Houston s Industrial Market 2013 YTD Positive Net Absorption Reaches 4.5M SF Houston

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1 Q INDUSTRIAL MARKET HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT Houston s Industrial Market 2013 YTD Positive Net Absorption Reaches 4.5M SF Houston HOUSTON INDUSTRIAL MARKET INDICATORS Q Q CITYWIDE NET ABSORPTION (SF) 1.2M 1.1M CITYWIDE AVERAGE VACANCY 5.3% 5.3% CITYWIDE AVERAGE RENTAL RATE $5.77 $5.90 SF DELIVERED 1.0M 2.6M SF UNDER CONSTRUCTION 2.4M 5.7M Houston s industrial market remains one of the top ten healthiest U.S. industrial markets because of its low vacancy, stable rental rates, and positive absorption. Houston posted 1.1M SF of positive net absorption in the third quarter, bringing the year-to-date net absorption to 4.5M SF. Industrial leasing activity reached 3.4M SF, mostly due to large renewals. Houston s average industrial vacancy rate increased from 5.0% to 5.3% between quarters because of the new space added to the market, and remained unchanged when compared to the same quarter one year ago. The citywide average quoted industrial rental rate increased to $5.86 from $5.74 per SF NNN between quarters, and increased on a year-over-year basis from $5.77 per SF NNN. Houston s lack of available industrial inventory has spurred demand for new product. Developers have responded and currently have 5.7M SF under construction. Some of the increased activity has been driven by build-to-suit projects for companies expanding in or relocating to the Houston market; however, more than half is in spec developments (3.2M SF). As Houston s available industrial inventory shrinks, we believe the increasing demand for new product will continue to spur both build-to-suit and spec development. The Houston metropolitan area added 80,700 jobs in the year ending August 2013, an annual increase of 3.0% over the prior year s job growth. Further, Houston s unemployment fell to 6.1% from 6.9% one year ago. With continued expansion in the energy industry, Houston s economy is expected to remain healthy for both the near and long-term. JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) UNEMPLOYMENT 8/12 8/13 HOUSTON 6.9% 6.1% TEXAS 6.9% 6.3% U.S. 8.2% 7.3% JOB GROWTH ANNUAL CHANGE # OF JOBS ADDED HOUSTON 3.0% 80.7K TEXAS 2.4% 258.5K U.S. 1.6% 2.2M 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , ,000 ABSORPTION, NEW SUPPLY & VACANCY RATES 8% 7% 6% 5% 4% 3% 2% Absorption New Supply

2 & Availability Although 2.6M SF of new inventory delivered during the third quarter, Houston s industrial vacancy rate only increased from 5.0% to 5.3% between quarters. At the end of the second quarter, Houston had 25.5M SF of vacant industrial space citywide, 1.5M SF more than the previous quarter. Among the major industrial corridors, the Northeast Corridor has the lowest vacancy rate, 3.0%, followed by the Northwest Corridor at 4.2%. Houston s industrial construction pipeline had 5.7M SF of projects underway at the end of the third quarter, including 3.2M SF of spec development. The largest project under construction is a 535,000-SF BTS distribution warehouse for Igloo, located in Katy, TX. A list of additional buildings currently under construction can be found on Page 4 of this report. The largest spec project in the pipeline is a 328,000-SF distribution warehouse located on Imperial Valley Drive in North Houston. Rental s Houston s citywide average quoted industrial rental rate for all product types increased from $5.74 to $5.86 per SF NNN in the third quarter. By property type, the average quoted NNN rental rates are as follows: $5.52 per SF for Distribution space; $4.49 per SF for Bulk Logistics space; $6.00 per SF for Flex/Service space; with Tech/R&D space averaging $12.56 per SF. Absorption & Demand Houston s industrial market posted 1.1M SF of positive net absorption in the third quarter, bringing the 2013 year-to-date total to 4.5M SF of positive net absorption. The North and Northwest Corridor submarkets outperformed all others in the third quarter, posting the largest positive net quarterly absorptions of 398K SF and 324K SF, respectively. There were several major tenant move-ins contributing to net absorption gains in the third quarter, including Crowley Maritime (128,500 SF); Favorite Brands (91,200 SF); Delta Petroleum (67,400 SF); Crane Worldwide (64,800 SF); and National Oilwell Varco ( 57,900 SF). Leasing Houston s industrial leasing activity reached 3.4M SF in the third quarter. A list of select third quarter industrial lease transactions are included in the table below. Q Top Industrial Leases Building Name/Address Submarket SF Tenant Lease Date 4331 Underw ood Dr East-Southeast Far 300,000 A-International 1, 2 Aug Rosprim St Northw est Inner Loop 119,700 Core Labratories 2 Jul Clinton Dr Dow ntow n 107,862 Chemtrusion, Inc. 1, 2 Jul W Airport Blvd Sugar Land 71,162 Pharmedium Sep Cedar Blvd East-Southeast Far 67,427 Delta Petroleum LLC 1 Jul Mula Rd Hw y 59/Hw y 90 (Alt) 65,130 EVS Valves, Inc. 2 Sep Gillingham Ln Sugar Land 55,326 Ellen Lighting 1 Aug W Little York Northw est Inner Loop 49,530 United Van Lines 2 Sep Canino Rd North Outer Loop 45,500 IFCO Systems North America Aug W Little York Rd, Suite 200 Northw est Inner Loop 32,045 IHS Global 2 Aug Navigation Blvd CBD-NW Inner Loop 31,972 Sam-Tex Exports LLC Sep Kirby Dr Southw est Far 30,271 Walgreens 2 Sep W Sam Houston Pky N West Outer Loop 26,280 Cosentino Aug West Little York Northw est Near 22,939 Cameron International Corporation Jul Blueberry St Northw est Near 20,708 A Finer Event Sep-13 1 Colliers International transaction 2 Renewal 3 Expansion COLLIERS INTERNATIONAL P. 2

3 Sales Activity Q Total Sales : $45.8M No. of Properties: 100 Total SF: 7.4M Average $/SF: $66 Average Cap : 7.3% Houston industrial sales activity remained steady between quarters with 100 property sales recorded in Q3 2013, compared to 91 in Q Two of this quarter s sales transactions are summarized at right. Mac Process Inc. sold a 75,000-SF Class C industrial warehouse to Deepwater Corrosion Services, Inc. for $4.7M or $62 per SF. The building is located on FM 529 in the Northwest Industrial submarket. The buyer will occupy the building. Fairview Equity Holdings LLC sold a 22,500-SF Class A industrial warehouse to Laser Welding Solutions for $2.7M or $120 per SF. The building is located on Fairview in the Northwest Industrial submarket. The buyer will occupy the building. Sources: Real Capital Analytics; CoStar Comps Houston Industrial Market Summary Market Rentable Area Direct Vacant SF Direct Houston Industrial Market Statistical Summary 3rd Quarter 2013 Sublet Vacant SF Sublet Total Vacant SF Total 3Q13 Net Absorption YTD 2013 Net Absorption 3Q13 Completions YTD 2013 Completions SF Under Construction Greater Houston Total 483,182,085 25,011, % 468, % 25,480, % 1,095,902 4,466,595 2,624,761 4,591,200 5,654,203 CBD-NW Inner Loop 11,717, , % 22, % 631, % 26, , Downtown 31,786,676 1,769, % - 0.0% 1,769, % 5,206 (9,286) North Inner Loop 5,014, , % - 0.0% 451, % ,000 Southwest Inner Loop 7,771,455 77, % - 0.0% 77, % 40,918 53, Total CBD Corridor 56,289,500 2,908, % 22, % 2,930, % 72, , ,000 North Fwy/Tomball Pky 15,922,820 1,301, % - 0.0% 1,301, % 190, ,693 83, , ,200 North Hardy Toll Rd 26,912,366 2,108, % 28, % 2,137, % 213, , ,807 1,429,957 1,422,142 North Outer Loop 18,240,752 1,212, % - 0.0% 1,212, % 25,345 (3,488) 150, , ,310 The Woodlands/Conroe 14,033, , % - 0.0% 613, % (31,496) 194,143 48, , ,600 Total North Corridor 75,109,685 5,235, % 28, % 5,264, % 397, ,446 1,044,258 2,317,888 2,264,252 Northeast Hwy 321 1,231,673 14, % - 0.0% 14, % 12,841 (5,399) Northeast Hwy 90 16,057, , % 129, % 349, % 57, ,585-20,000 20,000 Northeast I-10 3,634, , % - 0.0% 135, % 1,280 14,902-21,000 - Northeast Inner Loop 11,572, , % - 0.0% 491, % 67, , Total Northeast Corridor 32,496, , % 129, % 990, % 139, ,293-41,000 20,000 Hwy 290/Tomball Pky 15,312, , % - 0.0% 826, % 208, , , , ,143 Northwest Hwy 6 4,109, , % - 0.0% 133, % (21,947) (13,123) 14,400 14,400 30,000 Northwest Inner Loop 58,868,025 2,284, % 74, % 2,358, % (115,584) 438, , ,000 48,664 Northwest Near 16,772, , % 69, % 1,029, % (67,458) 27, , ,840 - Northwest Outlier 15,220, , % - 0.0% 956, % 226, , , ,034 1,682,731 West Outer Loop 23,204, , % 26, % 247, % 93, ,660 22,500 58, ,350 Total Northwest Corridor 133,487,248 5,382, % 169, % 5,551, % 323,715 1,734,743 1,484,508 1,216,199 2,153,888 South Highway 35 30,781,977 1,038, % 23, % 1,061, % 68, ,442 50,034 70, ,547 South Inner Loop 13,133, , % - 0.0% 834, % (48,189) (159,862) Total Southern Corridor 43,915,330 1,872, % 23, % 1,896, % 20,066 (7,420) 50,034 70, ,547 East I-10 Outer Loop 13,560, , % - 0.0% 195, % - (79,600) East-Southeast Far 46,328,329 4,481, % 13, % 4,494, % 2, , , ,818 Southeast Outer Loop 18,050, , % - 0.0% 498, % 111,420 (125,232) Total Southeast Corridor 77,939,199 5,175, % 13, % 5,188, % 113, , , ,818 Highway 59/Highway 90 22,009, , % 50, % 973, % (60,685) 678, , ,800 Southwest Far 10,471, , % 12, % 860, % 39, ,786 45,961 83,961 90,510 Southwest Outer Loop 12,826, , % 4, % 774, % 20, , Sugar Land/Ft Bend Co 18,637,193 1,034, % 15, % 1,049, % 29, ,370-61,000 27,388 Total Southwest Corridor 63,944,532 3,576, % 82, % 3,658, % 28,773 1,234,740 45, , ,698 COLLIERS INTERNATIONAL P. 3

4 Q Industrial Under Construction 60,000 SF or greater Submarket Cluster Submarket Building Address RBA % Pre- Leased Developer Estimated Delivery Northwest Corridor Northwest Outliers US-90 Hwy 535, % Panattoni Nov-13 Northwest Corridor Northwest Outliers US-90 Hwy 500, % Panattoni Oct-13 Northwest Corridor Northwest Outliers Mcallister Rd 400, % KDW Ltd Nov-13 North Corridor North Hardy Toll Rd Imperial Valley FM , % Avera Companies Dec-13 North Corridor North Hardy Toll Rd 110 Airtex Dr 267, % DCT Industrial Trust Nov-13 North Corridor North Outer Loop 121 Esplanade 244, % IDI Apr-14 Southeast Corridor East-Southeast Far 3750 Highway , % The Carson Companies Feb-14 Northwest Corridor West Outer Loop Port NW 171, % Transwestern Mar-14 North Corridor North Fwy/Tomball Pky Ella Blvd 163, % Liberty Property Trust Dec-13 North Corridor North Outer Loop W Hardy Rd 151, % TNRG Nov-13 Southern Corridor South Hwy Spectrum Blvd 150, % Unknown Feb-14 North Corridor North Hardy Toll Road 525 Century Plaza Dr 149, % Avera Companies Dec-13 Southern Corridor South Hwy Airport Blvd 137, % Unknown Dec-14 North Corridor North Hardy Toll Road Central Green Blvd 129, % Verde Nov-13 North Corridor North Hardy Toll Road Central Green Blvd 129, % Verde Nov-13 Southwest Corridor Hwy 59/Hwy 90 (Alt) S Gessner Rd 123, % Stream Realty Partners, L.P. Mar-14 Southeast Corridor East-Southeast Far 3700 Highway , % The Carson Companies Feb-14 Southwest Corridor Hwy 59/Hwy 90 (Alt) S Gessner 85, % Stream Realty Partners, L.P. Mar-14 North Corridor North Hardy Toll Road Kenswick Dr 74, % Trammell Crow Company Nov-13 Northwest Corridor Hwy 290/Tomball Pky 7220 N Sam Houston Pky 70, % TNRG Nov-13 Northwest Corridor Northwest Outliers Merchants Way 67, % InSite Commercial Real Estat Oct-13 North Corridor Ind North Fwy/Tomball Pky 1050 Greens Pky 67, % Liberty Property Trust Dec-13 Southwest Corridor South Main/Medical Center 9380 Kirby Dr 64, % Warehouse Associates Jan-14 Northwest Corridor Northwest Outliers 461 Stonegate Dr 63, % Clay Development Oct-13 Southeast Corridor East-Southeast Far 3800 Highway , % The Carson Companies Feb-14 Q Industrial Deliveries - 60,000 SF or greater Submarket Cluster Submarket Building Address RBA % Pre- Leased Developer Delivered Northwest Corridor Northwest Outliers I-10 & Highway , % Medline Industries, Inc. Sep-13 Northwest Corridor Northwest Near 7310 Langfield - Bldg , % Avera Companies Jul-13 North Corridor North Hardy Toll 8120 Humble Westfield Rd 240, % Duke Realty Sep-13 North Corridor North Hardy Toll Central Green Blvd 181, % Liberty Property Trust Sep-13 North Corridor North Hardy Toll 500 Northpark Central Dr 174, % Prologis Inc. Jul-13 North Corridor North Hardy Toll Heathrow Forest Pky 121, % Wolff Properties Aug-13 North Corridor North Hardy Toll 4730 Consulate Plaza Dr 101, % EastGroup Properties Aug-13 North Corridor North Fwy/Tomball Pky Spring Plaza Dr 83, % Unknown Jul-13 Northwest Corridor Northwest Outliers Park Row Rd 79, % Transwestern Sep-13 Northwest Corridor Northwest Inner Loop 1315 W Sam Houston Pky N - 70, % Caldwell Companies Jul-13 Northwest Corridor Northwest Outliers Park Row Dr 64, % Transwestern Sep-13 COLLIERS INTERNATIONAL P. 4

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