Houston Office Market Posts Second Straight Month of Occupancy Increase

Kathryn Koepke
Manager, Market Research
kkoepke@poconnor.com
713.686.9955, ext. 4239

Scott Sherrill
Director of Marketing
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713-686-9955, ext. 4264

Houston Office Market Posts Second Straight Month of Occupancy Increase Largest Increase in the Houston Metro Area

Houston, TX (May 11, 2007) - First quarter 2007 figures indicate that Houston's office market is on a roll, absorbing more than 2-million square feet for the second time in the past twelve months.

This is according to the first-quarter Houston Office Performance Update released by O'Connor & Associates, the Houston-based real estate consulting firm and provider of commercial market research data in Texas. The report tracks the Houston metropolitan area office real estate market including rent per square foot, absorption and occupancy.

A total of 2,102,253 square feet (sf) were absorbed over the quarter. Class A properties absorbed a total of 943,628 SF, with the strongest absorption in the Park 10 sector with 270,370 SF. Class B had the highest absorption amount with 984,512, led by the Galleria sector's 340,466 SF absorbed. Class C absorbed 171,944 SF and Class D remained relatively stable with 2,169 SF absorbed.

The increase in absorption over the quarter was related to increased occupancy levels. Class A properties are reporting an overall occupancy level of 91.70 percent, up 0.70 points from last quarter. With the strong absorption among the Class B properties, occupancy increased 1.24 points over last quarter to 84.74 percent. Class C properties increased 0.78 points to 83.16 percent. Class D properties increased 0.02 points to 77.10 percent.

True to form, as demand increases, so does price. All four classes experienced an increase in price per square foot (psf). This marks the seventh consecutive increase for overall rental rates. Class A rates increased $0.39 to $24.3s psf. The Galleria and Central

Business District sectors posted the highest rent psf at $25.83 and $25.57, respectively. Kingwood had the lowest Class A rent at $12.00 psf. Class B rent increased $0.49 psf to $18.19 psf. The Medical Center had the highest rent at $22.29 psf. Class C rates rose $0.26 psf to $14.53 psf, with Greenway Plaza sector reporting the highest rent at $17.19 psf. Class D also increased to $11.82 psf, a $0.29 increase over last quarter. The highest rates were in the Clear Lake sector at $14.71 psf.

For the complete report, visit

http://www.poconnor.com/file_repository/Houston-Office-Performance-1Q2007.pdf

Houston Office Market at a Glance
	Class A	Class B	Class C	Class D	Overall	Qtr.	Year
Occupancy	91.70%	84.74%	83.16%	77.10%	87.37%	^	^
Rent/SF	$24.37	$18.19	$14.53	$11.82	$20.44	^	^
Absorption	943,628	984,512	171,944	2,169	2,102,253	^	^

Source: O'Connor & Associates 1Q 2007 Houston Office Performance Update

There are a total of 1,288 operating traditional, multi-tenant office properties in the Houston area market with total net rentable square feet of 158,163,718. Approximately 44.94% of the total office space is Class A, 36.94% of the total office space is Class B, 14.62% of the total office space is Class C, and 3.50% of the total office space is Class D. About O'Connor & Associates O'Connor & Associates, a Texas-based national real estate service firm providing appraisals, market research, cost segregation studies and federal and ad valorem tax reduction services, has been in business since 1974. Patrick O'Connor, MAI, president of O'Connor & Associates since 1983, is frequently acknowledged by national publications as a respected source of information on real estate trends. Visit www.poconnor.com/marketresearch