The CoStar Industrial Report

Transcription

1 The CoStar Industrial Report M I D - Y E A R Houston Industrial Market

2 Houston Industrial Market MID-YEAR 2010 HOUSTON Table of Contents Table of Contents A Methodology B Terms & Definitions C Market Highlights & Overview CoStar Markets & Submarkets Employment & Tenant Analysis Employment & Unemployment Analysis Tenant Profiles Inventory & Development Analysis Construction Activity Map Inventory & Development Analysis Select Top Deliveries Select Top Under Construction Properties Figures at a Glance Figures at a Glance by Building Type & Market Figures at a Glance by Building Type & Submarket Historical Figures at a Glance Leasing Activity Analysis Leasing Activity Map Leasing Activity Analysis Select Top Lease Transactions Sales Activity Analysis Sales Activity Analysis Select Top Sales Transactions Select Same Building Sales Select Land Sales Analysis of Individual CoStar Markets Austin County Market CBD Market North Corridor Market Northeast Corridor Market Northwest Corridor Market San Jacinto County Market Southeast Corridor Market Southern Corridor Market Southwest Corridor Market 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT A

3 HOUSTON MID-YEAR 2010 Houston Industrial Market Methodology The CoStar Industrial Report calculates Industrial statistics using CoStar Group's base of existing, under construction and under renovation Industrial buildings in each given metropolitan area. All Industrial building types are included, including warehouse, flex / research & development, distribution, manufacturing, industrial showroom, and service buildings, in both single-tenant and multi-tenant buildings, including owner-occupied buildings. CoStar Group's national database includes approximately 71.7 billion square feet of coverage in 3 million properties. All rental rates reported in the CoStar Industrial Report are calculated using the quoted rental rate for each property. For information on subscribing to CoStar s other products and services, please contact us at COSTAR, or visit our web site at Copyright 2010 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or completeness of the information. The publication is provided as is and CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CoStar Group, Inc. 2 Bethesda Metro Center Bethesda, MD USA (800) NASDAQ: CSGP B THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

4 Houston Industrial Market MID-YEAR 2010 HOUSTON Terms & Definitions Availability Rate: The ratio of available space to total rentable space, calculated by dividing the total available square feet by the total rentable square feet. Available Space: The total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date. Build-to-Suit: A term describing a particular property, developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant. A build-to-suit can be leased or owned by the tenant. In a leased build-to-suit, a tenant will usually have a long term lease on the space. Buyer: The individual, group, company, or entity that has purchased a commercial real estate asset. Cap Rate: Short for capitalization rate. The Cap Rate is a calculation that reflects the relationship between one year s net operating income and the current market value of a particular property. The Cap Rate is calculated by dividing the annual net operating income by the sales price (or asking sales price). CBD: Abbreviation for Central Business District. (See also: Central Business District) Central Business District: The designations of Central Business District (CBD) and Suburban refer to a particular geographic area within a metropolitan statistical area (MSA) describing the level of real estate development found there. The CBD is characterized by a high density, well organized core within the largest city of a given MSA. Class A: A classification used to describe buildings that generally qualify as extremely desirable investment-grade properties and command the highest rents or sale prices compared to other buildings in the same market. Such buildings are well located and provide efficient tenant layouts as well as high quality, and in some buildings, one-of-a-kind floor plans. They can be an architectural or historical landmark designed by prominent architects. These buildings contain a modern mechanical system, and have above-average maintenance and management as well as the best quality materials and workmanship in their trim and interior fittings. They are generally the most attractive and eagerly sought by investors willing to pay a premium for quality. Class B: A classification used to describe buildings that generally qualify as a more speculative investment, and as such, command lower rents or sale prices compared to Class A properties. Such buildings offer utilitarian space without special attractions, and have ordinary design, if new or fairly new; good to excellent design if an older non-landmark building. These buildings typically have average to good maintenance, management and tenants. They are less appealing to tenants than Class A properties, and may be deficient in a number of respects including floor plans, condition and facilities. They lack prestige and must depend chiefly on a lower price to attract tenants and investors. Class C: A classification used to describe buildings that generally qualify as no-frills, older buildings that offer basic space and command lower rents or sale prices compared to other buildings in the same market. Such buildings typically have below-average maintenance and management, and could have mixed or low tenant prestige, inferior elevators, and/or mechanical/electrical systems. These buildings lack prestige and must depend chiefly on a lower price to attract tenants and investors. Construction Starts: Buildings that began construction during a specific period of time. (See also: Deliveries) Contiguous Blocks of Space: Space within a building that is, or is able to be joined together into a single contiguous space. Deliveries: Buildings that complete construction during a specified period of time. In order for space to be considered delivered, a certificate of occupancy must have been issued for the property. Delivery Date: The date a building completes construction and receives a certificate of occupancy. Developer: The company, entity or individual that transforms raw land to improved property by use of labor, capital and entrepreneurial efforts. Direct Space: Space that is being offered for lease directly from the landlord or owner of a building, as opposed to space being offered in a building by another tenant (or broker of a tenant) trying to sublet a space that has already been leased. Existing Inventory: The square footage of buildings that have received a certificate of occupancy and are able to be occupied by tenants. It does not include space in buildings that are either planned, under construction or under renovation. Flex Building: A type of building designed to be versatile, which may be used in combination with office (corporate headquarters), research and development, quasi-retail sales, and including but not limited to industrial, warehouse, and distribution uses. A typical flex building will be one or two stories with at least half of the rentable area being used as office space, have ceiling heights of 16 feet or less, and have some type of drive-in door, even though the door may be glassed in or sealed off. Full Service Rental Rate: Rental rates that include all operating expenses such as utilities, electricity, janitorial services, taxes and insurance. Gross Absorption: The total change in occupied space over a given period of time, counting space that is occupied but not space that is vacated by tenants. Gross absorption differs from leasing Activity, which is the sum of all space leased over a certain period of time. Unless otherwise noted Gross Absorption includes direct and sublease space. Growth in Inventory: The change in size of the existing square footage in a given area over a given period of time, generally due to the construction of new buildings. Industrial Building: A type of building adapted for such uses as the assemblage, processing, and/or manufacturing of products from raw materials or fabricated parts. Additional uses include warehousing, distribution, and maintenance facilities. The primary purpose of the space is for storing, producing, assembling, or distributing product. Landlord Rep: (Landlord Representative) In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the owner/landlord is referred to as the Landlord Rep. Leased Space: All the space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease. Leasing Activity: The volume of square footage that is committed to and signed under a lease obligation for a specific building or market in a given period of time. It includes direct leases, subleases and renewals of existing leases. It also includes any pre-leasing activity in planned, under construction, or under renovation buildings. Market: Geographic boundaries that serve to delineate core areas that are competitive with each other and constitute a generally accepted primary competitive set of areas. Markets are buildingtype specific, and are non-overlapping contiguous geographic designations having a cumulative sum that matches the boundaries of the entire Region (See also: Region). Markets can be further subdivided into Submarkets. (See also: Submarkets) 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT C

5 HOUSTON MID-YEAR 2010 Houston Industrial Market Multi-Tenant: Buildings that house more than one tenant at a given time. Usually, multi-tenant buildings were designed and built to accommodate many different floor plans and designs for different tenant needs. (See also: Tenancy). Net Absorption: The net change in occupied space over a given period of time. Unless otherwise noted Net Absorption includes direct and sublease space. Net Rental Rate: A rental rate that excludes certain expenses that a tenant could incur in occupying office space. Such expenses are expected to be paid directly by the tenant and may include janitorial costs, electricity, utilities, taxes, insurance and other related costs. New Space: Sometimes called first generation space, refers to space that has never been occupied and/or leased by a tenant. Occupied Space: Space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant. Office Building: A type of commercial building used exclusively or primarily for office use (business), as opposed to manufacturing, warehousing, or other uses. Office buildings may sometimes have other associated uses within part of the building, i.e., retail sales, financial, or restaurant, usually on the ground floor. Owner: The company, entity, or individual that holds title on a given building or property. Planned/Proposed: The status of a building that has been announced for future development but not yet started construction. Preleased Space: The amount of space in a building that has been leased prior to its construction completion date, or certificate of occupancy date. Price/SF: Calculated by dividing the price of a building (either sales price or asking sales price) by the Rentable Building Area (RBA). Property Manager: The company and/or person responsible for the day-to-day operations of a building, such as cleaning, trash removal, etc. The property manager also makes sure that the various systems within the building, such as the elevators, HVAC, and electrical systems, are functioning properly. Quoted Rental Rate: The asking rate per square foot for a particular building or unit of space by a broker or property owner. Quoted rental rates may differ from the actual rates paid by tenants following the negotiation of all terms and conditions in a specific lease. RBA: Abbreviation for Rentable Building Area. (See also: Rentable Building Area) Region: Core areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are further divided into market areas, called Markets. (See also: Markets) Relet Space: Sometimes called second generation or direct space, refers to existing space that has previously been occupied by another tenant. Rentable Building Area: (RBA) The total square footage of a building that can be occupied by, or assigned to a tenant for the purpose of determining a tenant s rental obligation. Generally RBA includes a percentage of common areas including all hallways, main lobbies, bathrooms, and telephone closets. Rental Rates: The annual costs of occupancy for a particular space quoted on a per square foot basis. Sales Price: The total dollar amount paid for a particular property at a particular point in time. Sales Volume: The sum of sales prices for a given group of buildings in a given time period. Seller: The individual, group, company, or entity that sells a particular commercial real estate asset. SF: Abbreviation for Square Feet. Single-Tenant: Buildings that are occupied, or intended to be occupied by a single tenant. (See also: Build-to-suit and Tenancy) Sublease Space: Space that has been leased by a tenant and is being offered for lease back to the market by the tenant with the lease obligation. Sublease space is sometimes referred to as sublet space. Submarkets: Specific geographic boundaries that serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted primary competitive set, or peer group. Submarkets are building type specific (office, industrial, retail, etc.), with distinct boundaries dependent on different factors relevant to each building type. Submarkets are non-overlapping, contiguous geographic designations having a cumulative sum that matches the boundaries of the Market they are located within (See also: Market). Suburban: The Suburban and Central Business District (CBD) designations refer to a particular geographic area within a metropolitan statistical area (MSA). Suburban is defined as including all office inventory not located in the CBD. (See also: CBD) Tenancy: A term used to indicate whether or not a building is occupied by multiple tenants (See also: Multi-tenant) or a single tenant. (See also: Single-tenant) Tenant Rep: Tenant Rep stands for Tenant Representative. In a typical lease transaction between an owner/landlord and tenant, the broker that represents the interests of the tenant is referred to as a Tenant Rep. Time On Market: A measure of how long a currently available space has been marketed for lease, regardless of whether it is vacant or occupied. Under Construction: The status of a building that is in the process of being developed, assembled, built or constructed. A building is considered to be under construction after it has begun construction and until it receives a certificate of occupancy. Vacancy Rate: A measurement expressed as a percentage of the total amount of physically vacant space divided by the total amount of existing inventory. Under construction space generally is not included in vacancy calculations. Vacant Space: Space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available. For example, sublease space that is currently being paid for by a tenant but not occupied by that tenant, would be considered vacant space. Likewise, space that has been leased but not yet occupied because of finish work being done, would also be considered vacant space. Weighted Average Rental Rate: Rental rates that are calculated by factoring in, or weighting, the square footage associated with each particular rental rate. This has the effect of causing rental rates on larger spaces to affect the average more than that of smaller spaces. The weighted average rental rate is calculated by taking the ratio of the square footage associated with the rental rate on each individual available space to the square footage associated with rental rates on all available spaces, multiplying the rental rate by that ratio, and then adding together all the resulting numbers. Unless specifically specified otherwise, rental rate averages include both Direct and Sublet available spaces. Year Built: The year in which a building completed construction and was issued a certificate of occupancy. YTD: Abbreviation for Year-to-Date. Describes statistics that are cumulative from the beginning of a calendar year through whatever time period is being studied. D THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

6 Houston Industrial Market OVERVIEW Houston s Vacancy Decreases to 6.8% Net Absorption Positive 483,401 SF in the Quarter MID-YEAR 2010 HOUSTON The Houston Industrial market ended the second quarter 2010 with a vacancy rate of 6.8%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 483,401 square feet in the second quarter. Vacant sublease space increased in the quarter, ending the quarter at 859,132 square feet. Rental rates ended the second quarter at $5.26, a decrease over the previous quarter. A total of four buildings delivered to the market in the quarter totaling 178,900 square feet, with 238,518 square feet still under construction at the end of the quarter. Absorption Net absorption for the overall Houston Industrial market was positive 483,401 square feet in the second quarter That compares to positive 1,785,882 square feet in the first quarter 2010, positive 222,801 square feet in the fourth quarter 2009, and positive 1,089,587 square feet in the third quarter Tenants moving out of large blocks of space in 2010 include: CADECO Industries, Inc. moving out of (251,000) square feet at 350 Portwall St, American Steel Building Co., Inc. moving out of (105,810) square feet at 750 Almeda Genoa Rd, and Bayou Packaging moving out of (85,450) square feet at 2830 Produce Row. Tenants moving into large blocks of space in 2010 include: Rooms To Go moving into 1,201,280 square feet at Miller Rd, Jake s Finer Foods moving into 180,000 square feet at Hollister Dr, and CADECO Industries, Inc. moving into 154,114 square feet at Lockwood Distribution Ctr - Bldg 1. The Flex building market recorded net absorption of positive 100,089 square feet in the second quarter 2010, compared to positive 404,733 square feet in the first quarter 2010, positive 254,275 in the fourth quarter 2009, and positive 452,573 in the third quarter The Warehouse building market recorded net absorption of positive 383,312 square feet in the second quarter 2010 compared to positive 1,381,149 square feet in the first quarter 2010, negative (31,474) in the fourth quarter 2009, and positive 637,014 in the third quarter Vacancy The Industrial vacancy rate in the Houston market area decreased to 6.8% at the end of the second quarter The vacancy rate was 6.9% at the end of the first quarter 2010, 6.9% at the end of the third and fourth quarter Flex projects reported a vacancy rate of 13.0% at the end of the second quarter 2010, 13.2% at the end of the first quarter 2010, 13.7% at the end of the fourth quarter 2009, and 14.2% at the end of the third quarter Warehouse projects reported a vacancy rate of 6.2% at the end of the second quarter 2010, 6.3% at the end of first quarter 2010 and at the end of the forth quarter as well. 6.1% at the end of the third quarter Largest Lease Signings The largest lease signings occurring in 2010 included: the 303,000-square-foot lease signed by Ashley Furniture at Airtex Industrial Center - Phase I in the North Corridor market; the 212,961-square-foot deal signed by Gulf Winds International, Inc. at South Loop one in the Southern Corridor market; and the 210,000-square-foot lease signed by Williamsport Distribution Center at Williamsport Distribution Center - Bldg Two in the Southeast Corridor market. Sublease Vacancy The amount of vacant sublease space in the Houston market increased to 859,132 square feet by the end of the second quarter Vacancy Rates by Building Type % Flex Warehouse Total Market 20% Vacancy Rate 15% 10% 5% 0% COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 1

7 HOUSTON MID-YEAR 2010 Houston Industrial Market OVERVIEW 2010, from 834,704 square feet at the end of the first quarter There was 1,082,824 square feet vacant at the end of the fourth quarter 2009 and 1,011,192 square feet at the end of the third quarter Houston s Flex projects reported vacant sublease space of 116,585 square feet at the end of second quarter 2010, up from the 112,422 square feet reported at the end of the first quarter There were 118,119 square feet of sublease space vacant at the end of the fourth quarter 2009, and 184,259 square feet at the end of the third quarter Warehouse projects reported increased vacant sublease space from the first quarter 2010 to the second quarter Sublease vacancy went from 722,282 square feet to 742,547 square feet during that time. There was 964,705 square feet at the end of the fourth quarter 2009, and 826,933 square feet at the end of the third quarter Rental Rates The average quoted asking rental rate for available Industrial space was $5.26 per square foot per year at the end of the second quarter 2010 in the Houston market area. This represented a 3.5% decrease in quoted rental rates from the end of the first quarter 2010, when rents were reported at $5.45 per square foot. The average quoted rate within the Flex sector was $8.44 per square foot at the end of the second quarter 2010, while Warehouse rates stood at $4.84. At the end of the first quarter 2010, Flex rates were $9.78 per square foot, and Warehouse rates were $4.90. U.S. Vacancy Comparison Past 8 Quarters Vacancy Rate 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2008 Source: CoStar Property q Houston q 2009 United States q q Deliveries and Construction During the second quarter 2010, four buildings totaling 178,900 square feet were completed in the Houston market area. This compares to 10 buildings totaling 1,562,986 square feet that were completed in the first quarter 2010, seven buildings totaling 786,483 square feet completed in the fourth quarter 2009, and 283,488 square feet in 12 buildings completed in the third quarter There were 238,518 square feet of Industrial space under construction at the end of the second quarter Some of the notable 2010 deliveries include: Miller Rd, a 1,057,126-square-foot facility that delivered in first quarter 2010 and is now 100% occupied, and Hollister Dr, a 180,000-square-foot building that delivered in first quarter 2010 and is now 100% occupied. The largest projects underway at the end of second quarter 2010 were Portwall Distribution Center IV, a 148,793-squarefoot building with 0% of its space pre-leased, and FM- 529, a 34,125-square-foot facility that is 0% pre-leased. Inventory Total Industrial inventory in the Houston market area amounted to 498,619,331 square feet in 14,279 buildings as of the end of the second quarter The Flex sector consisted of 44,435,734 square feet in 1,660 projects. The Warehouse sector consisted of 454,183,597 square feet in 12,619 buildings. Within the Industrial market there were 3,434 owner-occupied buildings accounting for 151,141,494 square feet of Industrial space. Sales Activity Tallying industrial building sales of 15,000 square feet or larger, Houston industrial sales figures fell during the first quarter 2010 in terms of dollar volume compared to the fourth quarter of In the first quarter, three industrial transactions closed with a total volume of $12,529,120. The three buildings totaled 312,640 square feet and the average price per square foot equated to $40.08 per square foot. That compares to seven transactions totaling $18,124,000 in the fourth quarter. The total square footage was 310,092 for an average price per square foot of $ Total year-to-date industrial building sales activity in 2010 is up compared to the previous year. In the first three months of 2010, the market saw three industrial sales transactions with a total volume of $12,529,120. The price per square foot has averaged $40.08 this year. In the first three months of 2009, the market posted six transactions with a total volume of $10,895,000. The price per square foot averaged $ Cap rates have been lower in 2010, averaging 7.44%, compared to the first three months of last year when they averaged 7.93%. One of the largest transactions that has occurred within the last four quarters in the Houston market is the sale of Igloo Products Corp. in Katy. This 914,195-square-foot industrial building sold for $38,100,000, or $41.68 per square foot. The property sold on 5/21/2010, at an 8.13% cap rate. Reports compiled by: Alfredo Negron CoStar Research Manager; Jeannie Reamer, CoStar Research Associate; and Shanice Ortiz, CoStar Research Associate. 2 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

8 Houston Industrial Market OVERVIEW MID-YEAR 2010 HOUSTON. Absorption & Deliveries Past 8 Quarters 5.0 Net Absorption 4.3 Deliveries (1.0) (0.4) q q q q Source: CoStar Property 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 3

9 HOUSTON MID-YEAR 2010 Houston Industrial Market MARKETS CoStar Markets & Submarkets In analyzing metropolitan areas in the U.S., CoStar has developed geographic designations to help group properties together, called Regions, Markets and Submarkets. Regions are the equivalent of metropolitan areas, or areas containing a large population nucleus, that together with adjacent communities have a high degree of economic and social integration. Regions are then divided into Markets, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group. Markets Austin County Ind CBD Ind North Corridor Ind Northeast Corridor Ind Northwest Corridor Ind San Jacinto County Ind Southeast Corridor Ind Southern Corridor Ind Southwest Corridor Ind Submarkets Austin County Ind CBD-NW Inner Loop Ind Downtown Houston Ind North Inner Loop Ind Southwest Inner Loop Ind North Fwy/Tomball Pky Ind North Hardy Toll Road Ind North Outer Loop Ind Woodland/Conroe Ind Northeast Hwy 321 Ind Northeast Hwy 90 Ind Northeast I-10 Ind Northeast Inner Loop Ind Hwy 290/Tomball Pky Ind Northwest Hwy 6 Ind Northwest Inner Loop Ind Northwest Near Ind Northwest Outliers Ind West Outer Loop Ind San Jacinto County Ind East I-10 Outer Loop Ind East-Southeast Far Ind Southeast Outer Loop Ind South Hwy 35 Ind South Inner Loop Ind Hwy 59/Hwy 90 (Alt) Ind Southwest Far Ind Southwest Outer Loop Ind Sugar Land Ind 4 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

10 Houston Industrial Market EMPLOYMENT AND TENANT MID-YEAR 2010 HOUSTON Total Employment by Industry Percent of Total Employment by Industry Total Employment Growth Total Number of Jobs Added Per Year 4% 15% 9% 4% 12% 7% Natural Resources & 9% Mining Construction 14% 5% 20% 1% Manufacturing Trade, Transportation & Utilities Information Financial Activities Professional & Business Services Education & Health Services Leisure & Hospitality Other Services Government Percent Growth 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% Houston U.S. Average Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics Total Employment Growth Cumulative Growth in Jobs Over the Past 5 Years Market Employment Growth Inventory Growth Difference Atlanta -5.00% 3.70% -8.70% Chicago -4.10% 3.90% -8.00% Dallas/Ft Worth 2.40% 6.60% -4.20% Denver -2.10% 3.20% -5.30% Detroit % 0.80% % Houston 5.10% 6.30% -1.20% Inland Empire (California) -8.40% 13.70% % Los Angeles -6.40% 1.20% -7.60% Northern New Jersey -3.70% 2.20% -5.90% Pittsburgh -1.80% 1.80% -3.60% Source: Department of Labor, Bureau of Labor Statistics Historical Unemployment Rates Industrial* Employment Growth Number of Industrial* Jobs Added Per Year Percent Growth 6.0% Houston U.S. Average 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% Source: Department of Labor, Bureau of Labor Statistics. * Industrial employment is defined as jobs in the Manufacturing, and Trade, Transportation & Utilities industries 12.0% Houston U.S. Average 10.0% Percent Unemployment 8.0% 6.0% 4.0% 2.0% 0.0% Source: Department of Labor, Bureau of Labor Statistics 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 5

11 HOUSTON MID-YEAR 2010 Houston Industrial Market EMPLOYMENT AND TENANT Flex Tenants by Size Range Based on Total Number of Tenants Warehouse Tenants by Size Range Based on Total Number of Tenants 75,000 SF & Up 2.7% 75,000 SF & Up 11.4% 50,000-74,999 SF 1.6% 50,000-74,999 SF 7.6% 25,000-49,999 SF 5.3% 25,000-49,999 SF 15.8% 10,000-24,999 SF 18.9% 10,000-24,999 SF 30.5% 5,000-9,999 SF 20.0% 5,000-9,999 SF 13.5% 2,500-4,999 SF 24.8% 2,500-4,999 SF 8.7% Up to 2,499 SF 26.7% Up to 2,499 SF 12.5% 0% 5% 10% 15% 20% 25% 30% Percentage of Tenants 0% 5% 10% 15% 20% 25% 30% 35% Percentage of Tenants Source: CoStar Tenant Flex Tenants by Lease Expiration Based on Total Square Footage of Tenants Source: CoStar Tenant Warehouse Lease Expiration Based on Total Square Footage of Tenants % % % % % % % % % % % % 0% 5% 10% 15% 20% 25% Percentage of Tenants 0% 2% 4% 6% 8% 10% 12% 14% Percentage of Tenants 6 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

12 Houston Industrial Market INVENTORY & DEVELOPMENT MID-YEAR 2010 HOUSTON Construction Highlights in Select CoStar Markets Color Coded by Under Construction Square Footage as a Percentage of Existing Inventory 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 7

13 HOUSTON MID-YEAR 2010 Houston Industrial Market INVENTORY & DEVELOPMENT Historical Deliveries Deliveries Average Delivered SF Millions of SF * Future deliveries based on current under construction buildings. Construction Activity Markets Ranked by Under Construction RBA Under Construction Inventory Average Bldg Size Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C Northeast Corridor Ind 1 148, % 42, ,793 Northwest Corridor Ind 1 34, % 36,959 34,125 Southwest Corridor Ind 3 29, % 28,906 9,867 Southern Corridor Ind 1 26, % 31,008 26,000 San Jacinto County Ind % 11,450 0 Southeast Corridor Ind % 50,135 0 CBD Ind % 31,984 0 North Corridor Ind % 29,982 0 Austin County Ind % 32,244 0 Totals 6 238, % 34,920 39,753 Recent Deliveries Leased & Un-Leased SF in Deliveries Since 2006 Future Deliveries Preleased & Un-Leased SF in Properties Scheduled to Deliver 12.0 Leased Un-Leased 200 Preleased Un-Leased Millions of SF Thousands of SF T q 8 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

14 Houston Industrial Market INVENTORY & DEVELOPMENT MID-YEAR 2010 HOUSTON Historical Construction Starts & Deliveries Square Footage Per Quarter Starting and Completing Construction 6.0 Construction Starts Deliveries Millions of SF q q q q q q q Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant < 50,000 SF 7 75,760 32, % $ ,200 50,560 50,000 SF - 99,999 SF 4 327, , % $ , , ,000 SF - 249,999 SF 2 281, , % $ , ,000 SF - 499,999 SF % $ 0 0 >= 500,000 SF 1 1,057,126 1,057, % $ 0 1,057,126 Recent Development by Tenancy Existing Inventory Comparison Based on RBA Developed for Single & Multi-Tenant Use Based on Total RBA 2010 Deliveries Currently Under Construction By Building Type By Tenancy Type 13% 25% 9% 52% 48% 87% 75% 91% Multi Single Multi Single Flex Warehouse Multi Single 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 9

15 HOUSTON MID-YEAR 2010 Houston Industrial Market INVENTORY & DEVELOPMENT 10 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

16 Houston Industrial Market INVENTORY & DEVELOPMENT MID-YEAR 2010 HOUSTON 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 11

17 HOUSTON MID-YEAR 2010 Houston Industrial Market FIGURES AT A GLANCE Flex Market Statistics Mid-Year 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County Ind % $ CBD Ind 199 4,099, , , % (2,791) 0 0 $9.56 North Corridor Ind 276 7,622, , , % 19,648 10,000 0 $9.27 Northeast Corridor Ind ,498 30,400 30, % $7.84 Northwest Corridor Ind ,771,095 2,352,595 2,401, % 428, ,560 0 $8.21 San Jacinto County Ind % $ Southeast Corridor Ind 146 2,996, , , % (7,736) 0 0 $7.99 Southern Corridor Ind 104 2,873, , , % 11, $7.88 Southwest Corridor Ind ,301,501 1,119,463 1,149, % 55, $8.12 Totals 1,660 44,435,734 5,667,865 5,784, % 504, ,560 0 $8.44 Warehouse Market Statistics Mid-Year 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County Ind , % $6.11 CBD Ind 1,886 62,586,652 3,344,656 3,362, % 250, $3.90 North Corridor Ind 2,069 62,685,346 4,357,170 4,542, % 316, ,350 0 $6.11 Northeast Corridor Ind ,676,599 1,264,510 1,264, % (326,978) 7, ,793 $4.04 Northwest Corridor Ind 3, ,647,684 6,655,476 6,922, % 604, ,650 34,125 $5.30 San Jacinto County Ind 3 34, % $4.45 Southeast Corridor Ind 1,452 77,119,421 6,407,231 6,519, % (458,490) 2,400 0 $4.03 Southern Corridor Ind 1,330 41,591,669 1,846,161 1,866, % (201,294) 5,000 26,000 $4.24 Southwest Corridor Ind 1,932 56,454,951 3,558,394 3,696, % 1,578,678 1,057,126 29,600 $6.23 Totals 12, ,183,597 27,433,598 28,176, % 1,764,461 1,501, ,518 $4.84 Total Industrial Market Statistics Mid-Year 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County Ind , % $6.11 CBD Ind 2,085 66,686,620 3,732,834 3,764, % 248, $4.19 North Corridor Ind 2,345 70,307,770 5,292,987 5,503, % 336, ,350 0 $6.58 Northeast Corridor Ind ,447,097 1,294,910 1,294, % (326,978) 7, ,793 $4.07 Northwest Corridor Ind 3, ,418,779 9,008,071 9,324, % 1,033, ,210 34,125 $5.91 San Jacinto County Ind 3 34, % $4.45 Southeast Corridor Ind 1,598 80,116,069 6,953,217 7,065, % (466,226) 2,400 0 $4.20 Southern Corridor Ind 1,434 44,465,269 2,141,587 2,162, % (189,924) 5,000 26,000 $4.40 Southwest Corridor Ind 2,344 67,756,452 4,677,857 4,846, % 1,634,011 1,057,126 29,600 $6.55 Totals 14, ,619,331 33,101,463 33,960, % 2,269,283 1,741, ,518 $ THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

18 Houston Industrial Market FIGURES AT A GLANCE MID-YEAR 2010 HOUSTON Flex Submarket Statistics Mid-Year 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County Ind % $ CBD-NW Inner Loop Ind 60 1,529, , , % 12, $9.92 Downtown Houston Ind ,219 87,233 87, % 34, $8.92 East I-10 Outer Loop Ind 2 9, % $ East-Southeast Far Ind 121 2,451, , , % (11,456) 0 0 $8.44 Hwy 290/Tomball Pky Ind 31 1,131,454 90, , % 220, ,800 0 $10.70 Hwy 59/Hwy 90 (Alt) Ind 123 2,649, , , % 105, $8.81 North Fwy/Tomball Pky Ind 69 1,968, , , % (59,587) 10,000 0 $8.78 North Hardy Toll Road Ind 78 2,721, , , % 68, $6.13 North Inner Loop Ind , , , % (61,690) 0 0 $9.60 North Outer Loop Ind 37 1,137, , , % (9,640) 0 0 $7.90 Northeast Hwy 321 Ind 8 96,952 2,600 2, % $16.80 Northeast Hwy 90 Ind ,468 24,675 24, % $6.63 Northeast I-10 Ind 5 72, % $ Northeast Inner Loop Ind 8 223,032 3,125 3, % $ Northwest Hwy 6 Ind 13 1,165, , , % $7.77 Northwest Inner Loop Ind 243 8,013,417 1,079,478 1,108, % 157,024 25,760 0 $8.26 Northwest Near Ind 82 1,686, , , % 11, $11.09 Northwest Outliers Ind 40 1,491, , , % 7, $7.48 San Jacinto County Ind % $ South Hwy 35 Ind 70 1,850, , , % 5, $3.44 South Inner Loop Ind 34 1,022,829 87,583 87, % 5, $9.11 Southeast Outer Loop Ind ,926 92,682 92, % 3, $5.75 Southwest Far Ind 49 1,776, , , % (23,159) 0 0 $9.61 Southwest Inner Loop Ind 88 1,276, , % 12, $11.17 Southwest Outer Loop Ind 145 3,879, , , % (37,558) 0 0 $7.48 Sugar Land Ind 95 2,996, , , % 10, $8.72 West Outer Loop Ind 59 1,282,732 90,525 94, % 32, $5.72 Woodland/Conroe Ind 92 1,794, , , % 20, $12.93 Totals 1,660 44,435,734 5,667,865 5,784, % 504, ,560 0 $ COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 13

19 HOUSTON MID-YEAR 2010 Houston Industrial Market FIGURES AT A GLANCE Warehouse Submarket Statistics Mid-Year 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County Ind , % $6.11 CBD-NW Inner Loop Ind ,101, , , % 110, $4.91 Downtown Houston Ind ,022,320 1,953,780 1,953, % 102, $3.51 East I-10 Outer Loop Ind ,092, , , % (63,132) 0 0 $3.91 East-Southeast Far Ind ,376,069 5,374,184 5,411, % (199,160) 2,400 0 $4.20 Hwy 290/Tomball Pky Ind ,531, , , % 68, $5.58 Hwy 59/Hwy 90 (Alt) Ind ,576,038 1,424,730 1,539, % 248, $5.42 North Fwy/Tomball Pky Ind ,474,514 1,018,375 1,021, % 95, $6.21 North Hardy Toll Road Ind ,522,094 2,113,452 2,288, % 177, ,100 0 $6.01 North Inner Loop Ind 169 6,005, , , % (22,542) 0 0 $3.65 North Outer Loop Ind ,105, , , % 55,425 67,250 0 $5.67 Northeast Hwy 321 Ind 37 1,058, % 8, $4.92 Northeast Hwy 90 Ind ,974, , , % (135,541) 0 0 $4.55 Northeast I-10 Ind 117 3,358,121 12,800 12, % 0 7,800 0 $4.29 Northeast Inner Loop Ind ,285, , , % (200,037) 0 148,793 $3.54 Northwest Hwy 6 Ind 123 3,354, , , % 22,072 65,000 0 $7.14 Northwest Inner Loop Ind 1,251 54,892,165 2,600,147 2,832, % 135, $4.91 Northwest Near Ind ,206, ,889 1,013, % (56,266) 0 0 $4.47 Northwest Outliers Ind 182 9,820, , , % 125, $6.42 San Jacinto County Ind 3 34, % $4.45 South Hwy 35 Ind 1,005 28,386,804 1,436,157 1,456, % (293,334) 5,000 26,000 $4.22 South Inner Loop Ind ,204, , , % 92, $4.33 Southeast Outer Loop Ind ,650, , , % (196,198) 0 0 $3.55 Southwest Far Ind 335 8,625, , , % 96, $7.19 Southwest Inner Loop Ind 419 9,457, , , % 60, $5.48 Southwest Outer Loop Ind ,163, , , % 156, $6.70 Sugar Land Ind ,089, , , % 1,076,652 1,057,126 29,600 $6.19 West Outer Loop Ind ,843,186 1,476,282 1,497, % 310, ,650 34,125 $5.81 Woodland/Conroe Ind ,583, , , % (12,451) 0 0 $6.81 Totals 12, ,183,597 27,433,598 28,176, % 1,764,461 1,501, ,518 $ THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

20 Houston Industrial Market FIGURES AT A GLANCE MID-YEAR 2010 HOUSTON Total Industrial Submarket Statistics Mid-Year 2010 Existing Inventory Vacancy YTD Net YTD Under Quoted Market # Blds Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates Austin County Ind , % $6.11 CBD-NW Inner Loop Ind ,631, , , % 123, $5.42 Downtown Houston Ind ,908,539 2,041,013 2,041, % 136, $3.66 East I-10 Outer Loop Ind ,101, , , % (63,132) 0 0 $3.91 East-Southeast Far Ind 1,096 44,827,750 5,827,488 5,864, % (210,616) 2,400 0 $4.43 Hwy 290/Tomball Pky Ind ,662,966 1,074,284 1,090, % 288, ,800 0 $5.90 Hwy 59/Hwy 90 (Alt) Ind ,225,175 1,623,474 1,740, % 354, $5.69 North Fwy/Tomball Pky Ind ,443,387 1,370,350 1,380, % 36,275 10,000 0 $6.56 North Hardy Toll Road Ind ,243,809 2,391,303 2,566, % 246, ,100 0 $6.03 North Inner Loop Ind 179 6,412, , , % (84,232) 0 0 $4.28 North Outer Loop Ind ,242, , , % 45,785 67,250 0 $5.77 Northeast Hwy 321 Ind 45 1,155,713 2,600 2, % 8, $5.38 Northeast Hwy 90 Ind ,353, , , % (135,541) 0 0 $4.59 Northeast I-10 Ind 122 3,430,167 12,800 12, % 0 7,800 0 $4.29 Northeast Inner Loop Ind ,508, , , % (200,037) 0 148,793 $3.54 Northwest Hwy 6 Ind 136 4,519, , , % 22,072 65,000 0 $7.65 Northwest Inner Loop Ind 1,494 62,905,582 3,679,625 3,940, % 292,024 25,760 0 $5.53 Northwest Near Ind ,893,037 1,146,990 1,160, % (45,262) 0 0 $5.85 Northwest Outliers Ind ,311, , , % 133, $6.55 San Jacinto County Ind 3 34, % $4.45 South Hwy 35 Ind 1,075 30,237,575 1,644,000 1,664, % (287,759) 5,000 26,000 $4.21 South Inner Loop Ind ,227, , , % 97, $4.94 Southeast Outer Loop Ind ,186, , , % (192,478) 0 0 $3.63 Southwest Far Ind ,401, , , % 73, $7.35 Southwest Inner Loop Ind ,734, , , % 72, $5.71 Southwest Outer Loop Ind ,043,257 1,281,203 1,281, % 119, $6.94 Sugar Land Ind ,086,252 1,097,955 1,149, % 1,086,812 1,057,126 29,600 $6.69 West Outer Loop Ind ,125,918 1,566,807 1,592, % 342, ,650 34,125 $5.80 Woodland/Conroe Ind ,377, , , % 7, $8.30 Totals 14, ,619,331 33,101,463 33,960, % 2,269,283 1,741, ,518 $ COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 15

21 HOUSTON MID-YEAR 2010 Houston Industrial Market FIGURES AT A GLANCE Flex Market Statistics Mid-Year 2010 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates q 1,660 44,435,734 5,667,865 5,784, % 100, , $ ,658 44,425,734 5,762,117 5,874, % 404, , ,000 $ q 1,655 44,195,174 5,930,593 6,048, % 254, , ,560 $ ,654 44,157,324 6,080,878 6,265, % 452, , ,410 $ q 1,650 44,116,574 6,507,693 6,676, % 240, , ,400 $ ,643 43,749,106 6,341,258 6,549, % (113,216) , ,018 $ ,628 43,359,329 5,911,185 6,046, % 560, , ,195 $ ,595 42,458,648 5,626,436 5,706, % 1,551, , ,684 $ ,576 41,835,465 5,864,128 6,634, % 482, , ,703 $ ,554 41,823,275 6,266,003 7,104, % 892, , ,563 $ ,533 40,931,353 6,197,359 7,105, % 1,093, , ,114 $ ,517 40,434,778 6,728,732 7,703, % 267, , ,175 $ ,490 39,571,765 6,289,942 7,107, % (436,371) , ,912 $ ,464 38,888,549 5,617,764 5,988, % 494, ,367, ,742 $ ,427 37,520,608 4,706,032 5,114, % (634,090) 47 1,371, ,477 $ ,380 36,148,830 2,914,252 3,108, % 575, , ,927 $5.72 Quoted Warehouse Market Statistics Mid-Year 2010 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates q 12, ,183,597 27,433,598 28,176, % 383, , ,518 $ , ,014,697 27,668,275 28,390, % 1,381, ,332, ,418 $ q 12, ,682,271 27,474,575 28,439, % (31,474) 6 748, ,530,926 $ , ,015,388 26,913,990 27,740, % 637, , ,279,559 $ q 12, ,772,650 27,110,535 28,135, % (609,562) 30 1,279, ,231,947 $ , ,493,641 25,358,091 26,246, % 619, ,947, ,336,512 $ , ,546,069 21,963,880 22,918, % 9,188, ,045, ,409,625 $ , ,553,867 21,501,147 22,114, % 9,923, ,379, ,064,209 $ , ,509,911 22,644,704 22,994, % 7,803, ,782, ,644,396 $ , ,062,250 24,545,726 25,349, % 13,234, ,607, ,308,873 $ , ,259,025 28,944,788 29,780, % 8,622, ,431, ,899,049 $ , ,827,484 32,357,998 33,972, % 445, ,048, ,246,339 $ , ,169,566 29,217,128 30,759, % 1,462, ,141, ,967,449 $ , ,407,482 25,234,756 26,459, % 4,601, ,433, ,120,964 $ , ,088,965 23,308,122 24,742, % 3,325, ,480, ,614,516 $ , ,636,610 19,841,842 20,615, % (1,770,986) 165 8,600, ,193,181 $4.67 Quoted Total Industrial Market Statistics Mid-Year 2010 Existing Inventory Vacancy Net Deliveries UC Inventory Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates q 14, ,619,331 33,101,463 33,960, % 483, , ,518 $ , ,440,431 33,430,392 34,265, % 1,785, ,562, ,418 $ q 14, ,877,445 33,405,168 34,487, % 222, , ,771,486 $ , ,172,712 32,994,868 34,006, % 1,089, , ,547,969 $ q 14, ,889,224 33,618,228 34,812, % (369,414) 37 1,646, ,515,347 $ , ,242,747 31,699,349 32,796, % 505, ,337, ,769,530 $ , ,905,398 27,875,065 28,964, % 9,749, ,946, ,186,820 $ , ,012,515 27,127,583 27,821, % 11,474, ,002, ,545,893 $ , ,345,376 28,508,832 29,629, % 8,285, ,500, ,293,099 $ , ,885,525 30,811,729 32,454, % 14,127, ,553, ,011,436 $ , ,190,378 35,142,147 36,886, % 9,716, ,928, ,639,163 $ , ,262,262 39,086,730 41,675, % 713, ,946, ,702,514 $ , ,741,331 35,507,070 37,867, % 1,026, ,854, ,500,361 $ , ,296,031 30,852,520 32,448, % 5,096, ,801, ,784,706 $ , ,609,573 28,014,154 29,857, % 2,691, ,852, ,586,993 $ , ,785,440 22,756,094 23,724, % (1,195,438) 201 9,491, ,018,108 $4.80 Quoted 16 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

22 Houston Industrial Market LEASING ACTIVITY MID-YEAR 2010 HOUSTON Leasing Highlights in Select CoStar Markets Color Coded by Vacancy Rate 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 17

23 HOUSTON MID-YEAR 2010 Houston Industrial Market LEASING ACTIVITY Historical Rental Rates Based on Quoted Rental Rates $14.00 Flex Warehouse Total Market $12.00 $1 Dollars/SF/Year $8.00 $6.00 $4.00 $2.00 $ q q q q Vacancy by Available Space Type Vacancy by Building Type Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Building Type Houston United States Houston United States 3% 4% 17% 14% 83% 86% 97% 96% Direct Sublet Direct Sublet Flex Warehouse Flex Warehouse U.S. Rental Rate Comparison Based on Average Quoted Rental Rates Future Space Available Space Scheduled to be Available for Occupancy* Dollars/SF/Year $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 Houston United States Millions $1.00 $ q q q q q q q * Includes Under Construction Space 18 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

24 Houston Industrial Market LEASING ACTIVITY MID-YEAR 2010 HOUSTON Select Top Industrial Leases Based on Leased Square Footage For Deals Signed in 2010 Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company 1 Airtex Industrial Center - Phase I North Hardy Toll Road Ind 303,000 1st Ashley Furniture Jones Lang LaSalle Americas, Inc. Colliers International 2 South Loop 1* South Hwy 35 Ind 212,961 2nd Gulf Winds International, Inc. N/A CB Richard Ellis 3 Williamsport Distribution Center - Bldg 2 Wil East-Southeast Far Ind 210,000 2nd Williamsport Distribution Center CB Richard Ellis Liberty Property Trust 4 Wingfoot Distribution Ctr - Bldg 1 Northwest Inner Loop Ind 201,624 1st N/A N/A ProLogis 5 Lockwood Distribution Ctr - Bldg 1 Downtown Houston Ind 154,114 1st CADECO Industries, Inc. Grubb & Ellis InSite Commercial Real Estate 6 Ellington Trade Center Phase I - Building D East-Southeast Far Ind 146,792 2nd N/A Fischer & Company NAI Houston 7 Bayport North Distribution Center - Phase I East-Southeast Far Ind 144,000 1st N/A N/A The Carson Companies 8 Beltway Crossing - Building 2 Hwy 59/Hwy 90 (Alt) Ind 141,440 1st Charming Charlie Jones Lang LaSalle Americas, Inc. Stream Realty Partners, L.P N Loop Fwy E Northeast Inner Loop Ind 139,871 2nd xpedx N/A N/A 10 Bay Area Business Park - Bldg 2 East-Southeast Far Ind 120,120 2nd N/A N/A Stream Realty Partners, L.P W Loop Fwy N* CBD-NW Inner Loop Ind 104,975 1st Prefco Corporation N/A Weingarten Realty Investors 12 Bayport North Distribution Center - Phase II East-Southeast Far Ind 100,000 1st A-International Distribution Corporation Jones Lang LaSalle Americas, Inc. Vantage Houston, Inc Aldine Westfield Rd North Hardy Toll Road Ind 98,850 1st LKQ Corporation N/A N/A Market St Southeast Outer Loop Ind 98,517 1st N/A N/A Weingarten Realty Investors 15 Jersey Village Corporate Center - Bldg 1* Hwy 290/Tomball Pky Ind 96,000 2nd United Stationers N/A ProLogis Clara Rd* Northwest Inner Loop Ind 81,350 1st The Service Center Ltd Jackson & Cooksey Transwestern Airline Dr* North Outer Loop Ind 78,483 2nd Gowan, Inc. N/A N/A 18 Airtex Industrial Center - Phase I North Hardy Toll Road Ind 75,860 1st Velocity Express Mohr Partners International Colliers International 19 Bayport North Distribution Center - Phase I East-Southeast Far Ind 72,000 1st N/A N/A The Carson Companies 20 Santa Fe Business Park South Hwy 35 Ind 71,000 2nd N/A N/A Garver Real Estate 21 East Belt-Bldg 4 East-Southeast Far Ind 68,883 1st Wrist USA Jones Lang LaSalle Americas, Inc. CB Richard Ellis 22 CDC Spec 15* East-Southeast Far Ind 67,500 1st Desselle Maggard Corporation- DMC NAI Houston Clay Development & Construction 23 Glazier Foods Co. Southwest Inner Loop Ind 65,617 2nd N/A N/A Cushman & Wakefield, Inc. 24 Verde Central Green Corporate Cente - Bldg #5 North Hardy Toll Road Ind 64,462 1st GAC Marine and Energy Direct Deal Verde Corporate Realty Services 25 Beltway Crossing Bldg 6 North Fwy/Tomball Pky Ind 63,763 1st N/A N/A InSite Commercial Real Estate 26 Fortune One Foods CBD-NW Inner Loop Ind 60,000 2nd Fortune One Foods Inc RE/MAX International, Inc. Michael Hill Properties High Life Dr North Fwy/Tomball Pky Ind 56,155 1st Pipestream, Inc The National Realty Group, Inc. Holt Lunsford Commercial, Inc Brittmoore Park Dr West Outer Loop Ind 52,727 1st N/A Direct Deal Butera Properties, Inc 29 Minimax 1* CBD-NW Inner Loop Ind 52,524 1st Funsource Partners NAI Houston Stream Realty Partners, L.P. 30 Claymoore Business Park - Bldg 1* Northwest Inner Loop Ind 52,200 1st Mohawk Carpet Transportat N/A Transwestern 31 ProLogis NorthPark - 8 North Hardy Toll Road Ind 51,758 1st General Cable Corporation Jones Lang LaSalle Americas, Inc. ProLogis 32 Beltway Crossing BP - Bldg 1* North Fwy/Tomball Pky Ind 50,453 2nd State of Texas N/A InSite Commercial Real Estate 33 Royal Holdings - Building 1 Hwy 290/Tomball Pky Ind 50,000 1st Prime Hardwoods 4M Realty Company The National Realty Group, Inc. 34 Greens Port Industrial Pk - 2G East I-10 Outer Loop Ind 50,000 2nd N/A N/A Cushman & Wakefield, Inc. 35 Alamo Crossing Commerce - Bldg D Northwest Near Ind 50,000 2nd Skyline Display Jones Lang LaSalle Americas, Inc. Colliers International 36 Intercontinental Cargo Ct - Bldg B* North Hardy Toll Road Ind 42,000 2nd Associated Global Systems, Inc. CB Richard Ellis Stream Realty Partners, L.P. 37 Equator Plaza Northwest Inner Loop Ind 40,712 1st Transcore Indermuehle & Company ICON Commercial Interests, LLC 38 Port North West - Bldg 4A West Outer Loop Ind 40,298 1st TSC Apparel Company NAI Houston Transwestern Sommermeyer St* Northwest Inner Loop Ind 36,450 1st Pathfinder Energy Services Jones Lang LaSalle Transwestern * Renewal 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 19

25 HOUSTON MID-YEAR 2010 Houston Industrial Market SALES ACTIVITY The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter 10.0% Cap Rate Price/SF $ % $160 Cap Rate Percentage 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% $140 $120 $100 $80 $60 $40 Dollars/SF 1.0% $20 0.0% q q q q q q 2010 $0 Source: CoStar COMPS Sales Volume & Price Sales Analysis by Building Size Based on Industrial Building Sales of 15,000 SF and Larger Based on Industrial Bldg Sales From April March 2010 Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate $300 $80 Millions of Sales Volume Dollars $250 $200 $150 $100 $50 $70 $60 $50 $40 $30 $20 $10 Price/SF < 25,000 SF ,499 $ 27,315,739 $ % 25K-99K SF ,665 $ 24,745,000 $ % 100K-249K SF 3 540,085 $ 48,450,000 $ % $ q q q q q q q q q q $0 >250K SF 2 646,004 $ 24,829,120 $ % Source: CoStar COMPS Source: CoStar COMPS U.S. Price/SF Comparison Based on Industrial Building Sales of 15,000 SF and Larger U.S. Cap Rate Comparison Based on Industrial Building Sales of 15,000 SF and Larger $80 Houston US 12.0% Houston US Dollars per SF $70 $60 $50 $40 $30 $20 $10 Cap Rate Percentage 10.0% 8.0% 6.0% 4.0% 2.0% $ q q q q q q q q q q 0.0% q q q q q q q q q q Source: CoStar COMPS Source: CoStar COMPS 20 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.

26 Houston Industrial Market SALES ACTIVITY MID-YEAR 2010 HOUSTON 2010 COSTAR GROUP, INC. THE COSTAR INDUSTRIAL REPORT 21

27 HOUSTON MID-YEAR 2010 Houston Industrial Market SALES ACTIVITY Select Land Sales Based on Industrial Zoned Land Sales Occurring From April June Bellaire Blvd, FM 1640, Rosenberg 6942 Fairbanks N Houston Rd, Houston Sale Price: $5,000,000 Sale Price: $655,142 Sale Price: $549,493 Acres: Acres: 4.00 Acres: 4.11 Price/SF: $6.72 Price/SF: $3.76 Price/SF: $3.07 Closing Date: 10/06/2009 Closing Date: 05/22/2009 Closing Date: 12/03/2009 Zoning: None Zoning: SY Zoning: Industrial Intended Use: Industrial Intended Use: Self-Storage Intended Use: Hotel Buyer: Kennedy Funding Buyer: Nolan, Pat & Amy Buyer: Fairbanks Ventures Seller: Carnival Night Club Seller: Simron Properties Llp Seller: Guhn Levi A Source: CoStar COMPS 22 THE COSTAR INDUSTRIAL REPORT 2010 COSTAR GROUP, INC.