Brokerage Outlook: Texas

• Dallas/Fort Worth Retail

• Dallas Industrial

• Houston Industrial  New!

• Dallas Multifamily

• Austin Multifamily

• Houston Multifamily

• Dallas Office

Dallas/Fort Worth Retail Submitted by Greg Pierce, executive vice president of retail tenant representation/investment sales with the Dallas office of Colliers International. Posted 5-17-06. What area is your expertise? • Dallas/Fort Worth What trends do you see presently in retail development in your area? • The trend is still strong; the top submarkets for construction include: Allen with 350,000 square feet under construction at Market Street complex, located at 75 and Bethany; 1 million square feet of proposed construction at Allentowne, located at the southwest corner of 121 and 75; 500,000 square feet of proposed construction at Star Creek, located at 121 and Watters Road; and 102,000 square feet of proposed construction at McDermott and Cedar drives Garland with 800,000 square feet completed on Phase I of Firewheel Town Center, 77,000 square feet of proposed construction on Phase II at Firewheel Town Center and 161,000 square feet of proposed construction at George Bush and Crist Road Frisco with 800,000 square feet currently under construction; 30,000 square feet of proposed construction at Custer and Eldorado Parkway; 350,000 square feet of proposed construction at Frisco Trails; and 112,000 square feet of proposed construction at Teel Crossing, located at 720 and Main northwest Fort Worth with 500,000 square feet of proposed retail projects at Alliance Texas McKinney with 350,000 square feet of recently completed space with 50,000 square feet under construction north Dallas with 300,000 square feet of proposed construction at 75 and Park Lane What type of retail product is doing well in your area? • power centers and lifestyle centers What retailers are new to your area? • Wal-Mart, Target, The Home Depot, Lowe's Home Improvement Warehouse, LA Fitness, 24 Hour Fitness, Golf Galaxy, Cinemark, Best Buy, Bass Pro Shops and Kohl's Who are the active retail developers in your area? • Terry Montesi/Trademark, Harvest Partners and Provident Realty Advisors Please name one or two significant retail developments in your area. What impact will these projects have on the market? • Allen Market Street with grocery and lifestyle retailers (see below) Where is the majority of development taking place? Why is this area doing well? • Allen due to its density and income What area do you expect to be the next big retail development market? Why? • A majority of new development in the market is in Allen. According to Charisse Bodisch, executive director of The Allen Economic Development Corporation, retail projects totaling 3.7 million square feet of retail space are in the offing for Allen. Chicago-based General Growth, the second largest mall developer in the United States, said it will close on 238 acres of land at the southwest corner of State Highway 121 and U.S. 75 this spring with plans to develop Allentowne, a 1 million-square-foot retail development featuring an attractive, pedestrian-friendly center that will attract upscale, locally operated boutique retail shops, restaurants and professional offices. · Fort Worth-based developer Trademark Property Company is set to develop an urban village, multi-use concept on 60 acres situated at North Central Expressway and Bethany Drive. Trademark's Allen project will be the gateway to a 500-acre commercial and residential development called Montgomery Farm. The first phase of the project will open in fall 2007. · Developer Eric Benavides of Plano-based Benavides Investments is setting his sights on making Allen's relatively quiet central business district a more vibrant place with a $12 million mixed-use project. · And shopping center developer MG Herring Group has set aside 200 acres south of Stacy Road in Allen for The Village at Allen, an open-air shopping center. Its other development, The Village at Fairview, located at the northeast corner of U.S. 75 and Stacy Road, will begin construction this year. · Frisco-based Blue Star Land is developing a retail center at Star Creek, a residential project that borders State Highway 121 and lies east and west of Watters Road in Allen. About 500,000 square feet of retail space is planned at Star Creek. · Benavides is planning an L-shaped, 102,000-square-foot retail and office project on the southwest corner of McDermott and Cedar drives. The two-story development, called Town Square in Allen, will be built on 4.2 acres encompassing seven vacant land parcels. Most of the land purchases are closed or under contract. (Source: Dallas Business Journal) Please describe the retail leasing activity in your area. • Strong, especially in the Class A to Class B+, well-located retail properties What major leases have been closed recently? • In Allen, Market Street Grocery, a development created by Trademark Property Company to be built at North Central Expressway and Bethany Drive, will have 350,000 square feet of retail space, 80,000 square feet of office space and approximately 250 apartments. Trademark has received commitments for approximately 160,000 square feet of retail space. The three- to five-story buildings will be arranged in a triangle around a central area with smaller buildings and a crescent-shaped "town green." Market Street grocery store, operated by United Supermarkets, will be the largest merchant in the project. The city of Allen has agreed to provide more than $20 million in incentives to help pay for parking garages and some of the infrastructure. The first phase of the project will open in fall 2007. • In Garland, Bass Pro Shops, a 120,000-square-foot outdoor store located on the shores of Lake Ray Hubbard, will feature a more than 8,000-square-foot Islamorada Fish Company restaurant, courtesy boat docks and many of the signature features of Bass Pro Shops stores. It is scheduled to open in October and will anchor the 28-acre Harbor Point Development, a retail/entertainment development located on the shores of Lake Ray Hubbard and Interstate 30. Please give a measure of retail vacancy rates. Please give a measure of available sublease space. • The market is generally 10 percent vacant. What types of retailers should look into your market in the coming year? What type of retail is needed? • Maybe more entertainment types of retailers, but other than that, we are pretty exhausted. Would you like to make any additional observations about the retail market in your area? • The Dallas/Fort Worth area has a tremendous amount of retail and restaurant options for the area's 5.5 million folks to take advantage of.

Dallas Industrial Dunn David R. Dunn, managing director with Sperry Van Ness/Dunn Commercial. Posted 06/14/07. What area is your expertise? • Dallas/Ft. Worth (DFW) industrial. What trends do you see presently in industrial development in your area? • In first quarter 2007, 12 buildings were delivered to the market totaling approximately 1.44 million square feet, and more than 11,000 square feet of buildings were under construction. The majority of construction is large bulk distribution facilities. The area continues to be the distribution capital of the southern states. What type of industrial product is doing well in your area? • Bulk distribution continues to lead absorption in the DFW Metroplex. Who are the active industrial developers in your area? • Active developers in the DFW market include: Prologis, Duke Realty, First Industrial Realty Trust Inc., Panattoni Development, Hillwood Development, Seefried Properties and Koll Development Company. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? • Located in Lancaster, Texas, Prologis Park 20/35 is a 656,105-square-foot development in the south Dallas industrial market. This is a 100 percent speculative development and currently vacant. Its delivery date is second quarter 2007 and the park will total 3.2 million square feet divided among seven buildings on 200 acres. The park just achieved foreign trade zone status. Its location allows you to be within 24 hours of half of U.S. population by truck. A new intermodal facility in south Dallas was instrumental in the selection of the location. Where is the majority of development taking place? Why is this area doing well? • There are two properties under construction — Duke Realty’s 872,000-square-foot build-to-suit and the 656,105-square-foot Prologis Park — in the south Dallas industrial market because of the new intermodal facility, foreign trade zone, cost of land and great freeway access. The next hottest market is the DFW Airport market with Trammell Crow Company (now CBRE) building 554,500 square feet and Duke Realty building 527,100 square feet with 68 percent of it pre-leased. Rates are ranging from $3.10 to $3.20 industrial net for this new product. The DFW Airport market is a foreign trade zone and continues to expand because of airport access. What area do you expect to be the next big industrial development market? Why? • I predict that the industrial market will continue to move south because of land prices and transportation accessibility. Please describe the industrial leasing activity in your area. • The DFW industrial market ended the first quarter 2007 with a vacancy rate of 9.9 percent. The vacancy rate continues to shrink, and overall rates are still increasing, currently at approximately $4.76 per square foot, a four-year high. Please describe the industrial sales activity in your area. • The industrial dollar volume continues to rise compared to last year. Total year-to-date sales in 2006: 133 sales transactions closed with a $50.11 price per square foot compared with $53.26 per square foot this year. Cap rates have also been pushed down to 7.71 percent compared to 7.85 percent last year. Please give a measure of industrial vacancy rates and a measure of available sublease space. • The DFW market vacancy rate decreased to 9.9 percent, down from10 percent last year. Most industrial projects reported an increase in vacant sublease space in first quarter 2007. What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year? • Interest rates do have a definite influence on the industrial market by pushing cap rates up or down and affecting the cost of tenant finish. I think that interest rates will go down in the next 2 years. What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected? • China’s imports are continuing to push space demand, and, as the housing market cools, we will see a downsizing of material suppliers for that industry. Would you like to make any additional observations about the industrial market in your area? • The Dallas/ Fort Worth industrial market usually lags behind the East and West coast markets. This lag will keep us going for a longer period and lets us have a softer landing because we know what is coming. ** Numbers and stats were taken from Costar’s 1st Quarter Report

Houston Industrial Nicholson Submitted by John Nicholson, senior vice president with the Houston office of Grubb & Ellis. Posted 06-19-08.            What area is your expertise? Houston, TX Industrial Leasing Market What trends do you see presently in industrial development in your area?  Houston’s industrial market continued to record strong development activity at the start of 2008.  The Port of Houston area, Northwest and North Houston (near IAH) account for the bulk of the new construction.  Driving the robust activity in these submarkets is the strong growth and expansion at Houston’s Bush Intercontinental Airport (North Far) and the Port of Houston (Southeast). What type of industrial product is doing well in your area? Houston is becoming more of a distribution hub than ever before.  We are seeing larger size transactions contributing to the overall absorption. Who are the active industrial developers in your area?  First Industrial, ML Realty, Clay Development, Transwestern, ProLogis, and Duke Realty to name a few. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? > Interport Distribution Center – First Industrial Realty Trust – located in the Port area. > Park 288 – Transwestern – Central / Med Center. > Underwood Distribution Center – Clay Development – Port area. Where is the majority of development taking place? Why is this area doing well?  The majority of the development is taking place in the Port of Houston area with approximately 6 million SF built, under construction, or planned. What area do you expect to be the next big industrial development market? West Houston / Katy, TX Please describe the industrial leasing activity in your area. Houston’s industrial leasing market registered a healthy quarter to kick-off 2008 by posting 755,268 square feet of positive net absorption, marking the 17th consecutive quarter the market has witnessed positive growth.  The lion’s share of the quarterly growth occurred in Warehouse/distribution sector with 543,862 square feet of net absorption, which comes on the heels of posting a robust 6.1 million square feet of positive growth in 2007.  Please describe the industrial sales activity in your area.  Houston’s industrial investment sales market remains active but has slowed from previous quarters.  According to Real Capital Analytics (RCA), private, public and institutional investors have spent $61.4 million throughout 4 sales transactions priced above the $5 million price tag during the first quarter of this year.  Average sales prices stand at $41 per square foot, while average capitalization rates sit at 7.5 percent on all closed sales.  Please give a measure of industrial vacancy rates and a measure of available sublease space. Overall vacancy inched upward by 50 basis points to 6.4 percent, as new construction deliveries outpaced demand.  During the quarter, new space deliveries totaled nearly 1.2 million square feet, the majority being Warehouse/distribution type product with 847,300 square feet.  In addition, Standard industrial properties saw vacancy increase by 110 basis points to 4.2 percent during the quarter, still the lowest vacancy among all property subtypes.    Warehouse/distribution properties witnessed vacancy climb by 40 basis points to 6 percent during the survey period while R&D/flex properties saw vacancy actually edge downward slightly by 10 basis points to 14.3 percent.  What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year? Although strong fundamentals in Houston’s commercial real estate market are expected to attract a larger share of national investors, the fact remains that the buyer pool has shrunk dramatically.  On the macro level, historically low interest rates are expected to rise in 2008. What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?  Houston still stands to post another healthy year as local economic growth boosted by the thriving energy industry will continue to drive solid industrial growth.  A strong local manufacturing sector supported by companies servicing the expanding energy and chemicals industries will contribute significantly to the annual absorption. Would you like to make any additional observations about the industrial market in your area? Rental rates should continue to rise in 2008 as demand for industrial space remains healthy. Tenants will have to contend with the higher price for the new product entering the pipeline, especially in submarkets where construction activity is most active as landlords and developers account for the skyrocketing land prices and construction costs. Currently, the rental rates for distribution on new construction properties are between $4 to $5 NNN per square foot.

Dallas Multifamily Burns Submitted by Tom Burns and Jay Gunn, associate partner and senior investment advisor with the Dallas office of Hendricks & Partners. Posted 08/23/07. What area is your expertise? • We will be discussing the Dallas and Fort Worth multifamily sector. What trends do you see presently in multifamily development in your area? • Construction activity has picked up steam over the past three years and this trend should continue through 2007. Healthy economic growth has brought thousands of new jobs to the area and developers are actively filling the demand. We expect approximately 10,000 new units will be added to inventory this year. Gunn Who are the active multifamily developers in your area? • The most active multifamily developers in the metro area are Lincoln Property Co., Alliance, UDR, Wood Partners, Hanover Financial Co., Flournoy Development, Gables Residential and Legacy Partners. Between these developers, more than 1,400 apartment units are scheduled for completion this year alone. Please name one or two significant multifamily developments in your area. What impact will these projects have on the market? • The Republic National Bank Building, located in downtown Dallas is a highly anticipated transformation. The 36-story former banking-hall pavilion, with its trademark aluminum siding, is being refurbished to include 229 high-end apartments. The long-vacant Mercantile Bank complex, located at Main and Ervay streets, is also receiving a makeover. The 31-story clock tower is currently being rehabilitated to contain 225 apartments, while a new 15-story building housing 150 units on top of roughly 30,000 square feet of retail space will be built in place of the demolished buildings. Where is the majority of development taking place? Why is this area doing well? • The Galleria, Las Colinas, Frisco, Allen, McKinney and Uptown/Intown areas are all performing well currently due to healthy growth. The local population has been increasingly shifting to pedestrian-friendly environments. Areas with infill urban environments consisting of residential areas, quality schools, developed infrastructure, and retail and office space will likely continue to do well. Developers have been successful at creating these types of communities in these areas. What area do you expect to be the next big development market? Why? • Galleria and Addison will be the next big development market because infill urban areas are becoming more expensive. Developers push to economic sites where employment is plentiful and growth is occurring. Redevelopment will be the most popular alternative in the near term. What areas are doing well in terms of apartment leasing?Which areas are struggling with leasing?  • There are several areas outperforming the market currently, including Intown, Downtown Dallas, Las Colinas, and the Museum District in Fort Worth. Conversely, the infill submarkets south of the Central Business District in Dallas and Fort Worth with some exceptions (i.e. North Oak Cliff) are struggling. Farmers Branch, Lake Highlands and West Fort Worth are also marginal performing markets at this time. Please give a measure of apartment vacancy rates. • Apartment vacancy in the metro area was recorded at 6.9 percent in first quarter 2007, down 40 basis points from first quarter 2006. We expect vacancy to remain in the high 6 to low 7 percent range for the remainder of the year. Please give a measure of condo sales activity in the area. • Condo sales activity is moderate right now as housing affordability is relatively high in this market. Many potential condo buyers are also able to afford detached single-family homes and choose to go that route instead. Condo projects in urban environments continue to do well, as the demand for the live-work-play lifestyle has not waned. What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in the next year? • Rising interest rates had a significant impact on the multifamily market. Interest rates have a strong correlation with cap rates and as interest rates have risen, cap rates have also, resulting in decreased values. All signs point to further rate hikes in the coming year. What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market? • Job growth has recorded healthy gains so far this year. As of April 2007, local employment was up 2.2 percent over the past 12 months. Also in April, unemployment dipped below 4.0 percent for the first time in six years. The steady improvement of the job market has been very positive for the multifamily market, particularly for apartment occupancy rates. Would you like to make any additional observations about the multifamily market in your area? • The apartment market looks to be in good shape. An optimistic economic outlook is helping with fundamental improvements. Investors have been active in this market and additional capital is flowing into the area.