Houston Regional Market Profile

HOUSTON 2016 REGIONAL MARKET PROFILE

AUSTIN I BRAZORIA I CHAMBERS I FORT BEND I GALVESTON I HARRIS I LIBERTY I MONTGOMERY I SAN JACINTO I WALKER I WALLER

HOST TO SUPER BOWL LI IN 2017

Greater Houston 11-County Region

Table of Contents Introduction 4

Walker

Gateway to Global Markets 6

San Jacinto

Montgomery

Economy & Industry 10

Liberty

Austin

Waller

Demographics & Diversity 14

Harris Chambers Fort Bend

Galveston

Brazoria

Workforce & Education 16

Transportation & Infrastructure 18

Business Costs 20

The Greater Houston Partnership’s mission is to make the Houston region the best place to live, work and build a business. The organiza on was established in 1989, when Houston’s Chamber of Commerce, Economic Development Council and the World Trade Associa on merged. The Partnership’s roots extend to the original Houston Chamber of Commerce’s crea on in 1840. Over the past 25 years, our membership, comprised of over 1,200 leading companies, has tackled the region’s most important issues that impact our community. While the Partnership represents an 11-county region, BLS data in this publica on represents the Houston MSA (Houston–The Woodlands–Sugar Land), a nine-county region including the coun es of Harris, Fort Bend, Montgomery, Brazoria, Galveston, Liberty, Waller, Chambers and Aus n.

Incentives 22

Quality of Life 24

Services 28

WALLER

WALKER COUNTY

GREATER HOUSTON REGION

BRAZORIA CHAMBERS FORT BEND GALVESTON HARRIS LIBERTY MONTGOMERY SAN JACINTO WALKER WALLER

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The Partnership is proud to represent the following 11 counÆ&#x;es:

Introduction

HOUSTON REGION GROWTH ON THE FAST TRACK

Population Growth 2014-2015

RANK: 9

+1.7% SINCE JULY ‘14

+60,714 Sea le

RANK: 5

+0.4%

The Houston-The Woodlands-Sugar Land Metropolitan Statistical Area (MSA) is the nation’s fifth-largest MSA. Houston led the nation in population growth between July 2014 and July 2015, with a total of 6.6 million people in the region.

SINCE JULY ‘14

+87,186 Boston

New York New York

I C A’S AMER T S T S FA E G IN W O R G O T E M R UREAU

Chicago

Houston is one of the youngest, fastestgrowing, and most diverse popula ons B ENSUS -U.S. C anywhere in the world. People from across the globe relocate to Houston every year to take advantage of the abundant opportuni es the region provides.

In addi on to being mul cultural, Houston’s popula on is young and educated. The Houston popula on’s median age is among the lowest of the na on’s major metro areas, and the percentage of college graduates living in Houston is ahead of the U.S. average while significantly exceeding the state average. All of these demographics add up to a diverse and well-educated workforce that can supply a range of skills and occupa ons.

Philadelphia

Washington WashingtonD.C. D.C.

RANK: 8

+1.1% SINCE JULY ‘14

+63,793

LosLos Angeles Angeles

Atlanta

Phoenix

Atlanta

RANK: 3

+1.7% SINCE JULY ‘14

Dallas Dallas

RANK: 6

+95,431

+0.6% SINCE JULY ‘14

+85,671

RANK: 4

Houston

+2.0%

Austin

SINCE JULY ‘14

Walker

San Jacinto

Orlando

Montgomery Liberty

Waller Harris

Galveston

Houston

+87,988

Brazoria

SINCE JULY ‘14

RANK: 2

+2.1%

Houston also reaps the benefits of a dis nctly business friendly environment engendered at state and local levels. Houston’s leadership has always had a posi ve a tude towards business growth. Costs of doing business are significantly lower than in other major metropolitan areas, and the state of Texas has one of the lowest tax burdens in the na on.

RANK: 10

+2.6%

Chambers Fort Bend

SINCE JULY ‘14

+60,409 Miami Miami

+144,704 RANK:7

+1.3% SINCE JULY ‘14

+75,231

RANK: #1

+2.4% SINCE JULY ‘14

+159,083

Source: U.S. Census Bureau, 2015

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2016 HOUSTON REGION MARKET PROFILE

HOUSTON.ORG/BUSINESS

5

Gateway to Global Markets

Global Trade The Houston-Galveston Customs District recorded trade valued at $196.4 billion for 2015. This places Houston as the largest U.S. Customs District based on vessel weight and the second largest based on vessel value. Houston’s top 20 trade partners were responsible for 70 percent, or $138.4 billion, of the region’s foreign trade in 2015.

GATEWAY TO THE WORLD ST A R G E .S. 4T H L U N I Y OM ECO N N THE I GEST DP R A L 26 T H R L D B Y G W O BEA, IMF -U.S.

Houston is an undisputed leader in interna onal business, with es reaching around the world. The nine-county region’s geographic loca on provides global access for people and goods. From the Port of Houston to the Houston Airport System to a host of mul -na onal en es doing business around the clock, Houston is where you want to be if your business is looking to go global.

, 2014

Houston’s Top Five Trading Partners - 2015 (in Billions) Total All Countries

$196.4 Billion

Total For Top 20

$138.4 Billion

China

$18.5 Billion

Mexico

$17.7 Billion

Brazil

$10.5 Billion

Germany

$10.0 Billion

The Netherlands

$8.4 Billion

• • • •

More than 90 consulate offices Nineteen foreign banks, represen ng nine na ons More than 430 companies with branches in 144 other na ons More than 5,700 Houston area firms, foreign government offices and nonprofit organiza ons involved in interna onal business • If Houston were a country, it would rank 26th in GDP globally

2014 GDP of Foreign Countries vs.

Houston’s 2014 Nominal GAP (in Billions of Dollars)

MOST M E T R OCS O M P E T IT IV E IN A M E R IC A - Forbes

Source: US Census Bureau Foreign Trade Division, WISERTrade AUSTRIA

437.6

DENMARK

342.4

Houston’s Interna onal Community

2014 GDP

2014 GDP

More than 1.5 million Houstonians — or nearly one in four — are foreign born.

HOUSTON, TX

525.4 2014 GAP

COLOMBIA

THAILAND

2014 GDP

2014 GDP

377.9

404.8

25.2% 41.0% 3.7% 4.6% 4.7% 5.1% 15.7%

ARGENTINA

543.1 2014 GD P

SOUTH AFRICA

350.1 2014 GDP

Source: U.S. Bureau of Economic Analysis and the International Monetary Fund

6

2016 HOUSTON REGION MARKET PROFILE

Asia Mexico Other Europe South America Africa Central America

UNITED ARAB E M I R AT E S

399.5 2014 GDP

Source: U.S. Bureau of Census, 2014 American Community Survey

HOUSTON.ORG/BUSINESS

7

Gateway to Global Markets

Houston Companies With Foreign Trade Ties

FORTUNE 500 COMPANIES

According to the Partnership, there are more than 5,700 Houston area firms, foreign government offices and nonprofit organiza ons involved in interna onal business. In the Houston area, 430 companies report having offices abroad in 144 countries; 730 firms in Houston report foreign ownership and more than 100 countries have business offices and/or government representa on in Houston.

Houston’s centralized loca on in the United States is one of the many reasons why the region ranks third in corporate headquarters for Fortune 500 companies. Locate your company near some of the world’s largest and most successful businesses today.

24 FORTUNE 500 HEADQUARTERS IN HOUSTON Phillips 66 (30)

Kinder Morgan (198)

Quanta Services (352)

Sysco (57)

Waste Management (221)

CenterPoint Energy (363)

ConocoPhillips (90)

Occidental Petroleum (225)

Targa Resources (387)

Enterprise Products Partners (104)

Group 1 Automo ve (267)

Apache (388)

Halliburton (117)

Huntsman (277)

Calpine (402)

Plains GHP Holdings, LP (121)

Cameron Interna onal (319)

FMC Technologies (410)

Baker Hughes (178)

EOG Resources (322)

Marathon Oil (438)

Na onal Oilwell Varco (192)

Anadarko Petroleum (324)

Spectra Energy (493)

Source: Fortune, June 2016

Selected Interna onal Companies with a Presence in Houston

Services is the most frequently reported business type, accoun ng for more than 27 percent of all repor ng companies. These include accoun ng, law, banking, computer so ware, engineering, health care, and telecommunica ons. Manufacturing accounts for approximately 22 percent of all repor ng companies, with oil and gas field machinery and equipment being the most frequently cited product group. Other business sectors, including trading, transporta on/u li es, finance/insurance/real estate, mining, government health and educa on, accounted for the remainder of the reported surveyed companies.

Types of Companies in Houston With Foreign Trade Ties

Houston’s foreign commercial ties exceed 5,700 firms and organizations trading more than 250 types of products and services in 210 countries.

More than 100 interna onal companies have opened, expanded, or relocated to Houston. (see logos of selected companies) 17.7% 17.8% 21.9% 11.5% 9.3% 5.0% 6.7% 3.0% 7.0%

Professional Services Other Manufacturing Wholesale/Retail Trade Transporta on Energy Finance & Insurance Telecommunica ons Engineering & Construc on

*Source: Greater Houston Partnership, International Business Database, 2015

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2016 HOUSTON REGION MARKET PROFILE

HOUSTON.ORG/BUSINESS

9

Economy & Industry

Houston–The Woodlands–Sugar Land MSA

REGIONAL ECONOMY

The Perryman Group forecasts Houston’s population and employment to grow faster than the nation over the next 25 years.

Dynamic Economy for Con nued Growth

12

From ’09 to ’14, the region’s gross domes c product grew by $151.9 billion, exceeding the en re GDP of the Aus n metro.

With GDP at $525.4 billion, Houston is the na on’s fourth largest metro economy.

2014 Gross Domestic Product

10

Rank

Metro Area

$ in Billions

1

New York

2

Los Angeles

866.7

3

Chicago

610.5

4

Houston

525.4

5

Dallas-Fort Worth

504.4

6

Washington, D.C.

471.6

7

San Francisco

412.0

8

Philadelphia

391.1

9

Boston

382.5

10

Atlanta

324.9

1,558.50

MILLIONS

8

6

Source: U.S. Bureau of Economic Analysis

Job Crea on

Photo: Discovery Green (Greater Houston Conven on and Visitors Bureau)

4

The metro area has created 486,700 jobs since the bo om of the recession, or more than three jobs for every one lost in the downturn. No other major metro area can make a comparable claim.

2

The Future From ’15 to ’40, the Perryman Group sees popula on growth averaging 1.7 percent annually in the Houston region. Over the same period, the Texas-based economic forecas ng firm expects wage and salary employment to rise at a 1.6 percent annual rate.

The Houston–The Woodlands–Sugar Land Metro Area will add 3.4 million residents between ’15 and ’40. Perryman also forecasts that Houston will add an addi onal 1.5 million jobs during that me frame.

10 2016 HOUSTON REGION MARKET PROFILE

0 ’15

’20

’25

’30

’35

’40

YEAR PopulaƟon

Employment Source: The Perryman Group, Summer 2015

HOUSTON.ORG/BUSINESS

11

Economy & Industry

Advanced Manufacturing

INDUSTRIES

INDUSTRY SECTORS

MOST W IN N E IN C. 5000 T IM E, BRAS O F A LL N U M B ES E D O N C O M PA NR O F IE S In c. – June 20 14

Houston is one of the most important industrial bases in the world and was ranked the No. 1 U.S. City for Manufacturing (Forbes, June 2014). Houston is also home to the largest medical complex in the world - the Texas Medical Center - and provides clinical health care, research and educa on at its 54 ins tu ons. Houston was one of the first words spoken from the moon, and NASA’s Johnson Space Center is an aerospace hub and transfer site for NASA-developed technology.

And as the Energy Capital of the World, Houston is growing its presence in both tradi onal and renewable forms of energy technology.

THE 10 LARGEST EMPLOYERS IN THE HOUSTON REGION Organiza on

# of local employees

This is the right me and right place for manufacturing in Houston. Across 6,300 manufacturing establishments in the region, $80 billion dollars of products are produced annually. The skilled workforce includes more than 230,000 industrial workers and Houston subsector special es include fabricated metal, machinery, and chemical manufacturing. Collec vely, these subsectors represent 60 percent of Houston’s total manufacturing workforce.

Advanced Technologies Houston’s vibrant economy revolves around disrup ve technologies emerging within the energy, life sciences and aerospace industries. The region’s innova on flows from NASA, the Texas Medical Center and three er one universi es including Rice University, the University of Houston and Texas A&M University.

Last year, $2 billion dollars of research and development expenditures occurred at the university level.

Addi onally, more than 175,850 high-tech professionals call Houston home, that is, persons who hold computer, mathema cal, engineering or architecture occupa onal tles.

Energy Houston is the U.S. energy headquarters and “brain trust” for virtually every segment of the oil and gas industry, including explora on, produc on, transmission, marke ng, supply and technology. Houston employs nearly a third of the na on’s jobs in oil and gas extrac on. Houston is home to 4,800 energyrelated firms and is primed to be at the forefront of foreign investment in energy—par cularly in Mexico.

Addi onally, Houston’s petrochemical sector is experiencing record level growth with $50 billion dollars of facility construc on underway.

Memorial Hermann Health System

24,000

Headquarters & Business Services

The University of Texas MD Anderson Cancer Center

20,000

United Airlines

15,000

Houston ranks third in the U.S. for the number of Fortune 500 companies with 24 high profile headquarters offices. Addi onally, 50 Fortune 1000 companies and 66 Forbes Global 2000 companies are located in the region. A thriving professional and business services sector employs nearly 460,000 Houstonians and represents 15.4 percent of all jobs in the region.

Houston Methodist

14,985

ExxonMobil Corpora on

13,000

UTMB Health

12,448

Kroger Company

12,000

Shell Oil Company

11,892

Na onal Oilwell Varco

11,563

Schlumberger Limited

10,000 Source: Greater Houston Partnership Research, 2016

12 2016 HOUSTON REGION MARKET PROFILE

Life Sciences The healthcare industry in Houston employs more than 320,000, greater than Houston’s energy sector, and is home to the world-renowned Texas Medical Center and more than 190 life science companies, 132 hospitals and health clinics, and some of the country’s top research facili es. TMCx is one of the country’s largest life science business incubators facilita ng the development of early-stage digital health and medical device companies, while housing the new Johnson & Johnson’s Innova on JLABS’ incubator.

Transporta on & Logis cs Houston is a gateway for trade to Mexico, Canada and the expanding markets of La n America. The region is also a transporta on hub to the U.S. heartland due to its equidistant loca on between the U.S. East and West coasts. Houston’s mul modal transporta on system—port, airports, highways and railways— includes three class 1 railways and 198 domes c and interna onal air des na ons, enabling growth and access to markets around the world.

HOUSTON.ORG/BUSINESS

13

Demographics & Diversity

2014 Houston MSA Population

by Race/Ethnicity

DEMOGRAPHICS & DIVERSITY

The Houston MSA is more racially and ethnically diverse than the nation.

Houston MSA

NaƟon For companies seeking a young, diverse, highly skilled workforce, Houston abounds with prospects — as one of the youngest major metropolitan areas in the United States.

Houston’s median age is 34.0 years, while the U.S. median age is 37.7 years.

As of 2014 more than 2.2 million residents call the city of Houston home, making it the fourth most populous U.S. city.

Houston is the na on’s fi h-largest Metropolitan Sta s cal Area (MSA) with more than 6.6 million residents. According to the U.S. Census Bureau, between 2010 and 2015, Houston’s MSA grew 12.4 percent, faster than any other U.S. metro.

12.3% 16.8%

MOST ET D IV E R S EH N IC A LLY IN T H E NR E G IO N AT IO N -

8.5%

61.9%

36.3%

9.1%

2013 Hous ton Annual Survey, Kind er at Rice Un Ins tute iversity

17.3%

37.8%

Anglo Black Hispanic Asian/Other

Source: U.S. Bureau of the Census, 2014 American Community Survey

Diversity is highly evident throughout Houston’s resident popula on as well as its business community. Meanwhile, Houston contains the na on’s fourth-largest Hispanic popula on and the na on’s seventh-largest Asian popula on.

Houston’s popula on will look like the U.S. in 25 years.

2014 Age Distribution: Houston - U.S. Comparison

Houston’s median age is 34.0 - second lowest among the nation’s major metro areas.

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20% 15–24 Years

30%

40%

25–34 Years

50% 35–54 Years

60%

70%

55–64 Years

80%

90%

100%

65 and Over

Source: U.S. Census Bureau, 2014 American Community Survey

HOUSTON.ORG/BUSINESS

15

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Workforce & Education

Photo: SURGE Accelerator (Greater Houston Partnership)

WORKFORCE & EDUCATION Houston boasts more than 2.9 million jobs, more than the total employment of 35 U.S. States.

Occupa on by Industry Service industries account for roughly 2.4 million Houston-area jobs or eight out of ten workers in the region. The largest services industries are trade, transporta on, and u li es (20.5 percent of jobs); professional and business services (15.4 percent), and educa onal and health services (12.7 percent).

EA RO AR T M E TM J O B S S E B #1 O R S T E F 2015 nuary ub - Ja WalletH

HOUSTON’S ENGINEERING STRENGTH

A significant supply of recent college graduates in numerous fields con nues to strengthen the large professional talent pool throughout Houston. The region is home to over 60 two-year and four-year colleges and universi es, with a combined enrollment of more than 403,000. More than 47,900 students graduate annually from higher educa on facili es in the Houston region.

SELECTED FOUR-YEAR COLLEGES

DEGREES AWARDED School Year 2015 - 2016

Engineers have a strong presence in Houston, which has been described as “the world’s leading pool of engineering talent.”

Houston Bap st University Prairie View University

1,596

ENGINEERING LOCATION QUOTIENT

Rice University

1,920

The average occupational LQ is 1.00. A location quotient greater than 1.00 means that the occupation is more strongly represented in the local than in the national labor force.

Sam Houston State University Texas A&M University

628

4,432 14,520

Engineering in Houston MSA

Loca on Quo ent

Texas A&M University-Galveston Texas Southern University

1,549

Aerospace Engineers

2,360

1.66

University of Houston-Clear Lake

2,571

Biomedical Engineers

270

0.60

University of Houston-Downtown

2,435

4,360

6.37

University of Houston-University Park

9,279

11,030

1.89

University of St. Thomas

Electrical Engineers

4,450

1.17

Electronics Engineers, Except Computer

3,100

1.08

900

0.81

Health and Safety Engineers, Except Mining Safety Engineers and Inspectors

1,550

2.93

Industrial Engineers

5,100

0.97

Marine Engineers and Naval Architects

1,360

8.41

680

1.18

8,760

1.48

700

4.10

Engineering Discipline

Chemical Engineers Civil Engineers

Environmental Engineers

Materials Engineers Mechanical Engineers Mining and Geological Engineers, Including Mining Safety Engineers Petroleum Engineers All Other Engineers Total – Engineering OccupaƟons

10,810

14.70

2,740

1.03

58,170

1.81

SELECTED TWO-YEAR COLLEGES

411

990

DEGREES AWARDED School Year 2015 - 2016

Alvin Community College

1,165

Blinn College

1,722

Houston Community College System

7,192

Lee College

1,771

Lone Star College System

7,995

San Jacinto College District

5,235

The largest business schools in the area con nue to a ract na onal a en on. Ranked no. 3 in 2015 by the Princeton Review and Entrepreneur Magazine, the University of Houston’s (UH) undergraduate entrepreneur program con nues to garner na onal praise.

Source: U.S. Bureau of Labor Statistics, Occupational Employment Statistics, May 2015

16 2016 HOUSTON REGION MARKET PROFILE

Houston Region Average Annual Employment - 2015

Educa on

HOUSTON.ORG/BUSINESS

1% 2% 3% 3% 4% 7% 8% 10% 13% 13% 16% 20%

Informa on Real Estate/Rental/Leasing Finance & Insurance Energy Other Services Construc on Manufacturing Leisure & Hospitality Educa onal & Health Services Government Professional & Business Services Trade/Transporta on/U li es Source: Texas Workforce Commission, January 2016

Entrepreneurial Spirit Houston consistently ranks as one of the top metros with a high level of entrepreneurial spirit. In fact, Houston ranks eighth for startup ac vity among the 40 largest MSAs in the United States, according to a 2015 study conducted by the Ewing Marion Kauffman Founda on.

17

Transportation & Infrastructure

TRANSPORTATION & INFRASTRUCTURE Whether by land, air, or sea, Houston offers an impressive array of logis cal and distribu on channels that businesses count on to meet the demands of today’s fastpaced marketplace. With a loca on that’s equidistant from the East and West coasts, and just hours by air from any metro area in the country, Houston is an ideal hub for companies that need na onal distribu on for their products.

N O. 1 P O U.S. IN FROT IN T H E TO N N ARGE IG N E - PORT OF HOUST AUTHORITY ON

69

Airports The Houston Airport System (HAS) ranks as one of the largest mul -airport systems in North America. The Houston Airport System is comprised of George Bush Intercon nental Airport (IAH), William P. Hobby Airport (HOU) and Ellington Airport (EFD). Scheduled and charter passenger carriers fly directly to approximately 124 domes c and 74 interna onal des na ons from Houston. Other airports in the region include: Scholes Interna onal Airport at Galveston (GLS), Jack Brooks Regional Airport (BPT) near Beaumont and Sugar Land Regional Airport (SGR), Conroe-North Houston Regional Airport (KCXO).

69

Highways

Railroads

Houston’s trucking industry is well-integrated with the Port of Houston, Houston Intercon nental Airport (IAH), Hobby Airport, Ellington Airport, and the mainline railroads serving the city. Houston is at the crossroads of Interstate highways 10, 45 and 99. Highway 99, also known as Houston’s third loop, is more than halfway complete and slated to be the longest U.S. beltway. Other major highways serving Houston are Interstate 610, U.S. 59 (I-69), U.S. 90, U.S. 290, Texas 146, Texas 225, Texas 249, Texas 288, Hardy Toll Road, Westpark Tollway, and Beltway 8. Houston is located along the route of the I-69 “NAFTA superhighway” that will link Canada, the U.S. industrial Midwest, Texas and Mexico.

As one of the na on’s busiest rail centers, the Houston region has 3 class 1 railways with a rail network of more than 800 miles of rail line and 21 miles of railroad bridges.

Fourteen mainline tracks radiate from Houston and approximately 2,200 trains per week travel within the Houston region’s rail network. The widespread coverage of BNSF, KCS and UP allows them to connect to most of the major markets.

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The region is home to a number of ports including the ports of Houston, Galveston, Freeport and Texas City. The Port of Houston is ranked first in the U.S. in foreign tonnage and second in total tonnage.

An environmental and security leader, the Port of Houston was the first U.S. port to achieve both ISO14001 and ISO28000. The Port of Houston is the largest container port on the Gulf Coast, handling 68 percent of Gulf Coast container traffic in 2015 and ranked sixth largest U.S. container port by total TEUs in 2015. The Ports of Houston and Freeport are inves ng heavily to increase container and break bulk cargo capacity. Capital investments and maintenance expenditures at the Port of Houston from 2010-2015 totaled $28.8 billion in investments and expenditures. Projected actual investment for all companies for 2012 to 2015 could reach $35 billion for the region.

HOUSTON.ORG/BUSINESS

19

U li es The majority of Texas enjoys a deregulated energy market, thus providing electricity customers with a selec on of retail providers and open market compe on. For the majority of the Houston region, electric power is provided by CenterPoint Energy, the local PUC-regulated Transmission and Distribu on U lity or “local wires company” or Entergy Texas. Water supply now available or under development will meet Houston’s needs beyond 2035.

Taxes Houston’s tax structure makes it a low cost center for doing business.

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Business Costs

Overview of Taxes in the City of Houston TA X

BUSINESS COSTS

Personal Income Tax

None

Corporate Income Tax

None

State Franchise Tax 2, 3

The franchise tax rates are: 1.0% for most en es 0.5% for qualifying wholesalers and retailers 4 0.575% for those en es with $10 million or less in Total Revenue and elec ng the E-Z Computa on

Office & Industrial Space Houston office space remains a bargain in contrast with other major metropolitan areas. In Houston ― the na on’s fi h-largest office market, with 210.1 million square feet (msf) of net rentable area ― overall occupancy at the closing of the first quarter in ‘16 stood at 85.7 percent (90.5 percent in the Central Business District (CBD) and 84.5 percent in the suburbs). Houston’s 112.1 msf of Class A space was 88.1 percent leased. The first quarter ’16 Class A asking lease rates averaged $45.16 per square foot in the CBD and Class A lease rates in suburban sub markets averaged $35.46. Overall asking lease rates averaged $28.24.

Ad Valorem Property Tax The following items are taxed at the local level in the state of Texas. The same tax rates are applicable for all items: -Real Property (includes land and buildings) -Tangible Personal Property used for the produc on of income (includes inventory, equipment, raw materials, furnishings, vehicles and tools)

U.S. INDUSTRIAL MARKETS COST COMPARISON Q1 2016 Metro Market U.S. Total/Average

Exis ng Inventory (Sq.Ft.)

Under Construc on (Sq.Ft.)

Vacancy Rate (%)

Sales Price (U.S. $/Sq.Ft.)

15,193,827,467

185,534,889

6.3%

$81.00

Houston, TX

519,561,628

12,261,923

5.4%

$66.00

Atlanta, GA

640,715,663

12,796,701

8.2%

$49.00

Boston, MA

171,329,699

1,061,855

18.6%

$77.00

1,338,800,146

11,476,764

7.1%

$68.00

Los Angeles, CA

895,073,600

2,914,200

1.4%

$125.00

Miami, FL

215,849,162

2,405,232

4.7%

$83.00

Washington, DC

227,027,165

3,142,655

9.3%

$122.00

Chicago, IL

Source: Colliers International, Industry Highlights, First Quarter 2016

Union & Labor Costs Texas is a right-to-work state, ensuring a choice among quality union and non-union skilled labor.

Houston boasts one of the lowest unioniza on rates na onwide with only 3.2 percent of its private workers unionized.

20 2016 HOUSTON REGION MARKET PROFILE

Descrip on

Unemployment Insurance Sales & Use Tax (Note: Maximum sales tax in the state of Texas is 8.25%)

Workers’ Compensa on Insurance

Property Tax Rates per $100 of Appraised Value (2015 rates)1 State of Texas............................................. None City of Houston.......................................... $0.601120 Harris County ............................................ $0.419230 Houston Independent School District.............. $1.1967 Houston Community College......................... $0.101942 Total Tax Rate............................................. $2.3190 (Note: These are illustra ve rates for a selected site within the City of Houston. Taxing jurisdic ons and tax rates vary depending on loca on of the property throughout the metro area)

2.7% general entry rate, charged on first $9,000 in earnings, reassessed a er 6 quarters and charged at the company’s own experience rate State of Texas—6.25% Harris County—None City of Houston—1.0% Harris County Metropolitan Transit Authority—1.0% Not required by the state of Texas. Op ons include: self insurance, state-operated Texas Workers’ Compensa on Insurance Fund or licensed private insurance company.

1

Taxes for ci es, coun es, school districts, municipal districts and other taxing jurisdic ons vary throughout the region. These rates are current as of April 2016 2 The revised tax base is the taxable en ty’s margin, unless a taxable en ty qualifies and elects to file using E-Z Computa on. Margin equal the lowest of three calcula ons: total revenue minus cost of goods sold; OR total revenue minus compensa on; Or total revenue mes 70 percent.

3 Exemp ons: The following businesses are exempt from business tax: Sole proprietorships, General partnerships (excluding limited liability partnerships) owned en rely by natural persons; Certain unincorporated passive en es, grantor trusts, estates of natural persons, escrows, real estate mortgage investment conduits (REMICs) and certain real estate investment trusts (REITs); where at least 90% of revenue is from passive investments (rent is not considered passive income); Non-profit and other organiza ons currently exempt from he franchise tax; Businesses with total revenue below the no-tax-due threshold amount; and Businesses that owe less than $1,000 in tax.

4 The 0.5% tax rate applies to taxable en es primarily engaged in wholesale or retail trade as described in Division F and Division G of the 1987 Standard Industrial Classifica on (SIC) Manual.

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Incentives & Resources

Texas Enterprise Fund

LOCAL & STATE BUSINESS INCENTIVES* Property Tax Abatement – Chapter 312

State

The Texas Enterprise Fund allows the Governor, with approval of the Lieutenant Governor and the Speaker of the House, to award cash grants for economic development, infrastructure development, community development, job training programs and to provide business incen ves to companies reloca ng or expanding in the state.

Texas Enterprise Zone Program

Local

State

A variety of ci es and coun es in the Houston region offer tax abatement agreements that exempt part of the increased value in real or personal property from taxa on for a period not to exceed 10 years.

Designated local communi es can partner with the State of Texas to promote job crea on and significant private investment to economically distressed areas of the state. Approved projects are eligible to apply for state sales and use tax refunds on qualified expenditures.

Foreign Trade Zone

Skills Development Fund

Local

Foreign Trade Zones (FTZ’s) allow companies dealing in foreign trade to delay payment of U.S. Custom’s import du es un l their goods and merchandise actually enter U.S. commerce. Goods can be brought into Foreign Trade Zones (FTZ) without formal U.S. Customs entry or without incurring U.S. Customs du es or excise taxes unless and un l they are imported into the United States.

Freeport Tax Exemp on

These discre onary incen ves typically take the form of property tax abatements, loans or grants, commitments for infrastructure, or payments of por ons of the sales tax generated by the project.

Nego a ons on these incen ves between the local jurisdic on and the developer occur on a case by case basis. The Chapter 380 is targeted specifically for use by ci es while Chapter 381 is specifically for use by county governments. These agreements can be used in tandem for the same project.

Local

An appraised value limita on agreement in which a taxpayer agrees to build or install property and create jobs in exchange for a limita on on the taxable property value for school district maintenance and opera ons tax (M&O) purposes and a tax credit. The minimum limita on value varies by school district.

Type A & Type B

State

Leased or purchased machinery, equipment, replacement parts, and accessories that are used or consumed in the manufacturing, processing, fabrica ng, or repairing of tangible personal property for ul mate sale, are exempt from state and local sales and use tax.

Natural Gas & Electricity Sales & Use Tax Exemp on

Local

School Property Tax Limita on - Chapter 313

Skills Development Fund grants are available to train employees through the state’s community colleges, successfully merging business needs and local customized training. This fund assists businesses and trade unions by financing the design and implementa on of customized job training projects.

Manufacturing Sales Tax Exemp on

Local

Many ci es, coun es and school districts in the Houston region have adopted the Freeport Tax Exemp on, exemp ng ad valorem property taxes for any inventory exported outside the state within 175 days. Freeport property includes goods, wares, merchandise, ores and certain aircra and aircra parts.

Chapter 380 & 381

State

Local

Municipali es may offer cash awards made possible by local sales and use tax allotments dedicated to economic development (Type A and Type B sales tax). The tax revenues in two forms, the original ‘4A’ tax and the more flexible ‘4B’ tax, are used to finance economic development programs and incen ves that create primary (or direct) jobs.

State

Natural Gas & Electricity Texas companies are exempt from paying state and local sales and use tax on electricity and natural gas used in manufacturing, processing, or fabrica ng tangible personal property.

Texas Capital Fund

State

Supports rural business development, reten on and expansion by providing funds for public infrastructure, real estate development, or the elimina on of deteriorated condi ons.

Diversifica on Waiver (Out-of-State Tui on Waiver)

State

The Economic Development and Diversifica on In-State Tui on Incen ve may be offered to qualified businesses that are in the decision-making process to relocate or expand their opera ons into Texas.

Research and Development Tax Credit

State

The Research & Development tax credit provides qualified companies with an op on for tax savings based on a purchase of equipment or so ware, R&D expenditures or contracts with higher educa on ins tu ons performing research.

State Sales Tax Exemp on for Qualified Data Centers

State

Texas provides 100 percent exemp on on sales tax for computers, equipment, cooling systems, power infrastructure, electricity and fuel for data centers mee ng the minimum thresholds of $200 million in capital investment, 20 new jobs, and a salary at least 120 percent of the county average salary.

22 2016 HOUSTON REGION MARKET PROFILE

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POSITIVE RATINGS OF JOB OPPORTUNITIES IN THE HOUSTON AREA

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Houstonians on Houston Based on the 35th Annual Kinder Institute Houston Area Survey, Houstonians are positive about job opportunities in the Houston region. When asked how they would rate the Houston area for job opportunities, 62 percent of respondents gave ratings of “excellent” or “good”.

30% 20% 10% 83 86 89 92 95 98 01 04 07 10 13 16 Year of Survey

Source: 35th Annual Kinder Institute Houston Area Survey

Health Care

Houston is not just a great place to work; it’s a great place to live and play. From an eclec c culture and nightlife to affordable living and the ability to land a great job, the opportuni es in Houston are limitless.

Houstonians enjoy the big city perks and ameni es Houston has to offer without the he y price tag.

Houston has long been known for its first-rate health care system, with many Houston area hospitals consistently ranking among the na on’s top ins tu ons. The Texas Medical Center is the largest medical complex in the world with 54 world-renowned medical research and academic ins tu ons, including six general hospitals, 11 specialized hospitals, two specialized pa ent facili es, three medical schools, five schools of nursing, two schools of pharmacy, a dental school and a community college focused on 19 health science fields.

Affordable Housing and Livable Income In Houston, residents enjoy a much higher buying power than virtually any other major metropolitan area in the country. The C2ER Cost of Living Index for the first quarter of 2015 also shows that Houston’s overall a er-taxes living costs are 1.8 percent below the average for all 273 urban areas par cipa ng in the survey.

Houston’s Downtown Living Ini a ve, a program which awards $15,000 per unit in tax rebates to developers who create homes or mul family projects, will triple over the next few years. As of February, the Downtown District reports a total of 17 residen al projects that are under construc on or in the planning to date.

Urban Development Houston has seen a resurgence in urban living. Houston’s Downtown, Midtown and Neartown communi es offer residents access to urban living at affordable costs. A $50 million renova on to one of Houston’s urban parks, Buffalo Bayou Park, allows residents quick access to scenery and skyline views, artwork, play areas, the “go-to” dog park in the city, hike and bike trails, and gathering places to enjoy outdoor ac vi es as well as live, ar s c performances.

COST OF LIVING COMPARISONS: SELECTED METRO AREAS PERCENT ABOVE/BELOW THE U.S. AVERAGE COST

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24 2016 HOUSTON REGION MARKET PROFILE

H O M E TO THE W O R LD’S LA R G E ST M E D IC A L CENTER C O M P LE X

Source: Council for Community and Economic Research (C2ER), Cost of Living Index, First Quarter, 2016 (Data based on a survey of 260 urban areas, published May 2016)

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HOUSTON: THE CITY WITH NO LIMITS Arts & Culture Houston is one of the few U.S. ci es with resident companies in all four major performing arts - drama, ballet, opera and orchestra. Houston has an acclaimed and extensive cultural scene including interna onally renowned museums, symphony, grand opera, ballet and theatre; and a 17-block Downtown Theater District.

AND C U LT U RCEA P ITA L O F Y C U LI N A RA S ͳ 10,000 TEX ANTS AND R E S TAU R D R IN K IN EGN T S. HM E S TA B LI S

Outdoor Recrea on

Shopping & Entertainment Houston offers world-class shopping, from the famed Houston Galleria to the pedestrian-friendly Sugar Land Town Square; from the urban vibe of CITYCENTRE to the family-friendly Memorial City Mall and The Woodlands Market Street.

There is something for every taste and budget. And when it comes to music, Houstonians can enjoy the indie scene at the Free Press Summer Fest, or catch some of the music industry’s biggest names playing at the Toyota Center, NRG Stadium, Bayou Center and the Cynthia Woods Mitchell Pavilion.

Sports Houston has played host to the na on’s biggest spor ng events from the Super Bowl to NCAA Final Four and the NBA Finals. Locally, we cheer on the Astros (MLB) at Minute Maid Park, the Rockets (NBA) at Toyota Center, the Texans (NFL) at NRG Stadium, the Dynamo (MLS) and the Dash at BBVA Compass Stadium, the rustlers at the Houston Livestock Show and Rodeo (the world’s largest) – and everything in between.

There are almost 53,000 acres of park space and 378 miles of hike and bike trails in the city of Houston alone. Houston has three of the 50 largest parks — Cullen Park (7th); George Bush Park (10th); and Bear Creek Pioneers Park (34th). There are more than 170 golf courses in the region — from Memorial Park, one of the highest rated municipal golf courses in the state, to the well-maintained and lower-priced Brock Park. For outdoor fun, the op ons in Houston are limitless.

26 2016 HOUSTON REGION MARKET PROFILE

THECITYWITHNOLIMITS.COM

Services

FIVE KEY STEPS FOR A SUCCESSFUL EXPANSION INTO HOUSTON The Greater Houston Partnership’s economic development team is on stand-by to assist with each step, including exploring available incentives.

1

2

3

4

Research the Houston market Contact the Greater Houston Partnership Fact finding visits to Houston Build the business case Learn about business opportuni es

Legal, accounting and banking Tax considera ons Register a U.S. en ty Set up a U.S. bank account Compliance with U.S. accoun ng principles

Real Estate Options Locate office space Find warehouse/industrial space Explore purchase/lease op ons Obtain insurances

Workforce Obtain visas Staff recruitment, reloca on Employment law

GREATER HOUSTON PARTNERSHIP ECONOMIC DEVELOPMENT SERVICES The Partnership works in conjunc on with more than 35 regional economic development groups to: • • • • •

Assist in site selec on analysis Assist in evalua ng and applying for incen ves Aid in the permi ng process Provide data on key business factors Provide introduc ons to industry and innova on leaders and regional economic development organiza ons

For more informaƟon about Houston’s business climate, or expanding in the region, contact the Greater Houston Partnership’s Economic Development Division at 713.844.3648 or visit www.houston.org/business.

5 28 2016 HOUSTON REGION MARKET PROFILE

Open for business Marke ng and communica ons Supply chain development Develop business networks Review expansion plans HOUSTON.ORG/BUSINESS

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