DOWNTOWN HOUSTONJuly 13, 2011
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I-10
59
Theater District
Minute Maid Park
Discovery Green
Convention Center
Toyota Center
Harris County Complex
City Complex
Main StreetSt. Joseph Hospital
Macy’sHouston Pavilions
Historic District
Shops at HC
Soccer stadium (u/c)
New YMCA
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I-10
59
Devon, Plains
Hess (move 2011)
Lyondell
BG Group
Chevron
Exxon
El Paso Corp.,CenterPoint
KBR
Chevron
EOG
Hess, Kinder Morgan
Shell (behind)
NRG/ReliantShell, GenOn
Enterprise Products, Enbridge
Calpine, TransCanada, Plains Expl
Total, Hilcorp
Exxon
Milagro, Dynamic Offshore, Key Energy
Chevron
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I-10
59
E&Y, Jenkins
Fulbright
Continental Airlines KBR
Deloitte
Baker Botts
Waste Mgmt & Vinson & Elkins
Accenture
ChasePWC
Cooper Ind, Andrews Kurth, Locke Lord, Winstead
King & Spalding
Bank of America
Akin Gump
Bracewell Guiliani
Waste Mgmt
Latham Watkins
DEVELOPMENTS
DOWNTOWN DEVELOPMENT
Complete since 2000 $4.29 billion
Under construction + $.73 billion
Pre-development/design + $ .66 billion
Development since 2000 $5.68 billion
RECENTLY COMPLETED
INTOWN LIVING One Park Place
• 346 apartment units• ~90% leased• To have over 700 residents• 1/3 of tenants have a unit as
a second home.• Generally $2.40 – $3.00 / sf• 976 sf to 2,615 sf• Pool area modeled after
Ritz Carlton in Maui• 37 stories; 30 resid levels• Phoenicia grocery store
~July 2011
DOWNTOWN YMCA
107,000 sfOpened 10/2010
BALLET CENTER FOR DANCE
• 6-stories• 10,000+ sf• Offices,
classrooms, studio space, dormitory
• Gensler• One level
underground parking
PARKS – MARKET SQUARE PARK
PARKS – MARKET SQUARE PARK
UNDER CONSTRUCTION
PROGRESS
• Former Sheraton• Empty, boarded up for years• In process of deconstruction• Will be 3 levels of
underground parking, surface parking
• Build to new city parking standard
JULIA IDESON BUILDING
• New 24,500 sf, $38 million wing• Phase I open January 2010• Phase II (restoration of 1926 building) begins
spring 2010, takes 12-18 months
PHOENICIA
• Family-owned, gourmet international food store
• Offerings:– Fresh produce, fruits,
meats and seafood– Cheeses, dairy and frozen
foods– Wines, beers and beverages– Bakery, fresh breads and
pizza center– Prepared foods, dining space– Grocery essentials and dry
goods– Free parking– Delivery and catering
DYNAMO STADIUM
• Land, bldg owned/paid for by city & county, team pays $60m for the stadium, city and county add infrastructure outside the stadium. Total cost: $95m
• Seating: 22,000• Light rail stop• Construction 1Q11 – 2012 soccer season
HARRIS COUNTYJury Assembly Plaza
• Four 250-seat jury selection rooms below grade• $16 million, construction started 7/09, opens this month• Tunnel-connect to Criminal, Civil, Juvenile and Family Law Center
OPENINGS TIMELINE• 9/10– Market Square Park & new YMCA open• 4Q10 – NRG moved to Pavilions (262,000 sf)• 2/11 – Embassy Suites opens (262 rooms)• 2/11 – KPMG moves to MainPlace (100,000 sf)• 4/9/11 – Ballet Center for Dance• 5/11 – Hess moves to Hess Tower (844,000 sf)• 7/11 – Jury Assembly opens• 8/11 – BG Group moves in (350,000 sf)• 10/11 – Phoenicia opens – grocery store• 11/11 – Sundance opens• 4/12 – Dynamo Stadium opens• 2014 – Expanded light rail in operation
PROPOSED
BUFFALO BAYOU
• BBP & HC Flood Control District to move forward with White Oak Bayou Diversion Channel
• Purchasing more land
• Reshaping the Buffalo Bayou channel east of San Jacinto
• Sunset Coffee Bldg• Elysian Viaduct
CONVENTION COMPLEX
1111 RUSK
• Owner: Kimberly-Clark• Broker: CBRE/Mike
Hassler• Former proposed uses:
Ritz Carlton, Marriott Renaissance
• Most likely use: 315 apartments and condos
• ~$20 million• Built 1915, 1938
PROPOSED: HSPVA
• Current facility: • Montrose at Stanford• Outdated, overcrowded
• Est total cost $45-49 million for new downtown building• Potentially raise $15 million• 160,000+/- square feet
• Funding from various sources, including HISD• Several potential downtown sites identified• Accommodates 650 students• Parking required: up to 300 spaces• Two light rail lines: Main Street/ Southeast
806 MAIN
• Main & Rusk• Marriott branding• 250 rooms• 6,000 sf of meeting space• Construction: 18 months• $74 million
Residential Neighborhoods• Warehouse District “Sketch Pan”• Northeast Quadrant “Sketch Plan”• Southeast Quadrant “Sketch Plan”
Active Sidewalks• Lamar St. Ped Lighting Pilot• TIRZ 3:Travis-Fannin / Clay-Jefferson
• TXDOT/COH:Southeast Quadrant
New Attractions• Dynamo Stadium • Regional Tourism Center - ADLA• Schools: HSPVA, Houston Ballet• UH Downtown Masterplan
A Dynamic Economic Center• Mixed Use Retail Core Area• 806 Main Development• GRB Convention Center Masterplan• Convention Hotels• Other New Developments
Buffalo Bayou• Austin Street Portal Repairs• North Channelization• Sesquicentennial to Travis Portal• International Coffee Building• Buffalo Bayou Partnership Plan
Parks & Plazas• Tranquillity Park• Jones Plaza• Pockets & Pets
Public Services & Amenities• Louisiana LED Street Lighting Pilot• Main St OCS Pole Lighting Pilot• Theater Pole Relocation• Congress Street Bridge• LRT Capitol & Rusk Streets• Main Street Paver Repairs• Dallas Ave. Caroline to AdlA• Jury Assembly / 1910 Courthouse
Connected and Convenient• Bike Share Program• Downtown / EaDo Livable Centers• Wayfinding Improvements• GREENLINK Circulator• Elysian Viaduct Bridge & Gateways• Dynamo Stadium Sidewalks: TIRZ 15• Bastrop Promenade• Sister Cities / International Zone• North San Jacinto Extension
PLANNINING INITIATIVES 2011-2012
ASSETS
TUNNEL & SKYBRIDGE SYSTEM
• 6.5 miles• 81 buildings• Goods and services:
– Restaurants, gift shops, personal services, professional services
FITNESS CENTERS
Houston Center Club
Houstonian Lite (2)
Houston Club
Larry North Fitness
The Met
YMCA
THEATER DISTRICT
Theater District:• Six venues• Nine stages• 12,948 seats for performances
plus 1,480 movie seats• One of 5 in the US with four
permanent companies
DOWNTOWN Outdoors
DISCOVERY GREEN
SPECIAL EVENTS
PUBLIC ENVIRONMENTS
• Emphasis on public spaces– streets, squares, art, esplanades and street trees
PUBLIC SAFETY GUIDES
Training highlights:• First Aid/CPR• Crisis Intervention Training• Downtown 101• HPD• Coalition for the Homeless• METRO• Two-way Radio/Programmable Handheld Units• Parking: on-street meters, garages and surface lots• Map Training• Report Writing
HOTELS
EMBASSY SUITES
• $55 million, 19-stories, 262 rooms• American Liberty Hospitality• Architect: Houston-based Mitchell
Carlson Stone• Opened 2/2011• Faces Discovery Green;
1515 Dallas at LaBranch• On 99-year land lease• Avg room rates $200
Two-room suites with separate living area, bedroom and minikitchens. Meeting and event space, pool, sauna, fitness center, restaurant and lounge.
INTOWN LIVING
54,000 residents within a 2-mile radius of Macy’s
Nearby Residents
Gain of 6,519 (62%) college grad 25-34 year-olds within 3 miles 2000-2009
INTOWN LIVING
INTOWN LIVING
• Characteristics of downtown residents• Young, high wage• Empty-nesters• Affluent• Want to be close to cultural
and sports venues
• Those most likely to live downtown:• Have lived in another
downtown• One person works
downtown• Desire for less upkeep of
the home
TRANSPORTATION
TRANSIT USE
Single Occupant
Vehicle, 48%
Park & Ride, 29%
Local bus, rail or both,
8%
Carpool, 11%Other, 4%
Downtown Workforce Mode Split
TRANSIT
METRO SYSTEM EXPANSION
• Construction began 2009
• April 2010: relocation of utility lines begins
• Train in service in downtown Oct 2013 east of Main
• Train in service in downtown April 2014 west of Main
SYSTEM
DOWNTOWN TAXI
• $6.00 cab rides anywhere in downtown
• Up to four people can ride for one flat fee
• Hail a cab when you need it
OFFICE
WHY DOWNTOWN
• Want to be in the mainstream of deal flow; proximity to peers, clients, vendors
• Labor force
• Best transportation anywhere in Houston
• Heart of the city
• Prestige of a downtown address
• The “hip” factor – new, urban, cool
• Residential – opportunity to live close to office; to hire young workers who want to live “urban”
HOMELOCATIONS
Where downtown workers live
FORTUNE 500 COMPANY HQ
Houston MSA: 23 Fortune 500 headquartersDowntown: 11 Fortune 500 headquarters
Source: Fortune, April, 2011
Company
Fortune 500
Rank
Revenues
($millions)
Enterprise Products Partners 80 33,739Plains All American Pipeline 99 25,893Waste Management 196 12,515KBR 242 10,099CenterPoint Energy 279 8,785Kinder Morgan 294 8,191Enbridge Energy Partners 309 7,736Calpine 349 6,637EOG Resources 377 6,100Targa Resources* 416 5,469El Paso 481 4,616
OFFICE SPACE
• 44 million square feet, 30 million in competitive space• Few large blocks available• Vacancy: 3.5 million sf• Prices: soft, not in freefall
• Newest buildings:– Hess Tower– BG Group Place
• Brookfield, Hines, Crescent control ~1/2 the market
BUILDING SALES 2011
• Four Allen Center (1400 Smith)– Purchaser: Chevron– Price: $340-380 million (292/sf) – Cap rate 6.3%– SF: 1,300,000– Seller: Brookfield
• Wells Fargo Plaza – 49% interest– Purchaser: ING Clarion/NY Common Fund– Price: $255 million ($300/sf) – Seller: MetLife
MAJOR RELOCATIONS
Year Company Type From To Initial SF
2010 Ascend New to Houston n/a Chase Tower 20,0002010 BG Group Relocation Galleria BG Group Place 354,0002009 Latham Watkins New to Houston n/a 717 Texas 25,0002009 Accenture Relocation Allen Parkway 1301 Fannin 25,2002008 Breitburn New to Houston n/a Chase Tower 22,0002008 Vestas New to Houston n/a Heritage Plaza 28,0002008 Dynamic Offshore Relocation Greenspoint Fulbright Tower 49,0002008 McDermott Will New company n/a Wells Fargo Plaza 75,0002007 ACL Transportation Svcs New to Houston Indiana First City Tower 26,0002007 Liskow Lewis New to Houston New Orleans First City Tower 55,0002007 TransCanada Spinoff n/a 717 Texas 110,0002007 Plains All American (Pogo) Relocation Greenway Plaza 717 Texas 135,0002006 Linn Energy Relocation Pittsburgh Chase Tower 22,0002006 Teekay Shipping/Skaugen Relocation Galleria 2 Houston 23,0002006 NRG Relocation Greenway Plaza Fulbright Tower 50,0002006 Walter P Moore Relocation Greenway Plaza Fulbright Tower 63,0002005 Morris Architects Relocation Greenway Plaza First City Tower 22,0002005 Watkins, Hamilton Ross Relocation Greenway Plaza 1111 Louisiana 50,0002005 Total Relocation Greenspoint & Gessner 1201 Louisiana 150,0002005 EPCO family of companies Relocation Loop 610/290 area 1100 Louisiana 325,0002004 Chase Technology Center Relocation New York 1111 Fannin 60,0002004 Howery Simon Relocation Galleria 1111 Louisiana 100,0002003 Jones Day New to Houston Dallas 717 Texas 70,0002003 Burlington Resources Relocation Galleria 717 Texas 250,0002002 Halliburton Relocation Dallas 5 Houston Center 30,000
and new firms
OFFICE INFO(CBD Story):
56 Central Houston, Inc. 2011
Buildings Surveyed
Class A
Class B
Total
Number
24
20
44
Rentable SF
24,771,609
9,290,633
34,062,242
Buildings in the survey universe are those that have proven the ability to compete for tenants in the downtown Class A and B markets. The following owner-occupied buildings, therefore, are excluded: 800 Bell/Exxon, 1500 Louisiana/Chevron and El Paso Bldg.
Office Building Use by Industry
Including owner-occupied buildings
57 Central Houston, Inc. 2011
“Energy” is very broadly defined and includes exploration and production, pipelines, utilities and chemical companies.
Owner-occupied buildings are included in this slide –800 Bell/Exxon, 1500 Louisiana/Chevron and El Paso
FIRE = Finance, Insurance, Real Estate
Other includes Waste Management, Continental Airlines, KBR and others.
Energy, 56%
Legal, 19%
FIRE, 12%
Other, 13%
Large Tenants in Bldg Universe
58 Central Houston, Inc. 2011
Tenants by number of floorsOne or more floors 204Two or more floors 116Four or more floors 53
Tenants by square footage20,000+ sf 204100,000+ sf 48200,000+ sf 26500,000+ sf 8
10 tenants control 26% of the survey universe20 tenants control 35% of the survey universe55 tenants control 50% of the survey universe
Excludes Exxon’s 800 Bell, Chevron’s 1500 Louisiana, and El Paso
Summary Data
January 1, 2011
59 Central Houston, Inc. 2011
Space Being Marketed (Direct)
Percent Being Marketed (Direct)
Space Being Marketed (Sublease)
2010 Absorption (Direct)
2010 Leases Signed (Direct)
5,358,104
15.7%
1,002,601
- 237,727
5,064,912
Historical Availability
Direct space being marketed
60 Central Houston, Inc. 2011
Vacancy rate
0%
5%
10%
15%
20%
25%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Perc
enta
ge V
acan
cy
Squ
are
Feet
, Mill
ions
Historical Leasing Activity
61 Central Houston, Inc. 2011
Direct, All Lease Types
0
1
2
3
4
5
6
7
'84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Squ
are
Feet
, Milli
ons
Effective Blocks of Space
62 Central Houston, Inc. 2011
June 16, 2011 100,000 SF+
Red text indicates sublease space
Class Building Floors Total SF Comments
A Pennzoil (North Tower) 12-30 396,346 Current lease exp 7/2013A BG Group Place 11-21 294,295 187ksf is unencumberedA 2 Houston Center 4-10 280,181 Current lease exp 7/2013A 2 Allen Center 17-20; 22-24 198,500 Sublease thru 1/2020A 1 Allen Center 14-20 192,371B JPMorgan Chase Center 14, 15 (most), 19 187,720 Potential to 400ksfB 1300 Main 11, 13-18, 20 171,341B 919 Milam 11-16 130,000 Current lease exp 7/2013A JPMorgan Chase Tower 31-35 110,609 Floors 31-33 encumbered
Full-Floor Sublease Spaces
63 Central Houston, Inc. 2011
Class Building Description Exp SF
A 2 Allen Center 3-5, 17-20, 22-24 (10 floors) (Devon) Jan 2020 281,755
A 3 Allen Center 5-6, 21-23 (Devon) Jan 2020 118,593
A Bank of America 3rd floor (BOA) Sept 2019 38,945
A Wells Fargo Plaza 65-67 (Dynegy) Dec 2017 78,357
A Wells Fargo Plaza 60-61 (Dynegy) Dec 2017 49,917
A Pennzoil-North 6-7 (AEI/Cheniere) Sept 2017 40,866
A Fulbright Tower 32, part of 33 (Coronado Energy) Dec 2016 42,558
A 1600 Smith 48-49 (CRA International) Aug 2015 22,544
B 1111 Fannin 8, 9, 11th floors (Chase) Sept 2021 95,000
B One City Centre 16 & 18th floors (EDS) April 2015 42,532
B Wedge 23 & 26th floors (Dominion) Feb 2013 37,061
With term, not necessarily contiguous; as of 6/13/11
Lease Transactions
64 Central Houston, Inc. 2011
Direct
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
50,000+ 20-50,000 5-20,000 <5,000
Squ
are
Feet
Renewal Expan. New
55
36
108
41
23
48
5
6
15
4
1
8
65
Factors Affecting 2011+• Chevron reduced space from
461ksf to 311ksf in 1600 Smith
• Shell is trying to decrease space by 15-20%. Expected to exit Pennzoil Plaza, 437,000 sf. PZL and 2 Houston leases exp 2013.
• Continental Airlines will reduce space – by how much? Has 600ksf in leases between 1600 Smith and 600 Jefferson, expire 2014.
• Devon still has 281,755sf sublease in 2AC and 138,000sf sublease in 3AC on the market. Exp 2020
• Dynegy may go to Chapter 11; Has 207ksf/8 floors, put 128ksf/5 floors on sublease market (expires 2017)
Beyond 2012
• Exxon to vacate 800 Bell, which isn’t in the survey universe. Potential to decrease later in 1301 Fannin.
• No new buildings – earliest delivery early 2015.
THANK YOU!