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Market Brief...

Houston

OFFICE

1Q2020 Property Pictured Above: 9135 Katy Freeway | Houston, Texas 77024


HOUSTON OFFICE MARKET BRIEF 1Q 2020

TABLE OF CONTENTS 1. HOUSTON OFFICE TEAM AND SUBMARKETS

1 2 3

2. HOUSTON OFFICE MARKET A. Facts and Figures

2. SUBMARKET INTELLIGENCE

A. CBD B. Katy Freeway West C. West Loop D. The Woodlands E. Westchase F. Greenspoint/IAH G. Greenway Plaza H. FM 1960 Corridor I. Medical Center J. Katy Freeway East K. Sugar Land L. Clear Lake M. Midtown N. San Felipe/Fountain View O. West Belt P. Southwest Beltway 8 Q. East Houston/Pasadena R. North Loop West S. Bellaire T. Northwest/Highway 290 Corridor U. Far West V. Southwest Freeway X. Kingwood Y. Suburban Outliers

1


2


HOUSTON HLC SUBMARKET COVERAGE

OTHER SUBMARKETS 1 CBD | 49,342,859 SF 2 WEST LOOP | 24,136,493 SF 3 WESTCHASE | 18,013,956 SF 4 GREENWAY PLAZA | 11,113,115 SF 5 MEDICAL CENTER | 10,110,667 SF 6 MIDTOWN | 6,606,972 SF 7 SAN FELIPE/FOUNTAINVIEW | 6,253,904 SF 8 NORTH LOOP WEST | 4,286,929 SF 9 BELLAIRE | 4,397,884 SF 10 SOUTHWEST FREEWAY | 3,694,093 SF TOMBALL

THE WOODLANDS 20,368,243 SF

KINGWOOD 2,359,539 SF

SPRING

FM 1960 CORRIDOR 11,491,568 SF

HUMBLE

GEORGE BUSH INTERCONTINENTAL AIRPORT

CYPRESS

GREENSPOINT/IAH 12,526,848 SF WEST BELT 5,887,876 SF

EAST HOUSTON/ PASADENA 5,476,879 SF

KATY FREEWAY EAST 9,146,747 SF

KATY FREEWAY WEST 26,937,312 SF

KATY

NORTHWEST/ HIGHWAY 290 CORRIDOR 4,187,186 SF

LAKE HOUSTON

8

HOUSTON FAR WEST 4,156,495 SF

2

6

7 3

GALLERIA

10 SOUTHWEST BELTWAY 8 5,833,583 SF

BAY TOWN

1 SHIP CHANNEL

4 9 5

MEDICAL CENTER

PASADENA LA PORTE HOBBY AIRPORT

SUGAR LAND

ELLINGTON AIRPORT

RICHMOND

TRINITY BA

MISSOURI CITY

SUGAR LAND 7,667,269 SF

PEARLAND

CLEAR LAKE 6,969,137 SF

LEAGUE CITY

3


HLC HOUSTON OFFICE MARKET EXPERTS

Brandon Avedikian joined Holt Lunsford Commercial (HLC) in 2016 as a Market Analyst for the Dallas Office Group. He most recently served the Dallas Office Group as a Market Director, where he was responsible for executing transactions on approximately 2 million square feet of office assets, representing both private and institutional investors. In February 2020, Brandon relocated to Houston to serve as Senior Vice President of the Houston Office Group, where he is responsible for growing HLC’s office portfolio. Prior to joining HLC, Brandon was an assurance professional at Ernst & Young, LLP in Fort Worth, where he performed financial statement audits on both public and private organizations in the real estate, oil & gas, and oilfield services industries. During this time, he gained valuable experience working on complicated transactions and providing excellent service to his clients. BRANDON AVEDIKIAN

Brandon received a BBA in Accounting and Masters in Accounting from Abilene Christian University.

Senior Vice President bavedikian@holtlunsford.com 713.602.3754

Brandon is a Texas Real Estate Commission license holder, a member of NAIOP and The Real Estate Council, and a Certified Public Accountant (CPA).

Brad Segreto joined Holt Lunsford Commercial in 2017 and serves as a Market Associate. His primary responsibilities include project leasing, tenant representation, and business development initiatives for HLC’s office portfolio in the Greater Houston market. Prior to HLC, Brad worked as a sales representative for an industrial engineering firm where he assisted clients with their predictive and reliability maintenance needs in the oil and gas sector and beyond. During his time at Holt Lunsford Commercial, Brad has participated in over 90 transactions totaling more than 3.4 million square feet of rentable space.

BRAD SEGRETO Market Associate bsegreto@holtlunsford.com 713.602.3758

4

Brad received his Bachelor of Science in Organizational Leadership & Supervision from the University of Houston and is a licensed real estate salesperson in Texas. Originally from The Woodlands, Brad is an active member of NAIOP, Young Professionals in Energy, the Houston Golf Association, and Champions Golf Club.


9135 KATY FREEWAY

NEW LISTING

The Offices at Hedwig: 19,000 SF New Construction Class A office building in Hedwig Village.

5


NEW LISTING

1240 BLALOCK

1240 Blalock: 28,800 SF Class B office building in the Katy Freeway East Submarket.

6


CYPRESSWOOD CROSSING

NEW LISTING

45,462 SF Class A office building with attached retail in the FM 1960 / Champions Submarket.

7


HLC HOUSTON OFFICE OVERALL MARKET

VACANCY - OVERALL HOUSTON 18.7%

CONSTRUCTION - OVERALL HOUSTON 6,000,000

20.0% 18.0%

17.4%

5,000,000

16.0% 14.0%

4,000,000

12.0%

3,000,000

10.0% 8.0%

2,000,000

6.0% 1,000,000

4.0% 1.3%

2.0%

0 2Q 17

0.0% 2Q 17

3Q 17

4Q 17 Direct

1Q 18

2Q 18

3Q 18

4Q 1Q 18 19 Sublet

2Q 19

3Q 19

4Q 19 Total

1Q 20

3Q 17

4Q 17

1Q 2Q 18 18 Total Net

3Q 18

4Q 18

1Q 19

2Q 3Q 4Q 19 19 19 Leasing Activity

1Q 20

4Q 17

1Q 2Q 3Q 18 18 18 Delivered Inventory

4Q 18

1Q 2Q 3Q 4Q 19 19 19 19 Under Construction

1Q 20

OVERVIEW - OVERALL HOUSTON

ABSORPTION - OVERALL HOUSTON

2Q 17

3Q 17

7,000,000

20.0%

6,000,000

19.0%

5,000,000

18.0%

4,000,000

17 .0%

3,000,000

16.0%

2,000,000

15.0%

1,000,000

14.0%

0

13.0%

(1,000,000)

12.0%

(2,000,000)

11.0%

(3,000,000)

10.0%

4,000,000

3,000,000

2,000,000

1,000,000

0

(1,000,000)

(2,000,000) 1Q 17

2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

Deliveries

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Vacancy

Source: CoStar 1Q 2020 Office Report

HOUSTON OVERALL At the close of 1Q 2020, the overall Houston office market had a vacancy rate of 18.8% which was slightly higher than 18.7% at the close of 4Q 2019. Absorption was positive with 108K SF of space absorbed, down considerably from the 860K SF of positive absorption in 4Q 2019. Leasing activity remained strong with more than 4.6M SF of deals completed and was slightly higher than the 4.2M SF of deals completed in 4Q 2019. There is currently more than 5.3M SF of class A and B office space under construction and about 400K SF was delivered in 1Q 2020.

8


HLC HOUSTON OFFICE OVERALL MARKET

Market

Existing Inventory

Vacancy Total SF

Vac. %

YTD Net Absorption

9,208,499

10,161,129

20.6%

5,256,995

5,825,947

21.6%

#Bldgs.

Total RBA

Direct SF

CBD

88

49,342,859

Katy Freeway West

165

26,937,312

YTD Deliveries

Under Const. SF

Quoted Rates

(271,557)

-

1,251,856

$40.17

257,411

-

-

$29.41

West Loop

104

24,136,493

4,465,223

4,729,771

19.6%

(184,071)

-

277,202

$36.10

The Woodlands

168

20,368,243

2,070,976

2,296,013

11.3%

(130,172)

200,000

705,938

$33.47

Westchase

104

18,013,956

4,148,802

4,450,837

24.7%

(158,284)

0

0

$27.72

Greenspoint/IAH

94

12,526,848

5,614,544

5,629,892

44.9%

78,012

0

0

$18.64

Greenway Plaza

58

11,113,115

1,759,528

1,891,721

17.0%

37,835

0

0

$35.02

FM 1960 Corridor

146

11,491,568

2,413,701

2,483,326

21.6%

(98,336)

0

59,000

$20.32

Medical Center

57

10,110,667

569,073

570,573

5.6%

(17,409)

0

126,000

$26.80

Katy Freeway East

64

9,146,747

855,485

965,678

10.6%

12,181

0

1,350,000

$36.85

Sugar Land

95

7,667,269

820,710

904,707

11.8%

75,656

0

105,321

$26.66

Clear Lake

97

6,969,137

1,027,726

1,056,572

15.2%

45,874

81,446

53,000

$21.46

Midtown

61

6,606,972

668,211

695,217

10.5%

(34,032)

0

520,762

$29.57

San Felipe/Fountain View

56

6,253,904

1,246,351

1,271,506

20.3%

(67,964)

0

0

$28.05

West Belt

68

5,887,876

1,059,869

1,309,579

22.2%

(150,165)

0

0

$25.02

Southwest Beltway 8

59

5,833,583

1,160,727

1,240,847

21.3%

26,146

0

0

$17.54

East Houston/Pasadena

94

5,476,879

722,447

782,074

14.3%

2,454

0

92,500

$22.70

North Loop West

42

4,286,929

832,953

838,043

19.5%

68,689

0

114,349

$25.06

Bellaire

34

4,397,884

652,149

670,219

15.2%

21,201

0

52,825

$25.00

Northwest/Highway 290 Corridor

48

4,187,186

763,546

779,346

18.6%

38,163

0

0

$17.52

Far West

56

4,156,495

558,984

607,786

14.6%

17,380

30,000

150,920

$28.62

Southwest Freeway

32

3,694,093

796,737

796,737

21.6%

62,168

0

0

$16.33

Kingwood

42

2,359,539

274,124

276,299

11.7%

43,018

55,000

309,106

$25.61

Suburban Outliers

179

10,262,244

1,240,355

1,259,739

12.3%

(67,217)

49,672

218,419

$26.23

2,011

271,227,798

48,187,715

51,493,558

19.0%

(393,019)

416,118

5,387,198

$26.66

Totals

9


HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption (312,545)

vs. Prev. Qtr 304,918

107,521

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

20.7%

20.0%

19.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

754,645

898,064

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

943,260 Delivered SF Quoted Rates $39.46

VITAL STATS

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$41.70

$41.71

22.0%

1,200,000 1,000,000

20.0%

800,000 600,000

18.0%

400,000 200,000

16.0%

0 (200,000)

14.0%

(400,000) (600,000)

12.0%

(800,000) 1Q 17

2Q 17

3Q 17

Absorption

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Deliveries

3Q 19

4Q 19

1Q 20

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Central Business District (CBD) is the largest Houston office submarket, containing more than 50M SF of class A and B office space in an area totaling less than two square miles. Houston’s CBD continues to command the highest rents in the city with a current average of $39.46 per square foot for class A and B property types. The submarket is home to a large concentration of energy, professional and business services, and government tenants. Recent residential and retail developments, and the existing infrastructure of the underground tunnel system, have helped Houston’s CBD become a true live-work-play environment. At the close of 1Q 2020, the CBD submarket had a vacancy rate of 20.7% which was slightly higher than 4Q 2019. Absorption was negative with more than 300K SF, opposite of the 300K SF of positive absorption in 4Q 2019. Leasing activity remained solid with more than 940K SF of deals completed and activity was higher than the 750K SF of deals completed in 4Q 2019. Currently, 1.2M SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Enterprise Products has signed a 512K SF renewal in 1100 Louisiana. • Barclays Capital has signed a 57K SF lease in Fulbright Tower. • Cheniere Energy has signed a 33K SF lease in 700 Milam Street. • Waste Management has signed a 32K SF lease in Bank of America Tower. • Office of the Comptroller of Currency has signed a 15K SF lease in Two Houston Center. • DTE Energy has signed a 12K SF lease in JP Morgan Chase Tower. • Korn Ferry International has signed a 8K SF lease in TC Energy Center. • Jeff Diamant PC has signed a 5K SF lease in Two Houston Center. • Waterous Energy Fund has signed a 3K SF lease in Heritage Plaza.

10

• Superior Natural Gas Corporation has signed a 3K SF renewal in 1100 Louisiana. • Cima Energy LP has signed a 2K SF lease in LyondellBasell Tower. • NGP Capital has signed a 1K SF lease in 717 Texas.

DEALS IN THE MARKET • The Tamborello Building | 1901 Milam Street – a 24K SF class B office building • The Republic Building | 1018 Preston Street – a 21K class B office building • 421 Fannin Street – a 20K SF class B office building • 1712 Pease Street – a 20K SF class B office building

NEW DEVELOPMENTS • Texas Tower | 845 Texas Avenue – a 1.1M SF class A office building • Post Houston | 401 Franklin Street – a 150K SF class A office building

LARGE EXISTING VACANCIES • • • • • • • • • • • • • • •

800 Bell | 800 Bell Street – 1,314,350 SF 1001 Fannin Street – 558,141 SF JP Morgan Chase Tower | 600 Travis Street – 493,629 SF Fulbright Tower | 1301 McKinney Street – 489,027 SF Wells Fargo Plaza | 1000 Louisiana Street – 480,777 SF GreenStreet Tower | 1201 Fannin Street – 475,687 SF 1600 Smith Street – 473,253 SF One City Centre | 1021 Main Street – 467,803 SF 4 Houston Center | 1221 Lamar Street – 466,809 SF 919 MIlam | 919 Milam Street – 460,239 Two Allen Center | 1200 Smith Street – 416,901 SF TC Energy Center | 700 Louisiana Street – 375,465 SF 717 Texas | 717 Texas Street – 310,167 SF Pennzoil Place South Tower | 711 Louisiana Street – 309,151 SF 1801 Smith Street – 308,513 SF


KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption 362,229

vs. Prev. Qtr 555,238

161,142

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.2%

22.6%

23.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

431,368

428,357

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

251,746 Delivered SF Quoted Rates $29.12

VITAL STATS

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$30.05

$30.60

600,000

30.0%

400,000 200,000 25.0%

0 (200,000) (400,000)

20.0%

(600,000) (800,000) (1,000,000)

15.0% 1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK Other than the Greenspoint submarket, no major Houston office submarket besides the Katy Freeway West submarket was hit harder by the oil downturn. This submarket includes the Energy Corridor which is home to large energy corporations ConocoPhillips, Shell, and British Petroleum, among other energy and energy service related organizations. With the downturn of the energy sector, the Katy Freeway West submarket has transformed from a landlord-driven to a tenant-driven submarket. This submarket, along with most of the metro, has experienced a recent and significant flight-to-quality so these large corporations can continue to attract a talented workforce. At the close of 1Q 2020, the Katy Freeway West submarket had a vacancy rate of 21.2% which was over 1% higher than 4Q 2019. Absorption was positive with more than 360K SF, down from the 550K SF absorbed in 4Q 2019. Leasing activity remained strong with more than 250K SF of deals completed but still lower than the 430K of deals completed in 4Q 2019. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • First Solar has signed a 15K SF renewal in Kirkwood Tower. • Othonhas has signed a 14K SF lease in Energy Center II. • Qval Property Advisors has signed a 10K SF renewal in Timberway II. • Taunton, Snyder & Parish Texas Trial Lawyers has signed a 10K SF lease in One Eldridge Place. • Garver LLC has signed a 8.5K SF lease in Woodbranch Plaza II. • Samsung C&T Corporation has signed a 4K SF lease in Republic Square. • The Austin Group Energy has signed a 3.7K SF renewal in Broadfield at Park Ten. • ETTMA, Inc. has signed a 3K SF lease in The Westchester.

• Kagey Family Counseling has signed a 1.7K SF lease in

HLC Deal

Ashford Place III.

DEALS ON THE MARKET • Ashford Place | 1500 South Dairy Ashford Road – a 134K SF class B office building

• Ten West Plaza | 15915 Katy Freeway – a 105K SF class B office building

• 1250 Woodbranch Park Drive – a 102K SF class B office building

• Eleven Five Eleven Building | 11511 Katy Freeway – a 78K SF class B office building

• 16900 Park Row – a 77K SF class B office building • 16000 Memorial Drive – a 28K SF class B office building • Ashford Corner | 1710 South Dairy Ashford Road – a 23.5K SF class B office building

LARGE EXISTING VACANCIES • Three WestLake Park | 550 Westlake Park Boulevard – 417,854 SF

• Eldridge Oaks Phase 1 | 1080 Eldridge Parkway – 363,086 SF

• Two WestLake | 580 Westlake Park Boulevard – 348,787 SF

• Three Eldridge Place | 737 North Eldridge Parkway – 308,182 SF

• Energy Tower II | 11720 Katy Freeway – 297,919 SF • West Memorial Place 2 | 15377 Memorial Drive – 267,087 SF • Republic Square 1 | 13501 Katy Freeway – 238,317 SF • Energy Center II | 575 North Dairy Ashford Road – 208,116 SF • One Eldridge Place | 777 North Eldridge Parkway – 169,021 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF

HLC Deal

11


WEST LOOP SUBMARKET INTELLIGENCE Absorption 33,639

vs. Prev. Qtr

vs. 12 Mths Ago

199,921

(44,225)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

18.6%

18.8%

17.9%

Leasing Act. 332,815 Delivered SF Quoted Rate $36.05

vs. Prev. Qtr

vs. 12 Mths Ago

478,059

445,422

vs. Prev. Qtr -

vs. 12 Mths Ago -

vs. Prev. Qtr

vs. 12 Mths Ago

$36.02

$36.11

24.0%

VITAL STATS 600,000

20.0%

800,000

19.0%

22.0%

1,000,000

350,000

600,000

18.0% 100,000

20.0%

400,000

17.0% (150,000)

18.0%

16.0%

200,000 (400,000)

15.0%

16.0%

14.0%

0 (650,000)

14.0%

(200,000)

13.0%

1Q 16

(900,000) 1Q 17

2Q

3Q

4Q

2Q 17 3Q 17 4Q17 16 Absorption 16 16

Absorption

1Q

1Q18 17

2Q

18 2Q 17

3Q 18 3Q

4Q

184Q 17 17 Deliveries

1Q 19 1Q

18

2Q 3Q 19 2Q 19

18

Deliveries

4Q

(400,000)

1Q

3Q 19 4Q20 18Vacancy 18

1Q 19

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK CoStar’s Galleria, Uptown, Post Oak Park, and Riverway submarkets make up HLC’s West Loop submarket. This submarket contains approximately 24M SF of class A and B office space. Thanks to the high-profile location and assets, asking rents here are among the highest in the city. Historically, the West Loop submarket commands average rents of $35.71 per square foot, second only to the CBD.

NEW DEVELOPMENTS • Park Place | River Oaks | 4200 Westheimer Road – a 207,202 SF class A office building.

• 1801 Post Oak Boulevard – a 133,248 SF class A office building.

LARGE EXISTING VACANCIES • Marathon Oil Tower | 5555 San Felipe Street – 824,319 SF

At the close of 1Q 2020, the West Loop submarket had a vacancy rate of 18.6% which was slightly lower than 4Q 2019. Absorption was positive with 33K SF, down from the 200K SF of positive absorption in 4Q 2019. Leasing activity remained steady with more than 330K SF of deals completed, lower than the more than 475K SF absorbed in 4Q 2019. Currently, 277K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Sempra LNG has signed a 68K SF sublease in 1500 Post Oak Boulevard with BHP.

• Serendipity Labs has signed a 28K SF lease in Marathon Oil Tower. • Hometrust Mortgage has signed a 11K SF renewal in Yorktown Plaza One. • Commonwealth LNG has signed a 11K SF renewal in One Riverway. • Banorte has signed a 10K SF lease in Galleria Financial Center. • TBG Group has signed a 9K SF lease in Park Towers South. • Veritas Title has signed a 7K SF lease in Post Oak Park. • Houssiere Durant Houssiere has signed a 6.9K SF renewal in Three Post Oak Central. • Millennial Energy Management has signed a 6.7K SF lease in Marathon Oil Tower.

12

• Williams Tower | 2800 Post Oak Boulevard – 344,263 SF

• Sage Plaza | 5151 San Felipe Street – 308,266 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 248,157 SF • Five Post Oak Park | 4400 Post Oak Parkway – 228,392 SF • Three Riverway | 3 Riverway – 202,226 SF • Wells Fargo Bank Tower | 1300 Post Oak Boulevard – 189,409 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 182,055 SF • One Riverway | 1 Riverway – 181,655 SF

12


THE WOODLANDS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

92,029

406,954

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

11.1%

9.8%

8.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

153,864

240,499

vs. Prev. Qtr

vs. 12 Mths Ago

(107,205)

1,155,539 Delivered SF 180,000 Quoted Rates

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$32.70

$33.02

VITAL STATS

16.0%12.0%

300,000 700,000 250,000

200,000

11.0%

500,000

150,000

14.0%

300,000 100,000

10.0%

50,000

100,000

0

9.0%

12.0%

(100,000)

(50,000)

8.0%

(100,000)

(300,000)

(150,000) 10.0%

7.0%

(500,000)

1Q 16

$29.74

1Q 17

2Q 2Q 17

16

3Q 3Q17

16

4Q 4Q17

16

Absorption Absorption

1Q 1Q18

17

2Q 2Q 18

17

3Q 3Q 18

17

4Q 4Q 18

17

Deliveries Deliveries

1Q 1Q 19

18

2Q 192Q

18

3Q 193Q

18

4Q 19 4Q

18

1Q 20

(200,000)

1Q 19

Vacancy Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Woodlands submarket continues to be one of the most active Houston office submarkets. It has grown so much that it now competes with other premier submarkets such as the CBD, West Loop, Greenway Plaza, and the two Katy Freeway submarkets. This submarket continues to outperform averages in Houston by commanding higher rents and maintaining a vacancy rate well below the city average. At the close of 1Q 2020, The Woodlands submarket had a vacancy rate of 11.1% which was higher than 4Q 2019. Absorption was negative by more than 100K SF, opposite the 92K SF of positive absorption in 4Q 2019. Leasing activity was high with more than 1.1M SF of deals completed, significantly higher than the 150K SF of deals completed in 4Q 2019. Currently, more than 700K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Occidental Petroleum has signed a 807K SF lease in The Woodlands Towers at The Waterway.

• Westerm Midstream Partners has signed a 134K lease in The Woodlands Towers at The Waterway.

• Earthstone Energy has signed a 20K SF lease in The Woodlands Chase Building.

• Visa Solutions has signed a 4K SF lease in 25227 Grogans Mill Road.

DEALS IN THE MARKET • 8800 Technology Forest Place – a 29K SF class B office

NEW DEVELOPMENTS • HPE Buildings 3 & 4 | City Place Drive – two 284K SF class A office buildings

• Building 9 | 9709 Lakeside Boulevard – a 135K SF class A office building

• Life Time Co-Work | Six Pine Drive – a 35K SF class B office building

LARGE EXISTING VACANCIES • The Woodlands Towers at The Waterway | 9950 Woodloch Forest Drive – 453,263 SF

• Hewitt Lake Woodlands | 9500 Lakeside Boulevard – 360K SF

• Hughes Landing | 1725 Hughes Landing Boulevard – 134,784 SF

• CityPlace 1 | 1700 City Plaza Drive – 113,174 SF • 2001 Timberloch Place – 77,820 SF • Wildwood Corporate Centre I | 460 Wildwood Forest Drive – 70,240 SF

• Two Hughes Landing | 1790 Hughes Landing Boulevard – 65,870 SF

• Lake Front North | 2107 Research Forest Drive – 64,834 SF

• The Woodlands Medical Plaza 4 | 9180 Pinecroft Drive – 62,135 SF

• 24 Waterway | 24 Waterway Avenue – 57,636 SF • Waterway Plaza Two | 10001 Woodloch Forest Drive – 55,470 SF

building

• Venture Tech VIII | 8708 Technology Forest Drive – a 70K SF class B office building

• The Gateway Building | 26865 I-45 – a 24K SF class B office building

• 143 Vision Park Boulevard – a 20K SF class B office building 13

13


WESTCHASE SUBMARKET INTELLIGENCE Absorption (339,291)

vs. Prev. Qtr

vs. 12 Mths Ago

(194,920)

(149,030)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

25.0%

23.8%

25.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

477,983

440,812

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

182,899 Delivered SF Quoted Rates $27.93

$27.71

$27.06

20.0%

VITAL STATS

800,000

26.0%

1,200,000

18.0%

600,000

16.0% 25.0% 400,000 14.0%

24.0%

700,000200,000

12.0% 10.0% 23.0%

0

8.0% 6.0%

(200,000)

22.0%

200,000

(400,000) 4.0% 21.0% (600,000)

2.0% 0.0%

20.0%

(300,000) 1Q

2Q

1Q 17 2Q 17 16 16

3Q

3Q 17 16

4Q

4Q17 16

Absorption

1Q

1Q18 17

2Q

2Q 18 17

Absorption

3Q 3Q 18

17

4Q 4Q 18

17

Deliveries

Deliveries

1Q 191Q

18

2Q 19 2Q

18

3Q 4Q 1Q 19 3Q 19 4Q 20

18

18

Vacancy

(800,000)

1Q 19

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK

The Westchase office submarket is located 15 miles west of the CBD and five miles southeast of the Energy Corridor. Historically, this submarket has been popular with oil, gas, and engineering firms as it provides an alternative to the nearby Energy Corridor. However, given the concentration of energy related tenants in this submarket, demand in Westchase is affected by changes in the energy sector similar to the Energy Corridor. Westchase surpasses almost all other submarkets with its unrivaled ingress and egress, along with the submarket’s vicinity to Houston’s population center. These attributes make it an attractive alternative to CBD, West Loop, and other competing submarkets. At the close of 1Q 2020, The Westchase submarket had a vacancy rate of 25.0% which was higher than 4Q 2019. Absorption was negative by 340K SF, up from the 200K SF of negative absorption in 4Q 2019. Leasing activity consisted of 180K SF of deals completed and was lower than the 475K of deals completed in 4Q 2019. Currently, no office space is under construction in the submarket.

TOP LEASE TRANSACTIONS • Honeywell has signed a 46K SF lease in CityWestPlace Building One. • Round Table Medical Consultants has signed a 23K SF renewal in Royal Oaks Centre. • Ward Getz & Associates has signed a 15K SF renewal in Woodlake Office Park. • CDM Smith has signed a 14K SF renewal in Royal Oaks Centre. • Advance Energy Partners has signed a 13K SF renewal in Royal Oaks Centre. • Family Endeavors has signed a 11K SF lease in Westchase Place. • Farmer Insurance has signed a 9K SF lease in 2925 Briarpark. • HSF Affiliates has signed a 6K SF renewal in 11000 Richmond Avenue. • Next Level Urgent Care has signed a 4K SF lease in 2925 Briarpark. 14

• Round Table Medical Consultants has signed a 4K SF lease in Royal Oaks Centre.

DEALS IN THE MARKET • Columbia Centre | 11011 Richmond Avenue – a 167K SF class A office building

• The Colonnade | 11111 Richmond Avenue – a 96K SF class B office building

• 3030 South Gessner Road – a 61K SF class B office building

• 6650 West Sam Houston Parkway South – a 45K SF class A office building

• 2610 West Sam Houston Parkway South – a 26K SF class B office building

• 10590 Westoffice Drive – a 26K SF class B office building

LARGE EXISTING VACANCIES • 10200 Bellaire Boulevard – 568,458 SF • Pinnacle Westchase | 3010 Briarpark Drive – 366,487 SF

• CityWestPlace Building 4 | 2103 CityWest Boulevard – 203,045 SF

• CityWestPlace Building 1 | 2101 CityWest Boulevard – 188,312 SF

• 3250 Briarpark Drive – 164,972 SF • Millennium Tower | 10375 Richmond Avenue – 154,179 SF

• 2500 CityWest | 2500 CityWest Boulevard – 151,458 SF

• Towers at Westchase I | 10370 Richmond Avenue – 143,074 SF

• Towers at Westchase II | 10350 Richmond Avenue – 142,155 SF

• Westchase Point | 1250 West Sam Houston Parkway – 145,034 SF

• West8 Tower | 10205 Westheimer Road – 134,969 SF • Westchase Park I | 3700 West Sam Houston Parkway – 125,231 SF 14


GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption 68,712 Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

27,031

(205,092)

vs. Prev. Qtr

vs. 12 Mths Ago

45.0%

45.6%

45.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

155,667

92,110

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

159,914 Delivered SF Quoted Rate $18.55

$18.50

VITAL STATS

25.0%

100,000

48.0%

300,000

24.5% 200,000

24.0%

0

46.0%

23.5%

100,000

23.0%44.0%

(100,000)

22.5%

0

22.0%42.0%

(200,000)

(100,000)

21.5%

(300,000)

21.0%40.0%

(200,000)

20.5% (400,000)

38.0%

20.0%

1Q 16

$18.79

1Q 17

2Q

2Q 17 16

3Q

3Q17 16

4Q

17 4Q 16

Absorption

Absorption

1Q

18 1Q 17

2Q 18 2Q

17

3Q 183Q

17

4Q 184Q

17

Deliveries

1Q 19

1Q 18

2Q 19

Deliveries

2Q 18

3Q 19

4Q

3Q 19 18

1Q

4Q20 18

Vacancy

(300,000)

1Q 19

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Greenspoint/IAH office submarket continues to suffer more than any other submarket in Houston and there is unfortunately little to suggest this trend will reverse anytime soon. This northern Houston submarket’s vacancy rate was largely affected by the downturn within the energy sector and remains the highest in the city. Rents have fallen significantly and investors have been working persistently to rebrand the submarket. At the close of 1Q 2020, the Greenspoint/IAH submarket had a vacancy rate of 45.0% which was slightly lower than 4Q 2019. Absorption was positive by 68K SF, up from the 27K SF absorbed in 4Q 2019. Leasing activity remained steady with 160K SF of deals completed, almost the same as the 155K SF of deals completed in 4Q 2019. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Oprona Inc. has signed a 23K SF lease in Gateway I. • Oprona Inc. has signed a 9K SF renewal in Gateway II. • Trees LLC has signed a 6K SF lease in Greenbriar Place.

• Pinpoint Rehab has signed a 3K SF lease in 15109 Heathrow Forest Parkway. • Trans-Tech Energy has signed a 2K SF lease in 363 North Belt.

DEALS IN THE MARKET • EM Houston | 13401 North I-45 – a 143K SF class A office building

• Northborough Business Park | 220 Meadowfern Drive – a 102K SF class B office building

• Greens Crossing I | 810 Gears Road – a 79K SF class B office building

• Sam Houston Plaza | 507 North Sam Houston Parkway East – a 78K SF class B office building

• 14450 John F Kennedy Boulevard – a 46K SF class B office building

• 1030-1034 Regional Park Drive – a 23K SF class B office building

• 3808 World Houston Parkway – a 22K SF class B office building

LARGE EXISTING VACANCIES • CityNorth 5 | 17001 Northchase Drive – 458,331 SF • CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF • CityNorth 1 | 233 Benmar Drive – 253,562 SF • 363 North Sam Houston Parkway East – 245,131 SF • 222 Benmar Drive – 198,256 SF • Glenborough Tower | 100 Glenborough Drive – 181,978 SF

• 396 West Greens Road – 164,411 SF • World Houston Plaza | 15710 John F. Kennedy Boulevard – 157,905 SF

• North Houston Tech Tower | 12707 North Freeway – 157,276 SF

• CityNorth 4 | 16945 Northchase Drive – 155,048 SF

15

15


GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption 41,012 Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

(270,031)

55,405

vs. Prev. Qtr

vs. 12 Mths Ago

VITAL STATS 26.0% 20.0%

300,000 300,000

19.0% 25.0%

250,000 250,000

24.0%

17.0%

17.4%

15.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

22.0%

283,183

158,862

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

Delivered SF Quoted Rates $35.08

$32.31

100,000

16.0%

0

21.0%

(50,000)

14.0%

50,000 0

(100,000)

20.0% 13.0%

(50,000)

(150,000)

12.0% 19.0%

(200,000)(100,000)

11.0% 18.0%

(250,000)(150,000)

10.0%

(300,000) 1Q 1Q17

16

$31.91

150,000

50,000 100,000

15.0%

17.0%

200,000

150,000

17 .0%

23.0%

146,302

200,000

18.0%

2Q 2Q17

16

3Q 3Q 17

16

4Q 4Q 17

16

Absorption Absorption

1Q 1Q 18

17

2Q 2Q 18

17

3Q 183Q

17

4Q 184Q

17

Deliveries Deliveries

1Q 2Q 3Q 4Q 19 1Q 19 2Q 19 3Q 19

18

18

18

1Q 4Q20

18

(200,000)

1Q 19

Vacancy Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Greenway Plaza office submarket received its name from the eleven (11) building, 50-acre, master-planned complex at the heart of the submarket. Given its convenient location between the West Loop, Medical Center and CBD submarkets, Greenway Plaza continues to be one of the most desirable submarkets in Houston. Recent improvements to the master-planned Greenway Plaza complex and other recent developments have helped breathe life back into this submarket.

LARGE EXISTING VACANCIES • Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF • Nine Greenway Plaza | 9 Greenway Plaza – 229,988 SF • Twelve Greenway Plaza | 12 Greenway Plaza – 219,577 SF

• Phoenix Tower | 3200 Southwest Freeway – 217,947 SF • Three Greenway Plaza | 3 Greenway Plaza –175,938 SF • Weslayan Tower | 24 Greenway Plaza – 116,873 SF • 3737 Buffalo Speedway Avenue – 106,617 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 90,925 SF

At the close of 1Q 2020, the Greenway Plaza submarket had a vacancy rate of 17.0% which was slightly lower than 4Q 2019. Absorption was positive by 41K SF, up from the 270K SF of negative absorption in 4Q 2019. Leasing activity remained steady with 146K SF of deals completed, less than the more than 283K SF leased in 4Q 2019. Currently, no office space is under construction in the submarket.

• 3555 West Alabama | 3555 West Alabama Street – 81,634 SF

• 20 Greenway Plaza – 68,329 SF • Two Greenway Plaza | 2 Greenway Plaza – 64,808 SF • Eight Greenway Plaza | 8 Greenway Plaza – 62,934 SF

TOP LEASE TRANSACTIONS • Marker Therapeutics has signed a 26K SF lease in Phoenix Tower. • RediClinic has signed a 6K SF lease in Phoenix Tower. • DPR Construction has signed a 5K SF lease in Phoenix Tower. • Ferguson Braswell has signed a 4K SF lease in Phoenix Tower. • Parris Pain Center has signed a 3K SF renewal in 3100 Timmons. • Hensley & Krueger has signed a 2K SF lease in 5615 Kirby.

16

16


FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption (27,275)

vs. Prev. Qtr

vs. 12 Mths Ago

46,944

53,835

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.0%

20.8%

15.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

145,535

159,474

vs. Prev. Qtr

vs. 12 Mths Ago

73,000

28,080

vs. Prev. Qtr

vs. 12 Mths Ago

115,713 Delivered SF Quoted Rate $20.22

$20.05

$20.08

VITAL STATS

20.0%

200,000

22.0%

200,000

150,000 100,000

16.0%20.0%

0

100,000

12.0%18.0% (100,000) 50,000

8.0%16.0% (200,000)

0

14.0%

4.0%

(300,000)

(50,000)

12.0%

0.0%

(400,000) 1Q

2Q

1Q 17 2Q 17 16 16

3Q

3Q 17 16

4Q

4Q17 16

Absorption Absorption

1Q

1Q18 17

2Q

2Q 18 17

3Q

3Q 18 17

4Q 4Q 18

1Q 1Q 19

2Q 192Q

3Q 193Q

4Q 19 4Q

1Q 20 1Q

17

18

18

18

18

19

Deliveries Deliveries

Vacancy Vacancy

(100,000)

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s FM 1960 Corridor office submarket includes CoStar’s FM 1960/Highway 249, Champions, and I-45 North submarkets. The submarket follows Farm-to-Market Road 1960 from Clay Road in West Houston up to North East Houston and stops just before George Bush International Airport. This submarket is home to more than 10M SF of class A and B office space. At the close of 1Q 2020, the FM 1960 Corridor had a vacancy rate of 21.0% which was slightly higher than 4Q 2019. Absorption was negative by almost 30K SF, down from the 47K SF of positive absorption in 4Q 2019. Leasing activity remained steady with 115K SF of deals completed. Currently, 59K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • MD Advanced Skincare has signed a 5K SF lease in Hargrave Medical Office Building. • Fresh Start Therapeutic Services has signed a 4K SF lease in Torrey Chase I. • Lifespan Euro Med Spa has signed a 2.5K SF lease in 4560 FM 1960 West. • Lone Star Lung & Sleep Clinic has signed a 2K SF lease in Hargrave Medical Office Building.

DEALS IN THE MARKET • 11403 Compaq Center West Drive – a 260K SF class B office building • Denmark House | 12777 Jones Road – a 119K SF class B office building • Wells Fargo Cypress | 12337 Jones Road – a 85K SF class B office building • Champions-Wells Fargo Building | 5625 FM 1960 West – a 64K class A office building • Olde Oaks Atrium | 3724 FM 1960 West – a 62K SF class B office building • Steeplechase Corner Professional Building | 11301 Fallbrook Drive – a 61K SF class B office building • Highway Six Professional Building | 16100 Cairnway Drive – a 60K SF class B office building 17

• 18750 Interstate 45 – a 60K SF class A office building • Texas School of Business | 711 Airtec Drive – a 42K SF class B office building • The Mill Creek Building | 4702 FM 1960 West – a 40K SF class B office building • 12824 Willow Centre Drive – 32K SF class B office building • Cairnway Plaza | 16125 Cairnway Drive – a 28K SF class B office building • Building 1 One | 8403 Louetta Road – a 25K SF class B office building • West Road Office Building | 14025 West Road – a 23K SF class B office building • 6810 FM 1960 West – a 20K SF class B office building

NEW DEVELOPMENTS • 8900 Point Six Circle – a 35K SF class B office building • 17910 Coventry Park Drive – a 24K SF class B office building

LARGE EXISTING VACANCIES • Noble Energy Center II | 002 Noble Energy Way – 437,793 SF • University Park Buildings 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF • Creekridge II | 140 Cypress Station Drive – 137,396 SF • Chasewood Crossing III | 19350 State Highway 249 – 122,074 SF • 616 FM 1960 Road West – 67,889 SF • Northwest Medical Plaza | 800 Peakwood Drive – 65,891 SF • Chasewood Crossing II | 19450 State Highway 249 – 54,313 SF • Chasewood Crossing I | 19500 State Highway 249 – 54,189 SF • Cypress Station Medical Building | 1140 Cypress Station Drive – 52,038 SF • Cornerstone Tower | 3707 FM 1960 West – 48,012 • The Willowbrook Building | 7915 FM 1960 West – 47,313

17


MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption (11,527) Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4,293

(20,367)

vs. Prev. Qtr

vs. 12 Mths Ago

5.6%

5.5%

5.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

50,454

31,038

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

93,115 Delivered SF Quoted Rates $26.47

$26.28

VITAL STATS

14.0%

120,000

7.0%

200,000

100,000 6.5%

80,000

12.0%

60,000

6.0%

40,000 20,000

10.0%5.5%

0 (20,000)

5.0%

(40,000)

8.0%

(60,000)

4.5%

150,000

100,000

50,000

0

(50,000)

(80,000) 4.0%

6.0%

(100,000) 1Q

1Q 17 16

$26.80

2Q

2Q17 16

3Q

3Q17 16

4Q

17 4Q 16

Absorption

Absorption

1Q

18 1Q 17

2Q 18 2Q

17

3Q 183Q

17

4Q 184Q

17

Deliveries

1Q 2Q 3Q 4Q 19 1Q 19 2Q 19 3Q 19

Deliveries

18

18

18

1Q

4Q20 18

Vacancy

(100,000)

1Q 19

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Medical Center submarket is located three miles southwest of the CBD and is a specialty market focused heavily on the healthcare sector. It is home to the Texas Medical Center, the largest medical center in the world. More than two-thirds of the roughly 10M SF of office space in this submarket is considered medical office. Major medical institutions, such as the M.D. Anderson Cancer Center and Memorial Hermann Hospital, are among the top medical office tenants in this submarket. This submarket historically holds the lowest vacancy rate in the city.

LARGE EXISTING VACANCIES • Texas Medical Center | 7501 Fannin Street – 83,008 SF • Museum Medical Tower | 1213 Hermann Drive – 65,434 SF

• 7505 Fannin Street – 53,842 SF • Main Link Biotechnology Park | 10301 Stella Link Road – 42,105 SF

• One Fannin | 7400 Fannin Street – 37,288 SF • Houston Medical Plaza – 34,378 SF • 2646 South Loop West – 29,863 SF • Atrium 2656 | 2656 South Loop Freeway West – 28,389 SF

At the close of 1Q 2020, the Medical Center submarket had a vacancy rate of 5.6% which was slightly higher than 4Q 2019. Absorption was negative with 11K SF of space given back, down from the 4K SF of positive absorption in 4Q 2019. Leasing activity moved higher with 93K SF of deals completed. Currently, 300K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Hourglass Capital has signed a 2.5K SF lease in

• Greenpark II Professional Building | 7505 Main Street – 28,224 SF • Greenpark One | 7515 South Main Street – 27,127 SF • 1200 Binz | 1200 Binz Street – 26,613 SF • NRG Office Complex | 2626 South Loop Freeway West – 26,304 SF • Prosperity Bank Plaza | 5020 Montrose Boulevard – 24,621 SF • Memorial Hermann Medical Plaza | 6400 Fannin Street – 22,915 SF

Prosperity Bank Plaza.

• Pelvic Rehabilitation Medicine has signed a 2.2K SF lease in Greenpark II Professional Building.

NEW DEVELOPMENTS • Museo Plaza Office Building | 5115 Fannin Street – a 180K SF class A office building

• 7500 Fannin Street – a 126K SF class B office building

18

18


KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption 16,244

vs. Prev. Qtr

vs. 12 Mths Ago

(31,186)

(65,676)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

10.5%

10.7%

12.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

229,983 Delivered SF Quoted Rates $36.71

141,172

246,081

vs. Prev. Qtr

vs. 12 Mths Ago

102,474

-

vs. Prev. Qtr

vs. 12 Mths Ago

$36.77

23.0%

VITAL STATS

1,000,000

16.0%

300,000

250,000800,000

22.0% 21.0%

200,000

600,000

14.0%

150,000

20.0% 19.0%

100,000

400,000

50,000 200,000

12.0%

0

18.0%

0

(50,000) 17.0%

(200,000)

10.0%

16.0% 1Q 16

$34.99

(100,000) 1Q 2Q 3Q 4Q 1Q 172Q 17 3Q 17 4Q 17 1Q18 Absorption 16 16 16 17

Absorption

2Q 18 2Q 17

3Q 4Q 1Q 2Q 3Q 4Q 1Q 18 184Q 19 1Q 19 2Q19 3Q19 20 3Q 4Q Deliveries Vacancy 17 17 18 18 18 18

Deliveries

(400,000) 1Q 19

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Katy Freeway East office submarket benefits greatly from the demographics of the Memorial Villages. The submarket is centrally located along Interstate 10 and Beltway 8, near the Energy Corridor and the rapidly growing western suburbs, and is home to MetroNational’s Memorial City and Midway’s CityCentre mixed-use developments. At the close of 1Q 2020, the Katy Freeway East submarket had a vacancy rate of 10.5% which was slightly lower than 4Q 2019. Absorption was positive with almost 16K SF of space absorbed, up from 31K SF of negative absorption in 4Q 2019. Leasing activity remained strong with nearly 230K SF of deals completed which was higher than the 140K SF of deals completed in 4Q 2019. Currently, more than 1.35M SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • TGS-Nopec Geophysical has signed a 97K SF renewal in 10451 Clay Road. • STA Wealth Management has signed a 12K SF lease in CityCentre One. • Simmons & Fletcher has signed a 10K SF renewal in Memorial City Place. • Sojitz has signed a 6K SF lease in CityCentre Three. • Medical Associates of Houston has signed a 6K SF lease in Hedwig Place Atrium II. • DTE Energy Trading has signed a 5K SF renewal in CityCentre Three. • Texas American Title Company has signed a 4K SF renewal in Town Centre One. • Mokveld has signed a 2K SF renewal in Hedwig Plaza.

19

DEALS IN THE MARKET • Town & Country Central I | 10497 Town & Country Way – a 150K SF class A office building

NEW DEVELOPMENTS • Marathon Oil HQ | 990 Town & Country Boulevard – a 440K SF class A office building

• 8020 Katy Freeway – a 420K class A office building • Village Towers I & II | 9655 Katy Freeway – two 150K SF class A office buildings • 9753 Katy Freeway – a 161K SF class A office building

LARGE EXISTING VACANCIES • One Memorial City Plaza | 800 Gessner Road – 132,885 SF

• Memorial Hermann Tower | 929 Gessner Road – 113,181 SF

• Two Memorial City Plaza | 820 Gessner Road – 98,314 SF

• Three Memorial City Plaza | 840 Gessner Road – 82,778 SF

• CityCentre Two | 818 Town & Country Boulevard – 77,471 SF

• CityCentre One | 800 Town & Country Boulevard – 64,771 SF

• 10777 Clay Road – 56,871 SF • 952 Echo Lane – 48,562 SF • Medical Plaza 3 | 915 Gessner Road – 44,503 SF • 920 Memorial City Way – 36,356 SF • Park Centre I | 9950 Westpark Drive – 31,405 • Hedwig Place | 8731 Katy Freeway – 28,650 SF • Nexen Building | 945 Bunker Hill Road – 25,076 SF • 9805 Katy Freeway – 25,017 SF

19


SUGAR LAND SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(5,995)

(5,061)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

11.5%

12.5%

11.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

170,613

284,713

69,282

44,099 Delivered SF Quoted Rates $27.01

vs. Prev. Qtr

vs. 12 Mths Ago

3,663

37,863

vs. Prev. Qtr

vs. 12 Mths Ago

$26.98

$26.21

VITAL STATS

12.0% 14.0%

250,000 100,000

200,000 11.0%

50,000

150,000 12.0% 0

10.0%

100,000

(50,000)

50,000

9.0% 10.0%

(100,000)

0

8.0%

(150,000)

(50,000)

7.0%

8.0%

(200,000) 1Q

2Q

3Q

1Q 17 2Q 17 3Q 17 16 16 16

4Q

4Q 17 16

Absorption Absorption

1Q

1Q18 17

2Q

2Q 18 17

3Q

3Q 18 17

4Q

4Q 18 17

Deliveries Deliveries

1Q 1Q 19

18

2Q 192Q

18

3Q 193Q

18

4Q 1Q 19 4Q 20 1Q

18

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Sugar Land office submarket in Southwest Houston is home to a variety of energy and engineering firms. Large corporations such as Fluor Enterprises, Schlumberger, Fairfield Technologies, and Nalco Champion call this submarket home. Other non-energy tenants including CocaCola, Imperial Sugar, and Kelsey-Seybold Clinic have a large presence as well. With its proximity to Houston’s growing population centers and workforce, the submarket continues to be a great suburban alternative to other major Houston office submarkets such as West Loop, Westchase, and Greenway Plaza. At the close of 1Q 2020, the Sugar Land submarket had a vacancy rate of 11.5% which was lower than 4Q 2019. Absorption was positive by 70K SF, up considerably from the 6K SF of negative absorption in 4Q 2019. Leasing activity included 44K SF of deals completed but was still lower than the 170K SF of deals completed in 4Q 2019. Currently, 105K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Charter Title has signed a 4K SF lease in Pioneer at Telfair.

• Centercorp Management has signed a 2.5K SF lease in Market at Towne Center.

• Victory Solar has signed a 2K SF lease in Kirkwood Tech Center.

• DeGroot-Brill Earth Sciences has signed a 1.6K SF lease in Sugar Land Plaza.

• Aria Dental has signed a 1.5K SF lease in 4899 Highway 6.

• Motto Mortgage has signed a 1.2K SF lease in 13313

DEALS IN THE MARKET • 4690 Sweetwater Boulevard – a 29K SF class B office building

NEW DEVELOPMENTS • 13151 West Airport Boulevard – a 56K SF class B office building

• University Boulevard – a 27K SF class B office building • 6908 Brisbane Court – a 22K SF class B medical office building

LARGE EXISTING VACANCIES • Sugar Creek on the Lake | 14141 Southwest Freeway – 121,k158 SF

• Sugar Creek Tower II | 13131 Dairy Ashford Road – 95,518 SF

• Building A | 1 Flour Daniel Drive – 85,927 SF • Sugar Creek Place I | 14100 Southwest Freeway – 84,814 SF

• Sugar Creek Tower I | 13135 Dairy Ashford Road – 62,601 SF • Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 45,441 SF • The Minute Maid Building | 2150 Town Square Place – 44,895 SF • 12603 Southwest Freeway – 44,345 SF • The Texas Drive Building | 2245 Texas Drive – 41,681 SF • Commerce Green One | 14090 Southwest Freeway – 40,833 SF • The Glenn Lakes Professional Building | 3634 Glenn Lakes Lane - 39,500 SF • 7619 Branford Place – 35,031SF • Comerica Bank Building – 31,927 SF

Southwest Freeway.

20

20


CLEAR LAKE SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(12,175)

23,263

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

15.2%

14.8%

15.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

85,053

129,281

vs. Prev. Qtr

vs. 12 Mths Ago

45,012

91,533 Delivered SF 87,000 Quoted Rates $21.43

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$22.11

$22.21

VITAL STATS 12.0%16.0%

250,000 90,000 70,000

200,000

11.0%

50,000

15.0%

150,000

30,000

10.0%

10,000100,000

14.0% (10,000)

50,000

9.0%

(30,000)

0

13.0%

(50,000)

8.0% (70,000) (50,000) 12.0%

7.0%

(90,000) 1Q

2Q

1Q 17 2Q 17 16 16

3Q

3Q 17 16

4Q

4Q17 16

Absorption Absorption

1Q

1Q18 17

2Q

18 2Q 17

3Q

18 3Q 17

4Q 18 4Q

17

Deliveries Deliveries

1Q 19 1Q

18

2Q 192Q

18

3Q 193Q

18

4Q 19 4Q

18

1Q 20 1Q

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK Located southeast of the CBD, the Clear Lake office submarket is home to the Lyndon B. Johnson Space Center and a large concentration of government jobs. Office space in this submarket relies heavily on the Space Center but is also home to a diverse mix of industries. The area boasts strong demographics given the high volume of NASA scientists, well-paid workers at the Houston Ship Channel, and related downstream industries who choose to live in communities close to the water. At the close of 1Q 2020, the Clear Lake submarket had a vacancy rate of 15.2% which was higher than 4Q 2019. Absorption was positive by 45K SF, up from the 12K SF of negative absorption in 4Q 2019. Leasing activity remained steady with 91K SF of deals completed, slightly higher than the 85K SF of deals completed in 4Q 2019. Currently, 53K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Hoyer Global has signed a 23K SF renewal in Atrium @ Nassau Bay Building. • C & I Engineering has signed a 9K SF renewal in Atrium @ Nassau Bay Building. • Ares Corporations has signed a 6K SF lease in The Cimarron Building.

• Galaxy II | 455 East Medical Center Boulevard – a 107K SF class A office building

• 2222 Bay Area Boulevard – a 65K SF class B office building • 17300 Saturn Lane – a 24K SF class B office building

NEW DEVELOPMENTS • Phase I | 13150 Space Center Boulevard – a 53K SF class B office building

LARGE EXISTING VACANCIES • Clear Lake Central | 600 Gemini Street – 317,198 SF • Atrium Crest | 18333 Egret Bay Boulevard – 71,981SF • Boeing | 3700 Bay Area Boulevard – 66,195 SF • Hercules II | 1290 Hercules Avenue – 64K SF • 13100 Space Center Boulevard – 61,840 SF • One Corporate Plaza | 2525 Bay Area Boulevard – 46,520 SF

• Hercules I | 1300 Hercules Avenue – 31,222 SF • Two Corporate Plaza | 2625 Bay Area Boulevard – 28,937 SF

• Space Park Office Building | 2200 Space Park Drive – 25,105 SF

• Bay Plaza | 711 West Bay Area Boulevard – 23,180 SF • 16055 Space Center Boulevard – 23,081 SF

DEALS IN THE MARKET • Clear Lake Central | 600 Gemini Street – a 363K SF class B office building • Two Corporate Plaza | 2625 Bay Area Boulevard – a 161K SF class A office building • Jacobs | 2224 Bay Area Boulevard – a 138K SF class B office building • One Corporate Plaza | 2525 Bay Area Boulevard – a 114K SF class A office building

21

21


MIDTOWN SUBMARKET INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

49,726

(38,571)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

10.2%

10.0%

10.4%

12.0%12.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

10.0%

(13,778)

170,483 Delivered SF Quoted Rate $29.63

77,321

100,836

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$29.43

$28.69

18.0%14.0%

150,000600,000

16.0%

125,000

500,000

100,000 75,000

400,000

50,000300,000 25,000 0

200,000

8.0%

(25,000)100,000

6.0%10.0%

(50,000)

0

(75,000)

4.0%

(100,000)

(100,000)

2.0% 0.0%

(200,000) (125,000) (150,000)

8.0% 1Q

2Q

1Q 17 2Q 17 16 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

18 1Q 17

2Q

18 2Q 17

3Q 18 3Q

17

4Q 18 4Q

17

Deliveries Deliveries

1Q 191Q

18

2Q 19 2Q

18

3Q 4Q 19 3Q 19

18

1Q

(300,000)

4Q 20 1Q 18 19

Vacancy Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Midtown office submarket is centrally located due west of CBD and has recently been dubbed the “Millennial Corridor”. The submarket includes the Heights to the north, Montrose/Museum District, Upper Kirby to the west, and Rice Village to the south. Further west along the Washington Corridor, the submarket has seen considerable interest from developers of all property types along Allen Parkway and Washington Avenue. At the close of 1Q 2020, the Midtown submarket had a vacancy rate of 10.2% which was slightly higher than 4Q 2019. Absorption was negative by 13K SF, down from the 49K SF of positive absorption in 4Q 2019. Leasing activity remained steady with 170K SF of deals completed and was higher than the 77K SF of deals completed in 4Q 2019. Currently, 520K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Live Nation has signed a 75K SF lease in Montrose Collective.

• Houston Police Officers Pension System has signed a 13K SF renewal in 602 Sawyer Street.

• The James Street Group has signed a 7K SF renewal in 5300 Memorial Drive.

• Gordon Arata Montgomery Barnett has signed a 6K SF lease in San Felipe Place.

• SHEspace has signed a 6K SF lease in 2728 Summer

DEALS IN THE MARKET • 2303 Smith | 2303 Smith Street – a 23K SF class B office building

NEW DEVELOPMENTS • The Ion | 4201 Main Street – a 270K SF class A office building. • Montrose Collective | 888 Westheimer Road – a 126K SF class A office building • River Oaks Medical | 3720 Westheimer Road – a 52K SF medical office building • Rethink Co-Working | 1512 Center Street – a 37K SF class B office building • 190 TC Jester Boulevard – a 35K SF class B office building

LARGE EXISTING VACANCIES • America Tower | 2929 Allen Parkway – 147,861 SF • Wortham Tower | 2727 Allen Parkway – 137,900 SF • Central Square | 2100 Travis Street – 116,481 SF • HCC Building | 3100 Main Street – 108K SF • 2777 Allen Parkway – 57,670 SF • 2000 Crawford | 2000 Crawford Street – 48,736 SF • 100 Waugh | 100 Waugh Drive – 40,508 SF • 55 Waugh Drive – 32,695 SF • 2800-2810 San Jacinto Street – 27,484 SF • Buffalo Heights | 3663 Washington Avenue – 23,642 SF • River Oaks Bank Building | 2001 Kirby Drive – 21,046 SF

Street.

• Infra GTL Technology has signed a 4K SF renewal in The Bellevue.

22

22


SAN FELIPE/FOUNTAIN VIEW SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(7,925)

(64,132)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.3%

19.2%

18.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

121,559

100,705

vs. Prev. Qtr

vs. 12 Mths Ago

(3,668)

128,948 Delivered SF Quoted Rate $27.91

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$27.52

$27.45

VITAL STATS 12.0%22.0%

250,000 200,000

40,000

20.0% 11.0%

150,000 (10,000)

10.0%18.0%

100,000 (60,000) 50,000

9.0%16.0%

0 14.0%

(110,000)

12.0%

(160,000)

8.0%

(50,000) 7.0%

1Q

1Q 17 16

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

18 1Q 17

2Q

18 2Q 17

3Q

18 3Q 17

4Q 18 4Q

17

Deliveries Deliveries

1Q 191Q

18

2Q 192Q

18

3Q 19 3Q

18

4Q 19 4Q

18

1Q 20 1Q

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s San Felipe/Fountain View office submarket is a smaller submarket with a premier location, just west of the West Loop submarket. This submarket contains about 6M SF of class A and B office space, providing tenants with a great alternative to the higher than average rates of the West Loop and Katy Freeway East submarkets. At the close of 1Q 2020, the San Felipe/Fountain View submarket had a vacancy rate of 19.3% which was slightly higher than 4Q 2019. Absorption remained negative with 3K SF, similar to the 8K SF of negative absorption in 4Q 2019. Leasing activity remained steady with 128K SF of deals completed. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • W&T Offshore has signed a 46K SF lease in 5718 Westheimer Road.

• PO & G Resources has signed a 10K SF renewal in San

DEALS IN THE MARKET • 6300 Richmond Avenue – a 43K SF class B office building

LARGE EXISTING VACANCIES • San Felipe Plaza | 5847 San Felipe Street – 222,290 SF • 5718 Westheimer Road – 219,910 SF • 2000 Bering | 2000 Bering Drive – 102,511 SF • 2603 Augusta Drive – 76,398 SF • Memorial Tower I – 66,681 SF • Augusta Place | 2400 Augusta Drive – 56,142 SF • The Spectrum Office Building | 5858 Westheimer Road – 52,394 SF

• Galleria Oaks Towers I | 5821 Southwest Freeway – 42,899 SF

• Memorial Tower II | 7500 San Felipe Street – 40,725 SF • 510 Bering Drive – 40,009 SF • 1800 Bering Drive – 34,313 SF • 5850 San Felipe Street – 35,276 SF

Felipe Plaza.

• Haddington Ventures has signed a 8K SF renewal in 2603 Augusta Drive.

• Edward Jones has signed a 5K SF lease in 5718 Westheimer Road.

• Pedernales Energy has signed a 3.7K SF lease in Two Bering Park.

23

23


WEST BELT SUBMARKET INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

(102,726)

76,287

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

100,000400,000

22.1%

19.7%

19.8%

12.0%

50,000300,000

vs. 12 Mths Ago

10.0%

(140,425)

Leasing Act. 46,106 Delivered SF Quoted Rate $24.87

vs. Prev. Qtr 64,790

147,381

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$24.48

$25.67

18.0%26.0%

600,000 200,000

16.0%

150,000500,000

24.0%

22.0% 0

200,000

8.0%

(50,000) 100,000

6.0%

(100,000)

4.0%18.0%

(150,000)

20.0%

0

(100,000)

(200,000)

2.0%

(200,000)

16.0%

(250,000)

0.0%

1Q 16

1Q 17

2Q 2Q 17

16

3Q 3Q17

16

4Q 4Q17

16

Absorption Absorption

1Q 18 1Q

17

2Q 18 2Q

17

3Q 18 3Q

17

4Q 18 4Q

17

Deliveries Deliveries

1Q 191Q

18

2Q 19 2Q

18

3Q 4Q 19 3Q 19

18

4Q 18

1Q 20

Vacancy Vacancy

(300,000)

1Q 19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The West Belt submarket spans a quarter-mile along the West Sam Houston Parkway/Beltway 8 between Clay Road and Highway 249. This submarket houses nearly 7M SF of class A and B office space. The submarket’s proximity to the Energy Corridor makes it one of the most energydriven office markets in Houston. With the submarket’s heavy concentration of energy related tenants, the West Belt submarket felt the oil downturn more than most other submarkets. Notwithstanding this, the outlook for this submarket looks promising given its close proximity to the population center of Houston. At the close of 1Q 2020, the West Belt submarket had a vacancy rate of 22.1% which was higher than 4Q 2019. Absorption remained negative by 140K SF, lower than the 102K SF of negative absorption in 4Q 2019. Leasing activity remained steady with 46K SF of deals completed, but was lower than the 65K SF of completed deals in 4 2019. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • EXP has signed a 28K SF lease in Westway Plaza. • CoAdvantage has signed a 2.6K SF lease in Willowbrook Place I.

DEALS IN THE MARKET • Westway One | 11210 Equity Drive – a 143K SF class A office building

• Tanner Office Building | 11302 Tanner Road – a 58K SF class B office building

• 8400 North Sam Houston Parkway West – a 40K SF class B office building

• 15000 Northwest Freeway – a 38K SF class B office building

• 9949 West Sam Houston Parkway North – a 36K SF class B office building

• 16060 Dillard Drive – a 24K SF class B office building • 16000 Dillard Drive – a 24K SF class B office building LARGE EXISTING VACANCIES • Westway II | 4424 West Sam Houston Parkway North – 231,666 SF

• Westway Building Two | 11000 Corporate Centre Drive – 164,348 SF

• Beltway Lakes Phase III | 5775 North Sam Houston Parkway West – 154,972 SF

• Westway One | 11220 Equity Drive – 143,960 SF • Westway Plaza | 11330 Clay Road – 118,450 SF • Beltway Lakes Phase I | 5825 North Sam Houston Parkway West – 58,429 SF

• Tanner Office Building | 11302 Tanner Road – 57,798 SF • Concourse at Westway | 4700 West Sam Houston Parkway North – 57,413 SF

• York Centre | 10235 West Little York Road – 49,455 SF • Heron Lake | 10740 North Gessner Drive – 41,652 SF • Sam Houston Crossing One | 10343 Sam Houston Park Drive – 37,665 SF

• Westway Building Four | 4920 Westway Park Boulevard – 35,675 SF

24

24


SOUTHWEST BELTWAY 8 SUBMARKET INTELLIGENCE Absorption (18,188) Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

93,931

13,457

vs. Prev. Qtr

vs. 12 Mths Ago

21.1%

20.8%

20.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

62,411

58,216

49,677 Delivered SF Quoted Rates $16.11

vs. Prev. Qtr vs. Prev. Qtr $15.49

vs. 12 Mths Ago vs. 12 Mths Ago $16.00

VITAL STATS 12.0%24.0%

250,000 100,000 80,000

200,000

60,000

11.0% 22.0%

40,000

150,000

20,000

10.0%

0

20.0%

100,000

(20,000)

50,000

9.0%

(40,000) (60,000) 0

18.0%

(80,000)

8.0%

(50,000) (100,000) 16.0%

7.0%

(120,000) 1Q

1Q 17 16

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

18 1Q 17

2Q

18 2Q 17

3Q

18 3Q 17

4Q 18 4Q

17

Deliveries Deliveries

1Q 191Q

18

2Q 192Q

18

3Q 19 3Q

18

4Q 19 4Q

18

1Q 20 1Q

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s Southwest Beltway 8 office submarket extends southeast to the tip of Missouri City and northwest to the Buffalo Bayou just west of the Energy Corridor. The submarket’s geographic boundaries extend much further than those of neighboring West Houston submarkets but deliveries here have been significantly fewer than in other submarkets recently. At the close of 1Q 2020, the Southwest Beltway 8 submarket had a vacancy rate of 21.1% which was slightly higher than 4Q 2019. Absorption moved negative with 18K SF, significantly different from the 93K SF of positive absorption in 4Q 2019. Leasing activity remained steady with 50K SF of deals completed. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Amsys has signed a 16K SF lease in Sterling Plaza. • Juggatech PC Solutions has signed a 1.4K SF lease in

LARGE EXISTING VACANCIES • Southwest Corporate Center | 9700-9702 Bissonnet Street – 286,738 SF

• 11111 South Wilcrest Drive – 190,398 SF • Houston Technology Center | 5959 Corporate Drive – 90,791 SF • Centre One | 9800 Centre Parkway – 87,241 SF • Westwood Green | 9494 Southwest Freeway – 74,011 SF • The Center | 8323 Southwest Freeway – 73,309 SF • The Center | 8303 Southwest Freeway – 70,635 SF • Merlyn Plaza | 9301 Southwest Freeway – 52,336 SF • 9896 Bissonnet Street – 50,419 SF • The Ranchester Building | 10333 Harwin Drive – 44,492 SF • Sterling Plaza | 10101 Southwest Freeway – 44,003 SF • Park Green I | 8300 Bissonnet Street – 43,427 SF • The Atrium Tower | 9894 Bissonnet Street – 35,547 SF

Enterprise Park II.

DEALS IN THE MARKET • Houston Technology Center | 5959 Corporate Drive – a 567K SF class B office building

• American First Tower | 9999 Bellaire Boulevard – a 212K SF class A office building • 11111 South Wilcrest Drive – a 190K SF class B office building • Westwood Green | 9494 Southwest Freeway – a 140K SF class B office building • Tolunay-Wong | 10710 South Sam Houston Parkway West – a 47K SF class B office building • 9945 Bissonnet Street – a 28K SF class B office building

25

25


EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE VITAL STATS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

20,687

(14,286)

9,995

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

13.9%

14.3%

13.0%

12.0%

vs. 12 Mths Ago

10.0%

Leasing Act. 49,880 Delivered SF -

vs. Prev. Qtr 63,880 vs. Prev. Qtr

38,150 vs. 12 Mths Ago

-

-

Quoted Rates

vs. Prev. Qtr

vs. 12 Mths Ago

22.72

22.09

21.61

18.0%18.0%

600,000 120,000

16.0%

500,000

100,000

14.0%

80,000400,000

16.0%

60,000

300,000

40,000

200,000

20,000

14.0%

8.0%

0

0

(40,000)

12.0%

4.0%

(100,000)

(60,000)

2.0%

(80,000) (200,000)

10.0%

0.0%

100,000

(20,000)

6.0%

(100,000) 1Q

1Q 17 16

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

18 1Q 17

2Q

18 2Q 17

3Q 18 3Q

17

4Q 18 4Q

17

Deliveries Deliveries

1Q 191Q

18

2Q 192Q

18

3Q 4Q 1Q 19 3Q 19 4Q 20

18

18

Vacancy Vacancy

(300,000)

1Q 19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s North Loop West office submarket is located northwest of the CBD and is within the transitioning Heights and Oak Forest/Garden Oaks communities. This submarket consists of more than 6M SF with most of the office properties located along the western portion of Interstate 610 North Loop which lends the submarket its name. At the close of 1Q 2020, the North Loop West submarket had a vacancy rate of 20.0% which was slightly higher than 4Q 2019. Absorption remained positive with 50K SF, slightly lower than the 67K SF of absorption in 4Q 2019. Leasing activity remained strong with 128K SF of deals completed. Currently, 114K SF office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • XCL Resources has signed a 16K SF lease in The MKT Building 3.

• Innowatts has signed a 12K SF lease in Brookhollow Central II.

• Page Parkes has signed a 7.7K SF lease in Washington Place.

• Workforce Solutions has signed a 5.5K SF lease in 2525 North Loop West.

• Star Protection Agency has signed a 3K SF lease in 2600 North Loop West.

• The Patout Law Firm has signed a 1K SF lease in 2190 North Loop West.

26

DEALS IN THE MARKET • 10050 Northwest Freeway – a 43K SF class B office building

NEW DEVELOPMENTS • The MKT | 600 North Shepherd Drive – a 89K SF class A office park

LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway West – 144,072 SF

• Brookhollow Central III | 2950 North Loop Freeway West – 125,385 SF • 2727 North Loop Freeway West – 123,103 SF • Brookhollow Central I | 2800 North Loop Freeway West – 63,028 SF • North Loop Center | 1235 North Loop Freeway West – 59,659 SF • 1225 North Loop Freeway West – 29K SF • 2180 North Loop West – 24,263 SF • 2707 North Loop Freeway West – 23,928 SF • Brookhollow II | 9800 Northwest Freeway – 22,001 SF • 1415 North Loop West – 17,420 SF • Citadel Plaza | 2600 Citadel Plaza Drive – 17,268 SF • 2190 North Loop West – 16,605 SF • 3535 West 12th Street – 16,400 SF • 10050 Northwest Freeway – 14,880 SF • 1919 North Loop West – 14,827 SF

26


NORTH LOOP WEST SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

67,159

(88,200)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

20.0%

21.2%

22.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

148,619

33,221

vs. Prev. Qtr

vs. 12 Mths Ago

49,905

128,471 Delivered SF Quoted Rates $25.34

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$24.68

$24.47

VITAL STATS 12.0%24.0%

250,000 140,000 200,000

90,000

11.0% 22.0%

150,000

40,000

10.0%

100,000

20.0%

(10,000)

50,000

9.0%

(60,000)

0

18.0%

8.0%

(110,000)

(50,000) 16.0%

7.0%

(160,000) 1Q

1Q 17 16

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

18 1Q 17

2Q

18 2Q 17

3Q

18 3Q 17

4Q 18 4Q

17

Deliveries Deliveries

1Q 191Q

18

2Q 192Q

18

3Q 19 3Q

18

4Q 1Q 19 4Q 20 1Q

18

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s North Loop West office submarket is located northwest of the CBD and is within the transitioning Heights and Oak Forest/Garden Oaks communities. This submarket consists of more than 6M SF with most of the office properties located along the western portion of Interstate 610 North Loop which lends the submarket its name. At the close of 1Q 2020, the North Loop West submarket had a vacancy rate of 20.0% which was slightly higher than 4Q 2019. Absorption remained positive with 50K SF, slightly lower than the 67K SF of absorption in 4Q 2019. Leasing activity remained strong with 128K SF of deals completed. Currently, 114K SF office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • XCL Resources has signed a 16K SF lease in The MKT Building 3.

• Innowatts has signed a 12K SF lease in Brookhollow Central II.

• Page Parkes has signed a 7.7K SF lease in Washington Place.

• Workforce Solutions has signed a 5.5K SF lease in 2525 North Loop West.

• Star Protection Agency has signed a 3K SF lease in 2600 North Loop West.

• The Patout Law Firm has signed a 1K SF lease in 2190

DEALS IN THE MARKET • 10050 Northwest Freeway – a 43K SF class B office building

NEW DEVELOPMENTS • The MKT | 600 North Shepherd Drive – a 89K SF class A office park

LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway West – 144,072 SF

• Brookhollow Central III | 2950 North Loop Freeway West – 125,385 SF

• 2727 North Loop Freeway West – 123,103 SF • Brookhollow Central I | 2800 North Loop Freeway West – 63,028 SF

• North Loop Center | 1235 North Loop Freeway West – 59,659 SF • 1225 North Loop Freeway West – 29K SF • 2180 North Loop West – 24,263 SF • 2707 North Loop Freeway West – 23,928 SF • Brookhollow II | 9800 Northwest Freeway – 22,001 SF • 1415 North Loop West – 17,420 SF • Citadel Plaza | 2600 Citadel Plaza Drive – 17,268 SF • 2190 North Loop West – 16,605 SF • 3535 West 12th Street – 16,400 SF • 10050 Northwest Freeway – 14,880 SF • 1919 North Loop West – 14,827 SF

North Loop West.

27

27


SUBMARKETBELLAIRE INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

57,322

14,631

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

15.2%

15.7%

16.7%

12.0%

vs. 12 Mths Ago

10.0%

22,148

Leasing Act. 25,321 Delivered SF Quoted Rates $24.93

vs. Prev. Qtr 60,206

224,427

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$24.86

$25.05

18.0%20.0% 16.0%

600,000 100,000500,000

18.0%

0

16.0%

400,000 300,000

(100,000)

14.0%

200,000

8.0%12.0%

(200,000)

6.0%

0 (300,000)

100,000

10.0%

4.0%

(100,000)

(400,000)

8.0%

2.0% 0.0%

(200,000) 6.0%

(500,000)

1Q 16

1Q 17

2Q 2Q 17

16

3Q 3Q 17

16

4Q 4Q17

16

Absorption

Absorption

1Q 18 1Q

17

2Q 18 2Q

17

3Q 18 3Q

17

4Q 18 4Q

17

Deliveries

1Q 191Q

18

Deliveries

2Q 19 2Q

18

3Q 4Q 19 3Q 19

18

4Q 18

1Q 20

Vacancy

(300,000)

1Q 19

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK Adjacent to the Galleria/Uptown and the Texas Medical Center, Bellaire is a smaller, more mature office submarket. Like much of Houston, a significant amount of Bellaire’s inventory was delivered in the 1970s and 1980s. With the submarket’s proximity to the Texas Medical Center, many medical tenants call this submarket home.

NEW DEVELOPMENTS • Bissonnet Medical Plaza | 4460 Bissonnet Street – a 53K SF class A medical office building

LARGE EXISTING VACANCIES • 4800 Fournace Place – 305,202 SF • Houston Chronicle | 4747 Southwest Freeway – 82,200 SF

At the close of 1Q 2020, the Bellaire submarket had a vacancy rate of 15.2% which was slightly lower than 4Q 2019. Absorption remained positive by 22K SF, lower than the 57K SF of absorption in 4Q 2019. Leasing activity remained positive with 25K SF of deals completed. Currently, 53K SF office space is under construction in this submarket.

• 4900 Fournace Place – 72,500 SF • Bellaire Park | 6565 West Loop South – 66,074 SF • Loop Central I | 4888 Loop Central Drive – 42,617 SF • Loop Central III | 4828 Loop Central Drive – 39,116 SF • Loop Central II | 4848 Loop Central Drive – 29,982 SF • The Offices at Pin Oak Park | 6750 West Loop South –

TOP LEASE TRANSACTIONS • Spencer Law Firm has signed a 5.4K SF lease in West

• Bellaire Medical Professional Building | 6550

Tower.

27,742 SF

Mapleridge Street – 26,986 SF

• Bellaire Park | 6575 West Loop South – 26,482 SF

DEALS IN THE MARKET • 9009 West Loop South – a 473K SF class B office building • Southwestern AT&T | 6500 West Loop South – a 351K SF class B office building

28

28


NORTHWEST/HIGHWAY 290 CORRIDOR SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

3,001

(46,738)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

18.3%

19.5%

21.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

91,733

117,237

vs. Prev. Qtr

vs. 12 Mths Ago

50,912

42,787 Delivered SF Quoted Rate $17.42

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$17.68

VITAL STATS 12.0% 22.0%

250,000 60,000 40,000 200,000

21.0%

11.0%

20,000

150,000

20.0%

0

10.0%

100,000 (20,000)

19.0%

50,000

9.0%

(40,000)

18.0%

0 (60,000) 8.0%17 .0%

(80,000) (50,000)

16.0%

7.0%

(100,000) 1Q

1Q 17 16

$17.43

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

1Q 18 17

2Q

2Q 18 17

3Q

3Q 18 17

4Q 4Q 18

17

Deliveries Deliveries

1Q 191Q

18

2Q 192Q

18

3Q 193Q

18

4Q 19 4Q

18

1Q 20 1Q

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s Northwest/Highway 290 Corridor office submarket includes CoStar’s Northwest Near and Northwest Far submarkets. The struggles in this submarket over the past few years are primarily attributable to the extensive expansion and reconstruction of U.S. Highway 290 which has impacted traffic flow within the submarket. The 290 project is now complete and the submarket is starting to see an increase in activity, but the recovery is sure to take some time. Most of the more than 4M SF of class A and B office space is located in the vicinity of Highway 290 and Hollister Road. At the close of 1Q 2020, the Northwest/290 Corridor submarket had a vacancy rate of 18.3% which was lower than 4Q 2019. Absorption remained positive with 50K SF, up much higher than the 3K SF of absorption in 4Q 2019. Leasing activity remained steady with 43K SF of deals completed. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Lexitas has signed a 2.6K SF lease in Northwest

LARGE EXISTING VACANCIES • Northwest Crossing |13333 Northwest Freeway – 76,707 SF

• Northwest Crossing III | 13105 Northwest Freeway – 74,260 SF

• Northwest One Building | 13100 Northwest Freeway – 72,130 SF

• 13111 Northwest Freeway – 67,303 SF • One Northwind Plaza | 7600 West Tidwell Street – 67,180 SF • Wells Fargo Building | 13201 Northwest Freeway – 59,830 SF • Granite Tower at 290 | 13430 Northwest Freeway – 57,088 SF • 7000 Hollister Road – 49K SF • Katy Design Center | 1000 West Loop Freeway North – 28,174 SF • Hollister & Hillmont Building | 5300 Hollister Road – 26,713 SF • Northwest Central Plaza | 5700 Northwest Central Drive – 23,341 SF

Crossing I.

• Hemmersbach US has signed a 2.3K SF lease in Northwest Crossing III.

• Industrial Tax Consulting has signed a 2.2K SF lease in Northwest Crossing I.

DEALS IN THE MARKET • Northwest Crossing II | 7676 Hillmont Street – a 143K SF class B office building

29

29


WEST SUBMARKETFARINTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

(90,447)

58,502

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

14.6%

14.4%

9.7%

12.0% 16.0%

vs. Prev. Qtr

vs. 12 Mths Ago

10.0%

12,109

32,063

18,490

Leasing Act. 34,805 Delivered SF 30,000 Quoted Rates $28.55

vs. Prev. Qtr

vs. 12 Mths Ago

50,000

-

vs. Prev. Qtr

vs. 12 Mths Ago

$29.66

$28.87

18.0% 20.0%

600,000 150,000 500,000

16.0% 18.0%

400,000 100,000

300,000 200,000 50,000

14.0%

8.0%

100,000 0

6.0% 12.0% 4.0%

(100,000)

10.0%

2.0% 8.0% 0.0%

0

(50,000)

(200,000)

1Q1Q 16 17

2Q2Q 1617

3Q 3Q 1617

4Q 4Q 1617

1Q 1Q 18 17

2Q 2Q 18 17

Absorption

3Q 3Q 18 17

4Q 4Q 1817

Deliveries Deliveries

1Q 1Q 1918

2Q 2Q 1918

3Q3Q 19 18

4Q4Q 19 18

1Q 1Q 20 19

(100,000) (300,000)

Vacancy Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s Far West office submarket includes CoStar’s Katy Freeway/Grand Parkway submarket, about 25 miles west of Houston’s CBD. Growth among all product types in West Houston has been a common theme and the office sector has been no exception, as it is located close to Houston’s fastest-growing population center and the expanded Grand Parkway. Nearly 80% of the metro’s population growth since 2010 has occurred in the unincorporated areas of Harris County covering parts of this and neighboring submarkets.

LARGE EXISTING AVAILABILITIES • Mason Creek Office Center II | 21700 Merchants Way – 127,953 SF

• The Offices at Greenhouse | 19219 Katy Freeway – 87,844 SF

• Greenhouse at Park Row | 2051 South Greenhouse Road – 69,480 SF

• 2002 Grand Parkway North – 58,427 SF • Horizon Medical Plaza 2 | 19002 Park Row – 50K SF • Methodist St. Catherine Plaza II | 707 South Fry Road – 48,201 SF

At the close of 1Q 2020, the Far West submarket had a vacancy rate of 14.6% which was slightly higher than 4Q 2019. Absorption turned positive by 18K SF, up from the 90K SF of negative absorption in 4Q 2019. Leasing activity remained steady with 35K SF of deals completed. Currently, 150K SF is under construction in this submarket.

• Det Norske Veritas Phase 2 | 1400 Ravello Drive – 28,836 SF

• Westgreen Professional Building | 750 Westgreen Boulevard – 27,940 SF

DEALS IN THE MARKET • Katy Commerce Center | 1773 Westborough Drive – a 27K class B office building

NEW DEVELOPMENTS • Katy Ranch Phase II | 24279 Katy Freeway – a 150K SF class A office building

• Grand Parkway & Franz Road | Building 3 – a 130K SF class A office building

30

30


SOUTHWEST FREEWAY SUBMARKET INTELLIGENCE Absorption 58,720

vs. Prev. Qtr 15,075

26,710

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.7%

23.3%

22.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

97,244

62,468

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$16.32

$16.17

80,430 Delivered SF Quoted Rates $16.35

VITAL STATS

vs. 12 Mths Ago

80,000

26.0%

60,000 40,000 24.0%

20,000 0 (20,000)

22.0%

(40,000) (60,000) 20.0%

(80,000) (100,000) (120,000)

18.0%

(140,000) (160,000) 16.0%

(180,000) 1Q 17

2Q 17

3Q 17

Absorption

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Deliveries

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK The Southwest Freeway office submarket contains a small geographic area in Southwest Houston along Highway 59 South, extending as far north as the Westpark Tollway and as far south as Beechnut. This smaller office submarket consists of about 5M SF of class A and B office space. At the close of 1Q 2020, the Southwest Freeway submarket had a vacancy rate of 21.7% which was lower than 4Q 2019. Absorption was positive by 59K SF, up from the 15K SF of absorption in 4Q 2019. Leasing activity remained steady with 80K SF of deals completed. Currently, no space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Lane Law Firm has signed a 5K renewal in Regency Square Tower.

• BioCureRx has signed a 4K SF lease in Southwest Center.

• Lane Law Firm has signed a 1.2K SF lease in Regency

LARGE EXISTING VACANCIES • Two Arena Place | 7324 Southwest Freeway – 174,563 SF

• One Arena Place | 7322 Southwest Freeway – 139,204 SF

• 7011 Southwest Freeway – 112,590 SF • Southwest Medical Plaza I | 7777 South US 59 Highway – 73,078 SF

• Southwest Medical Plaza II | 7737 Southwest Freeway – 70,072 SF • 6464 Savoy Drive – 58,925 SF • 6001 Savoy Drive – 49,881 SF • 5999-6057 Savoy Drive – 38,337 SF • Southwest Center | 6671 Southwest Freeway – 35,847 SF • Southwest Medical Plaza IV | 7789 Southwest Freeway – 33,510 SF • Harwin Plaza I | 7447 Harwin Drive – 32,790 SF • Harwin Plaza II | 7457 Harwin Drive – 32,377 SF

Square Tower.

DEALS IN THE MARKET • Regency Square Tower | 6200 Savoy Drive – a 225K SF class A office building

• Hillcroft Plaza | 6065 Hillcroft Avenue – a 62K SF class B office building

• 7111 Harwin Drive – a 45K SF class B office building • 5999-6057 Savoy Drive – a 38K SF class B office building

31

31


KINGWOOD SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

15,876

23,528

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

11.2%

11.5%

11.6%

54,535

Leasing Act. 34,529 Delivered SF 50,000 Quoted Rates $25.50

vs. Prev. Qtr 11,908 vs. Prev. Qtr

vs. 12 Mths Ago 15,719

VITAL STATS 12.0%16.0%

250,000 140,000

200,000

14.0%

11.0%

90,000

150,000

12.0%

10.0%

40,000

100,000

10.0% (10,000)

50,000

9.0% 8.0%

(60,000)

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$25.55

$25.82

0

8.0%6.0%

(110,000)

(50,000)

4.0%

7.0%

(160,000) 1Q

1Q 17 16

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

Absorption Absorption

1Q

1Q 18 17

2Q

2Q 18 17

3Q

3Q 18 17

4Q 4Q 18

17

Deliveries Deliveries

1Q 191Q

18

2Q 192Q

18

3Q 19 3Q

18

4Q 1Q 19 4Q 20 1Q

18

Vacancy Vacancy

(100,000)

19

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s Kingwood office submarket is located in Northeast Houston and situated between the Sam Houston Tollway and the Grand Parkway. This smaller outlying office submarket has seen a recent boost in development thanks to the Grand Parkway, Houston’s third loop. The submarket currently contains just over 2M SF of class A and B office space. At the close of 1Q 2020, the Kingwood submarket had a vacancy rate of 11.2% which was lower than 4Q 2019. Absorption remained positive by 54K SF, up from the 16K SF of absorption in 4Q 2019. Leasing activity remained steady with 35K SF of deals completed. Currently, 310K SF is under construction in this submarket.

TOP LEASE TRANSACTIONS • Vytalus Medical Group has signed a 20K SF renewal in BRB Medical Office Building.

NEW DEVELOPMENTS • Insperity Campus Building 5 | US-50 & Kingwood Drive – a 270K SF class A office building

• 215 Kingwood Executive Drive – a 41K SF class A office building

LARGE EXISTING VACANCIES • Northeast Medical Tower II | 18980 North Memorial Drive North – 82,793 SF

• Kingwood West Tower | 22999 Highway 59 North – 31,906 SF

• Humble Medical Office Building | 1485 FM 1960 Bypass East – 30,810 SF

• Three Kingwood Place | 800 Rockmead Drive – 20,778 SF

• Four Kingwood Place | 900 Rockmead Drive – 19,512 SF • 2300 Green Oak Drive – 18,854 SF • Kings Harbor | 4501 Magnolia Cove Drive – 16,520 SF • 22710-22720 Professional Drive – 14,468 SF • 2218 Northpark Drive – 12,663 SF • Woodforest National Bank Building | 1710 West Lake Houston Parkway – 11,063 SF • Two Kingwood Place | 700 Rockmead Drive – 9,213 SF

32

32


SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

36,322

25,126

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.0%

11.2%

10.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

107,471

62,540

vs. Prev. Qtr

vs. 12 Mths Ago

(35,302)

83,699 Delivered SF 49,672 Quoted Rates $25.82

33,284

73,773

vs. Prev. Qtr

vs. 12 Mths Ago

$26.33

$25.25

VITAL STATS 12.0%16.0%

250,000 500,000 200,000

400,000

11.0% 14.0%

150,000 300,000

10.0%

100,000

12.0%

200,000

50,000

9.0%

100,000

0

10.0%

8.0%

0

8.0%

7.0%

(50,000)

(100,000) 1Q

1Q 17 16

2Q

2Q 17 16

3Q

3Q17 16

4Q

4Q17 16

1Q

1Q 18 17

2Q

2Q 18 17

Absorption Absorption

3Q

3Q 18 17

4Q 4Q 18

17

1Q 191Q

18

2Q 192Q

18

3Q 19 3Q

Deliveries Deliveries

18

4Q 1Q 19 4Q 20 1Q

18

(100,000)

19

Vacancy Vacancy

Source: CoStar 1Q 2020 Office Report

HLC OUTLOOK HLC’s Suburban Outliers office submarket consists of the remaining submarkets outside of the major Houston submarkets such as the CBD, Greenway Plaza, Westchase, and The Woodlands. These smaller submarkets are located on the outskirts of Houston and include more than 7.5M SF of class A and B office buildings. At the close of 1Q 2020, the Suburban Outliers submarket had a vacancy rate of 12.0% which was higher than 4Q 2019. Absorption turned negative by 35K SF, opposite from the 36K SF of positive absorption in 4Q 2019. Leasing activity remained steady with 84K SF of deals completed. Currently, 218K SF is under construction in this submarket.

TOP LEASE TRANSACTIONS • Mott Macdonald has signed a 14K SF renewal in 11233 Shadow Creek Parkway.

• Tomball Bank of America | 1431 Graham Drive – a 28K SF class B office building

• The Lakes Professional Center | 6455 South Shore Boulevard – a 24K SF class B office building

• Midstream Business Park | 2830 FM 565 – a 24K SF class A office building

• 455 School Street – a 22K SF class B office building • 3100 Gulf Freeway – a 21K SF class B office building • Baylor St. Luke’s Emergency Center | 4019 Interstate 45 North – a 20K SF class B office building

NEW DEVELOPMENTS • Towne Lake Office Condos | 10242 Greenhouse Road – 50K SF of class B office condos

• HCA Healthcare | 11200 Broadway Street – a 48K SF class A office building

• Primeline Pro Office Building | 2941 Broadway Bend Drive – a 32K SF class B office building

• NS Smiles DDS has signed a 2K SF lease in Northpoint

• 9851 FM 1097 Road West – a 32K SF class B office

Crossing. • Edward Jones has signed a 1.3K SF lease in 17302 House Hahl Road.

• Buildings A & B | 2640 Highway 3 South – two 29K SF

DEALS IN THE MARKET • Primary Medical Tower II | 2800 Garth Road – a 129K Class B office building • Magnolia Landmark Building | 18230 FM 1488 Road – a 65K SF class B office building • 301 South First Street – a 59K SF class B office building • 32100 Dobbin Huffsmith Road – a 47K SF class A office building • The Offices at Greatwood | 6514-6548 Greatwood Parkway – a 43K SF class B office building • Bank of America | 4000 Garth Road – a 33K SF class B office building • NOV | 10586 Highway 75 North – a 30K SF class B office building 33

building

class B office buildings

LARGE EXISTING VACANCIES • 4005 Technology Drive – 205K SF • Westland Bunker | 550 Club Drive – 54,819 SF • Cypress Medical Office Building | 27700 Highway 290 – 53,615 SF

• 4001 Technology Drive – 40,681 SF • UT Physicians Facilities | 1517 Thompson Road – 40,106 SF

• Oakbend Professional Building | 1601 Main Street – 36,324 SF • 17302 House Hahl Road – 35,613 SF • 2401 Termini Street – 30,262 SF

33


DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955

FORT WORTH

1200 Summit Avenue Suite 300 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550

Profile for Holt Lunsford Commercial

1Q 2020 Houston Office Market Brief  

1Q 2020 Houston Office Market Brief