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NASA / Clear Lake Office Market Report

2Q, 2010

Market Area

NASA / Clear Lake Office Submarket

Market Snapshot

Class Total Inventory

S.F.

DirectVacant

S.F.

PercentLeased

DirectAvailable

S.F.

Sublease Available

S.F.

TotalAvailable

S.F.

TotalVacancy

Rate

Wt. Avg.Asking

Rent

A 1,500,938 180,288 87.99% 180,288 37,319 217,607 14.5% $22.12

B 3,286,374 458,977 86.03% 628,705 44,618 673,323 15.3% $19.39

C 963,644 173,985 81.95% 173,985 71,681 223,666 23.2% $15.23

Total 5,750,956 813,250 85.86% 982,978 153,618 1,114,596 16.4% $19.34

NASA / Clear Lake Office Submarket

Market Snapshot

Asking Rental Rates

Class A Class B Class C Overall $-

$5.00

$10.00

$15.00

$20.00

$25.00 $22.12

$19.39

$15.23

$19.34

Weighted Average Annual Rate per Square Foot

Annual Rate

Market Snapshot

Occupancy Rates

Class A Class B Class C Total78.00%

79.00%

80.00%

81.00%

82.00%

83.00%

84.00%

85.00%

86.00%

87.00%

88.00%

87.99%

86.03%

81.95%

85.86%

Percent Leased by Class

% Leased

VacancyNASA / Clear Lake Office Submarket

Vacancy

217,607

673,323

223,666

Class AClass BClass C

Available Square Feet by Class

Vacancy

Building Address Class Rentable Area

Total Available

Largest Contiguous

2224 Bay Area 2224 Bay Area Blvd. B 169,728 169,728 169,728

Boeing 13100 Space Center Blvd. B 180,000 95,300 90,000

Galaxy II 455 E. Medical Center. A 110,000 66,000 66,000

Flint Ridge Plaza 201 Flint Ridge Road B 45,000 45,000 45,000

1275 Space Park 1275 Space Park Drive C 43,222 43,222 43,222

Boeing 3700 Bay Area Blvd. A 399,088 56,705 40,000

Clear Lake Central I 555 Gemini Avenue B 124,908 40,000 40,000

1300 Bay Area - Bldg. B 1300 Bay Area Blvd. C 35,690 35,690 35,690

Armand Plaza 16441 Space Center Blvd. B 64,000 39,315 32,000

16055 Space Center 16055 Space Center Blvd. A 147,000 32,841 22,400

Largest Contiguous Blocks of Available Space

The Impact of Johnson Space Center

The NASA Equation

2261480;

39%

2676226;

47%

813250; 14%

NASA / AerospaceOther TenantsAvailable

• NASA Related tenants occupy over 2.2 million square feet

• 39% of the total office inventory is NASA related tenants

• 47% of the currently leased space is occupied by NASA related

tenants

The NASA Equation

• Congress is now considering the controversial new plan for Human Space Exploration

which the Obama Administration proposed last February. Thus far, the new program has

been vigorously opposed by representatives in the states most affected by the cancellation

of Constellation -- Alabama, Texas, and Utah. The Constellation Program was the

replacement for the Space Shuttle program which is scheduled to end in 2011. The

President’s plan is not considered to positive for Johnson Space Center and the Clear

Lake Area, and it has been estimated as many as 5,000-7,000 jobs could be lost in the

Clear Lake area if the President’s plan is implemented. Some are fighting to save

Constellation, and a few are seeking additional shuttle flights. Both of these outcomes are

highly unlikely since they would take a lot more money than is likely to be approved.

• The conventional wisdom or maybe even optimistic hope among Texas congressional

leaders and business leaders in Houston is for a compromise plans that will mitigate job

losses at Johnson Space Center and among the many aerospace contractors. The only

thing that is clear at this point is that there is a lot uncertainty around what the new vision

of NASA will look like and its impact on the Clear Lake area.

Market Outlook

• The NASA / Clear Lake office market has yet to feel the uncertainty swirling around NASA

in a significant way, but changes could be on the horizon. Boeing has placed 135,000

square feet of space on the market in corporately owned office properties, and USA Space

Alliance the primary contractor for the Space Shuttle contract has over 800,000 SF of

leases expiring in 2010 and 2011. USA recently announced layoffs of 300-400 jobs in the

Houston area to align the company’s workforce with NASA’s requirements to fly out the

remaining assembly and supply missions to the International Space Station.

• With both the National and Houston economy only showing modest signs of recovery,

there is likely not an economic driver to replace any significant job losses related to NASA

in the Clear Lake area in the short term. I expect vacancy rates to rise and a shift in market

conditions to the tenant’s favor. This means lower rental rates, and more concessions. The

degree to which this happens really depends on what happens with NASA. At present the

NASA / Clear Lake Office Market is one big question mark.

Coy Davidson

Coy Davidson

Senior Vice President

Office Services Group

Direct: 713.830.2128

coy.davidson@colliers.com

www.coy.davidson.com

www.colliers.com

Accelerating success.