Colliers Houston Trends 2016 slides

Disclosures, page

Crude Oil Facts and Fears Houston Trends 2016

27

February 2, 2016

Brandon Blossman [email protected]

mailto:[email protected]

The News

Crude Lower for (a Lot) Longer

Shale Oil There will be Blood

US Oil Export Ban Lifted Energy Security Gains

Saudi Wages Market Share WarCrushes Price

Oil Crushed on Threat of Iranian Exports

Softening Asian Demand Dooms Oil

3

4

Remember When Oil was a $100 Commodity?

Source: FactSet, Bloomberg (through 1/22/16)

$0

$20

$40

$60

$80

$100

$120

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

Wes

t Te

xas

Inte

rmed

iate

, $/

bbl

January 2012 - Current WTI Crude Oil

$100?

$30?

The Market Doesnt Have a Clue About the Future

5 Source: Bloomberg, TPH & Co.

-50%

-25%

0%

25%

50%

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

% D

iffe

renc

e-St

rip

vs. A

ctua

l

Strip Too High(Strip Too Low)

6

Global Supply and Demand : Quarterly

84

88

92

96

100

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0

Supp

ly/D

eman

d (m

mbb

l/d)

Und

er/ S

uppl

y (m

mbb

l/d)

Implied Inventory Change Supply Demand

Undersupplied

Oversupplied

Note: A missing barrels adjustment is made to projected inventories, but not shown on this chart. Thus, they will not match with the supply and demand differences.

OECD Inventories

7 Source: IEA, TPH Research

2,200

2,700

3,200

Jan Apr Jul Oct

Mill

ion

Barr

els

2015

Max

Min

Norm

2014

Sep & Oct inventories: Built at ~normal pace, pointing to a

market approaching balance

The US Has Been The 800 Pound Gorilla Of Supply

Source: IEA, TPH & Co. 8

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2008 2009 2010 2011 2012 2013 2014 2015 2016E

Prod

uctio

n G

row

th (I

ndex

ed to

1.0

)OPEC (ex. Saudi) OECD (ex. US) Non-Oecd (ex. Russia) Saudi Arabia United States Russia

Oil Production Growth By Country/Region

The News







9

10

The Shale Revolution

4

6

8

10

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

mm

bpd

US Oil Production1995-2015

Source: EIA

Brave New WorldSame Old Rules Apply

11

Source: Holditch

Hard to findeasy to produce

Easy to findhard to produce

12

U.S. Rig Count Setting New Shale Era Lows

Sources: Rigdata, TPH Research

200

700

1200

1700

2200

2700

RigData US Land Rig Count

Rig count fell ~1,475 rigs or 62% peak to trough (~8 month troughing process)

Rig count currently down >1,500 rigs or 70% peak to trough

(~15 months into this bottoming process). No

economic reason for it to flatten /

reverse course with oil ~$30-35/bbl.

~600 rigs currently drilling

2008 / 2009 troughed at ~900 rigs

Painful Realities of Current Macro Environment

13

* Refelcts a world where operators try to live within cash flow at $35/bbl oil and $2.35/mmbtu gas** Still reflects industry cash flow outspend, asset sales / capital markets access will be needed to fund the spending gap

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Large-Caps Mid-Caps Small-Caps

2015 vs. TPHe 2016 E&P Capex Expectations ($Billions)

TPHe 2015 Capex TPHe 2016 Capex

-60%

-50%

-40%

-30%

-20%

-10%

0%

Large-Caps Mid-Caps Small-Caps

TPHe 2016 E&P Capex Delta vs. 2015

TPHe 2016 E&P Capital Expenditures TPHe 2016 Capex

Source: TPH Research, FactSet, Company Filings

Our E&P coverage universe is looking to make meaningful cuts to capex y/y 2016

Companies and investors seem laser focused on balance sheet preservation and ~$30/bbl oil has enhanced E&P discipline / desire to live closer to within cash flow.

We believe overall E&P capex for our coverage universe is biased down ~50% y/y at $35/bbl oil and $2.35/mmbtu gas.

US Drilling Activity Quick-Cycle Reaction

Source: RigData, TPH Securities 14

0

500

1,000

1,500

2,000

2,500

U.S

. Lan

d Ri

g Co

unt

Week

Peak to Trough Rig Count:'08-'09 vs. Current2008-2009 Current

0

3

6

9

Jan-10 Jan-12 Jan-14 Jan-16 Jan-18

US O

il Pr

oduc

tion,

mill

ion

barr

els p

er d

ay

US Onshore

65kbopd monthly decline results in ~700kbopd annual onshore decline in 2016.

US Oil Production Declines are HappeningNow!

15 Source: EIA, TPH Research

65 kbpd monthly declineOnshore Annual Change

mmbpd kbpd2014 6.8 2015 7.4 608 2016 6.7 (696)

Dec'16 less Apr'15 (1,507)

The News







16

17

Exports?...What About Imports?

-

2

4

6

8

10

12

14

2011 2012 2013 2014 2015 2016

mm

bpd

Venezuala

Mexico

Saudi

Canada

Others

US Still Imports ~40% of Crude Supply

The News







18

Non-OPEC Oil Production Growth Aint Happening

19

20

25

30

35

40

4

5

6

7

8

9

10

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Non

-OPE

C Cr

ude

Oil

Prod

ucti

on (

ex.

US)

, mm

bpd

US

Crud

e O

il Pr

oduc

tion

, m

mbp

d

United States Non-OPEC ex. US

Source: EIA, TPH Research

Non-OPEC ex-US supply has been ~flat in recent years. We do not expect major declines in 16 or 17 as projects in progress should offset declines. The big decline

risk starts in 2018 as project deferrals/cancelations start to impact supply

20

OPEC: Volatility, Growth and Decline

Sources: IEA, TPH Research

10

12

14

16

18

20

Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18

Prod

ucti

on, m

illi

on b

arre

ls p

er d

ay

Saudi ArabiaIranIraqLibya

Rest of OPEC

1.5% annual decline ~200kbpd decline in 2016

Further, OPEC growth will come from Saudi, Iran, Iraq, Libya, as second tier OPEC is in decline

The News







21

Iran: The 1mmbpd Supply Risk?


1

2

3

4

5


Mil

lion

bar

rels

per

day

500 kbopd Increase

Sanctions

Post-sanctions, Iran should produce 3.3mmbpd500kbpd higher than current. But expect Iraq production to decline 200kbpd (leakage).

1

2

3

4

5


Mil

lion

bar

rels

per

day

Iraq

Iran

23

Iran and Iraq Leakage?

Sources: IEA, TPH Research

We assume only 200kbpd of cross border Iranian supply even though a 1mmbpd decrease in Iranian supply corresponded with a 500kbpd increase in Iraqi production in 2012.

The News







24

25

Global Supply and Demand : Quarterly

84

88

92

96

100

(2.0)

(1.5)

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0

Supp

ly/D

eman

d (m

mbb

l/d)

Und

er/ S

uppl

y (m

mbb

l/d)

Implied Inventory Change Supply Demand

Undersupplied

Oversupplied

Note: A missing barrels adjustment is made to projected inventories, but not shown on this chart. Thus, they will not match with the supply and demand differences.

The market remains undersupplied, even with OPEC increasing supply 1.2mmbpd in 17

Global Demand The Big Uncertainty


-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Our assumption of 1.1% global demand growth in 16 & 17 is consistent with the long term average growth rate

Global Demand

27

20

25

30

35

40

45

50

55

60

2000 2004 2008 2012 2016

Dem

and,

mm

bpd

OECD Demand

Non-OECD Demand

Non-OECD demand growth has been much more resilient than OECD demand

Source: IEA, TPH Research

28

Analyst Certification: We, Dave Pursell, Barndon Blossman, Jeoffrey Lambujon, and Erik Stevens, do hereby certify that, to the best of our knowledge, the views and opinions in this research report accurately reflect our personal views about the company and its securities. We have not nor will we receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report. Important Disclosures: The analysts above (or members of their household) do not own any securities mentioned in this report. For detailed rating information, distribution of ratings, price charts and disclosures regarding compensation policy and investment banking revenue, please visit our website at http://www.TPHco.com/disclosures or request a written copy of the disclosures by calling 713-333-2960 (United States). OTHER DISCLOSURES Trade Name Tudor, Pickering, Holt & Co. is the global brand name for Tudor, Pickering, Holt & Co. Securities, Inc. (TPHCSI) and its non-US affiliates worldwide including Tudor, Pickering, Holt & Co. International, LLP. Legal Entities Disclosures U.S.: TPHCSI is a member of FINRA and SIPC. U.K.: Tudor, Pickering, Holt & Co. International, LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. OC349535. Registered Office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE. Canada The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein and any representation to the contrary is an offense. United Kingdom Tudor, Pickering, Holt & Co International LLP does not provide accounting, tax or legal advice. In addition, we mutually agree that, subject to applicable law, you (and your employees, representatives and other agents) may disclose any aspects of any potential transaction or structure described herein that are necessary to support any UK income tax benefits, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, with no limitations imposed by Tudor, Pickering, Holt & Co International LLP or its affiliates. The information contained herein is confidential (except for information relating to tax issues) and may not be reproduced in whole or in part. Tudor, Pickering, Holt & Co International LLP assumes no responsibility for independent verification of third-party information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by, reviewed or discussed with the managements of your company and/ or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and Tudor, Pickering, Holt & Co International LLP materials. This information is intended only for the use of professional clients and eligible counterparties or persons who would fall into these categories if they were clients of Tudor, Pickering, Holt & Co International, LLP, or any of its affiliates. Retail clients must not rely on this document and should note that the services of Tudor, Pickering, Holt & Co International, LLP, are not available to them. Under no circumstances is this presentation to be used or considered as an offer to sell or a solicitation of any offer to buy, any security. Prior to making any trade, you should discuss with your professional tax, accounting, or regulatory advisers how such particular trade(s) affect you. This brief statement does not disclose all of the risks and other significant aspects of entering into any particular transaction. Notice to UK Investors: This publication is produced by Tudor, Pickering, Holt & Co. Securities, Inc. which is regulated in the United States by FINRA. It is to be communicated only to persons of a kind described in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. It must not be further transmitted to any other person without our consent. Any other person should not rely on or act upon the content of this publication. Persons falling within Article 19 include authorised or exempt investment firms, UK or overseas governments, UK or overseas local authorities or international organisations. Person falling within Article 49 include companies or unincorporated associations with net assets or called-up share capital of 5 million or subsidiary companies of the same that have net assets or called-up share capital of 500,000. Tudor, Pickering, Holt & Co. International, LLP is a limited liability partnership registered in England and Wales (registered number OC349535). Its registered office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE. Tudor, Pickering, Holt & Co. International, LLP (TPH International) is authorised and regulated by the Financial Conduct Authority, and is a separate but affiliated entity of Tudor, Pickering, Holt & Co. Securities, Inc. (TPH Securities). TPH Securities is a member of FINRA and SIPC. Unless governing law permits otherwise, you must contact the Tudor, Pickering, Holt & Co. entity in your home jurisdiction if you want to use our services in effecting a transaction. See http://www.TPHco.com/disclosures for further information on regulatory disclosures including disclosures relating to potential conflicts of interest.

Copyright 2016, Tudor, Pickering, Holt & Co. This information is confidential and is intended only for the individual named. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Tudor, Pickering, Holt & Co. This communication is based on information which Tudor, Pickering, Holt & Co. believes is reliable. However, Tudor, Pickering, Holt & Co. does not represent or warrant its accuracy. The viewpoints and opinions expressed in this communication represent the views of TPH as of the date of this report. These viewpoints and opinions may be subject to change without notice and TPH will not be responsible for any consequences associated with reliance on any statement or opinion contained in this communication. The viewpoints and opinions herein do not take into consideration individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. Past performance is not indicative of future results. This message should not be considered as an offer or solicitation to buy or sell any securities. Institutional Communication Only. Under FINRA Rule 2210, this communication is deemed institutional sales material and it is not meant for distribution to retail investors. Recipients should not forward this communication to a retail investor.

Analyst Certification:

We, Dave Pursell, Barndon Blossman, Jeoffrey Lambujon, and Erik Stevens, do hereby certify that, to the best of our knowledge, the views and opinions in this research report accurately reflect our personal views about the company and its securities. We have not nor willwe receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report.

Important Disclosures:

The analysts above (or members of their household) do not own any securities mentioned in this report.

For detailed rating information, distribution of ratings, price charts and disclosures regarding compensation policy and investment banking revenue, please visit our website at http://www.TPHco.com/disclosures or request a written copy of the disclosures by calling 713-333-2960 (United States).

OTHER DISCLOSURES

Trade Name

Tudor, Pickering, Holt & Co. is the global brand name for Tudor, Pickering, Holt & Co. Securities, Inc. (TPHCSI) and its non-US affiliates worldwide including Tudor, Pickering, Holt & Co. International, LLP.

Legal Entities Disclosures

U.S.: TPHCSI is a member of FINRA and SIPC. U.K.: Tudor, Pickering, Holt & Co. International, LLP is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. OC349535. Registered Office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE.

Canada

The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein and any representation to the contrary is an offense.

United Kingdom

Tudor, Pickering, Holt & Co International LLP does not provide accounting, tax or legal advice. In addition, we mutually agree that, subject to applicable law, you (and your employees, representatives and other agents) may disclose any aspects of any potential transaction or structure described herein that are necessary to support any UK income tax benefits, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, with no limitations imposed by Tudor, Pickering, Holt & Co International LLP or its affiliates.

The information contained herein is confidential (except for information relating to tax issues) and may not be reproduced in whole or in part. Tudor, Pickering, Holt & Co International LLP assumes no responsibility for independent verification of third-party information and has relied on such information being complete and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by, reviewed or discussed with the managements of your company and/ or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). These materials were designed for use by specific persons familiar with the business and the affairs of your company and Tudor, Pickering, Holt & Co International LLP materials.

This information is intended only for the use of professional clients and eligible counterparties or persons who would fall into these categories if they were clients of Tudor, Pickering, Holt & Co International, LLP, or any of its affiliates. Retail clients must not rely on this document and should note that the services of Tudor, Pickering, Holt & Co International, LLP, are not available to them.

Under no circumstances is this presentation to be used or considered as an offer to sell or a solicitation of any offer to buy, any security. Prior to making any trade, you should discuss with your professional tax, accounting, or regulatory advisers how such particular trade(s) affect you. This brief statement does not disclose all of the risks and other significant aspects of entering into any particular transaction.

Notice to UK Investors: This publication is produced by Tudor, Pickering, Holt & Co. Securities, Inc. which is regulated in the United States by FINRA. It is to be communicated only to persons of a kind described in Articles 19 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. It must not be further transmitted to any other person without our consent. Any other person should not rely on or act upon the content of this publication.

Persons falling within Article 19 include authorised or exempt investment firms, UK or overseas governments, UK or overseas local authorities or international organisations. Person falling within Article 49 include companies or unincorporated associations with net assets or called-up share capital of 5 million or subsidiary companies of the same that have net assets or called-up share capital of 500,000.

Tudor, Pickering, Holt & Co. International, LLP is a limited liability partnership registered in England and Wales (registered number OC349535). Its registered office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE. Tudor, Pickering, Holt & Co. International, LLP (TPH International) is authorised and regulated by the Financial Conduct Authority, and is a separate but affiliated entity of Tudor, Pickering, Holt & Co. Securities, Inc. (TPH Securities). TPH Securities is a member of FINRA and SIPC. Unless governing law permits otherwise, you must contact the Tudor, Pickering, Holt & Co. entity in your home jurisdiction if you want to use our services in effecting a transaction.

See http://www.TPHco.com/disclosures for further information on regulatory disclosures including disclosures relating to potential conflicts of interest.

Copyright 2016, Tudor, Pickering, Holt & Co. This information is confidential and is intended only for the individual named. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Tudor, Pickering, Holt & Co. This communication is based on information which Tudor, Pickering, Holt & Co. believes is reliable. However, Tudor, Pickering, Holt & Co. does not represent or warrant its accuracy. The viewpoints and opinions expressed in this communication represent the views of TPH as of the date of this report.These viewpoints and opinions may be subject to change without notice and TPH will not be responsible for any consequences associated with reliance on any statement or opinion contained in this communication.The viewpoints and opinions herein do not take into consideration individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. Past performance is not indicative of future results. This message should not be considered as an offer or solicitation to buy or sell any securities. Institutional Communication Only. Under FINRA Rule 2210, this communication is deemed institutional sales material and it is not meant for distribution to retail investors. Recipients should not forward this communication to a retail investor.

**Office of Tudor, Pickering, Holt & Co. International, LLP. Employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and is not registered/qualified with FINRA and is not an associated person of Tudor, Pickering, Holt & Co. Securities, Inc.Anish Kapadia, Shola Labinjo, and David Gamboa are employed by Tudor, Pickering, Holt & Co. International, LLP in the United Kingdom and are not registered/qualified as research analysts with FINRA. Mr. Kapadia, Mr. Labinjo, and Mr. Gamboa are not associated persons of Tudor, Pickering, Holt & Co. Securities, Inc. and as such are not subject to NASD Rule 2711 restrictions on communications with subject companies, public appearances and trading securities held by a research analyst account.

RESEARCH

W. Mark [email protected]

Oil Service / E&CByron [email protected]

George [email protected]

Taylor [email protected]

Shola Labinjo**+44 20 3008 [email protected]

Integrated Oils Anish Kapadia**+44 20 3008 [email protected]

David Gamboa**+44 20 3427 [email protected]

Refiners

Chi [email protected]

Matthew Blair, [email protected]

Erik [email protected]

TRADINGSALES

HoustonClay [email protected]

Mike [email protected]

Rusty [email protected]

Mike [email protected]

Oliver [email protected]

John [email protected]

Aly [email protected]

Houston - (800) 507-2400Scott [email protected]

Seth [email protected]

Ally [email protected]

New York - (800) 507-2400Jason [email protected]

DenverWin [email protected]

New YorkCraig [email protected]

James [email protected]

Harry [email protected]

LondonJonathan Wright**+44 20 3008 [email protected]

MacroDave [email protected]

Brandon [email protected]

MidstreamBrandon [email protected]

Colton [email protected]

Erik [email protected]

Utilities / PowerNeel [email protected]

Ryan [email protected]

Kevin [email protected]

E&PMatt [email protected]

Michael [email protected]

Jeoffrey [email protected]

Jamaal [email protected]

Sameer [email protected]

Oliver [email protected]

E&P InternationalAnish Kapadia**+44 20 3008 [email protected]

Shola Labinjo**+44 20 3008 [email protected]

David Gamboa**+44 20 3427 [email protected]

Confidential Colliers International 2016

FAS 13 Change

Effective January 2018-19

ALL Leases over 12 months will be on the BALANCE SHEET

Still two types

Capital Lease will be a Finance Lease (Type A) Asset is a Finance Right of Use

Operating Lease will still be Operating Lease Asset is an Operating Right of Use

Sale/Leaseback Accounting impacted structure now as Finance Lease not operating or beneficial accounting treatment lost.

All lease structuring will need more analysis to optimize.


Jobs Texas / U.S.

-8.0%

-4.0%

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

Percent Change in Employment: Texas vs. US Minus Texas December 2007 to December 2015

Texas U.S. Minus TX


2012 Dr. Ray Perryman, the Perryman Group: For every oilfield job created two jobs are created in Houston

Jobs

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

2009 2010 2011 2012 2013 2014 2015 2016

Houston-Sugar Land-Baytown Annual Job Growth

Forecast 21,000


Jobs

-20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000

Manufacturing

Mining and Logging

Financial Activies

Other Services

Professional and Business Services

Trade, Transportation and Utilities

Information

Construction

Government

Education and Health Services

Leisure and Hospitality

Houston 2015 Annual Job Growth

6.8%

5.3 %

-6.2%

2.7%

-3.5%

-7.4%

4.3%

1.4%

0.1%

0.1%

-1.4%

Energy


Office Big Picture End of Q4

Total Market 225,864,400 SF

Vacancy increases 80 basis points to 15.4%

Absorption is up slightly, but still significantly low compared to average

Under Construction is slowing


Houston Office 212.9M SF

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2,70

7,10

7 3,

147,

990

4,32

7,15

9 5,

283,

149

5,65

4,19

3 6,

039,

320

Available Office Sublease Space Houston, TX

Class A Class B

Available Sublease Space Q4 2015 Class A: 6,039,320 SF or 4.9% Class B: 1,872,129 SF or 2.1%

8.0M SF of Available Sublease Space



10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

$22.00

$24.00

$26.00

$28.00

$30.00

Houston Average Rent Houston Average Vacancy

Forecast


Average Class A Vacancy: 14.8%

Houston Office Class A Submarket Vacancy


Houston Office Class B Submarket Vacancy

Average Class B Vacancy: 16.7%


Average Cap Rate (Yield) Average Price ($) Per SF

Sales by Total $ (mil)

0

1,000

2,000

3,000

4,000

5,000

6,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15

Rolling 12-mo. Total Quarterly Vol.

0

50

100

150

200

250

300

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15

Houston United States

4%

6%

8%

10%

12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


Data Source:


http://www.rcanalytics.com/


Industrial Big Picture End of Q4


Vacancy increases 20 basis points to 5.0%

Absorption is down Less New Construction

Under Construction is slowing


2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

$5.00

$5.20

$5.40

$5.60

$5.80

$6.00

$6.20

$6.40

$6.60

$6.80

$7.00


Houston Industrial 512.5M SF

Forecast


Average Industrial Vacancy: 5.0%

Houston Industrial Submarket Vacancy



Data Source:

$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800$2,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15



$0$10$20$30$40$50$60$70$80$90

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


2%

4%

6%

8%

10%

12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


Houston Industrial 512.5M SF



Retail Big Picture End of Q4


Vacancy is remains steady at 5.8%

Absorption is up - Tenants move into newly delivered space

New Construction is slowing

Malls in motion Baybrook and San Jacinto Mall Redevelopment (Fidelis), Greenspoint


Houston Retail 283.6M SF

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

$12.00

$12.50

$13.00

$13.50

$14.00

$14.50

$15.00

$15.50

$16.00


Forecast


Obligatory Numbers Chart

Property TypeRentable

AreaDirect

Vacant SF

Direct Vacancy

Rate

Sublet Vacancy

SF

Sublet Vacancy

Rate

Total Vacancy

SF

Total Vacancy

Rate

Q4 2015 Net

Absorption

Class A Rental Rates

(in-line)*

Strip Centers (unanchored) 34,727,522 2,959,462 8.5% 32,992 0.1% 2,992,454 8.6% 106,978 $27.00-$45.00

Neighborhood Centers (one anchor) 70,949,103 6,642,494 9.4% 66,910 0.1% 6,709,404 9.5% 387,259 $28.00-$46.00

Community Centers (two anchors) 45,521,283 2,341,745 5.1% 67,939 0.1% 2,409,684 5.3% 69,947 $28.00-$45.00

Power Centers (three or > anchors) 25,664,500 979,702 3.8% - 0.0% 979,702 3.8% (36,106) $28.00-$45.00

Lifestyle Centers 5,239,605 259,759 5.0% 33,789 0.6% 293,548 5.6% 248,430 $40.00-$85.00

Outlet Centers 1,594,333 163,598 10.3% - 0.0% 163,598 10.3% 3,363 $20.00-$40.00

Theme/Entertainment 533,474 19,450 3.6% - 0.0% 19,450 3.6% (1,920) $25.00-$35.00

Single-Tenant 75,376,376 1,412,187 1.9% 25,728 0.0% 1,437,915 1.9% 234,763 N/A

Malls 23,999,275 1,341,442 5.6% 24,750 0.1% 1,366,192 5.7% 141,193 N/A

Greater Houston 283,605,471 16,119,839 5.7% 252,108 0.1% 16,371,947 5.8% 1,153,907


New Construction 2016 Delivery Scheduled

2,709,629 SF 76% Pre-Leased Grand Parkway & Greenfield Dominant Largest Projects: Shoppes at Parkwest Monzer Hourani 450,000 SF 100% Pre-Leased Baybrook Mall Lifestyle Expansion General Growth 500,000 SF


Active Larger (Anchor) Tenants

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjr8szfhs_JAhWFSCYKHa_-CdAQjRwIBw&url=http://www.storebrandsdecisions.com/news/2011/08/23/h-e-b-to-add-two-joe-vs-smart-shop-stores&psig=AFQjCNH0VuZLqFxkrGvYMCPN-X3IwU_u5Q&ust=1449759930866093


High Street Home Run River Oaks District



0200400600800

1,0001,2001,4001,6001,8002,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15



0

50

100

150

200

250

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


4%5%6%7%8%9%

10%11%12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


Data Source:

Houston Retail 283.6M SF



Multi-Family Big Picture End of Q4

Total Market 606,431 Units

Absorption is down Demand is slowing down

Under Construction Inner Loop Hot Spot

Developers pushing new projects to 2018


Current Multi-Family Projects Under Construction 98


80.0%

85.0%

90.0%

95.0%

100.0%

$600

$700

$800

$900

$1,000

Houston Average Rent Houston Average Occupancy

Houston Multi-Family 606.4K Units


Data Source:

Average Cap Rate (Yield) Average Price ($) Per Unit


0

1,000

2,000

3,000

4,000

5,000

6,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


020,00040,00060,00080,000

100,000120,000140,000160,000

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


4%5%6%7%8%9%

10%11%12%

Q4 '09 Q4 '10 Q4 '11 Q4 '12 Q4 '13 Q4 '14 Q4 '15


Houston Multi-Family 606.4K Units



Single Family Big Picture End of Q4

27,778 housing starts in 2015 down 7.1% over 2014 Metrostudy forecast for 2016 - 25,500 starts

Average 2015 Sales Price $280,290 up 3.7% from $270,182 in 2014

Months Supply 3.2

2015 Home Sales 81,224 down from 2014 record high of 83,307

Slumping oil prices and limited inventory slow home buying for a third straight month in December

Source: HAR, Metrostudy


Consultants have seen a slight decrease in demand for services. But for the most part they are staying busy, with layoffs only in their energy sector studios.

General Contractors continue to work through their backlog. Concern is mounting for 2016 projects. Industrial, retail, and medical still going strong.

Subcontractors workload is still challenging their capacity. Personnel that came to Houston during the boom now have the option of returning home to a recovered local economy.

Commodities have held steady, and in a few case decreased in cost. But we havent seen construction material prices significantly affected.

Long lead delivery times for critical path material and equipment continues to drive completion dates.

Construction Comments


Office

Retail

Hotel

Industrial

Apartment

Phase I Recovery

Phase II Expansion

Phase IV Recession

Phase III Oversupply

Rent Increasing

Rents Decreasing

Above Long-Term Avg.

Occupancy

Below Long-Term Avg. Occupancy

SELL

HOLD

BUY

Houston Commercial Real Estate Market Cycle

Thank you, have a great 2016.

Slide Number 1Crude Oil Facts and FearsHouston Trends 2016The NewsRemember When Oil was a $100 Commodity?The Market Doesnt Have a Clue About the FutureGlobal Supply and Demand : Quarterly OECD InventoriesThe US Has Been The 800 Pound Gorilla Of SupplyThe NewsThe Shale Revolution Brave New WorldSame Old Rules Apply U.S. Rig Count Setting New Shale Era LowsPainful Realities of Current Macro EnvironmentUS Drilling Activity Quick-Cycle ReactionUS Oil Production Declines are HappeningNow!The NewsExports?...What About Imports? The NewsNon-OPEC Oil Production Growth Aint HappeningOPEC: Volatility, Growth and DeclineThe NewsIran: The 1mmbpd Supply Risk? Iran and Iraq Leakage?The NewsGlobal Supply and Demand : Quarterly Global Demand The Big UncertaintyGlobal DemandSlide Number 28Slide Number 29Slide Number 30FAS 13 ChangeJobs Texas / U.S. JobsJobsSlide Number 35Slide Number 36Houston Office 212.9M SFHouston OfficeClass A Submarket VacancyHouston OfficeClass B Submarket VacancyHouston Office 212.9M SFIndustrial Big Picture End of Q4Houston Industrial 512.5M SFHouston IndustrialSubmarket VacancyHouston Industrial 512.5M SFRetail Big Picture End of Q4Houston Retail 283.6M SFObligatory Numbers ChartNew Construction 2016 Delivery ScheduledActive Larger (Anchor) TenantsHigh Street Home Run River Oaks DistrictHouston Retail 283.6M SFMulti-Family Big Picture End of Q4Current Multi-Family Projects Under Construction 98Houston Multi-Family 606.4K UnitsHouston Multi-Family 606.4K UnitsSingle Family Big Picture End of Q4Construction CommentsHouston Commercial Real Estate Market CycleSlide Number 59

Date post:	26-Jan-2017
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