NAI Houston

Industrial Report | First Quarter 2010

*Ellington Trade Center

1900 West Loop South, Suite 500

Houston, TX 77027
tel 713 629 0500
www.naihouston.com
 NAI Houston
Industrial Report | First Quarter 2010

OVERVIEW: Overall Vacancy (%)

TRENDS: The Houston industrial market ended the 1st quarter 2010 with a vacancy rate of 6.8%.
The vacancy rate was unchanged over the previous quarter, with net absorption totaling
positive 1,329,476 square feet. Rental rates ended the 4th quarter at $5.27, a decrease
over the previous quarter. A total of 5 buildings were delivered to the market in the 1st
quarter totaling 1,334,726 square feet with 285,518 square feet under construction.

Vacancy Rate The total Industrial inventory in Houston amounts to 493,441,861 SF in 14,065 buildings
at the end of the 1st quarter 2010. The Flex market consists of 42,911,903 SF in 1,617
properties. The Warehouse market consists of 450,529,958 SF in 12,448 properties.
Within the Industrial market, 3,437 are owner occupied properties with 148,371,318 SF of
space.

Absorption:
Tenants moving into large blocks of space in the 1st quarter 2010 include: Jake’s Finer
Foods, 13400 Hollister., (180,000 SF); CADECO Industries, Inc., 1060 Lockwood Dr.,
(154,114 SF) and Charming Charlie, 13323 S. Gessner Rd., (141,440 SF).
Net Absorption The Flex building market had a net absorption of positive 314,001 SF in the 1st quarter
2010 compared to positive 241,915 square feet in the 4th quarter 2009, positive 452,033
square feet in the 3rd quarter 2009 and positive 235,007 square feet in the 2nd quarter Average Asking Rental Rate
2009.

The Warehouse building market recorded net absorption of positive 1,015,475 square
feet in the 1st quarter 2010 compared to positive 149,844 square feet in the 4th quarter
2009, positive 724,329 in the 3rd quarter 2009 and negative (595,301) in the 2nd quarter
2009.

Vacancy:
Construction The Industrial vacancy rate in the Houston market was 6.8% at the end of the 1st quarter
2010. The vacancy rate was 6.8% at the end of the 4th quarter 2009, 6.7% at the end of
the 3rd quarter 2009 and 6.9% at the end of the 2nd quarter 2009.

Flex projects reported a vacancy rate of 12% at the end of the 1st quarter 2010, 12.3 at
the end of the 4th quarter 2009, 12.8% at the end of the 3rd quarter 2009, and 13.7% at
the end of the 2nd quarter 2009.

Warehouse projects reported a vacancy rate of 6.3% at the end of the 1st quarter 2010,
unchanged from the 4th quarter 2009, 6.1% at the end of the 3rd quarter 2009, and 6.2%
at the end of the 2nd quarter 2009.

Net Absorption (SF)

Rental Rates Rental Rates:
The average quoted rental rate for Industrial space was $5.27/SF at the end of the 1st
quarter 2010. This was a 3.7% decrease in quoted rental rates from the end of the 4th
quarter 2009 with rates reported at $5.47/SF.

Deliveries & Construction:

A total of 5 buildings with 1,334,726 SF were completed during the 1st quarter 2010. The
4th quarter 2009 brought 7 buildings totaling 880,333 SF to the Houston market. The 3rd
quarter 2009 brought 12 buildings totaling 283,488 SF, the 2nd quarter 2009 brought 38
buildings totaling 1,652,477 SF. Houston had 285,518 SF under construction at the end
of the 1st quarter 2010.

Outlook:
The market is showing signs of recovery. There is a minimal amount of speculative
development occurring and Landlords have become more negotiable on rental rates
which has lead to positive absorption in the Industrial Market. With lenders continuing to
be conservative on new developments we predict the current trends to continue in the
near future.

Activity has picked up in most submarkets for Industrial space in Houston. Landlords
have become more aggressive on rental rates and concessions for larger credit Tenants.
This trend is expected to continue in the short term.

Source: CoStar Property

 NAI Houston
Industrial Report | First Quarter 2010
Major Lease Transactions

Tenant Qtr. Building Size (SF)

Ashley Furniture 1st Airtex Industrial Center—Phase I 303,000 SF

CADECO Industries, Inc.. 1st Lockwood Distribution Center 154,114 SF

Charming Charlie 1st Beltway Crossing—Bldg. 2 141,400 SF

 NAI Houston
Industrial Report | First Quarter 2010
Market Statistics
Warehouse Market Statistics
TOTAL
TOTAL TOTAL TOTAL TOTAL NET UNDER
AVERAGE
MARKET # BLDGS. RBA AVAIL. AVAIL ABSORPTION CONSTRUCTION
RATE ($/
(SF) (SF) (%) (SF) (SF)
SF/YR)

CBD 1,889 62,709,732 3,629,876 5.8% (138,218) $4.53 0

North Corridor 2,024 61,691,021 4,314,837 7.4% 34,668 $6.00 0

Northeast Corridor 732 32,294,449 911,073 2.8% 50,094 $3.99 178,793

Northwest Corridor 3,127 119,161,546 6,519,649 5.7% 593,619 $5.20 34,125

Southeast Corridor 1,434 76,567,728 6,844,978 9.0% (959,035) $3.96 3,000

Southern Corridor 1,318 41,607,817 1,629,747 3.9% 63,320 $4.51 0

Southwest Corridor 1,913 56,281,860 3,756,335 6.9% 1,371,027 $6.06 69,600

Totals 12,448 450,529,958 27,606,495 6.3% 1,015,475 $4.92 285,518

Flex Market Statistics

TOTAL
TOTAL TOTAL TOTAL TOTAL NET UNDER
AVERAGE
MARKET # BLDGS. RBA AVAIL. AVAIL ABSORPTION CONSTRUCTION
RATE ($/
(SF) (SF) (%) (SF) (SF)
SF/YR)

CBD 198 4,023,721 432,655 10.8% (34,104) $9.66 0

North Corridor 270 7,881,444 875,324 11.1% 105,629 $9.15 0

Northeast Corridor 54 706,998 9,158 1.3% (3,433) $9.18 0

Northwest Corridor 455 13,349,640 1,835,957 13.8% 236,860 $7.90 0

 NAI Houston
Industrial Report | First Quarter 2010
Market Statistics
Flex Market Statistics (Continued)

Southeast Corridor 143 2,862,493 539,893 18.9% (24,478) $8.41 0

Southern Corridor 94 2,731,955 287,446 10.5% 850 $8.60 0

Southwest Corridor 403 11,355,352 1,149,938 10.1% 32,677 $9.05 0

Totals 1,617 42,911,903 5,130,371 12.0% 314,001 $8.56 0

Total Industrial Market Statistics

TOTAL
TOTAL TOTAL TOTAL TOTAL NET UNDER
AVERAGE
MARKET # BLDGS. RBA AVAIL. AVAIL ABSORPTION CONSTRUCTION
RATE ($/
(SF) (SF) (%) (SF) (SF)
SF/YR)

CBD 2,087 66,733,453 4,076,931 6.1% (172,322) $4.79 0

North Corridor 2,294 69,572,465 5,426,371 7.8% 140,297 $6.40 0

Northeast Corridor 786 33,001,447 920,231 2.8% 46,661 $4.02 178,793

Northwest Corridor 3,582 132,511,186 8,630,311 6.5% 830,479 $5.64 34,125

Southeast Corridor 1,577 79,430,221 7,460,081 9.4% (983,513) $4.12 3,000

Southern Corridor 1,412 44,339,772 1,926,872 4.3% 64,170 $4.68 0

Southwest Corridor 2,316 67,637,512 5,028,896 7.4% 1,403,704 $6.51 69,600

Totals 14,065 493,441,861 33,469,693 6.8% 1,329,476 $5.27 285,518

 NAI Houston
Methodology / Definitions / Submarket Map
Absorption (Net)
The change in occupied space in a given time
period.

Available Square Footage

Net rentable area considered available for lease;
excludes sublease space.

Average Asking Rental Rate

Rental rate as quoted from each building’s
owner/management company. For industrial, a
NNN basis.

Direct Vacancy
Space currently available for lease directly with
the landlord or building owner.

Overall Vacancy
All physically unoccupied lease space, either di-
rect or sublease.

SF/PSF
Square foot/per square foot, used as a unit of
measurement.

Sublease
Arrangement in which a tenant leases rental
property to another, and the tenant becomes the
landlord to the subtenant.

Sublease Space
Total square footage being marketed for lease by
the tenant.

Sublease Vacancy
Space currently available in the market for sub-
lease with an existing tenant within a building
acting as the landlord.

The information contained herein has been given to us by

sources we deem reliable. We have no reason to doubt its accu-
racy, however, we do not make any guarantees. All information
should be verified before relying thereon.