1Q2014 Land Forecast Report

Scott Davis

CASE Commercial Real Estate Partners

May 14, 2014

1Q Sales Activity Double Last Year

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

Source: CoStar, CASE CommercialSource: CoStar, CASE Commercial, 1Q2014

1Q13 – 5,795 Acres Sold – Sales Activity Increasing

2005

- Q1

2005

- Q3

2006

- Q1

2006

- Q3

2007

- Q1

2007

- Q3

2008

- Q1

2008

- Q3

2009

- Q1

2009

- Q3

2010

- Q1

2010

- Q3

2011

- Q1

2011

- Q3

2012

- Q1

2012

- Q3

2013

- Q1

2013

- Q3

2014

- Q1

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Source: CoStar, CASE CommercialSource: CoStar, CASE Commercial, 1Q2014

1Q: More than 94% of acreage sold outside Beltway

2009

- Q1

2009

- Q2

2009

- Q3

2009

- Q4

2010

- Q1

2010

- Q2

2010

- Q3

2010

- Q4

2011

- Q1

2011

- Q2

2011

- Q3

2011

- Q4

2012

- Q1

2012

- Q2

2012

- Q3

2012

- Q4

2013

- Q1

2013

- Q2

2013

- Q3

2013

- Q4

2014

- Q1

0

2,000

4,000

6,000

8,000

10,000

12,000

Total Outside 610 Outside BeltwayInside Beltway Inside 610

Source: CoStar, CASE CommercialSource: CoStar, CASE Commercial, 1Q2014

Inner Loop Land Sales Slow, but Remain Strong

2009

- Q1

2009

- Q2

2009

- Q3

2009

- Q4

2010

- Q1

2010

- Q2

2010

- Q3

2010

- Q4

2011

- Q1

2011

- Q2

2011

- Q3

2011

- Q4

2012

- Q1

2012

- Q2

2012

- Q3

2012

- Q4

2013

- Q1

2013

- Q2

2013

- Q3

2013

- Q4

2014

- Q1

0

20

40

60

80

100

120

140

160

180

200

Source: CoStar, CASE CommercialSource: CoStar, CASE Commercial, 1Q2014

Sales to List Spread Widens

Source: CoStar, CASE Commercial, 1Q2014

2007

- Q2

2007

- Q4

2008

- Q2

2008

- Q4

2009

- Q2

2009

- Q4

2010

- Q2

2010

- Q4

2011

- Q2

2011

- Q4

2012

- Q2

2012

- Q4

2013

- Q2

2013

- Q4

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

Median Days on Market Increases Again in 1Q14

Source: CoStar, CASE Commercial

2005

- Q1

2005

- Q3

2006

- Q1

2006

- Q3

2007

- Q1

2007

- Q3

2008

- Q1

2008

- Q3

2009

- Q1

2009

- Q3

2010

- Q1

2010

- Q3

2011

- Q1

2011

- Q3

2012

- Q1

2012

- Q3

2013

- Q1

2013

- Q3

2014

- Q2

-

100

200

300

400

500

600

700

800

Source: CoStar, CASE Commercial, 1Q2014

What Does the Future Hold?

What Does the Future Hold?

• Houston will continue to grow dramatically because of jobs

• Our demographic makeup is changing significantly

• Buyers want urban and suburban home options

• It needs to come from the market: declining support for urban land use policies

Houston is expected to lead the state and nation in population and employment growth between ’12 and ’40

2012 2015 2020 2025 2030 2035 20400

2

4

6

8

10

12

6.26.6

7.27.9

8.69.4

10.2

2.8 3 3.3 3.6 3.9 4.2 4.4

Population Employment

World Cities8-10m Pop:

• Rio De Janeiro• Moscow• Shanghai• Karachi• Paris• Istanbul• Nagoya• Beijing• Chicago• London

Source: Greater Houston Partnership, 2014

40% of population in 10 states wants to move within 12 months

Source: Gallup, December 2013

Houston47.7%

Dallas22.9%

Austin13.7%

San An-tonio8.1%

OKC3.2%

New Orleans2.1%

Nashville1.8%

Salt Lake0.4%

Only 9 MSAs (of largest 60) have created net new middle

class jobs since 2007. 48% were in Houston.

Business Analysis

Architectural Design

Electrical Engineering

Civil Engineering

Legal Services

Be Prepared for a More Diverse Workforce and Customer Base

1970 1980 1990 2000 2010 2020 2030 2040

72% 65% 58%48% 39% 36% 32% 30%

9% 14% 20%29% 36% 39% 42% 44%

19% 18% 18% 17% 17% 17% 17% 17%

3% 3%7% 7% 8% 9% 10%

White Hispanic Black OtherSource: HGAC Demographic Model

Mill

ions

Source: HAR.COM, April 2014

Source: Zillow, May 2014

Zip Codes with YOY List Price increases over 20%

How much higher can home prices go?

1975 Q11978 Q21981 Q31984 Q41988 Q11991 Q21994 Q31997 Q42001 Q12004 Q22007 Q32010 Q40

50

100

150

200

250

300

Nominal HPI

Real HPI

Real HPI Peak:3Q77 – 278.7

Current HPI:4Q13 – 206.9

Source: Quarterly House Price Index – Purchase Only, Federal Housing Finance Administration, 1Q14

Real home pricesStill 34% below 1977

peak

Almost 75% of suburban residents want to stay in suburbs

1999 2000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130%

10%

20%

30%

40%

50%

60%

70%

80%

51.0% 51.5%49.2%

53.7%

61.2% 59.7%56.7%

61.8%

50.5%

57.2%

63.1% 63.3%

71.2%

Source: Kinder Houston Area Survey, 2014

Over half of city residents want to stay in city

2011 2012 201345%

46%

47%

48%

49%

50%

51%

52%

53%

54%

55%

48.6%

54.5%54.2%

Source: Kinder Houston Area Survey, 2014

Increasing Numbers Want Small Urban Home Options

Single family home, drive Smaller urban home, walking0%

10%

20%

30%

40%

50%

60%

70%

59.1%

36.1%

57.9%

39.2%

47.4%51.0%

2005 2007 2008 2010 2012

Source: Kinder Houston Area Survey, 2014

Declining Support for Land Use Regulations

Better land use planning Free to build wherever0%

10%

20%

30%

40%

50%

60%

70%

80%72.0%

22.2%

68.8%

23.0%

64.9%

28.2%

64.0%

32.8%

2005 2007 2008 2010 2012

Source: Kinder Houston Area Survey, 2014

“

”

We are not a Houston whose provincial understanding of the world at large is manifested in clumsy, token ways; we are a Houston of effortless inclusiveness. We are a city of weavers. We are a city of builders and big ideas …

-Katherine Shilcutt