1. www.boyarmiller.com
The 5th Annual
Houston Commercial
Real Estate Markets:
What’s Ahead for 2012
Breakfast Forum
December 9, 2011

2. www.boyarmiller.com
Office Market
Brandi McDonald
Newmark Knight Frank

3. Third Quarter 2011
183M SF, 8th Largest Office Market in the Nation
Source: Newmark Knight Frank, Research Group, Class A & B Buildings
Source*: Represents all of Texas. The Texas Workforce Commission www.texasworkforce.com
Houston Office Market Trends
Vacancy 16.3%, down from 16.9% Q3 2010
Absorption 1,026,124 absorbed in Q3, 4th positive qtr
Lease Rates Rents stabilized, trending up in desired markets
New
Construction
1.4M SF under construction
Job Growth 286,200 jobs added over the last year*

4. Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
Two years have passed since the end of the Great Recession, so the recession has now been over for a longer period than its duration. So far, the
recession has taken a slower recovery path than any other the previous four U.S. recessions.
United States, Total Nonfarm Employment, % change from recession end
Recession End
Post-Recession Employment Growth

5. The Dow Jones Industrial Average, the Standard & Poor's 500 and corporate profits have each experienced around 40% growth since the end of the
recession, with corporate profits setting new historical highs on a quarterly basis. Total nonfarm payroll employment has been essentially unchanged
since the end of the recession, while average hourly earnings have managed a 4.6% improvement and personal income has increased 4.0%. In
addition, productivity has increased almost 30% since the end of the recession.
United States, June 2009 to Current
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics, Bureau of Economic Analysis, Yahoo! Finance
Recovery of Major Economic Indicators

6. United States, Nonfarm Business, Output Per Hour
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
The BLS reported that nonfarm business sector labor productivity in the U.S. increased at a 3.1% annual rate in the third quarter of 2011, compared to a
decreased of 0.1% in the second quarter and an increase of 2.1% in the third quarter of 2010. For the third quarter of 2011, output increased 3.8% and
hours worked increased 0.6%. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all
persons, including employees, proprietors, and unpaid family workers.
Productivity

7. United States, Profits From Current Production, Seasonally Adjusted at Annual Rates (billions)
Source: Newmark Knight Frank Research, Bureau of Economic Analysis
Corporate profits in the U.S. continue to break quarterly all-time highs. According to data from the BEA, from the end of the recession in June 2009 to
August 2011 corporate profits increased 53.5%. The BEA reported that profits from current production (corporate profits with inventory valuation and
capital consumption adjustments) increased $61.2 billion in the second quarter, a 3.3% quarterly increase, compared with an increase of $19.0 billion in
the first quarter. Over the last year, corporate profits have increased 8.5%, or $151.8 billion.
Corporate Profits

8.  Business investment is gaining strength (non-defense capital goods
orders increased 2.4% in the month of September)
 Retail sales reached a historical high of $395.5 billion
Consumer confidence is on the decline in the U.S. (Lower than any
level in the 40-year history of the index outside of the most recent
recession)
Possible Factors:
- European Debt Crisis
- Protests against Wall Street and the government
- Negative tone of economic news reports
Consumer Confidence
Source: U.S. Bureau of Labor Statistics

9. United States, Total Nonfarm, Not Seasonally Adjusted
The BLS reported that the number of job openings in September was 3.4 million, up from 3.1 million in August. Although the number of
job openings remained below the 4.4 million openings when the recession began in December 2007, the level in September was 1.2
million openings higher than the most recent trough in July 2009 and the highest level since August 2008. (There were 4.2 unemployed
persons for every job opening in the U.S. in September 2011.)
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
Job Openings

10. Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
United States, Not Seasonally Adjusted
The BLS reported that the average duration of unemployment in the U.S. was 39.8 weeks in October 2011, compared to 41.0 weeks in September and
34.9 weeks in October 2010. The historical high average, on records going back to 1948, was 41.4 weeks, reported in April 2011. Of the 13.9 million
people unemployed in the U.S. in October 2011, 43.8% were unemployed 27 weeks and longer, a total of 5.7 million persons. 18.6% of unemployed
persons had been unemployed less than 5 weeks, 22.8% of unemployed persons were unemployed 5 to 14 weeks, and 14.8% were unemployed 15 to
26 weeks.
Duration of Unemployment

11. Length of Recession
Months from Peak Employment to Employment Uptick
November 2011
*Excludes Detroit
Source: GHP and U.S. Bureau of Labor Statics

12. *Excludes Detroit
Source: GHP and U.S. Bureau of Labor Statics
Depth of Recession
% Jobs Lost During Recession
November 2011

13. Source: GHP and U.S. Bureau of Labor Statics, November 2011
Total Jobs Lost
Listed by Population Size
Metro Area Jobs Lost* Metro Area Jobs Lost*
New York -389,600 Detroit -480,900
Los Angeles -549,300 Phoenix -246,900
Chicago -340,800 San Francisco -169,300
Dallas -155,900 Riverside -172,500
Philadelphia -144,700 Seattle -141,500
Houston -121,200 Minneapolis -115,900
Miami -245,900 San Diego -101,600
Atlanta -224,800 St. Louis -83,900
Washington -95,800 Tampa -138,900
Boston -104,600 Baltimore -70,400
*Seasonally adjusted

14. Percent of Recovered Jobs
Percent of Recovered Jobs through September 2011
Houston vs. Top 10 Metros
Source: GHP and U.S. Bureau of Labor Statics

15. Houston MAS Job Recovery
Through August 2011
Midway Point
* Transportation, Warehousing and Utilities
Source: GHP and Texas Workforce Commission

16. 1990 Through March 2011
AnnualAverageWorkingRigs
Source: Baker Hughes, Inc; Nov 2011
U.S. Rotary Rig Count

17. Dollars per Barrel
Source: Newmark Knight Frank Research, U.S. Department of Energy
• According to the U.S. Department of energy, the spot price of West Texas Intermediate (WTI) crude oil, a traditional benchmark for the U.S.
market, fell to $85.32 in October from $85.52 in September, although remained higher than the $81.89 reported one year ago. The 10-year high for
the WTI was $133.88 in June 2008.
• The spot price for Brent, a global benchmark, was $109.55 in October compared to $112.83 in September and $82.67 one year ago.
Crude Oil Prices

18. United States, October 2011
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
Unemployment Rate by State

19. U.S. Shale Plays
Bakken
Gammon
Niobrara-
MowryHilliard Baxter
Mancos-Niobrara
Niobrara
Niobrara FM
Mancos
Cane Creek Gothic
Mancos
Pierre-
Niobrara
Barnett-
Woodford
Avalon-
Bone Spring
Eagle Ford
Barnett
Haynesville-
Bossier
Tuscaloosa
Woodford Woodford-
Caney
Excello-
Mulky
Fayetteville
Monterey-
Temblor
Kreyenhagen
Monteray
Antrium
Collingwood
New Albany
Floyd-Neil
Consauga
Marcellus
&
Utica
United States, October 2011
Source: Newmark Knight Frank Research, U.S. Bureau of Labor Statistics
EIA, July 2011

20. National
Vacancy Rate: 16.4%
National Rates 3Q 2011
Source: Newmark Knight Frank Research Group; 3Q 2011
Office Vacancy Rates

21. Source: Newmark Knight Frank Research Group, Class A & B Buildings
Net Absorption (SF)
Houston Metro Area Q3 2011

22. Historical Houston Absorption and Vacancy

23. Houston Metro Area Q3 2011
Average Asking Rent & Vacancy
Source: Newmark Knight Frank Research Group, Class A & B Buildings

24. Houston Metro Area Q3 2011
*Class A Office Only (Medical Excluded)
Source: Newmark Knight Frank Research Group
Class A Office Under Construction
Submarket SF % Pre-Leased
West Loop 682,000 26%
Energy Corridor 452,000 51%
The Woodlands 302,000 33%
Total 1,436,000 36%

25. New Developments
3009 Post Oak
SKANSKA
302K Delivery 1Q 2013
2200 Post Oak
BBVA Compass
380K Delivery 2Q 2013
842 W Sam Houston
CityCentre Three
120K Delivery 3Q 2012
West Loop Energy Corridor
945 Bunker Hill – Nexen Bldg
Metro National
332K Delivery 3Q 2012
The Woodlands
Three Waterway
The Woodlands Development Company
302K Delivery 1Q 2013

26. Source: Newmark Knight Frank Research Group; Class A and B
Submarket Comparison
Size (MSF) Vacancy % Vacancy (MSF) Rate (Class A)
CBD
41.0
Far Northwest
24.0%
CBD
6.3
CBD
$36.21
West Loop
33.7
Greenspoint
15.6%
West Loop
4.7
West Loop
$30.74
Energy Corr.
21.7
Westchase
15.3%
Energy Corr.
3.1
Energy Corr.
$29.86
Westchase
12.9
CBD
15.3%
Northwest
2.5
Westchase
$28.53
Far Northwest
10.5
Energy Corr.
14.4%
Westchase
2.0
Greenway
$28.47
Greenspoint
10.3
Westloop
13.8%
Greenspoint
1.7
Far Northwest
$26.05
Greenway
8.7
Greenway
12.5%
Greenway
1.1
Greenspoint
$20.95

27. 2012 Forecast
Vacancy
Absorption
Lease Rates
New
Construction
Job Growth

28. www.boyarmiller.com
Land Development,
Homebuildng & Multi-
Family Markets
Joel Marshall
Trendmaker Development Company

29. 17,100 16,500
55,700
66,300
11,100
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Austin Fort Worth Dallas Houston San Antonio
Texas Economy
MSA – Annual Job Growth September 2011
Source: Texas
Workforce
Commission

30. Houston's Historical
and Projected Population
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
People
IRF Forecast
TSDC - Scenario 1
TSDC - Scenario 2
Population
Source: Census, Metrostudy, Institute for Regional Forecasting and Texas State Data Center

31. Houston's Historical
Population Growth
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
People
Population Growth
Source: Census, Metrostudy, Institute for Regional Forecasting and Texas State Data Center

32. Houston
Apartments – Supply v. Demand
-5,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,0001996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Multi-FamilyUnits
New Units Completed
Apartment Absorption
Source:
Apartment Data
Services

33. 50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
OccupancyRate
Houston
Apartment Occupancy
Source:
Apartment Data
Services

34. $0.55
$0.60
$0.65
$0.70
$0.75
$0.80
$0.85
$0.90
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
RentalRate
Houston
Apartment Rental Rates
Source:
Apartment Data
Services

35. 50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
Class A Class B Class C Class D Total
Houston
Apartment Occupancy - Class
Source:
Apartment Data
Services

36. National Economic Overview
30 Year Mortgage Rate
3.50%
5.50%
7.50%
9.50%
11.50%
13.50%
15.50%
17.50%
19.50%
Sep-73
Sep-75
Sep-77
Sep-79
Sep-81
Sep-83
Sep-85
Sep-87
Sep-89
Sep-91
Sep-93
Sep-95
Sep-97
Sep-99
Sep-01
Sep-03
Sep-05
Sep-07
Sep-09
Sep-11
Source: Freddie Mac
20-yr Average = 7.00%

38. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
Annual Starts - Fort Bend County (Black) & Katy ISD (Red)

39. 3Q11 © Copyright Metrostudy 20113Q113Q11 © Copyright Metrostudy 2011
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
MonthsofSupply
Houston
MLS Months of Supply
Source: MLS
National Average
= 8.5 months

40. -3.89%
-2.27%
-2.04%
0.24%
-3.43%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Houston Austin Dallas San Antonio Fort Worth
Houston
Home Appreciation – 2Q11
Data Source:
FHFA

41. 0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Postings Foreclosures
Houston
Harris County Foreclosures
Source: Foreclosure
Information & Listings
Service

42. 0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
Annual Closings Annual Starts
3Q11 YTD = 13,838 New Home Starts
Houston
Annual Starts and Closings Trends

43. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0
200
400
600
800
1,000
1,200
<$100k $100k-
$125k
$125k-
$150k
$150k-
$175k
$175k-
$225k
$225k-
$300k
$300k-
$500k
>$500k
FinishedVacantUnits
Houston
Finished New Home Inv - Price
3Q-10 to 3Q-11

44. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0
10,000
20,000
30,000
40,000
50,000
60,000
3Q92
3Q93
3Q94
3Q95
3Q96
3Q97
3Q98
3Q99
3Q00
3Q01
3Q02
3Q03
3Q04
3Q05
3Q06
3Q07
3Q08
3Q09
3Q10
3Q11
AnnualLotDelivery&Absorption
Annual Lot Absorption
Annual Lot Delivery
Houston
Lot Delivery vs. Absorption

45. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
National Comparison
Vacant Developed Lot, Months of Supply

46. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
0
2,000
4,000
6,000
8,000
10,000
12,000
0-$99 $100-
$124
$125-
$149
$150-
$174
$175-
$224
$225-
$299
$300-
$499
$500-
$999
VDLMoS
AnnualStarts&VDL
Houston
VDL Supply and Annual Starts by Price Range

47. 2Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
0
5,000
10,000
15,000
20,000
25,000
0 to 5 6 to 11 12 to 23 24 to 47 48 to 71 72+
VDLMoS
Starts&VDL
Annual Starts
Ann Starts VDL VDL MoS
Houston
VDL Supply by Annual Starts Rate
Subs with 24+ Annual Starts:
9,604 Annual Starts
13,012 VDL – 16.3 MoS
178 MoS

48. 0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
National Economic Overview
Single Family Starts – NAHB Projections
Source: NAHB

49. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
$550,000
2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11
CA FL TX NV AZ
$200K Home Buying Scenario National Markets
$200,000 Home Scenario National Markets
Data Source:
FHFA, Metrostudy

50. 3Q11 © Copyright Metrostudy 20113Q11 © Copyright Metrostudy 2011
$150,000
$250,000
$350,000
$450,000
$550,000
$650,000
$750,000
2Q00 2Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11
CA FL TX NV AZ China
$200K Home Buying Scenario National Markets + China
Data Source:
FHFA, Metrostudy

51. www.boyarmiller.com
Retail Market
Ewing King
Ewing King Commercial Real Estate

52. State of Local Economy

53. Houston, Texas: Population Growth
Houston continues to improve employment and outpace the
rest of the country despite the continued, unprecedented
population growth.

54. • Among the nation’s 20 most
populous Metropolitan areas,
Houston has recovered the highest
percentage of jobs lost in the
recession. At current pace, Houston
will return to peak employment by the
end of the year.
• While the National Unemployment
Average is 9.1%, Houston maintains
an unemployment rate of 8.1%.
• 2011 job growth was 79,500.
• 2012 and 2013 projected job growth
80,000-100,000 per annum.
Unemployment Rate - Houston vs. U.S
Houston employment
rose 2.6% over the
past year compared to
the rest of the nation
where employment
only rose 0.9% in 2011.

55. A Corporate Center for Business
Energy Capital
The Port of Houston
Houston Airport System (HAS)
The Texas Medical Center
• Energy Capital:
Home to more than 5,000 energy related firms, Houston is considered the
Energy Capital of the world.
• The Port of Houston:
The Port of Houston ranks #1 in the United States in volume of foreign tonnage
and has an $118 billion statewide economic impact.
• Houston Airport System (HAS):
HAS, the fourth largest multi-airport system nationally & the sixth largest
worldwide, has a regional economic impact of $24.2 billion.
• The Texas Medical Center:
The Texas Medical Center is the largest medical complex in the world & has an
economic impact of $14 Billion.
“The Houston market continues to
face fewer market obstacles than
most U.S. markets...Texas’s pro-
growth policies and business
friendly environment will continue
to benefit local housing markets
and allow for 2011 to
show...growth.” Metrostudy

56. Houston Retail Markets at a Glance

57. Retail Breakdown
Houston continues to be
among the top cities in
the country for new retail
development. As retailers
seek to expand market
share and increase sales,
Houston is more
attractive than ever due to
the strong employment
and population growth.
Neighborhood and
Community Centers make
up the vast majority of
Houston Retail Shopping
Centers.

58. Houston Retail Statistics
Market Occupancy
Retail occupancy rates are the highest they’ve been
since 2005 at 92.9% led by inner loop properties.
Average Market Rents, currently at $14.41 psf, appear to have
bottomed out and are gradually climbing again. Despite the
recent downturn, current retail rents are still above the 8 year
historical average.
Market Rents

59. Houston continues to
experience positive
absorption as development
continues to be on an as
needed basis with
speculative building almost
non-existent.
Financing requirements and
prudent growth plans for
developers have created a
market place where Class A
demand is higher than
supply which continues to
assist in positive increases
of market rents.
Absorption Completions and Net Absorption

60. eHoliday & Holiday Sales

61. Changing Market Conditions

62. Retailers have exhibited a “Flight to
Quality” mentality with the past three
years providing opportunity for those
typical Class B tenants to get into
Class A space at relatively same
rental rates.
Retail Trends
• Continued effort of retailers to reduce the size of
stores.
• Retailers and Service Users are focusing on Low
Income & Hispanic Markets.
• Retailers are creating their own, discounted
product lines to reach a wider audience and
compete with the online retailers like Amazon.
• Retailers are offering No-Interest Financing
options to attract consumers back into their
stores.
• Internet Sales currently make up approximately
11% of total sales and are increasing annually at a
rate of 10% - 15%.

63. Challenges Still Facing Us

64. • National consumer confidence continues to be dampened by
the fear of a double dip in the economy.
• Economic strain in the EU continues to take its toll on U.S.
Markets.
• Pre-recession 2007 leases are expiring, leaving landlord’s
unsure about their ability to re-lease the space at equivalent
rents.
• 1,200 CMBS mortgages with a balance of $17.3 B are set to
mature in 2012. Borrowers will likely need to contribute
addition equity to secure five year financing.
• Tenant Rep Brokers and small in-line retailers are challenged
in securing good locations due to the limited supply.
• Difficult to secure construction financing due to higher pre-
leasing and equity requirements.
• Reduced number of active Anchor Tenants (not including
grocers).
Challenges Ahead

65. What’s Ahead

66. Grocery Anchored Developments 2011 Openings
Houston-area
Market Leaders
Wal-Mart
Supercenter
27.4% market share
Kroger
26.2% market share
H-E-B
17.7% market share
Randalls
<6.0% market share

67. Future Grocery Anchored Developments 2012 & Beyond
Houston-area
Market Leaders
Wal-Mart
Supercenter
27.4% market share
Kroger
26.2% market share
H-E-B
17.7% market share
Randalls
<6.0% market share

68. Urban Mixed Use Projects

69. Last Year’s Projections
 Increase in number of tenants actively
seeking locations.
 Continued pressure on public retailers to
grow externally through new store expansion.
 Legacy assets begin developing junior
anchor boxes and complementary inline
space adjacent to existing anchored
developments.
 Few if any full price retail centers from
ground up.
 Outlet center will be announced either in the
League City/Texas City submarket.
 Class A, small retail space will be in tight
supply and high demand.
 Rental Rates gradually increasing in the
second half of the year.
 Continued obsolescence of older and
poorly positioned retail centers -
candidates for adaptive reuses.

70. Outlook 2012
• New concepts will be drawn to the Houston
markets due to economic and population
growth.
• Increase in non-retail uses in traditional retail
locations.
• Shift to a Landlord market in Class A space.
• The arrival of Specialty Grocers.
• Gradual Increase in construction cost due to
increased demand for materials.
• Wholesale Clubs will announce a few new
locations.
• Plans for expansion of existing traditional
malls.
• Multiple construction starts for Mixed-Use
developments both inside and outside the
Loop.
• Increase in Foreign Capital being
invested in Houston.

71. www.boyarmiller.com
Industrial Market
Welcome W. Wilson, Jr.
GSL Welcome Group

74. 2010 2011
 499 million SF
 219,000 SF under
construction
 507.9 million SF
 1.977 million SF
under construction

76. U.S.
vs
Houston

77. Population
Growth

87. Questions & Answers