2Q 2020 Houston Office Market Brief by Holt Lunsford Commercial

Market Brief...

Houston

OFFICE

2Q2020 Property Pictured Above: Cypresswood Crossing | 16000 Stuebner Airline Road, Spring, Texas 77379

HOUSTON OFFICE MARKET BRIEF 2Q 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. West Loop C. Katy Freeway West D. The Woodlands E. Westchase F. Greenspoint G. FM 1960 Corridor H. Greenway Plaza I. Medical Center J. Southwest K. Katy Freeway East L. Northwest M. Sugar Land N. Clear Lake O. Midtown P. West Belt Q. East Houston-Pasadena R. Far West S. Kingwood T. Suburban Outliers

HOUSTON HLC SUBMARKET COVERAGE

THE WOODLANDS 20,407,126 SF

TOMBALL

KINGWOOD 2,346,405 SF SPRING

FM 1960 CORRIDOR 11,490,184 SF

HUMBLE

GEORGE BUSH INTERCONTINENTAL AIRPORT

CYPRESS

GREENSPOINT/IAH 12,525,833 SF

WEST BELT 5,871,244 SF

NORTHWEST 8,431,479 SF

KATY FREEWAY WEST 27,002,575 SF

KATY

KATY FREEWAY EAST 9,345,547 SF

FAR WEST 4,198,425 SF

LAKE HOUSTON

HOUSTON 6

EAST HOUSTON/ PASADENA 5,483,280 SF

2 3

GALLERIA

SHIP CHANNEL

4 5

SOUTHWEST 9,527,706 SF

BAY TOWN

MEDICAL CENTER

PASADENA LA PORTE HOBBY AIRPORT

SUGAR LAND

SUGAR LAND 7,750,381 SF

ELLINGTON AIRPORT

RICHMOND

TRINITY BAY

MISSOURI CITY PEARLAND

CLEAR LAKE 6,967,799 SF

LEAGUE CITY

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 project leasing and 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 Senior Vice President bavedikian@holtlunsford.com 713.602.3754

Brandon received a BBA in accounting and master’s degree in accounting from Abilene Christian University. 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 (HLC) in 2017 and serves as a Market Associate. His primary responsibilities include project leasing and business development initiatives for HLC’s Houston office portfolio. During his time at HLC, Brad has participated in more than 90 transactions totaling more than 3.4 million square feet of rentable space. Prior to HLC, Brad worked as a sales representative for an industrial engineering firm where he assisted clients in a variety of industries with their predictive and reliability maintenance needs. During this time, he gained valuable sales experience and provided excellent customer service to his clients, including many Fortune 500 companies.

BRAD SEGRETO Market Associate bsegreto@holtlunsford.com 713.602.3758

Brad received a Bachelor of Science in Organizational Leadership & Supervision from the University of Houston Brad is a Texas Real Estate Commission license holder, a member of NAIOP, the Houston Golf Association, and Champions Golf Club.

THE ROTUNDA BUILDING

NEW LISTING

5819 Highway 6: 51,000 SF Class B office building in Missouri City.

NEW LISTING 10750 HAMMERLY BOULEVARD

10750 Hammerly Boulevard: 38,000 SF Class B office building in Houston.

NEW LISTING THE OFFICES AT WESTHEIMER

5959 Westheimer Road: 78,000 SF Class B office building in Houston.

HLC HOUSTON OFFICE OVERALL MARKET

HOUSTON OVERALL The 2Q 2020 Office Market Brief is HLC Houston’s second reporting of quarterly data since the unprecedented events of the COVID-19 pandemic, global oil price war and shock to demand, and the resulting effects that began in late February 2020 and continue today. Prior to these events, Houston’s office market was recovering, albeit slowly, from the last oil downturn in 2014-2015. Leasing activity has dropped due to tenant uncertainty, even affecting renewals. Submarket with a high concentration of energy tenants including Katy Freeway West, Westchase, and West Belt are expected to once again see a resurgence in available office space. At the close of 2Q 2020, the overall Houston office market had a vacancy rate of 19.3%, which was slightly higher than the 18.8% vacancy rate at the close of 1Q 2020. Absorption was negative with 824K SF of space given back, down considerably from the 5K SF of positive absorption in 1Q 2020. Leasing was steady with more than 3.6M SF of deals completed but was lower than the 5M SF of deals completed in 1Q 2020. There is currently more than 5.3M SF of Class A and B office space under construction and 500K SF was delivered in 2Q 2020. As of the end of 2Q 2020, available sublease space in the market sat at 5.7M SF, slightly lower than 1Q 2020 SF. In the first three weeks of 3Q 2020, however, sublease space began to increase quickly and currently sits just over 6M SF, up over 5% since the end of 2Q 2020 as economic challenges persist and oil prices continue to struggle.

VACANCY - OVERALL HOUSTON 18.8%

CONSTRUCTION - OVERALL HOUSTON

20.0%

6,000,000

18.0% 17.6%

5,000,000

16.0% 14.0%

4,000,000

12.0% 10.0%

3,000,000

8.0% 2,000,000

6.0% 4.0% 1.2%

1,000,000

2.0% 0

0.0% 3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Direct

2Q 19

3Q 19

4Q 19

Sublet

1Q 20

3Q 17

2Q 20

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%

(2,000,000) (3,000,000) 2Q 18

3Q 18

Total Net

4Q 18

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Leasing Activity

2Q 20

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Under Construction

OVERVIEW - OVERALL HOUSTON

7,000,000

(1,000,000)

1Q 18

2Q 18

Delivered Inventory

4Q 17

1Q 18

Total

ABSORPTION - OVERALL HOUSTON

3Q 17

4Q 17

4,000,000

3,000,000

2,000,000

1,000,000

13.0% 12.0%

(1,000,000)

11.0% 10.0%

(2,000,000) 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

2Q 20

Vacancy

Source: CoStar 2Q 2020 Office Report

HLC HOUSTON OFFICE OVERALL MARKET

Market

Existing Inventory #Bldgs.

Total RBA

CBD

47,822,688

West Loop

195

35,010,982

Vacancy Direct SF

Total SF

Vac. %

9,012,450

9,912,163

20.7%

6,806,687

7,046,286

20.1%

YTD Net Absorption

YTD Deliveries

Under Const. SF

Quoted Rates

(335,499)

1,251,856

$41.05

(460,690)

207,202

122,825

$33.60

Katy Freeway West

165

27,002,575

5,222,522

5,796,789

21.5%

589,914

$28.94

The Woodlands

169

20,407,126

2,225,059

2,347,054

11.5%

(240,685)

200,000

737,938

$34.37

Westchase

104

18,020,183

4,197,137

4,514,972

25.1%

(225,108)

$28.29

Greenspoint/IAH

12,525,833

5,473,124

5,486,248

43.8%

151,888

$19.19

FM 1960 Corridor

147

11,490,184

2,346,829

2,405,034

20.9%

19,823

48,000

72,000

$20.49

Greenway Plaza

11,113,115

1,726,159

1,837,233

16.5%

40,330

$35.40

Medical Center

9,800,786

706,798

716,836

7.3%

176,918

277,181

$26.78

Southwest

9,527,706

1,974,938

2,000,471

21.0%

81,719

$17.43

Katy Freeway East

9,345,547

967,047

1,069,506

11.4%

57,469

170,000

1,200,000

$35.02

Northwest

8,431,479

1,608,115

1,632,867

19.4%

46,757

114,349

$21.77

Sugar Land

7,750,381

956,324

1,044,714

13.5%

(31,774)

49,321

56,000

$28.66

Clear Lake

6,967,799

1,023,769

1,060,238

15.2%

40,279

81,446

53,000

$21.56

Midtown

6,705,063

779,194

807,390

12.0%

(140,895)

527,716

$31.52

West Belt

5,871,244

1,202,327

1,465,765

25.0%

(381,400)

$25.76

East Houston/Pasadena

5,483,280

658,267

667,244

12.2%

85,070

94,896

$21.38

Far West

4,198,425

579,101

633,640

15.1%

13,972

180,843

$29.04

Kingwood

2,346,405

272,665

274,840

11.7%

35,283

55,000

309,106

$24.40

Suburban Outliers

180

10,296,972

1,272,756

1,287,410

12.5%

(63,761)

81,363

413,464

$27.43

2,022

270,117,773

49,011,268

52,006,700

19.3%

(540,390)

1,073,175

5,230,331

$27.60

Totals

HOUSTON CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption (172,347)

vs. Prev. Qtr (140,898)

172,495

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

20.7%

20.4%

20.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

981,284

973,729

vs. Prev. Qtr

vs. 12 Mths Ago

780,341

203,287 Delivered SF Quoted Rates $41.17

VITAL STATS

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$41.24

$43.40

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) 2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Absorption

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 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 $41.05 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 2Q 2020, the CBD submarket had a vacancy rate of 20.7%, slightly higher than 1Q 2020. Absorption was negative with 172K SF of space given back, slightly higher than the 141K SF of given back in 1Q 2020. Leasing activity was weak with just 203K SF of deals completed and activity was significantly lower than the 980K SF of deals completed in 1Q 2020. Currently, 1.2M SF of office space is under construction in this submarket.

• Quorum Business Solutions has signed a 3.3K SF lease in 811 Main.

DEALS IN THE MARKET • 1111 Fannin Street – a 428K SF class A office building • The Tamborello Building | 1901 Milam Street – a 24K SF class B office building

• 421 Fannin 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 – 1,320,075 SF • 1001 Fannin Street – 615,911 SF • Wells Fargo Plaza | 1000 Louisiana Street – 490,019 SF • GreenStreet Tower | 1201 Fannin Street – 481,442 SF • JP Morgan Chase Tower | 600 Travis Street – 480,809 SF

TOP LEASE TRANSACTIONS • Direct Energy has signed a 106K SF lease in Two Houston Center.

• Lone Star Legal Aid has signed a 20K SF renewal in Jefferson Towers at Cullen Center.

• Squire Patton Boggs has signed a 15.6K SF renewal in JP Morgan Chase Tower.

• Rockcliff Energy has signed a 14.4K SF lease in Fulbright Tower. • Enbridge Inc. has signed a 13K SF lease in 1100 Louisiana. • RCP has signed a 12.2K SF renewal in 801 Louisiana. • Liberty Mutual has signed a 5K SF renewal in 801 Louisiana. 10

• 1600 Smith Street – 473,253 SF • Fulbright Tower | 1301 McKinney Street – 472,330 SF • One City Centre | 1021 Main Street – 467,803 SF • 4 Houston Center | 1221 Lamar Street – 464,460 SF • 919 MIlam | 919 Milam Street – 431,040 SF • Two Allen Center | 1200 Smith Street – 415,170 SF • TC Energy Center | 700 Louisiana Street – 376,097 SF • Pennzoil Place South Tower | 711 Louisiana Street – 309,151 SF

• 1801 Smith Street – 308,513 SF • One Allen Center | 500 Dallas Street – 298,850 SF

WEST LOOP SUBMARKET INTELLIGENCE Absorption (327,127)

vs. Prev. Qtr (81,202)

VITAL STATS

vs. 12 Mths Ago (245,416)

22.0%

600,000

350,000

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.0%

20.1%

18.7%

18.3%

20.0%

100,000

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

19.0%

(150,000)

544,518

924,767

18.0%

(400,000)

vs. Prev. Qtr

vs. 12 Mths Ago

17.0%

(650,000)

608,948 Delivered SF 207,202 Quoted Rate $33.65

vs. Prev. Qtr

vs. 12 Mths Ago

$33.77

$33.71

16.0%

(900,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Deliveries

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2tQ 2020 Office Report

HLC OUTLOOK CoStar’s Galleria, Uptown, Post Oak Park, San Felipe/Voss, Richmond/Fountain View, Riverway, and Bellaire submarkets make up HLC’s West Loop submarket. This submarket contains approximately 35M 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 $33.65 per square foot, second only to the CBD. At the close of 2Q 2020, the West Loop submarket had a vacancy rate of 20.1%, higher than 1Q 2020. Absorption was negative by 327K SF, down significantly from the 81K SF of negative absorption in 1Q 2020. Leasing activity remained steady with more than 600K SF of deals completed, slightly higher than the 545K SF of completed deals in 1Q 2020. Currently, 122K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS Harris Health System has signed a 305K SF lease in 4800 Fournace Place. • Ryan, LLC has signed a 66K SF lease in Park Towers North. • Common Desk has signed a 30K SF lease in the Lakes at Post Oak. • Martin Asphalt Company has signed a 21K SF renewal in Three Riverway. • Optum has signed a 16.7K SF renewal in 2000 West Loop South. • Goree Architects has signed a 14.2K SF lease in Sage Plaza. • The Brazil Consulate has signed an 8.4K SF lease in 5444 Westheimer Road. • Versa Integrity Group has signed an 8K SF renewal in 1776 Yorktown. • Navigate has signed a 5.3K SF renewal in 5718 Westheimer. • R&B Industrial has signed a 5K SF renewal in Three Riverway.

DEALS IN THE MARKET • 9009 West Loop South – a 472K SF class B office building

• 6500 West Loop South – a 351K SF class B office building

• 6300 Richmond Avenue – a 43K SF class B office building

• 5606 South Rice Avenue – a 20K SF class B office building

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

• Bissonnet Medical Plaza | 4460 Bissonnet Street – a 52,825 SF class A office building

LARGE EXISTING AVAILABILITIES • Marathon Oil Tower | 5555 San Felipe Street – 834,433 SF

• Williams Tower | 2800 Post Oak Boulevard – 345,323 SF

• Sage Plaza | 5151 San Felipe Street – 287,192 SF • Two Post Oak Central | 1980 Post Oak Boulevard – 243,157 SF

• San Felipe Plaza | 5847 San Felipe Street – 229,516 SF • Five Post Oak Park | 4400 Post Oak Parkway – 227,874 SF

• TwentyFour25 | 2425 West Loop South – 204,610 SF • Three Riverway | 3 Riverway – 202,226 SF • 5718 Westheimer | 5718 Westheimer Road – 197,174 SF • 2000 West Loop | 2000 West Loop South – 181,918 SF • Three Post Oak Central | 1990 Post Oak Boulevard – 181,689 SF

• One Riverway | 1 Riverway – 179,785 SF • Galleria Tower I | 2700 Post Oak Boulevard – 177,239 SF

KATY FREEWAY WEST SUBMARKET INTELLIGENCE Absorption 30,992

vs. Prev. Qtr

vs. 12 Mths Ago

289,208

(310,767)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.5%

21.6%

25.1%

Leasing Act. 332,990 Delivered SF Quoted Rates $29.41

vs. Prev. Qtr

vs. 12 Mths Ago

240,327

351,860

vs. Prev. Qtr

vs. 12 Mths Ago

120,000

vs. Prev. Qtr

vs. 12 Mths Ago

$29.49

$31.13

24.0%

VITAL STATS 28.0%

600,000

27.0%

22.0%

400,000

26.0%

20.0%

1,000,000 800,000

200,000

600,000

400,000

25.0% 24.0%

18.0%

(200,000)200,000

23.0%

(400,000)

22.0%

16.0%

14.0%

21.0%

(600,000)

20.0%

(800,000)

1Q 16

(200,000)

2Q 17

2Q 17 3Q 17 4Q18 16 Absorption 16 16

1Q18 17

Absorption

18 2Q 17

4Q 18

19 3Q 4Q 17 17 Deliveries

Deliveries

2Q 19

1Q 18

3Q 19

2Q 18

4Q 19

(400,000)

3Q 20 4Q20 18Vacancy 18

1Q 19

Vacancy

Source: CoStar 2Q 2020 Office Report

HLC OUTLOOK Other than the Greenspoint submarket, no major Houston office submarket was hit harder by the oil downturn than the Katy Freeway West submarket. This submarket includes the Energy Corridor which is home to large energy corporations including 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 flightto-quality helping these large corporations to continue attracting a talented workforce. At the close of 2Q 2020, the Katy Freeway West submarket had a vacancy rate of 21.5%, slightly lower than 1Q 2020. Absorption was a positive 31K SF, down from the 290K SF absorbed in 1Q 2020. Leasing activity remained steady with more than 332K SF of deals completed, still higher than the 240K of deals completed in 1Q 2020. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Rimkus Consulting Group has signed a 50K SF sublease in Jacobs Plaza.

• American Society of Mechanical Engineers has signed a 12.2K SF lease in Kirkwood Tower.

• Everest has signed a 11.4K SF lease in Energy Tower IV. • Whiting Turner has signed a 5.7K SF lease in Two Eldridge Place. • Sparkhound has signed a 4.5K SF lease in Republic Square 1. • Lisbon Group has signed a 2.2K SF lease in Republic Square 1.

DEALS IN THE MARKET • Two WestLake | 580 Westlake Park Boulevard – a 387K SF class A 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

• 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 AVAILABILITIES • Three WestLake Park | 550 Westlake Park Boulevard – 406,484 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 • Energy Center II | 575 North Dairy Ashford Road – 274,227 SF • West Memorial Place 2 | 15377 Memorial Drive – 267,087 SF • Republic Square 1 | 13501 Katy Freeway – 249,437 SF • Two Eldridge Place | 757 North Eldridge Parkway – 234,274 SF • One Eldridge Place | 777 North Eldridge Parkway – 169,021 SF • Ashford 5 | 14701 St. Mary’s Lane – 166,770 SF • Energy Center I | 585 North Dairy Ashford Road – 160,907 SF • Energy Tower IV | 11750 Katy Freeway – 135,829 SF

THE WOODLANDS SUBMARKET INTELLIGENCE Absorption (73,421)

vs. Prev. Qtr (116,176)

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

11.5%

11.1%

8.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

130,770 20,000 Quoted Rates $34.10

1,166,394

415,077

vs. Prev. Qtr

vs. 12 Mths Ago

180,000

207,500

vs. Prev. Qtr

vs. 12 Mths Ago

$33.36

$31.14

VITAL STATS

300,000

12.0%

800,000

11.0%

600,000

14.0%10.0%

400,000

142,505

Vacancy

Delivered SF

16.0%

250,000 200,000

150,000 100,000

9.0%

200,000 50,000

0 12.0% 8.0%

(50,000)

(100,000) (200,000)

7.0%

(150,000) 10.0%

6.0% 2Q 3Q 4Q 1Q 1Q 17 2Q 17 3Q 17 4Q18

Absorption

2Q 1Q18

Absorption

3Q 2Q 18

4Q 3Q 18

1Q 4Q 19

Deliveries

2Q 191Q

(400,000) (200,000) 3Q 4Q 1Q 2Q 192Q 19 3Q 20 4Q 20 1Q

Deliveries

Vacancy

Source: CoStar 2Q 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 2Q 2020, The Woodlands submarket had a vacancy rate of 11.5% which was higher than 1Q 2020. Absorption was negative by more than 73K SF, better than the 116K SF of negative absorption in 1Q 2020. Leasing activity consisted of just 130K SF of deals completed, significantly lower than the 1.1M SF of deals completed in 1Q 2020. Currently, more than 700K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Wise Diagnostic Systems has signed a 2.7K SF lease in 1776 Woodstead Court.

• InterAmerica Title Group has signed a 1.7K SF lease in Two Hughes Landing.

• Total Depth Supply has signed a 1.6K SF renewal in 1776 Woodstead Court.

DEALS IN THE MARKET • 8800 Technology Forest Place – a 269K SF class B office building

• Venture Tech VIII | 8708 Technology Forest Drive – a

NEW DEVELOPMENTS • HPE Buildings 3 & 4 | City Place Drive – a 284K SF class A two (2) building office complex

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

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

• SWN South Tower | 10000 Energy Drive – 288,609 SF • 24955 Interstate 45 North – 170,368 SF • Hughes Landing | 1725 Hughes Landing Boulevard – 135,799 SF

• 9201 Pinecroft Drive – 121,060 SF • CityPlace 1 | 1700 City Plaza Drive – 115,206 SF • 2001 Timberloch Place – 76,620 SF • Wildwood Corporate Centre I | 460 Wildwood Forest Drive – 76,354 SF • Two Hughes Landing | 1790 Hughes Landing Boulevard – 72,506 SF • Lake Front North | 2107 Research Forest Drive – 64,834 SF • The Woodlands Medical Plaza 4 | 9180 Pinecroft Drive – 62,135 SF • 3 Waterway Square Plaza | 3 Waterway Avenue – 51,010 SF

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

WESTCHASE SUBMARKET INTELLIGENCE Absorption (18,315)

vs. Prev. Qtr

vs. 12 Mths Ago

(204,104)

219,952

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

25.1%

25.0%

23.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

234,448

635,726

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

161,171 Delivered SF Quoted Rates $27.96

$28.03

$27.91

20.0%

VITAL STATS

800,000

26.0%

1,200,000

18.0%

600,000

25.0%

16.0% 14.0%

400,000

24.0%

700,000200,000

12.0% 23.0% 10.0% 22.0%

8.0% 21.0% 6.0%

(200,000)

200,000 20.0%

(400,000)

4.0% 2.0% 0.0%

19.0%

(600,000) (300,000)

18.0% 2Q

1Q 17 2Q 17 16 16

3Q 17 16

4Q18 16

Absorption

1Q18 17

2Q 18 17

Absorption

4Q 3Q 18

1Q 4Q 19

Deliveries

2Q 191Q

Deliveries

3Q 19 2Q

4Q 1Q 2Q 19 3Q 20 4Q 20

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 2Q 2020, The Westchase submarket had a vacancy rate of 25.1% which was only 0.1% higher than 1Q 2020. Absorption was negative by 18K SF, up from the 200K SF of negative absorption in 1Q 2020. Leasing activity consisted of 161K SF of deals completed, lower than the 234K of deals completed in 1Q 2020. Currently, no office space is under construction in the submarket.

TOP LEASE TRANSACTIONS • CDM Smith has signed a 13.8K SF renewal in Royal Oaks Centre.

• CTCI Americas has signed a 9.2K SF renewal in 1500 CityWest.

• Reveal Energy Services has signed a 8.6K SF renewal in 1500 CityWest.

• Sorenson Communication has signed a 4.4K SF lease in 2500 CityWest.

DEALS IN THE MARKET • One Westchase Center | 10777 Westheimer Road – a 466K SF class A office building

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

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

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

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

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

• 3250 Briarpark Drive – 212,587 SF • CityWestPlace Building 4 | 2103 CityWest Boulevard – 178,255 SF

• 2500 CityWest | 2500 CityWest Boulevard – 164,541SF • Millennium Tower | 10375 Richmond Avenue – 155,813 SF • Towers at Westchase II | 10350 Richmond Avenue – 146,040 SF • Towers at Westchase I | 10370 Richmond Avenue – 140,391 SF • Westchase Point | 1250 West Sam Houston Parkway – 137,333 SF • West8 Tower | 10205 Westheimer Road – 134,969 SF • Westchase Park II | 3600 West Sam Houston Parkway – 125,660 SF • One BriarLake Plaza | 2000 West Sam Houston Parkway – 125,358 SF

GREENSPOINT/IAH SUBMARKET INTELLIGENCE Absorption 77,954 Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

68,712

(73,282)

vs. Prev. Qtr

vs. 12 Mths Ago

43.8%

44.4%

45.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

177,888

192,610

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

169,476 Delivered SF Quoted Rate $19.06

$18.57

$18.76

VITAL STATS

25.0%

300,000

26.0%

1,200,000

24.5% 25.0%

200,000

24.0%

23.5%

700,000

23.0%23.0% 22.5%22.0%

100,000

22.0%21.0% 200,000

21.5%

(100,000)

20.0%

21.0%

(200,000)

19.0%

20.5% (300,000)

18.0%

20.0%

1Q 16

2Q 17

2Q 17 16

3Q17 16

18 4Q 16

Absorption

18 1Q 17

3Q 18 2Q

Absorption

4Q 183Q

1Q 194Q

Deliveries

2Q 3Q 19 1Q 19

2Q 18

4Q 19

3Q 20 18

4Q20 18

Vacancy

(300,000)

1Q 19

Vacancy

Source: CoStar 2Q 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 2Q 2020, the Greenspoint/IAH submarket had a vacancy rate of 43.8% which was slightly lower than 1Q 2020. Absorption was positive once again with 77K SF, up from the 68K SF absorbed in 1Q 2020. Leasing activity remained steady with 170K SF of deals completed, almost the same as the 178K SF of deals completed in 1Q 2020. Currently, no office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • DHL Express has signed a 28.5K SF lease in CityNorth 3. • Select Physical Therapy has signed a 4K SF renewal in North Belt Atrium 1. • Jamail & Smith Construction has signed a 1.3K SF lease in Northborough Atrium II.

DEALS IN THE MARKET • 363 North Belt | 363 North Sam Houston Parkway East

• 411 North Sam Houston Parkway East – a 124,154 SF class B 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 • 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 AVAILABILITIES • CityNorth 5 | 17001 Northchase Drive – 458,331 SF • CityNorth 6 | 12450 Greenspoint Drive – 343,495 SF • 363 North Sam Houston Parkway East – 268,481 SF • CityNorth 1 | 233 Benmar Drive – 253,562 SF • Glenborough Tower | 100 Glenborough Drive – 181,984 SF • 10700 North Freeway – 165,048 SF • 396 West Greens Road – 164,411 SF • World Houston Plaza | 15710 John F. Kennedy Boulevard – 158,352 SF • North Houston Tech Tower | 12707 North Freeway – 157,276 SF • CityNorth 4 | 16945 Northchase Drive – 155,048 SF • 16666 Northchase Drive – 147,165 SF • 450 Gears | 450 Gears Road – 144,528 SF

– a 386K SF class A office building

• 10700 North Freeway – a 182,325 SF class A office building

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

FM 1960INTELLIGENCE CORRIDOR SUBMARKET Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

(27,875)

(381,297)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

24.0%

20.9%

21.1%

19.2%

23.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

122,248

194,095

vs. Prev. Qtr

vs. 12 Mths Ago

60,699

80,343 Delivered SF 48,000 Quoted Rate $20.51

vs. Prev. Qtr

vs. 12 Mths Ago

$20.19

$20.05

26.0% 26.0%

300,000

25.0%

100,000

24.0%

250,000 200,000

22.0%

150,000 100,000

20.0% 22.0%

(100,000)

50,000

21.0% 18.0%

(200,000)

20.0%

(50,000)

16.0%

19.0%

(300,000)(100,000)

14.0%

18.0%

(150,000)

12.0%

17.0%

(400,000) 2Q 1Q17

3Q 2Q17

4Q 3Q 17

1Q 4Q 18

Absorption Absorption

2Q 1Q 18

3Q 2Q 18

4Q 183Q

1Q 194Q

Deliveries Deliveries

2Q 3Q 4Q 1Q 19 1Q 19 2Q 19 3Q 20

2Q 4Q20

(200,000)

1Q 19

Vacancy Vacancy

Source: CoStar 2Q 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 2Q 2020, the FM 1960 Corridor had a vacancy rate of 20.9% which was slightly lower than 1Q 2020. Absorption turned positive with 60K SF of space absorbed, up from the 28K SF of negative absorption in 1Q 2020. Leasing activity remained steady with 80K SF of deals completed. Currently, 72K 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.

• Redbud E&P has signed a 4K SF renewal in Cypresswood Crossing.

DEALS IN THE MARKET • 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 • 18750 Interstate 45 – a 60K SF class A 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 16

• 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

• 3910 FM 1960 West – 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 AVAILABILITIES • Noble Energy Center II | 1002 Noble Energy Way – 437,793 SF

• 11403 Compaq Center West Drive – 260,790 SF • University Park Buildings 9 & 10 | 11450 Compaq Center West Drive – 208,841 SF

• Creekridge II | 140 Cypress Station Drive – 126,924 SF • Chasewood Crossing III | 19350 State Highway 249 – 122,074 SF

• 616 FM 1960 Road West – 72,753 SF • Chasewood Crossing II | 19450 State Highway 249 – 71,608 SF

• Cornerstone North | 3303 FM 1960 West – 70K SF • Northwest Medical Plaza | 800 Peakwood Drive – 65,891 SF

• Cy-Fair Medical Office Building | 13114 FM 1960 West – 58,235 SF

• Cypress Station Medical Building | 1140 Cypress Station Drive – 52,038 SF

• Chasewood Crossing I | 19500 State Highway 249 – 49,035 SF

• 14405 Walters Road – 44,489 SF • 3648 FM 1960 West – 44,335 SF • One Northchase Park | 4201 FM 1960 West – 43,836 SF • The Willowbrook Building | 7915 FM 1960 West – 40,098 SF 16

GREENWAY PLAZA SUBMARKET INTELLIGENCE Absorption 51,311

vs. Prev. Qtr

vs. 12 Mths Ago

41,012

(61,370)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

16.5%

17.0%

15.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

251,523

208,755

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

975,793 Delivered SF Quoted Rates $35.27

$35.38

$33.17

VITAL STATS

20.0%

200,000

20.0%

300,000

19.0%

250,000

150,000 200,000

16.0%18.0%

150,000 17 .0%

100,000 100,000

12.0%16.0%

50,000

15.0%

50,000

(50,000)

8.0%14.0%

(100,000) 0

13.0%

(150,000) 12.0%

4.0%

(200,000)

(50,000)

11.0%

(250,000)

10.0%

0.0%

(300,000) 2Q

1Q 17 2Q 17 16 16

3Q 17 16

4Q18 16

Absorption Absorption

1Q18 17

2Q 18 17

3Q 18 17

4Q 19 17

Deliveries Deliveries

2Q 1Q 19

3Q 192Q

4Q 193Q

1Q 2Q 20 4Q 20 1Q

Vacancy Vacancy

(100,000)

Source: CoStar 2Q 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. At the close of 2Q 2020, the Greenway Plaza submarket had a vacancy rate of 16.5% which was slightly lower than 1Q 2020. Absorption was positive by 51K SF, up from the 41K SF of absorption in 1Q 2020. Leasing activity moved higher with 976K SF of deals completed, almost four times the 251K SF leased in 1Q 2020. Currently, no office space is under construction in the submarket.

TOP LEASE TRANSACTIONS • Occidental Corporation has signed a 73K SF renewal in

LARGE EXISTING AVAILABILITIES • Nine Greenway Plaza | 9 Greenway Plaza – 278,451 SF • Four Greenway Plaza | 4 Greenway Plaza – 242,628 SF • Phoenix Tower | 3200 Southwest Freeway – 222,305 SF • Twelve Greenway Plaza | 12 Greenway Plaza – 207,022 SF • Three Greenway Plaza | 3 Greenway Plaza – 176,597 SF • Eight Greenway Plaza | 8 Greenway Plaza – 104,564 SF • Eleven Greenway Plaza | 11 Greenway Plaza – 93,125 SF • 3355 West Alabama | 3355 West Alabama Street – 82,558 SF • 3737 Buffalo Speedway Avenue – 81,455 SF • Weslayan Tower | 24 Greenway Plaza – 76,870 SF • 20 Greenway Plaza – 76,353 SF • 3555 Timmons Lane – 71,311 SF • 3800 Buffalo Speedway – 67,898 SF • Two Greenway Plaza | 2 Greenway Plaza – 64,808 SF

Three Greenway Plaza.

• Insite360 has signed a 24K SF lease in Nine Greenway Plaza.

• Weycer, Kaplan, Pulaski & Zuber, P.C. has signed a 16.8K SF lease in Weslayan Tower.

• Cornelius, Stegent, & Price, LLP has signed a 2.5K SF lease in Weslayan Tower.

• Roger Goddard, CPA has signed a 1.5K SF renewal in 3100 Timmons.

MEDICAL CENTER SUBMARKET INTELLIGENCE Absorption (164,694)

vs. Prev. Qtr

vs. 12 Mths Ago

(9,833)

(68,157)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.3%

5.6%

6.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

101,685

124,818

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

83,746 Delivered SF Quoted Rates $26.85

$26.44

VITAL STATS

14.0%

200,000

8.0% 100,000

150,000 60,000

12.0%7.0%

20,000 100,000

(20,000)

10.0%6.0%

50,000

(60,000)

0 (100,000)

8.0%5.0%

(140,000)(50,000)

4.0%

6.0%

(180,000) 2Q

1Q 17 16

$27.85

2Q17 16

3Q17 16

4Q 18 16

Absorption

1Q 18 17

3Q 2Q 18

4Q 183Q

1Q 194Q

Deliveries

2Q 3Q 4Q 1Q 19 1Q 19 2Q 19 3Q 20

Deliveries

4Q20 18

Vacancy

(100,000)

1Q 19

Vacancy

Source: CoStar 2Q 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 space. 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. At the close of 2Q 2020, the Medical Center submarket had a vacancy rate of 7.3% which was higher than 5.6% vacancy rate in 1Q 2020. Absorption was negative with 165K SF of space given back, down considerably from the 10K SF of negative absorption in 1Q 2020. Leasing activity remained similar to 1Q 2020 with 84K SF of deals completed. Currently, 300K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Trans Continental Trading has signed a 1.3K SF renewal in Arena Place.

• Continental Technology Solutions has signed a 1K SF renewal in Arena Place.

NEW DEVELOPMENTS • Museo Plaza Office Building | 5115 Fannin Street – a

LARGE EXISTING AVAILABILITIES • 6624 Fannin Tower | 6624 Fannin Street – 153,321 SF • Texas Medical Center | 7501 Fannin Street – 95,306 SF • Museum Medical Tower | 1213 Hermann Drive – 78,394 SF

• 7505 Fannin Street – 48,434 SF • One Fannin | 7400 Fannin Street – 47,340 SF • Greenpark One | 7515 South Main Street – 44,643 SF • US Pain & Spine Institute | 5445 La Branch Street – 36,394 SF • Fannin South Professional | 7707 Fannin Street – 32,656 SF • Greenpark II Professional Building | 7505 Main Street – 32,190 SF • 1200 Binz | 1200 Binz Street – 30,226 SF • Atrium 2656 | 2656 South Loop Freeway West – 27,261 SF • Memorial Hermann Medical Plaza | 6400 Fannin Street – 27,103 SF • 7900 Fannin | 7900 Fannin Street – 26,548 SF • Prosperity Bank Plaza | 5020 Montrose Boulevard – 24,370 SF • NRG Office Complex | 2626 South Loop Freeway West – 24,243 SF • Southside Medical Plaza | 7700 Main Street – 22K SF • Houston Medical Plaza | 6655 Travis Street – 21,367 SF • 3003 South Loop | 3003 South Loop West – 16,048 SF • Main Link Biotechnology Park | 10301 Stella Link Road – 15,437 SF

180K SF class A office building • 7500 Fannin Street – a 126K SF class B office building

SOUTHWEST SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

92,152

(20,626)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

21.0%

21.1%

22.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

5,775

120,833 Delivered SF Quoted Rates $17.43

114,918

174,506

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$16.82

VITAL STATS

23.0% 24.0%

1,000,000

150,000

22.0%

100,000800,000 50,000

22.0%

21.0%

600,000

20.0%

400,000 (50,000)

20.0%

19.0%

200,000

(100,000)

18.0% 18.0%

(150,000)

17.0%

(200,000) (200,000)

16.0%

16.0% 2Q

1Q 17 2Q 17 16 16

$16.91

3Q 17 16

4Q18 16

Absorption

1Q18 17

Absorption

2Q 18 17

3Q 18 17

1Q 4Q 19

2Q 191Q

3Q 192Q

4Q 19 3Q

Deliveries

(250,000) (400,000) 1Q 2Q 20 4Q 20 1Q

Vacancy

Source: CoStar 2Q 2020 Office Report

HLC OUTLOOK HLC’s Southwest office submarket includes CoStar’s Southwest Freeway and Southwest Beltway 8 submarkets. The submarket extends to 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 2Q 2020, the Southwest submarket had a vacancy rate of 21.0% which was slightly higher than 1Q 2020. Absorption was positive with 6K SF of space absorbed, down from the 92K SF absorbed in 1Q 2020. Leasing activity remained steady with 120K SF of deals completed. Currently, no office space is under construction in this submarket.

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

• Regency Square Tower | 6200 Savoy Drive – a 225K SF class A 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 • 6100 Corporate Drive – a 73K SF class B office building • 5999-6057 Savoy Drive – a 38K SF class B office building • 9945 Bissonnet Street – a 28K SF class B office building

LARGE EXISTING AVAILABILITIES • Houston Technology Center | 5959 Corporate Drive – 244,524 SF

• Southwest Corporate Center | 9700-9702 Bissonnet Street – 234,151 SF

• 11111 South Wilcrest Drive – 190,398 SF • Arena Place Two | 7324 Southwest Freeway – 185,458 SF

• Arena Place One | 7322 Southwest Freeway – 141,233 SF • 7011 Southwest Freeway – 112,590 SF • Centre One | 9800 Centre Parkway – 84,302 SF • Westwood Green | 9494 Southwest Freeway – 74,011 SF • Southwest Medical Plaza 1 | 7777 Southwest Freeway – 73,078 SF • Southwest Medical Plaza 2 | 7737 Southwest Freeway – 70,072 SF • The Center | 8323 Southwest Freeway – 65,353 SF • 6464 Savoy Drive – 58,925 SF • Merlyn Plaza | 9301 Southwest Freeway – 52,336 SF • 9896 Bissonnet Street – 50,794 SF • 6001 Savoy Drive – 49,881 SF • The Ranchester Building | 10333 Harwin Drive – 47,344 SF • The Atrium Tower | 9894 Bissonnet Street – 50,794 SF • Park Green I | 8300 Bissonnet Street – 43,427 SF • Sterling Plaza | 10101 Southwest Freeway – 38,974 SF

KATY FREEWAY EAST SUBMARKET INTELLIGENCE Absorption 62,958

vs. Prev. Qtr

vs. 12 Mths Ago

18,463

32,657

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

11.4%

10.7%

12.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

236,440

231,375

vs. Prev. Qtr

vs. 12 Mths Ago

227,500 Delivered SF 150,000 Quoted Rates $36.65

20,000

vs. Prev. Qtr

vs. 12 Mths Ago

$36.11

$34.50

12.0%

11.0%

VITAL STATS

250,000

16.0%

160,000 200,000

15.0%

120,000 150,000

14.0%

80,000 100,000

10.0% 13.0%

9.0%

40,000 50,000

12.0%

0 8.0% 11.0%

7.0%

(40,000) (50,000)

10.0%

1Q 16

2Q 3Q 4Q 1Q 17 2Q 17 3Q 17 4Q 18 16 16 16

Absorption

2Q 1Q18 17

3Q 18 2Q 17

4Q 18 3Q 17

1Q 19 4Q 17

Deliveries

2Q 19 1Q 18

Deliveries

3Q 192Q 18

(80,000) (100,000) 4Q 1Q 2Q 19 3Q 20 4Q 20 1Q 18 18 19

Vacancy

Source: CoStar 2Q 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. It is home to MetroNational’s Memorial City and Midway’s CityCentre mixed-use developments. At the close of 2Q 2020, the Katy Freeway East submarket had a vacancy rate of 11.4% which was slightly higher than 1Q 2020. Absorption was positive with 63K SF of space absorbed, up from 18K SF of absorption in 1Q 2020. Leasing activity remained strong with more than 225K SF of deals completed which was similar to the 236K SF of deals completed in 1Q 2020. Currently, more than 1.2M SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Jotun Paints has signed a 6K SF renewal in CityCentre Three.

• Crossroads Hospice has signed a 1.5K SF lease in West Memorial Park.

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 – a 150K SF class A two (2) building office complex • 9753 Katy Freeway – a 161K SF class A office building

LARGE EXISTING AVAILABILITIES • One Memorial City Plaza | 800 Gessner Road – 137,896 SF • Memorial Hermann Tower | 929 Gessner Road – 112,332 SF • Two Memorial City Plaza | 820 Gessner Road – 88,565 SF • Three Memorial City Plaza | 840 Gessner Road – 83,702 SF • 920 Memorial City Way – 83,115 SF • CityCentre One | 800 Town & Country Boulevard – 64,772 SF • 10777 Clay Road – 56,871 SF • CityCentre Two | 818 Town & Country Boulevard – 51,959 SF • 952 Echo Lane – 49,340 SF • Medical Plaza 3 | 915 Gessner Road – 43,323 SF • Village Tower I | 9655 Katy Freeway – 39,100 SF • Hedwig Place | 8731 Katy Freeway – 28,650 SF • Park Centre I | 9950 Westpark Drive – 28,302 SF • 8584-8588 Katy Freeway – 26,949 SF • Nexen Building | 945 Bunker Hill Road – 25,076 SF

NORTHWEST SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

77,148

48,133

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.4%

19.3%

21.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

184,226

289,099

vs. Prev. Qtr

vs. 12 Mths Ago

(6,222)

114,581 Delivered SF Quoted Rates $21.75

vs. Prev. Qtr

vs. 12 Mths Ago

$21.98

$21.00

VITAL STATS 12.0%24.0%

250,000 140,000

200,000 11.0%

90,000

22.0%

150,000 40,000

10.0%

100,000

20.0%

(10,000)

50,000

9.0%

(60,000)

18.0%

8.0%

(110,000)

(50,000) 7.0%

16.0%

(160,000) 2Q

1Q 17 2Q 17 16 16

3Q 17 16

4Q18 16

Absorption

1Q18 17

Absorption

18 2Q 17

18 3Q 17

1Q 19 4Q

Deliveries

2Q 191Q

3Q 192Q

4Q 19 3Q

1Q 2Q 20 4Q 20 1Q

Vacancy

(100,000)

Vacancy

Source: CoStar 2Q 2020 Office Report

HLC OUTLOOK HLC’s Northwest office submarket is located northwest of the CBD and starts at the transitioning Heights and Oak Forest/Garden Oaks communities and also 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 the major freeways which have 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 10M SF of class A and B office space is located at Loop 610 and Highway 290 or in the vicinity of Highway 290 and Hollister Road. At the close of 2Q 2020, the Northwest submarket had a vacancy rate of 19.4% which was slightly higher than 1Q 2020. Absorption turned negative with 6K SF of space given back, down from the 77K SF of positive absorption in 1Q 2020. Leasing activity remained strong with 184K SF of deals completed. Currently, 114K SF office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Meredith O’Donnell Fine Furniture has signed a 16K SF lease in The Katy Design Center.

• Houston Post Tension has signed a 10K SF lease in Northwest Crossing.

• AIM Directional Services has signed a 4.5K SF lease in One Northwind Plaza.

DEALS IN THE MARKET • Washington Place North & South | 7155 Old Katy Road

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

LARGE EXISTING VACANCIES • Brookhollow Central II | 2900 North Loop Freeway West – 142,401 SF

• Brookhollow Central III | 2950 North Loop Freeway West – 123,515 SF

• 2727 North Loop Freeway West – 123,103 SF • Brookhollow Central I | 2800 North Loop Freeway West – 90,793 SF

• Northwest Crossing III | 13105 Northwest Freeway – 72,417 SF • Northwest Crossing | 13333 Northwest Freeway – 71,153 SF • Granite Tower at 290 | 13430 Northwest Freeway – 69,550 SF • Northwest One | 13100 Northwest Freeway – 69,094 SF • One Northwind Plaza | 7600 West Tidwell Road – 68,179 SF • 13111 Northwest Freeway – 67,303 SF • North Loop Center | 1235 North Loop Freeway West – 65,931 SF • Wells Fargo Building | 13201 Northwest Freeway – 64,373 SF • 7000 Hollister Street – 49K SF • Hollister & Hillmont Building | 5300 Hollister Street – 30,152 SF • 1415 North Loop West – 29,042 SF • 2600 North Loop West – 28,660 SF • 1225 North Loop Freeway West – 28,549 SF • 2180 North Loop West – 27,011 SF

– a 90K SF class B office building

SUGAR LAND SUBMARKET INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

82,482

(81,946)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

13.5%

11.7%

12.1%

12.0%12.0%

vs. 12 Mths Ago

10.0%

(96,145)

Leasing Act. 74,570 Delivered SF 49,321 Quoted Rates $29.10

vs. Prev. Qtr 63,801

228,464

vs. Prev. Qtr

vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$28.85

$28.04

18.0%14.0%

150,000600,000

16.0%

500,000

100,000

400,000 50,000

300,000 0

8.0%

200,000

(50,000)100,000

6.0%10.0%

(100,000)

4.0%

(100,000) (150,000)

2.0% 0.0%

(200,000) (200,000)

8.0%

1Q 16

2Q 17

3Q 2Q 17

4Q 3Q17

1Q 4Q18

Absorption Absorption

2Q 18 1Q

3Q 18 2Q

4Q 18 3Q

1Q 19 4Q

Deliveries Deliveries

2Q 191Q

3Q 19 2Q

4Q 1Q 19 3Q 20

4Q 18

2Q 20

Vacancy Vacancy

(300,000)

1Q 19

Source: CoStar 2Q 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 2Q 2020, the Sugar Land submarket had a vacancy rate of 13.5% which was nearly 2.0% higher than 1Q 2020. Absorption was negative by 96K SF, the opposite of the 82K SF of positive absorption in 1Q 2020. Leasing activity included 74K SF of deals completed. Currently, 56K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • TDECU has signed a 30K SF sublease in Sugar Creek on the Lake.

• Dry Eye Center has signed a lease 1.4K SF lease at 13440 University Boulevard.

LARGE EXISTING VACANCIES • Sugar Creek on the Lake | 14141 Southwest Freeway – 276,432 SF

• Sugar Creek Tower II | 13131 Dairy Ashford Road – 96,303 SF

• Building A | 1 Flour Daniel Drive – 85,927 SF • Sugar Creek Place I | 14100 Southwest Freeway – 83,212 SF

• ABB Network Management | 1601 Industrial Boulevard - 69,250 SF • Sugar Creek Tower I | 13135 Dairy Ashford Road – 51,886 SF • 12603 Southwest Freeway – 48,030 SF • The Minute Maid Building | 2150 Town Square Place – 44,895 SF • Two Sugar Creek Center | 77 Sugar Creek Center Boulevard – 43,891 SF • Commerce Green One | 14090 Southwest Freeway – 43,734 SF • The Texas Drive Building | 2245 Texas Drive – 41,681 SF • The Glenn Lakes Professional Building | 3634 Glenn Lakes Lane – 39,500 SF • Comerica Bank Building | 1 Sugar Creek Center Boulevard – 35,517 SF • 7619 Branford Place – 35,031SF

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

CLEAR LAKE SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

39,458

(7,227)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

15.2%

15.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

158,383

89,235

vs. Prev. Qtr

vs. 12 Mths Ago

2,466

55,357 Delivered SF Quoted Rates $21.56

81,446

vs. Prev. Qtr

vs. 12 Mths Ago

$21.43

$22.18

VITAL STATS 12.0%16.0%

250,000 90,000 200,000 70,000

11.0% 15.0%

50,000 150,000

10.0%

30,000 100,000

14.0% 10,000 50,000

9.0%

(10,000) 0

13.0%

8.0%

(30,000)

(50,000)

12.0%

7.0%

(50,000) 2Q

1Q 17 16

2Q 17 16

3Q17 16

4Q18 16

1Q 18 17

2Q 18 17

Absorption Absorption

3Q 18 17

4Q 19 17

2Q 1Q 19

Deliveries Deliveries

3Q 192Q

4Q 193Q

1Q 204Q

2Q 20 1Q

(100,000)

Vacancy Vacancy

Source: CoStar 2Q 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.

DEALS IN THE MARKET • Two Corporate Plaza | 2625 Bay Area Boulevard – a 161K SF class A office building

• One Corporate Plaza | 2525 Bay Area Boulevard – a 114K SF class A office 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 El Camino Real – a 26K SF class B office building

At the close of 2Q 2020, the Clear Lake submarket had a vacancy rate of 15.2% which was lower than 1Q 2020. Absorption was positive by 2.5K SF, down from the 40K SF of positive absorption in 1Q 2020. Leasing activity fell slightly with 55K SF of deals completed, lower than the 160K SF of deals completed in 1Q 2020. Currently, 53K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Greenleaves Diagnostic has signed a 4.3K SF lease in 202 North Texas Avenue. • Amore Med Group has signed a 3.3K SF lease in Bay Plaza. • Orihuela & Associates, PLLC has signed a 1.5K SF lease in Bay Plaza. • Bay Area Hypnosis has signed a 1K SF lease in Bay Plaza. • 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.

• 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 AVAILABILITIES • 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 • Two Corporate Plaza | 2625 Bay Area Boulevard – 47,521 SF

• One Corporate Plaza | 2525 Bay Area Boulevard – 42,874 SF

• Clear Lake Tech Center | 17146 Feathercraft Laned – 38,474 SF

• Hercules II | 1290 Hercules Avenue – 32,389 SF • Hercules I | 1300 Hercules Avenue – 31,071 SF • Space Park Office Building | 2200 Space Park Drive – 25,105 SF

• 16055 Space Center Boulevard – 23,081 SF • 1322 Space Park Drived – 22,275 SF • Camino Center I | 17629 El Camino Reald – 20,683 SF • Bay Plaza | 711 West Bay Area Boulevard – 20,580 SF

MIDTOWN SUBMARKET INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

(12,778)

(38,695)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

12.0%

9.9%

10.6%

12.0%12.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

10.0%

(146,197)

102,389 Delivered SF Quoted Rate $31.92

171,714 vs. Prev. Qtr

181,843 vs. 12 Mths Ago

vs. Prev. Qtr

vs. 12 Mths Ago

$29.57

$28.57

18.0%14.0%

150,000600,000

16.0%

500,000 100,000

400,000 50,000300,000

8.0%

100,000

10.0%

(50,000)

6.0%

4.0%

(100,000) (100,000)

2.0% 0.0%

200,000

(200,000) 8.0%

(150,000)

2Q 3Q 4Q 1Q 17 2Q 17 3Q 17

1Q 4Q18

16 16 Absorption

Absorption

2Q 18 1Q

3Q 18 2Q

4Q 18 3Q

1Q 19 4Q

17 Deliveries

Deliveries

2Q 191Q

3Q 4Q 1Q 2Q 19 2Q 19 3Q 20 4Q 20

18 Vacancy

(300,000)

1Q 19

Vacancy

Source: CoStar 2Q 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 2Q 2020, the Midtown submarket had a vacancy rate of 12.0% which was over 2.0% higher than 1Q 2020. Absorption was negative by 146K SF, up considerably from the 12K SF of negative absorption in 1Q 2020. Leasing activity also fell with 102K SF of deals completed, lower than the 171K SF of deals completed in 1Q 2020. Currently, 527K SF of office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Marinor Associates has signed a 5.5K SF renewal in Wortham Tower.

• Fresh Arts has signed a 1K SF lease in 2101 Winter Street.

• Today’s Business Solutions has signed a 1K SF lease in 1920 North Memorial Way.

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

• 190 TC Jester Boulevard – a 35K SF class B office building

LARGE EXISTING AVAILABILITIES • America Tower | 2929 Allen Parkway – 152,478 SF • Wortham Tower | 2727 Allen Parkway – 143,208 SF • Central Square | 2100 Travis Street – 114,383 SF • HCC Building | 3100 Main Street – 108K SF • 2777 Allen Parkway – 57,719 SF • 2000 Crawford | 2000 Crawford Street – 42,352 SF • 100 Waugh | 100 Waugh Drive – 40,508 SF • 2302 Fannin Street – 38,995 SF • 2800-2810 San Jacinto Street – 27,484 SF • 55 Waugh Drive – 25,611 SF • Buffalo Heights | 3663 Washington Avenue – 23,642 SF • 5300 Memorial Drive – 23,587 • The Bellevue | 2323 South Shepherd Drive – 21,747 SF • River Oaks Bank Building | 2001 Kirby Drive – 21,046 SF

DEALS IN THE MARKET • Washington Place Lofts | 1716-1722 Washington Avenue – a 25K SF class B office building

• 2303 Smith | 2303 Smith Street – a 23K SF class B office building

WEST BELT SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(140,425)

94,163

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

25.0%

22.0%

18.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

46,106

110,888

vs. Prev. Qtr

vs. 12 Mths Ago

(174,053)

50,473 Delivered SF Quoted Rate $25.96

vs. Prev. Qtr

vs. 12 Mths Ago

$25.95

$26.75

VITAL STATS 12.0%26.0%

250,000 200,000 150,000

200,000

24.0% 11.0%

100,000

150,000

50,000

10.0%22.0%

100,000

(50,000)

50,000

20.0%

9.0%

(100,000)

(150,000)

18.0%

8.0%

(200,000) (50,000) 16.0%

7.0%

(250,000) 2Q

1Q 17 16

2Q 17 16

3Q17 16

4Q18 16

Absorption Absorption

18 1Q 17

18 2Q 17

18 3Q 17

1Q 19 4Q

Deliveries Deliveries

2Q 191Q

3Q 192Q

4Q 19 3Q

1Q 2Q 20 4Q 20

(100,000)

1Q 19

Vacancy Vacancy

Source: CoStar 2Q 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.

LARGE EXISTING AVAILABILITIES • 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 – 80,560 SF

• Concourse at Westway | 4700 West Sam Houston Parkway North – 57,413 SF

At the close of 2Q 2020, the West Belt submarket had a vacancy rate of 25.0% which was 3.0% higher than 1Q 2020. Absorption remained negative by 174K SF, lower than the 140K SF of negative absorption in 1Q 2020. Leasing activity remained flat with 50K SF of deals completed, barely higher than the 46 SF of completed deals in 1Q 2020. Currently, no office space is under construction in this submarket.

• Heron Lakes | 10740 North Gessner Drive – 52,379 SF • Beltway 8 Corporate Centre | 5300 West Sam Houston

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

• Westway Building Four | 4920 Westway Park Boulevard

Parkway North – 50K SF

• York Centre | 10235 West Little York Road – 49,455 SF • 10603 West Sam Houston Parkway North – 49,314 SF • Tanner Office Building | 11302 Tanner Road – 43,498 SF • Sam Houston Crossing One | 10343 Sam Houston Park Drive – 37,665 SF – 35,675 SF

office building • 11100 Brittmoore Park Drive – a 76K SF class B 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

EAST HOUSTON/PASADENA SUBMARKET INTELLIGENCE VITAL STATS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

66,801

37,160

(7,899)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%16.0%

80,000

12.2%

13.4%

11.9%

12.0%

60,000 300,000

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

10.0%

94,372 Delivered SF -

49,880 vs. Prev. Qtr

45,046 vs. 12 Mths Ago

Quoted Rates

vs. Prev. Qtr

vs. 12 Mths Ago

21.48

21.75

20.95

18.0%18.0%

600,000 120,000

16.0%

500,000

100,000

400,000

14.0%

40,000

200,000

20,000

8.0%

100,000

12.0%

6.0%

(20,000)

4.0%10.0%

(100,000) (40,000)

2.0%

(60,000) (200,000) 8.0%

(80,000)

0.0%

1Q 16

2Q 17

3Q 2Q 17

4Q 3Q17

1Q 4Q18

Absorption Absorption

2Q 1Q 18

3Q 2Q 18

4Q 3Q 18

1Q 4Q 19

Deliveries Deliveries

2Q 191Q

3Q 192Q

4Q 193Q

1Q 2Q 20 4Q 20

Vacancy Vacancy

(300,000)

1Q 19

Source: CoStar 2Q 2020 Office Report

HLC OUTLOOK HLC’s East Houston/Pasadena office submarket’s location has, historically, been driven more by industrial product than office. Fundamentals, though somewhat soft, were still healthier than many submarkets across the city.

NEW DEVELOPMENT • 4400 Harrisburg Boulevard – a 32K SF class B office building

• 2351 Oleander Drive – a 32K SF class B office building • Avenue CDC HEadquarters | 3417 Irvington Boulevard – a 31K SF class B office building

At the close of 2Q 2020, the East Houston/Pasadena submarket had a vacancy rate of 12.2% which was over 1.0% lower than 1Q 2020. Absorption remained positive by 67K SF, higher than the 37K SF absorbed in 1Q 2020. Leasing activity was up with 94K SF of deals completed, almost double the activity in 1Q 2020. Currently, 95K SF office space is under construction in this submarket.

TOP LEASE TRANSACTIONS • Intercontinental Terminals Company has signed a 8.7K SF sublease in 4400 Highway 225.

• The Law Office of Hugo Baldaras-Ibarra has signed a 1K SF lease in The Bank of America Building.

DEALS IN THE MARKET • North Houston Medical Plaza | 7007 North Freeway – a 86K SF class B office building

• 3737-3743 Red Bluff Road – a 86K SF class B office

LARGE EXISTING AVAILABILITIES • 100 Pasadena Boulevard – 114,356 SF • North Houston Medical Plaza | 7007 North Freeway – 51,306 SF

• Vibe Hobby | 8876 Gulf Freeway – 31,668 SF • 1001 Shaw Avenue – 30,938 SF • Gulf Freeway Plaza | 9333 Bryant Street – 29,750 SF • Atrium 10 Tower | 11811 East Freeway – 29,153 SF • Bank of America Building | 213 West Southmore Avenue – 25,511 SF

• Original US Schlumberger HQ (1938) | 2720 Leeland Street – 25,500 SF

• Medical Professional Building I | 908 East Southmore Boulevard – 25,145 SF

• Bayshore Medical Building | 3333 Bayshore Boulevard – 25,135 SF

• 12600 North Featherwood Drive – 24,471 SF

building

• Bank of America East Freeway | 12605 East Freeway – a 86K SF class B office building

• Wilson Road Building | 5810 Wilson Road – a 41K SF class B office building

• 2807 Little York Road – a 35K SF class B office building

WEST SUBMARKETFARINTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

17,066

(9,267)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

15.3%

15.2%

10.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

36,501

36,169

vs. Prev. Qtr

vs. 12 Mths Ago

(3,343)

50,259 Delivered SF Quoted Rates $28.28

30,000

vs. Prev. Qtr

vs. 12 Mths Ago

$27.67

$27.85

VITAL STATS 12.0%20.0%

250,000 200,000 200,000

150,000

11.0%18.0%

150,000

100,000

10.0%16.0%

100,000 50,000

50,000

14.0%

9.0%

0 12.0%

8.0%

(50,000)

(50,000) 10.0%

7.0%

(100,000) 2Q

1Q 17 16

2Q 17 16

3Q17 16

4Q18 16

Absorption Absorption

18 1Q 17

18 2Q 17

18 3Q 17

1Q 19 4Q

Deliveries Deliveries

2Q 191Q

3Q 192Q

4Q 19 3Q

1Q 2Q 20 4Q 20 1Q

Vacancy Vacancy

(100,000)

Source: CoStar 2Q 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. At the close of 2Q 2020, the Far West submarket had a vacancy rate of 15.3% which was slightly higher than 1Q 2020. Absorption turned negative by 3K SF, down from the 17K SF of positive absorption in 1Q 2020. Leasing activity rose with 47K SF of deals completed compared to the 36K SF of deals completed in 1Q 2020. Currently, 150K SF is under construction in this submarket.

TOP LEASE TRANSACTIONS • Vepica has signed a 20.6K SF renewal in 2002 West Grand Parkway North. • Computer Repair has signed a 1K SF lease in Silver Arc Atrium.

DEALS IN THE MARKET • Katy Commerce Center | 1773 Westborough Drive – a

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

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

• Katy Ranch Phase II | 24279 Katy Freeway – 126,017 SF • The Offices at Greenhouse | 19219 Katy Freeway – 91,596 SF • Greenhouse at Park Row | 2051 South Greenhouse Road – 69,480 SF • Katy MOB II | 707 South Fry Road – 50,359 SF • Horizon Medical Plaza 2 | 19002 Park Row – 47,500 SF • 2002 Grand Parkway North – 39,520 SF • Office at 410 | 410 West Grand Parkway South – 30,113 SF • Det Norske Veritas Phase 2 | 1400 Ravello Drive – 28,836 SF • Westgreen Professional Building | 750 Westgreen Boulevard – 27,940 SF • Katy Medical Plaza I | 23510 Kingsland Boulevard – 27,802 SF • Katy MOB I | 705 South Fry Road – 23,368 SF • 25807 Westheimer Parkway – 21,892 SF

27K class B office building

KINGWOOD SUBMARKET INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

51,175

8,153

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

14.0%

11.7%

11.0%

11.3%

12.0%12.0%

vs. 12 Mths Ago

10.0%

(15,892)

Leasing Act. 15,663 Delivered SF Quoted Rates $24.99

vs. Prev. Qtr 34,529

45,809

vs. Prev. Qtr

vs. 12 Mths Ago

55,000

vs. Prev. Qtr

vs. 12 Mths Ago

$24.97

$25.13

18.0%16.0%

600,000

16.0%

140,000500,000 14.0% 90,000

400,000 300,000

40,000

200,000

10.0%

(10,000)

8.0% 6.0%

100,000

8.0%

(60,000)0

4.0% 6.0%

(100,000)

(110,000)

2.0%

(200,000) 4.0%

0.0%

(160,000)

2Q 3Q 4Q 1Q 17 2Q 17 3Q 17

1Q 4Q18

16 16 Absorption

2Q 18 1Q

Absorption

3Q 18 2Q

4Q 18 3Q

1Q 19 4Q

17 17 Deliveries

2Q 191Q

Deliveries

3Q 4Q 1Q 2Q 19 2Q 19 3Q 20 4Q20

18Vacancy 18

(300,000) 1Q 19

Vacancy

Source: CoStar 2Q 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 11.7% which was higher than 1Q 2020. Absorption turned negative by 16K SF, down from the 51K SF absorbed in 1Q 2020. Leasing activity dropped to 16K SF, compared to the 35K SF of deals completed in 1Q 2020. Currently, 310K SF is under construction in this submarket.

TOP LEASE TRANSACTIONS • Tucker International has signed a 2.8K SF renewal in

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

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

• Four Kingwood Place | 900 Rockmead Drive – 28,902 SF

• Humble Medical Office Building | 1485 FM 1960 Bypass East – 26,516 SF

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

• Kings Harbor | 4501 Magnolia Cove Drive – 16,654 SF • 2300 Green Oak Drive – 16,464 SF • Two Kingwood Place | 700 Rockmead Drive – 15,976 SF • 22710-22720 Professional Drive – 14,468 SF • Woodforest National Bank Building | 1710 West Lake Houston Parkway – 11,063 SF

Four Kingwood Place.

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

SUBURBAN OUTLIERS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(76,565)

41,700

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.5%

12.4%

10.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

98,956

87,440

vs. Prev. Qtr

vs. 12 Mths Ago

14,968

29,965 Delivered SF 31,691 Quoted Rates $27.21

49,672

61,000

vs. Prev. Qtr

vs. 12 Mths Ago

$26.10

$25.69

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

10.0%

8.0%

7.0%

(50,000)

(100,000) 2Q

1Q 17 16

2Q17 16

3Q17 16

4Q18 16

1Q 18 17

2Q 18 17

Absorption Absorption

4Q 3Q 18

1Q 4Q 19

2Q 191Q

Deliveries Deliveries

3Q 192Q

4Q 19 3Q

1Q 20 4Q

2Q 20 1Q

(100,000)

Vacancy Vacancy

Source: CoStar 2Q 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.

• 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 • 24200 Via Mazzini Way – a 80K SF class A office building

At the close of 2Q 2020, the Suburban Outliers submarket had a vacancy rate of 12.5% which was higher than 1Q 2020. Absorption turned positive with 15K SF, opposite of the 77K SF of negative absorption in 1Q 2020. Leasing activity fell with only 30K SF of deals completed, compared to the 99K SF of deals completed in 1Q 2020. Currently, 218K SF is under construction in this submarket.

• 750 Fish Creek Thoroughfare – a 50K SF class B office

TOP LEASE TRANSACTIONS • Interim Healthcare has signed a 4.7K SF lease in Trinity

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

Retail Center.

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 • 9701 North Sam Houston Parkway – a 38K SF class A 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 • 12280 Broadway Street – a 25K SF class A office building • Pearland Medical Commons | 8540 Broadway Street – a 25K SF class A office building • The Lakes Professional Center | 6455 South Shore Boulevard – a 24K SF class B office building • Hughes Court Professional Building | 3828 Hughes Court – a 23K SF class B office building 29

building

• 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

• 2080 Central Pine Street – a 42K SF class B office building building

• 24130 State Highway 249 – a 29K SF class B office building

• Buildings A & B | 2640 Highway 3 South – a 29K SF class B two (2) building office complex

• 12280 Broadway Street – a 25K SF class A office building

LARGE EXISTING AVAILABILITIES • 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 • NOV | 10586 Highway 75 North – 30K SF • 1920 Country Place Parkway – 29,904 SF • Umar Syed Medical Tower/2802 Garth Road – 29,627 SF

• 32100 Dobbin Huffsmith Road – 28,449 SF

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