734 0.6% 345,263 10.9% 11.1% 6,005 -30,191 $28.16C 11 376,606 38,217 10.1% 0 0.0% 38,217 10.1% 10.1% -205 -1,877 $22.90Total 61 10,223,878 1,413,739 13.8% 85,445 0.8% 1,499,184 14.7% 17.5% 60,927 -33,937 $34.56GULF FREEWAY PASADENA A 2 105,782 1,295 1.2% 0 0.0% 1,295 1.2% 1.2% 0 -1,295 $33.09B 41 2,307,853 216,527 9.4% 2,233 0.1% 218,760 9.5% 9.1% -8,226 9,710 $21.40C 22 789,888 129,570 16.4% 0 0.0% 129,570 16.4% 15.3% -8,700 1,100 $25.37Total 65 3,203,523 347,392 10.8% 2,233 0.1% 349,625 10.9% 14.6% -16,926 9,515 $21.21I-10 EASTB 6 427,851 61,257 14.3% 0 0.0% 61,257 14.3% 12.2% -8,978 -1,197 $18.22C 4 150,124 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 -Total 10 577,975 61,257 10.6% 0 0.0% 61,257 10.6% 16.3% -8,978 -1,197 $18.22KATY FREEWAYA 85 21,952,773 4,048,794 18.4% 870,282 4.0% 4,919,076 22.4% 23.6% 255,984 -158,157 $36.68B 106 9,770,747 2,418,167 24.7% 36,981 0.4% 2,455,148 25.1% 25.5% 40,553 -206,894 $22.68C 28 1,242,343 52,255 4.2% 1,654 0.1% 53,909 4.3% 6.1% 22,244 12,793 $20.14Total 219 32,965,863 6,519,216 19.8% 908,917 2.8% 7,428,133 22.5% 22.0% 318,781 -352,258 $31.35KATY GRAND PARKWAYA 16 1,542,980 218,087 14.1% 2,539 0.2% 220,626 14.3% 11.3% -45,653 -634 $28.88B 16 1,036,076 7,228 0.7% 0 0.0% 7,228 0.7% 0.6% -1,262 4,304 $26.43C 2 149,262 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 -Total 34 2,728,318 225,315 8.3% 2,539 0.1% 227,854 8.4% 10.1% -46,915 3,670 $28.80KINGWOOD HUMBLEB 16 1,235,229 72,457 5.9% 0 0.0% 72,457 5.9% 5.0% -10,588 11,384 $22.81C 5 153,601 3,393 2.2% 0 0.0% 3,393 2.2% 2.1% -142 -3,011 $33.68Total 21 1,388,830 75,850 5.5% 0 0.0% 75,850 5.5% 6.2% -10,730 8,373 $23.30NASA CLEAR LAKE A 12 1,773,539 201,672 11.4% 0 0.0% 201,672 11.4% 9.8% -28,681 -13,936 $25.79B 45 3,026,139 678,881 22.4% 2,365 0.1% 681,246 22.5% 23.5% 29,504 24,781 $20.20C 16 534,498 63,668 11.9% 0 0.0% 63,668 11.9% 11.5% -2,192 933 $16.57Total 73 5,334,176 944,221 17.7% 2,365 0.0% 946,586 17.7% 22.9% -1,369 11,778 $21.15NORTH BELT GREENSPOINT

A 25 5,514,168 3,327,181 60.3% 14,890 0.3% 3,342,071 60.6% 61.1% 27,389 -69,033 $21.36B 53 5,523,042 1,743,964 31.6% 1,327 0.0% 1,745,291 31.6% 32.1% 27,620 -20,118 $15.38C 22 1,379,034 187,530 13.6% 0 0.0% 187,530 13.6% 14.2% 8,563 -23,569 $12.28Total 100 12,416,244 5,258,675 42.4% 16,217 0.1% 5,274,892 42.5% 44.3% 63,572 -112,720 $19.05NORTHEAST NEAR AND OUTLIERA 3 642,223 14,025 2.2% 6355 1.0% 20,380 3.2% 3.2% 0 7,677 -B 4 183,158 18,593 10.2% 4,000 2.2% 22,593 12.3% 9.5% -5,136 -1,075 $22.05C 2 56,562 15,950 28.2% 0 0.0% 15,950 28.2% 25.5% -1,552 2,380 $15.00Total 9 881,943 48,568 5.5% 10,355 1.2% 58,923 6.7% 6.3% -6,688 8,982 $13.37




(SF)RENTAL

RATE

CLASS # OF BLDGS.


(%) (SF) RATE (%)

TOTAL (SF) Q3-2019 Q2-2019 Q3-2019 Q2-2019 AVG

($/SF)

NORTHWEST AND NORTHWEST OUTLIERA 9 1,985,781 750,930 37.8% 1,203 0.1% 752,133 37.9% 40.1% 45,017 -17,579 $24.48B 74 5,632,104 1,021,963 18.1% 0 0.0% 1,021,963 18.1% 18.0% -7,183 -27,453 $19.11C 33 1,656,677 76,521 4.6% 0 0.0% 76,521 4.6% 5.1% 7,780 -16,633 $15.25Total 116 9,274,562 1,849,414 19.9% 1,203 0.0% 1,850,617 20.0% 20.0% 45,614 -61,665 $21.13RICHMOND FOUNTAINVIEWB 13 773,830 120,037 15.5% 0 0.0% 120,037 15.5% 14.7% -6,492 -20,686 $17.06C 10 392,300 9,224 2.4% 0 0.0% 9,224 2.4% 1.1% -5,060 18,755 $17.61Total 23 1,166,130 129,261 11.1% 0 0.0% 129,261 11.1% 12.7% -11,552 -1,931 $17.10SAN FELIPE VOSSA 3 1,720,793 396,382 23.0% 0 0.0% 396,382 23.0% 23.3% 4,028 475 $36.73B 33 3,389,485 631,320 18.6% 33,453 1.0% 664,773 19.6% 20.1% 15,604 -47,143 $25.18Total 36 5,110,278 1,027,702 20.1% 33,453 0.7% 1,061,155 20.8% 22.0% 19,632 -46,668 $29.63SOUTH B 11 331,493 29,534 8.9% 0 0.0% 29,534 8.9% 8.1% 19,490 4,618 $27.12C 4 165,387 23,550 14.2% 0 0.0% 23,550 14.2% 14.2% 0 0 $28.16Total 15 496,880 53,084 10.7% 0 0.0% 53,084 10.7% 8.0% 19,490 4,618 $27.26SOUTH MAIN MEDICAL CENTERB 10 786,887 151,380 19.2% 1,500 0.2% 152,880 19.4% 18.1% -10,166 -19,270 $20.38C 7 364,008 46,782 12.9% 0 0.0% 46,782 12.9% 12.9% 281 8,961 $19.68Total 17 1,150,895 198,162 17.2% 1,500 0.1% 199,662 17.3% 9.7% -9,885 -10,309 $16.65SOUTHEASTB 14 1,142,804 29,799 2.6% 0 0.0% 29,799 2.6% 0.5% -23,785 -1,133 $19.91C 1 22,220 0 0.0% 0 0.0% 0 0.0% 0.0% 0 0 $0.00Total 15 1,165,024 29,799 2.6% 0 0.0% 29,799 2.6% 8.1% -23,785 -1,133 $15.91SOUTHWESTA 6 1,586,913 494,445 31.2% 0 0.0% 494,445 31.2% 28.0% -50,366 6,309 $17.35B 62 6,053,095 1,332,951 22.0% 59,748 1.0% 1,392,699 23.0% 22.8% -13,425 -11,020 $15.95C 29 1,415,536 69,723 4.9% 2,971 0.2% 72,694 5.1% 5.4% 4,105 -2,332 $12.68Total 97 9,055,544 1,897,119 20.9% 62,719 0.7% 1,959,838 21.6% 19.3% -59,686 -7,043 $16.19

SOUTHWEST FAR AND OUTLIER A 2 158,720 19,737 12.4% 0 0.0% 19,737 12.4% 12.4% 0 0 $0.00B 11 849,340 209,564 24.7% 0 0.0% 209,564 24.7% 24.7% 0 -814 $0.00C 3 91,661 7,000 7.6% 0 0.0% 7,000 7.6% 7.6% 0 0 $0.00Total 16 1,099,721 236,301 21.5% 0 0.0% 236,301 21.5% 22.9% 0 -814 $26.23THE WOODLANDS A 57 13,164,376 1,094,444 8.3% 121,508 0.9% 1,215,952 9.2% 7.1% -235,863 90,598 $37.10B 63 4,292,601 424,375 9.9% 39,183 0.9% 463,558 10.8% 9.6% -49,557 19,901 $28.52C 6 169,558 500 0.3% 0 0.0% 500 0.3% 0.3% 0 -500 $18.61Total 126 17,626,535 1,519,319 8.6% 160,691 0.9% 1,680,010 9.5% 9.2% -285,420 109,999 $34.70WEST BELTA 29 3,738,419 693,697 18.6% 43,321 1.2% 737,018 19.7% 21.2% 56,195 56,146 $28.67B 36 2,021,674 324,279 16.0% 75,954 3.8% 400,233 19.8% 21.1% 26,788 -4,902 $22.07C 4 112,629 0 0.0% 20000 17.8% 20,000 17.8% 17.8% 0 -10,000 -Total 69 5,872,722 1,017,976 17.3% 139,275 2.4% 1,157,251 19.7% 28.8% 82,983 41,244 $26.57

7 Houston Research & Forecast Report | Q3 2019 | Office | Colliers International7

Office Development Pipeline

2.6 million SF of office space is under construction and approximately 40.4% is pre-leased. 2.1 million SF is spec development of which 23.1% is pre-leased. Below is a summary of the office buildings under construction with a GBA of 100,000 SF or greater.

BUILDING NAME ADDRESS SUBMARKET SF PRE-LEASED DEVELOPER/CONTRACTOR EST.

DELIVERY

Texas Tower 845 Texas Ave CBD 1,123,699 34.5% Hines Securities, Inc. Oct-21

Insperity Campus Building 5 US-59 N & Kingwood Dr. Kingwood/Humble 270,000 100% Insperity with D E Harvey Cleary Jun-20

Park Place | River Oaks 4200 Westheimer West Loop 207,202 13.8% Stonelake Capital Partners Mar-20

Alight Solutions 8770 New Trails Dr The Woodlands 180,000 100% The Woodlands Development Company LP Feb-20

Katy Ranch Phase II 24279 Katy Fwy Katy/Grand Pkwy West 150,900 0% Freeway Properties Aug-20

Village Plaza I 9655 Katy Freeway Katy Freeway 150,000 7.3% Moody National Companies Jul-20

Post Houston 401 Franklin St CBD 150,000 19.3% Lovett Commercial Aug-20

Research Forest Lakeside 9 9709 Lakeside Blvd The Woodlands 134,938 0% Warmack Investments Aug-20



(SF)RENTAL

RATE

CLASS # OF BLDGS.


(%) (SF) RATE (%)

TOTAL (SF) Q3-2019 Q2-2019 Q3-2019 Q2-2019 AVG

($/SF)

WEST LOOPA 51 18,186,304 3,364,429 18.5% 318,678 1.8% 3,683,107 20.3% 19.0% -221,718 83,668 $37.90B 49 5,472,044 695,912 12.7% 57,613 1.1% 753,525 13.8% 13.2% -32,332 -169,750 $26.54C 4 216,268 13,163 6.1% 0 0.0% 13,163 6.1% 5.1% -2,159 893 $19.50Total 104 23,874,616 4,073,504 17.1% 376,291 1.6% 4,449,795 18.6% 18.9% -256,209 -85,189 $35.90WESTCHASEA 32 9,277,659 1,965,285 21.2% 416,954 4.5% 2,382,239 25.7% 26.2% 50,458 38,558 $32.91B 62 7,600,151 1,522,356 20.0% 18,748 0.2% 1,541,104 20.3% 20.2% -7,956 23,759 $22.05C 4 147,000 8,802 6.0% 0 0.0% 8,802 6.0% 6.9% 1,391 0 $15.00Total 98 17,024,810 3,496,443 20.5% 435,702 2.6% 3,932,145 23.1% 19.8% 43,893 62,317 $28.65

2 31600 TRAVIS

600 Travis Street1,656,529 / 22,575 / 75

85.3%569,106192,461$43.40

1.0Texas Tower Ltd

717 TEXAS717 Texas Avenue

697,195 / 21,127 / 3353.5%

315,532273,174$45.75

1.3Hines

BANK OF AMERICA CENTER700 Louisiana Street

1,268,480 / 25,000 / 5675.8%

318,42083,381$45.81

2.0M-M Properties

BUILDING NAMEADDRESS

RBA / AVG FLOOR / # OF FLOORS% LEASED

TOTAL AVAILABLE SFMAX CONTIGUOUS SF

QUOTED RATE**PARKING RATIO

OWNER

AVAILABLE* SUBLEASE*

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

TWO ALLEN CENTER1200 Smith Street

995,623 / 26,613 / 3691.7%

454,401171,358$45.62

1.0Brook�eld O�ceProperties, Inc.

THREE ALLEN CENTER333 Clay Street

1,194,719 / 25,000 /5092.1%

308,60625,303$46.74


1100 LOUISIANA1100 Louisiana Street

1,327,882 / 23,060 / 5599.7%

330,604300,947$42.36

1.8Enterprise Products

Partners L.P.

HERITAGE PLAZA1111 Bagby Street

1,212,895 / 26,652 / 51100%29,29529,295$52.76


CENTERPOINT ENERGY1111 Louisiana Street

1,081,251 / 22,968 / 47100%

00

N/A2.5

CenterPoint Energy, Inc.

ONE ALLEN CENTER500 Dallas Street

993,297 / 29,214 / 3484.7%192,70170,171$46.51


KINDER MORGAN BLDG.1001 Louisiana Street937,003 / 28,510 / 32

100%124,600124,600

N/A1.0

Kinder Morgan, Inc.

TOTAL PLAZA1201 Louisiana Street

843,533 / 24,600 / 3597.7%28,4268,867

$43.801.0

Brook�eld O�ceProperties, Inc.

1918 2322 262120 24 25WELLS FARGO PLAZA1000 Louisiana Street

1,721,242 / 25,000 / 7176.6%

491,257101,773$49.65

1.7New York State Common

Retirement Fund





OWNER

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

811 MAIN STREET811 Main Street

972,474 / 27,000 / 46100%

80,00680,006$51.91

1.2Invesco Advisers, Inc.

ONE SHELL PLAZA910 Louisiana Street

1,228,923 / 24,572 / 5088.8%

364,830125,887$45.24

0.3Busycon Properties LLC

NORTH BLDG700 Milam Street

694,021 / 20,523 / 3665.5%

232,193142,954$44.95

3.0Metropolis Investment

Holdings Inc.

2 HOUSTON CENTER909 Fannin Street

1,024,956 / 25,624 / 4074.9%

275,52770,144$43.93

1.0Brook�eld Asset Management Inc.

LYONDELLBASELL TOWER1221 McKinney Street

1,065,215 / 24,000 / 4690.7%

193,00994,080$45.20



588,423 / 31,500 / 2659.9%

232,739114,504$41.38

2.0Busycon Properties LLC

SOUTH BLDG711 Louisiana Street

666,762 / 20,000 / 3474.7%

306,546207,758$44.95

3.0Metropolis Investment

Holdings Inc.

FULBRIGHT TOWER1301 McKinney Street

1,247,061 / 24,452 / 5171.2%

439,47575,376$44.32


5 HOUSTON CENTER1401 McKinney Street580,875 / 29,649 / 27

67.5%198,806124,756$50.00

2.0Spear Street Capital

1110 13124 5 96 7PENNZOIL PLACE609 MAIN at TEXAS

609 Main Street1,057,237 / 28,000 / 48

92.6%81,96128,337$52.00

1.7Hines

8

ONE CITY CENTRE1021 Main Street

608,660 / 21,266 / 2977.3%

424,260187,693$30.61

2.3Accesso Partners, LLC

1000 MAIN1000 Main Street

837,161 / 23,333 / 3680.2%

204,952144,394$52.06

2.0Union Investment

Real Estate

1001 FANNIN1001 Fannin Street

1,385,212 / 27,210 / 4995.1%

629,424393,634$44.97

1.0JMB Financial Advisors

171514HILCORP ENERGY TOWER

1111 Main Street406,600 / 17,678 / 23

95.7%00

N/AN/A

Hilcorp Ventures Inc.

16

CLASS A OFFICE BUILDINGSCENTRAL BUSINESS DISTRICT HOUSTON, TEXAS

AUGUST 2019

393,634 SFAvailable Nov 2021

187,693 SFAvailable Jan 2021

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

$22.00$24.00$26.00$28.00$30.00$32.00$34.00$36.00$38.00$40.00$42.00$44.00$46.00$48.00

Class A Rental Rate and Vacancy Percentage Central Business District - Houston, TX

CBD Class A Rents CBD Class A Vacancy

*Vacancy percentage includes direct and sublease space.

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Available Direct SpaceCentral Business District

Class A Class B

Available Direct SpaceQ2 2019

Class A: 8,240,382 SF or 24.2%Class B: 3,073,073 SF or 32.6%

0

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Available Sublease SpaceCentral Business District

Class A Class B

Available Sublease SpaceQ2 2019

Class A: 1,330,515 SF or 3.9%Class B: 198,885 SF or 2.1%

AVAILABLE* SUBLEASE*





OWNER


1,157,690 / 25,263 / 40100%

00

N/A1.1

ChevronTexaco Corp.

1301 FANNIN OFFICE TOWER1301 Fannin Street

784,143 / 26,000 / 2475.8%131,33467,544$38.63

1.0Netrality Properties

1400 SMITH1400 Smith Street

1,250,677 / 25,013 / 50100%

00

N/AN/A

Chevron Corporation

1600 SMITH1600 Smith Street

1,098,399 / 23,000 /5152.9%517,327351,741$37.44

1.0Brook�eld O�ce Properties, Inc.

WEDGE INT’L TOWER1415 Louisiana Street520,475 / 18,000 / 43

48.6%281,910119,708$32.11

2.7Wedge Group, Inc.

HESS TOWER1501 McKinney Street844,763 / 30,500 /29

100%215,887215,887

N/A1.7

H&R REIT

GreenStreet1201 Fannin Street

275,223 / 25,020 / 11100%

194,768194,768

N/A1.5

Midway Companies/Lionstone Investments

29 3027 3128 32 33

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75 CLASS A OFFICE BUILDINGSCENTRAL BUSINESS DISTRICT HOUSTON, TEXAS

AUGUST 2019

28

2

3

4 51

10

9

7

6

8

27

1716

15

14

25 2120

29

2426

19

1218

13

11

22

2330

3132

33

*Gold and white indicators are approximate only at the time of printing and are presented to show approximate percentage of availablespace by �oor/building. All indicators are left-to-right and are not meant to show location of available space.

**Rental rates listed are net + operating expenses.

COLLIERS INTERNATIONAL1233 West Loop South, Suite 900

Houston, TX 77027www.colliers.com/texas

Skylines | Now Available Online at colliers.com/houstonA 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.

https://www2.colliers.com/en/United-States/Cities/Houston



8 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International

Copyright © 2015 Colliers International.The information contained herein has been obtained from sources deemed reliable. While 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 professional advisors prior to acting on any of the material contained in this report.

Colliers International | Market000 Address, Suite # 000 Address, Suite #+1 000 000 0000colliers.com/<<market>>

8 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International

Copyright © 2019 Colliers International.The information contained herein has been obtained from sources deemed reliable. While 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 professional advisors prior to acting on any of the material contained in this report.

Colliers International | Houston1233 West Loop South, Suite 900 Houston, Texas 77027+1 713 222 2111colliers.com/houston

FOR MORE INFORMATIONLisa Bridges, CPRCDirector of Market Research | Houston+1 713 830 [email protected]

Colliers statistical criteria includes all general purpose multi and single tenant office buildings 20,000 SF or greater.

Taylor WrightVice President | Houston+1 713 830 [email protected]

Quoted gross rental rates for existing top performing office buildings

BUILDING NAME ADDRESS SUBMARKET RBA (SF) YEAR BUILT

% LEASED

AVAIL. SF

RENT($/SF) OWNER

609 Main at Texas 609 Main St CBD 1,057,237 2017 94.4% 68,243 $56.00 Hins Securities, Inc.

1000 Main 1000 Main St CBD 837,161 2003 80.2% 204,952 $51.72 HRO International, Ltd.

Kirby Grove 2925 Richmond Ave Greenway Plaza 248,275 2015 96.2% 72,782 $47.33 Midway Companies

CityCentre Five 825 Town & Country Blvd Katy Freeway 227,063 2015 94.1% 12,776 $47.58 Midway Companies

Town Centre One 750 Town & Country Blvd Katy Freeway 253,714 2015 98.9% 11,450 $45.59 Moody Rambin

Blvd Place 1800 Post Oak Blvd West Loop/Galleria 70,131 2009 93.9% 9,479 $45.55 Wulfe & Co

BBVA Plaza 2200 Post Oak Blvd West Loop/Galleria 326,200 2013 94.4% 58,497 $50.84 Corporacion Masaveu S. A.

Lockton Place 3657 Briarpark Dr Westchase 186,000 2017 92.8% 31,311 $41.00 Triten Corporation

Hughes Landing 1725 Hughes Landing Blvd The Woodlands 332,000 2015 96.9% 10,212 $39.62-$40.12

The Howard Hughes Corporation

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

Q3 2019 Houston Office Highlights

20.2% -135,127 SFVACANCY NET ABSORPTION

CLASS A: 57% CLASS B: 37% CLASS C: 6%TOTAL INVENTORY BY CLASS

CURR

ENT

132.0M SF 85.0M SF

13.7M SF

TOTAL OFFICEINVENTORY 230.7M SF

3.3M SF21.4%QUARTERLY

8.0M SF 3.3M SF-21.4%QUARTERLY

LEASINGACTIVITY

QUARTERLYABSORPTION

Q3 2018 664,934 SFQ4 2018 1,564,908 SF

Q2 2019-919,041 SFQ3 2019-135,127 SF

-120.3%ANNUALLY

114.7%QUARTERLY

Q1 2019 504,650 SF

http://colliers.com/texas/houstonoffice

https://www.facebook.com/colliersintlhouston

https://www.linkedin.com/company/5227

https://twitter.com/colliers_hou

Our philosophyrevolves around the fact

that the bestpossible results come

from linking our globalenterprise with

local advisors whounderstand your

business, your market,and how to

integrate real estateinto a successfulbusiness strategy.

C O L L I E R S I N T E R N A T I O N A L G L O B A L L O C A T I O N S

COMMERCIAL REAL ESTATE SECTORS REPRESENTED

OFF

ICE

IND

US

TR

IAL

LAN

D

RE

TAIL

HE

ALT

HC

AR

E

MU

LTIF

AM

ILY

HO

TE

L

$127BTRANSACTION VALUE

2BSF UNDER MANAGEMENT

$3.3BIN REVENUE

438OFFICES

17,300PROFESSIONALS

340ACCREDITED MEMBERS

68COUNTRIES

SIOR

ADVANTAGEColliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including a�liates), with more than $26 billion of assets under management.

Colliers professionals think di�erently, share great ideas and o�er thoughtful and innovative advice to accelerate the success of its clients. Colliers has been ranked among the top 100 global outsourcing �rms by the International Association of Outsourcing Professionals for 13 consecutive years, more than any other real estate services �rm. Colliers is ranked the number one property manager in the world by Commercial Property Executive for two years in a row.

PROPERTY POSITIONING

& MARKETINGREAL ESTATEINVESTMENT

VALUATION &

ADVISORYCORP

ORAT

E

SOLU

TIONS

MANAGEMENT

REAL ESTATE

REPRESENTATION

LANDLORDREPRESENTATION

TENANT

LOCAT

ION

INTE

LLIG

ENCE

MARKET

RESE

ARCH

&

MAR

KETS

PROJECT

MANAGEM

ENT

COLLIERSSPECIALIZATIONS

andREAL ESTATE SERVICE

REPRESENTATION

DATA

CEN

TERS

HEA

LTHCARE

HOTELS & HOSPITALITY SERVICES INDUSTRIAL LAND

HOUSING & MULTIFAMILY SERVICES MARINA, LEISURE & GOLF COURSE

OFFICE R

ETAI

L

SP

ECIA

L PU

RPOS

E

Documents

Research & Forecast ReportMarket+… · 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% CBD Vacancy Suburban Vacancy 2 Houston Research Forecast Report Q3 2019 O1ce Colliers International see leasing