Jennifer S. Cowley · Major Industries Business Climate ... Beltway 8 US Hwy 90 US Hwy 90 Jennifer...

Jennifer S. CowleyAssistant Research Scientist

Texas A&M University

July 2001

© 2001, Real Estate Center. All rights reserved.

Real Estate Market Overview

HoustonReal Estate Market Overview

Houston


Houston

NotePopulation

Employment

Job Market

Major Industries

Business Climate

Public Facilities

Transportation and Infrastructure Issues

Urban Growth PatternsMap 1. Growth AreasEducation

Housing

Multifamily

Map 2. Multifamily Building Permits

Manufactured HousingSeniors Housing

Retail Market

Map 3. Retail Building Permits

Office MarketMap 4. Office Building Permits

Industrial MarketMap 5. Industrial Building Permits

Conclusion

Contents

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Houston

1314

16

2318

25

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29

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35

1

Houston

Bellaire

Jersey Village

Aldine

Spring Valley

StaffordSugar Land

Brookside Village

Pasadena

Deer Park

Galena Park

Channelview

Sheldon

Piney Point VillageInterstate 10

Interstate 45

Loop 610US Hwy 59

US Hwy 290

US Hwy 59

Beltway 8

US Hwy 90

US Hwy 90

Jennifer S. CowleyAssistant Research Scientist


HoustonReal Estate Market Overview

Houston

BaytownBellaireConroe

Deer ParkGalena Park

HoustonHumble

Katy

La PorteMissouri City

PasadenaRichmondRosenberg

StaffordSugar Land

West University Place

CountiesChambersFort Bend

HarrisLiberty

MontgomeryWaller

Area Cities and Towns

Houston, a vibrant metropolitancommunity, is Texas’ largestcity. Houston was the fastest

growing city in the United States in the20th century, according to American

City Business Journals. The city had apopulation of 44,633 in 1900, growingto almost two million in 2000. Morethan four million people live in themetropolitan area, and all sectors are

growing rapidly. In 2000, Houston wasranked the most popular U.S. city foremployee relocations according to astudy by Cendant Mobility.

Land Area of Houston MSA5,995 square miles

Population Density (2000)697 people per square mile

2

Kelly Air Force Base, San AntonioPOPULATION

Houston MSA Population

Year Population

1990 3,342,2471991 3,430,2081992 3,515,1931993 3,580,4281994 3,641,3851995 3,698,8301996 3,767,2781997 3,841,9341998 3,926,8371999 4,010,9692000 4,177,646

Source: U.S. Census Bureau

County Population Growth

Growth 1990–2000County 2000 Population (in percent)

Chambers 26,031 29.6Fort Bend 354,452 57.2Harris 3,400,578 20.7Liberty 70,154 33.1Montgomery 293,768 61.2Waller 32,663 39.6


NOTE

The June 2001 flooding caused byTropical Storm Allison resultedin $4.88 billion in damage in

Harris County, including nearly $2billion damage to Texas MedicalCenter facilities.

Apartments and residential proper-ties sustained about $1.76 billion

damage, according to estimates madeby the Harris County Appraisal Districtand Harris County Emergency Man-agement. Flooding destroyed anestimated 2,744 homes and 696mobile homes. County businessessuffered an estimated $1.08 billion indamages

Some projects mentioned in thisreport may have been affected by theflooding, particularly those in the hard-hit downtown area. Some projectedstart or completion dates may havebeen delayed.

3

Area Cities With 10,000 or More Residents

Growth 1990–2000City 2000 Population (in percent)

Houston 1,953,631 15.1Pasadena 141,674 18.7Baytown 66,430 3.4Sugar Land 63,328 43.1Missouri City 52,913 45.9Conroe 36,811 27.0La Porte 31,880 14.3Deer Park 28,520 3.4Rosenberg 24,043 16.1South Houston 15,833 10.2Stafford 15,681 94.1Bellaire 15,642 13.7Humble 14,579 19.6West University Place 14,211 10.0Katy 11,775 48.0Richmond 11,081 9.4Galena Park 10,592 5.5


The population of the HoustonMSA increased at an averageannual rate of 2.4 percent during

the past decade. Houston grew at a

rate faster than the state in the 1990s.Population projections forecast anaverage growth rate of 2.1 percent peryear through 2020, according to the

Texas State Data Center. The TexasWater Development Board predicts agrowth rate of 2.3 percent per yearthrough 2020.

4

Texas Metropolitan Area Population Change, 1990–2000 (in percent)

McAllen-Edinburg-Mission 48.5 Galveston-Texas City 15.1Austin-San Marcos 48.2 Tyler 15.5Laredo 44.9 El Paso 14.9Dallas 31.5 Corpus Christi 14.3Brownsville-Harlingen-San Benito 28.9 Victoria 13.1Brazoria County 26.1 Waco 12.9Houston 25.8 Texarkana 9.4Fort Worth-Arlington 25.1 Lubbock 9.0Bryan-College Station 25.1 Wichita Falls 7.8Texas 22.8 Longview-Marshall 7.7Killeen-Temple 22.6 Beaumont-Port Arthur 6.6San Antonio 20.2 Abilene 5.8Sherman-Denison 16.4 San Angelo 5.6Amarillo 16.2 Odessa-Midland 5.1


Houston MSAProjected Population

Texas State Texas WaterYear Data Center Development Board

2005 4,402,934 —2010 4,806,857 4,910,0292015 5,167,001 —2020 5,615,482 5,932,219

Sources: Texas State Data Center and Texas Water Development Board

Projected Population Growth, 2000–2020(in percent)

Source: Texas State Data Center

41.9 40.2

0

10

20

30

40

50

Houston MSA Texas

5

Household Composition

Harris County Texas

Median household size (1990) 2.59 2.73

Population younger than 18(1999, in percent) 28.5 28.5

Population 65 and older(1999, in percent) 7.7 10.1


Ethnic Distribution (in percent)

Harris County TexasEthnicity 1990 2000 1990 2000

White 54.3 42.1 60.8 52.4Hispanic 21.8 32.9 25.3 32.0Black 19.4 18.2 11.7 12.2Asian 4.1 5.1 0.3 3.2American Indian 0.3 0.2 1.8 0.3Other 0.1 0.1 0.1 0.2Two or more races* — 1.3 — 1.1

*For the 2000 Census, the Census Bureau changed the “race” options, allowing people toreport their race as “other” or as two or more races.


Household size in Harris Countyis smaller than the state aver-age. The county also has a

smaller percentage of population age65 and older. The Houston area has

grown more ethnically diverse over thepast decade. The Hispanic populationhas seen a large increase, as it has inthe state as a whole. Asian populationdensity is almost twice the state

average. The Houston MSA had amedian per capita income of $32,386in 1999. The state average was$26,834, according to the U.S. Bureauof Economic Analysis.

6

Houston MSA Unemployment Rate(in percent)

Source: U.S. Bureau of Labor Statistics

Source: U.S. Bureau of Labor Statistics

EMPLOYMENT

Houston MSA Employment

98,000100,000

102,000104,000

106,000108,000

110,000112,000

114,000116,000

118,000120,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

0

1

2

3

4

5

6

7

Jan

uar

y-95

May

Sep

t

Jan

uar

y-96

May

Sep

t

Jan

uar

y-97

May

Sep

t

Jan

uar

y-98

May

Sep

t

Jan

uar

y-99

May

Sep

t

Jan

uar

y-00

May

Sep

t

Jan

uar

y-01

7

Bergstrom Air Force Base, AustinTop Ten Employers Top Ten Private Employers

Source: Houston Business Journal, 2000

Houston Independent School District Compaq Computer CorporationEducation Computer technology32,600 employees 19,785 employees

City of Houston Continental AirlinesGovernment Airline22,223 employees 17,010 employees

Compaq Computer Corporation AdministaffComputer technology Staffing services19,785 employees 15,968 employees

Continental Airlines Southwestern BellAirline Telecommunications17,010 employees 14,039 employees

Administaff Halliburton CompanyStaffing services Energy services15,968 employees 13,244 employees

Southwestern Bell Memorial Hermann Healthcare SystemTelecommunications Health Care14,039 employees 11,454 employees

U.S. Postal Service Kroger Food StoresMail Grocer13,906 employees 9,635 employees

Halliburton Company Wal-Mart StoresEnergy services Retailer13,244 employees 9,000 employees

Harris County Reliant EnergyGovernment Energy Services12,700 employees 7,756 employees

Memorial Hermann Healthcare System Shell Oil CompanyHealth Care Energy services11,454 employees 7,255 employees

8

Texas Metropolitan Area Employment Change, 1990–2000(in percent)

Austin-San Marcos 58.8 El Paso 15.4Laredo 40.3 Waco 14.3McAllen-Edinburg-Mission 35.8 Lubbock 14.0Dallas 30.4 Sherman-Denison 12.5Brownsville-Harlingen-San Benito 30.1 Longview-Marshall 12.2Bryan-College Station 29.2 Abilene 11.4Killeen-Temple 28.7 San Angelo 10.7San Antonio 28.6 Corpus Christi 10.3Fort Worth-Arlington 23.7 Galveston-Texas City 8.2Texas 23.3 Wichita Falls 7.8Tyler 22.9 Odessa-Midland 6.5Victoria 22.4 Texarkana 4.5Houston 22.1 Beaumont-Port Arthur 3.5Amarillo 18.6 Brazoria County 2.3

Source: U.S. Bureau of Labor Statistics, February 2001

Employment increased 2.6 per-cent in the Houston MSA during2000, compared with a 2 percent

increase during 1999. Employmentgrowth in the area is similar to employ-ment growth across the state. Totalnonagricultural employment was2,081,500 for 2000. Unemploymenthas fallen slightly to 4.1 percent for

2000, down from 4.5 percent in 1999,according to the Texas WorkforceCommission. The U.S. Bureau of LaborStatistics reports total civilian employ-ment in the Houston MSA was2,099,491 in 2000. Government,health care, airlines, computermanufacturing and oil and gas servicesare major employers in the area.

Employment Growth by Industry Houston MSA Texas

Employment growth, 2000 (in percent) 2.6 3.2Unemployment rate (in percent) 4.1 4.2New jobs in 2000 52,400 288,900Employment growth by sector (in percent) Services 3.5 4.7 Trade 2.1 3.1 Manufacturing 0.2 0.1 Mining 0.2 2.3 Finance, insurance and real estate 0.8 1.3 Construction 5.1 6.2 Government 2.4 1.7 Transportation, communications and public utilities 3.7 5.1

Source: Texas Workforce Commission

The Houston branch of the FederalReserve Bank of Dallas forecasts a 3.5to 4 percent growth rate in localemployment during 2001, whichtranslates to a gain of 70,000 to 80,000jobs. Houston will benefit from higheroil prices and the growing strength ofthe international economy.

9

JOB MARKET

Cadeco Industries opened acoffee processing plantemploying 50 in Houston in

2000. North American Galvanizingopened in Houston, employing 125.

Waste Management added 450employees in the Houston area in2000. Nationwide Credit added 200jobs to its back office operations.Anadarko merged with Union PacificResources, adding 300 jobs in Hous-ton. HCA-Healthcare opened a backoffice center and will add 380 employ-ees over two years.

Noble Affiliates is moving itscorporate headquarters from Ardmore,Oklahoma, to Houston and willemploy 174. Blue Cross Blue Shield isexpanding its service center, adding125 employees. Novo Industries isadding 500 employees, according tothe Texas Department of EconomicDevelopment.

In Jacinto City, Longhorn Glass willopen a longneck glass factory insummer 2001, employing 150.Anheuser-Busch Companies isexpanding its Jacinto City bottle plant,adding 120 employees.

In Sugar Land, Cable and Wirelessopened, employing 72. Saudi Basic

Industries Corporation added 43employees to its research lab. Conti-nental Polybags will relocate to SugarLand Business Park. The companymanufactures plastic bags for the retailindustry and will have 32 employees.Applied Optoelectronics is building amanufacturing and research facility inSugar Land.

In Rosenberg, MKM Engineersopened an engineering services firmemploying 46. Bison Building Materi-als expanded and added 50 employ-ees. Western Brick added 30 employees.

In New Caney, Wal-Mart plans toopen a distribution center. When thecenter opens in spring 2003, 350people will be hired; employment willeventually grow to 600.

In Baytown, Home Depot willcomplete a distribution center at theend of 2001. The center will employ300.

In Stafford, General Technologies isadding 60 employees. In Deer Park,Schwan’s Ales, an Asian food manu-facturer, expanded in early 2001,adding 120 employees. In Freeport,Associated Metals opened in 2000,employing 125.

Twister Communications of Conroeclosed in May 2000, laying off 250.Telxon Corporation merged withSymbol Technologies. The Houstonoffice was closed in late 2000, and 500employees were let go.

Compaq Computers moved itsHouston call center to Colorado,laying off 100 employees duringsummer 2000. The ebaseOne Corpo-ration closed, laying off 87 employees.

Compaq Computers laid off 900 inApril 2000. Minute Maid laid off 94employees in May 2000. ServiceCorporation, a funeral home operator,cut 33 employees in January 2000.Humana laid off 47 employees atMemorial Sisters of Charity HealthNetwork in December 2000.

Texas Instruments cut 125 jobs inStafford in spring 2001. Radisys closedits Houston manufacturing plant inJune 2001, laying off 132 employees.E-Docs.MD closed in April 2001,laying off 65 employees. Eagle GlobalLogistics cut 400 jobs in Houston in2001. Cingular Wireless will close itsHouston call center during summer2001, laying off 250 employees.

10

MAJOR INDUSTRIES

The services sector added themost jobs to the Houstoneconomy and accounts for the

largest share of Houston’s workforce at30 percent. Trade follows closely at 24percent of area employment, andgovernment, the third largest sector,represents 15 percent of area employ-ment. The services sector added21,800 jobs during 2000; trade added9,900 jobs.

Mining employment was the fastestgrowing industry in the area during1999, despite low oil prices. Industryemployment grew as a result of con-solidation within the oil and gassector. A number of major firms closedbranch offices, bringing employmentto their Houston headquarters. Themining sector added 100 jobs during2000.

The large concentration of govern-ment workers in the area is attributableto the school district, city and countygovernments and the Port of Houston.A total of 6,300 government jobs wereadded during 2000. Houston’s diversi-fied manufacturing sector, whichaccounts for 10 percent of local em-ployment, is divided among industrialmachinery, oil and gas, fabricatedmetal and other manufacturing.

Houston’s highly regarded medicalindustry includes many hospitals and amedical school. The medical industry,a component of the services sector,grew by 2.1 percent in 1999.

Construction employment grew by7,500 jobs during 2000, primarily dueto major office construction projectsthroughout the city. Manufacturing

employment gained 400 jobs in 2000while transportation, communicationsand public utilities added 5,500 jobs.The finance, insurance and real estatesector added 900 jobs in 2000.

In Chambers County, rice represents40 percent of agricultural receipts,according to the Texas AgriculturalExtension Service. In Fort Bend andHarris counties, more than 60 percentof receipts are from nursery products.Beef is also produced in the counties.

In Montgomery and Waller counties,timber is a major product, representing27 and 33 percent of receipts, respec-tively. Nursery products also areproduced in these counties. In LibertyCounty, timber represents 39 percentof agricultural receipts.

Total Agricultural Receipts, Projected 2001

County Total Receipts

Chambers $14,377,000Fort Bend 160,160,600Harris 254,346,000Liberty 50,145,000Montgomery 90,787,400Waller 37,117,000

Source: Texas Agricultural Extension Service

11

BUSINESS CLIMATE

Tax Rates, 2000

Tax Rate perTaxing Entity $100 Valuation

City of Houston $0.65Houston ISD 1.52Community College 0.08Hospital District 0.20Harris County 0.36Total $2.82

Source: Harris County Appraisal District

Houston MSA Retail Sales

Year Total Sales Sales per Capita

1990 $30,960,007,313 $9,2631991 29,756,765,485 8,6751992 30,960,007,313 8,8071993 32,915,247,241 9,1931994 36,341,345,551 9,9801995 38,910,856,792 10,5201996 43,128,300,464 11,4481997 52,042,620,313 13,5461998 53,206,789,517 13,5501999 52,686,724,106 13,1362000 55,410,473,362 13,636

State Average 2000 $12,612

Source: Texas Comptroller's Office

12

Exports to Selected Destinations – Houston MSA(in thousands)

Market 1997 1998 1999 Percent of Trade

Canada $2,548,380 $2,699,020 $2,746,764 14.5Mexico 2,179,931 2,414,792 2,593,081 13.6Caribbean, Central America 1,071,573 954,158 850,326 4.5South America 3,320,260 3,083,696 3,034,906 16.0Europe 3,187,893 3,747,321 3,652,447 19.2Asia 3,442,797 3,159,837 3,614,180 19.1Africa 1,222,992 1,263,507 977,794 5.2Near East 1,342,786 1,531,790 1,202,029 6.3Australia 279,237 264,666 296,043 1.6Total all Countries $18,595,875 $19,118,959 $18,967,586 100.0

Source: Office of Trade and Economic Analysis, International Trade Administration

Houston MSA Top Exports, 1999 (in thousands)

Product Export Value Percent

Industrial machinery and computers $6,488,128 34.2

Chemical products 5,644,639 29.8

Refined petroleum products 1,647,676 8.7

Transportation equipment 952,064 5.0

Electric and electronic equipment 792,382 4.2

Nonmanufactured commodities 733,797 3.9

Scientific and measuring instruments 659,390 3.5

Fabricated metal products 619,570 3.3

Food products 423,286 2.2

Primary metals 401,069 2.1

Source: Office of Trade and Economic Analysis, International Trade Administration

E xports were up 54.4 percentbetween 1993 and 1999. SinceNAFTA was put in place in

January of 1994, exports to Canadaand Mexico have increased 126percent and 131 percent, respectively.Canada is the country to whichHouston exports the most products.Exports to Belgium were up the mostduring the 1993 to 1999 period, rising203 percent from $141 million to $428million.

Houston offers a variety of incen-tives to new and expanding busi-nesses, including property tax abate-ments, franchise tax refunds and jobtraining funds. Site Selection magazineranked Houston fourth among the top100 U.S. cities for foreign investmentin 1999.

The sales tax rate in the area variesfrom 7.25 percent to 8.25 percent.Houston and most of the major areacities assess a sales tax of 8.25 percent.

The hotel-motel tax rate varies from 10to 13.25 percent. Houston assesses a13 percent hotel-motel tax.

The area has a variety of touristattractions including the HoustonAstros baseball team, which started the2000 season in the recently completedEnron Field. Six Flags Houston, SpaceCenter Houston, the Houston Rocketsbasketball team and numerousmuseums attract visitors to the area.

13

PUBLIC FACILITIES

A new downtown arena isplanned to house basketballand hockey. The project was

approved by voters in November 2000and is expected to be completed in2003.

Ground broke in March 2001 on thenew Reliant Stadium. The $400 millionproject is for the Houston Texans, anNFL football team. The stadium isexpected to be completed in fall 2002.

The George R. Brown ConventionCenter is planning an expansion to becompleted in 2003. The $100 millionproject will add 500,000 square feet ofexhibit and meeting space.

In March 2000, the $265 millionEnron Field, home of the HoustonAstros major league baseball team wascompleted.

A new Houston Area Women’sCenter facility is planned. The$500,000 project will provide a 125-bed shelter for women and children.The center is scheduled for completionby December 2001.

In January 2001, ground broke onthe Houston Emergency Center. Thecenter on North Shepherd will houseemergency dispatchers for the Hous-ton fire and police departments and911 emergency network. The 128,000-square-foot, $35 million building isexpected to be completed in March2002.

The Smith Branch of the HoustonPublic Library reopened in December2000. The library closed in May 1998for renovation.

The Hobby Center for the Perform-ing Arts, an $88 million project, isexpected to be completed in 2002.Construction on an 800-car garage forthe facility began in April 2001.

Bayou Place is an entertainmentcomplex downtown that has beenopen for three years. The West Hall ofthe former Albert Thomas ConventionCenter is phase two of the project. Thesite will feature a mix of entertainment,retail and restaurant tenants. Thedevelopment will expand Bayou Placefrom Bagby Street to the Buffalo Bayouwaterfront. Former fire station numberone is being redeveloped into aLandry’s Seafood restaurant andaquarium.

Buffalo Bayou Waterfront is pursu-ing a $2.7 million refurbishment ofAllen’s Landing Park and a $4 millionpathway link to Sesquicentennial Park.The project is expected to be com-pleted in 2001. Jones Plaza is undergo-ing a $5 million reconstruction.Completion of the urban plaza andoutdoor entertainment venue isexpected to be completed in 2001.

Harris County is planning the $119million Civil Justice Center at Carolineand Franklin. Construction of theparking garage begins in 2001. TheJuvenile Detention and AdministrationCenter is a $35 million project. Arehabilitation of the old CriminalCourts Building is scheduled to becompleted in 2003.

In Pasadena, the Red Bluff TerraceCommunity Center is under construc-

tion. The project is expected to becompleted during 2001.

Missouri City and Sugar Land areseeking land on both sides of a nine-mile corridor for the Brazos Rivershoreline. A total of 420 acres adjacentto the proposed University of Houston-Fort Bend campus will be developedfor recreational purposes.

In Sugar Land, a $34.5 million bondpackage was approved in January1999. The funds will be used fordesign and construction of a multipur-pose recreation center. The city iscurrently determining what types offacilities to include in the recreationcenter. In 2000, the $1.8 millionOyster Creek Park, which includes anamphitheater, picnic area and hikingtrails, opened.

A new fire station at Commonwealthand Elkins will be built in Sugar Land.The station is expected to open in July2001 and will be the fifth station in thecity.

Sugar Land is planning a full-servicehotel and conference center. Thecenter will be located at U.S. Highway59 and State Highway 6. No construc-tion date has been set.

In Houston, $13.2 million will bespent to renovate the six-story buildingat Preston and LaBranch; the DeGeorgeat Union Station will house homelessveterans.

14

TRANSPORTATION AND INFRASTRUCTURE ISSUES

Houston Airline Boardings

1997 1998 1999 2000

Ellington Field 58,501 53,446 49,776 39,809Houston Hobby 4,142,536 4,377,233 4,422,032 4,552,487George Bush Intercontinental 14,227,089 15,492,571 16,464,987 17,521,731

Source: Houston Airport System

1999 2000

Ellington 119 130

George Bush Intercontinental 566.4 604.3

Source: Houston Airport System

Houston Cargo(in millions of pounds)

Port of Houston Activity 1998 1999

Total calls 7,093 6,516

Total tonnage (in millions) 169.1 169.0

Source: Port of Galveston and Texas City

Port Statistics

The Houston metropolitan area isserved by many major roadsincluding I-610, I-10, I-45 and

U.S. Highways 59, 90 and 290. Statehighways servicing Houston are 6, 99,288, 225, Hardy Toll Road andBeltway 8.

A $17 million transfer station isplanned for the 1900 block of Main indowntown. The facility will handlebus and light rail transfers.

In Missouri City, State Highway 6 isbeing widened from Knights Court to

just south of the Missouri City citylimits. The project began in summer1999 but stopped in June 2000because of wetland violations. Con-struction will resume in August 2001.In 2000, voters approved bonds for theFort Bend Parkway Toll Road.

Houston has three airports —Ellington Field, Houston Hobby andGeorge Bush Intercontinental — andranks eighth in the world in interna-tional passenger volume and 14th in

total passengers. The Houston airportsystem is the fourth largest multi-airport system in the nation and thesixth largest in the world. Interconti-nental provides service to mostdestinations within the United Stateson 20 air carriers and 16 cargo carriersand was the 11th busiest U.S. airport inpassenger volume for 2000, accordingto the Airport Council International.Hobby is the 40th busiest U.S. airport inpassenger volume.

15

Ellington primarily provides cargoservice; United Parcel Service uses itas its cargo station. The number offlights out of Ellington has declined inrecent years as Continental Express hasreduced the number of flights from theairport.

Air Jamaica began offering servicebetween Houston and the Caribbeanin June 2001. Continental Airlinesadded service to Sacramento, Califor-nia, in May 2000. LanChile Cargoadded cargo flights from Intercontinen-tal to Buenos Aires, Argentina, and SaoPaulo, Brazil, in 2000.

Intercontinental is undergoing a$1.7 billion expansion. A $193 millionrunway on the north side of the airportis expected to be completed in 2003.

A $591 million InternationalServices Expansion Program began in2000 at Intercontinental. The projectincludes construction of a newinternational terminal, a new FederalInspection Services building, a parkinggarage, renovations to the currentinternational terminal and otherimprovements.

The new international terminal willbe used exclusively by ContinentalAirlines and will add 15 gates at a costof $235 million. The 685,000-square-foot Federal Inspection ServicesBuilding will house the Immigrationand Naturalization Service; U.S.Customs Service; Department ofAgriculture; Fish and Wildlife Serviceand other federal agencies. The $190million building is scheduled forcompletion in 2004.

A total of $85 million will be spent toexpand cargo facilities. The northeastcargo area will provide more than500,000 square feet of cargo terminalspace. A consolidated rental carfacility is under construction. The$131.5 million project will be com-pleted in 2002.

A new $8.3 million air traffic controltower opened in December 2000 atHobby. Ground broke in June 2000 on

a $78 million central concourse. The20-gate concourse will take three yearsto complete.

A permit to expand the City ofHouston’s Westside Airport Propertyin Waller County has been issued. Theproperty will be used to mitigate theenvironmental impact at the BushAirport.

In Sugar Land, a general aviationreliever airport serves southwestHouston and is the only public airportin Fort Bend County. A 27,000-square-foot hangar-office was constructed byWestern Airways to consolidate itsoperation to the Sugar Land Airport. A15,400-square-foot hangar and officeare under construction. The TexasDepartment of Transportation ap-proved $500,000 towards the con-struction of an air traffic control towerin December 2000.

The Port of Houston is the busiestport in the nation based on volume offoreign trade, according to the U.S.Census Bureau. Based on the value offoreign trade, it is the fourth busiestport. The Houston Ship Channelhandles more than 65 percent ofcontainer traffic in the Gulf of Mexico.

During 1999, the port handled 169million short tons, the same amount ithandled in 1998. The port had 6,516ships call during 1999. Petroleum andpetroleum products are Houston’sleading import and export commodities.

Two major railroads and 150trucking lines connect to the port. A$387 million bond issue to build acontainer and cruise ship terminal wasrecently passed by voters. A $500million project to dredge the HoustonShip Channel has begun. The channelwill be widened from 400 to 530 feetand deepened from 40 to 45 feet. Theproject is expected to be completed in2002. An expansion of the BarboursCut Container Terminal began inMarch 2001. The project will cost $40million and take five years to complete.

A light rail system is proposed inHouston with a 7.5-mile rail linerunning down Main Street betweendowntown and the Astrodome.Construction on the project is ex-pected to begin in 2001, with comple-tion set for 2004.

The City of Houston owns waterrights from Lake Houston and LakeLivingston and also gets water from theTrinity River and Sabine River basins.The city provides treated water tosurrounding areas. Houston increas-ingly will use the Sabine River basinfor water. Water supplies are expectedto be sufficient through 2030.

The City of Houston has beenupgrading its existing wastewatertreatment system, including therehabilitation of its Sims Bayoufacilities. Houston operates 47wastewater treatment plants, threesludge processing plants and 325 liftstations. The city completed three newbuildings at the Southwest WaterPlant, an $11.8 million project, inFebruary 2000.

A $150 million water treatment plantis under design. The plant will belocated near Lake Houston.

A sanitary sewer system is plannedfor Braeburn Gardens. The neighbor-hood is currently on individual septicsystems. The design portion of theproject is expected to be completed byMarch 2002 with constructionbeginning in summer 2002.

Harris County is moving thecounty’s water distribution systemfrom groundwater to surface water.The switch will be made by 2003 at acost of $1 billion.

In Pasadena, several water andsewer projects are under way. Davissanitary sewer and the West Ellaine liftstation are 90 percent complete.Golden Acres drainage and HoustonAvenue drainage projects are underway.

16

EDUCATION

Educational Level, Persons Age 25 and Older(in percent)

Level of Education Harris County Texas

High school graduate 23.3 25.6Some college, no degree 21.3 21.1Associate’s degree 4.9 5.2Bachelor’s degree 17.3 13.9Graduate or professional degree 8.1 6.5

Source: U.S. Census Bureau, 1990

Map 1. Growth Areas

Source: Real Estate Center at Texas A&M University

Houston, TexasCensus PlaceWater AreaHighwayInterstate Highway

�

I 10

I 45

I 10

I 610

US 59

US 59

US 290

I 610

SH 288

SH 8

SH 249

SH 8

SH 225

SH 8FM 1960

SH 6

SH 6

I 45

Retail

MixedUse

Retail

RetailOffice

Office

Office

Industrial

Industrial

Industrial

Industrial

RetailMultifamily

Multifamily

Multifamily

FM 1960

Single Family

Single Family

Single Family

URBAN GROWTH PATTERNS

Map 1 shows the major growthcorridors within Houston.Strong residential growth has

been occurring in Fort Bend County

and in The Woodlands area, north ofHouston. Apartment growth is concen-trated downtown and in north Hous-ton. Retail, office and industrial

development is spread across the city.Significant retail and office develop-ment has been occurring along theKaty Freeway.

17

Local College and University Enrollment

Spring 2005 2010School 2000 (estimated) (estimated)

University of Houston 32,123 35,513 37,881North Harris Montgomery Community College 26,426 27,646 30,279Houston Community College 49,520 40,203 43,655San Jacinto College 21,991 25,441 27,187University of Houston-Downtown 8,951 9,833 10,870University of Houston-Clear Lake 7,580 8,213 8,677Texas Southern University 6,886 7,478 8,075Prairie View A&M University 6,609 7,197 7,787Lee College 6,225 6,608 6,987Wharton County Junior College 4,571 5,009 5,186University of Texas Health Science Center 3,143 N/A N/AHouston Baptist University 2,519 N/A N/ABaylor College of Medicine 4,514 N/A N/ARice University 4,202 N/A N/AUniversity of St. Thomas 2,744 N/A N/ASouth Texas College of Law 1,231 N/A N/ATexas Woman’s University 847 N/A N/A

Sources: Educational institutions and Texas Higher Education Coordinating Board, January 2001

The University of Houston at FortBend will have a new $11 millionfacility for fall 2002. Construc-

tion began in October 2000 and willbe completed in March 2002. Enroll-ment at the campus is expected to be2,000 when the campus opens.

The University of Houston isspending $6 million to renovateRobertson Stadium, increasing seatingby 10,000. The University added amaster’s degree in social work that willbe offered in Corpus Christi.

North Harris Montgomery Commu-nity College District is the fifth-largestcommunity college district in Texas.Tomball College is under phase threeof construction and is projected to becompleted by May 2001. A newcommunity college will be built in theCy-Fair area and will open in fall 2003.The district has acquired 200 acres forthe college at Barker-Cypress andWest roads. The campus will have atleast five buildings.

At San Jacinto College North, a newcampus technology training centeropened in January 2000.

Texas Southern University has twonew construction projects and severalrenovation projects underway.

At Prairie View A&M University, anew science building and UniversityCollege housing complex werededicated in November 2000. The $28million science building has fourstories and 166,000 square feet of laband auditorium space. The UniversityCollege complex provides housing forfreshman.

Lee College is located in Baytown.Lee Drive is undergoing phase two of aconstruction project.

The University of Texas HealthScience Center has plans for a newNursing and Biomedical Sciencesbuilding. The $40 million building willbe completed by 2003. The eight-story, 190,000-square-foot buildingwill be on the site of the currentGraduate School of BiomedicalSciences, which will be razed. Thecenter has plans for a $16 millionMental Sciences Institute. No con-struction date has been set.

South Texas College of Law brokeground in October 1999 on the FredParks Law Library. The five-story

library within the existing law schoolbuilding will double the size of thecurrent library. Construction wascompleted in spring 2001.

Baylor College of Medicine com-pleted a Center for ComparativeMedicine in 2000. The Denton A.Cooley Building is scheduled forcompletion in 2001. The M.D.Anderson Cancer Center FacultyCenter is currently under construction.The Texas Children’s Hospital projectis scheduled for completion in 2002.

Rice University has the fourth-largestendowment per student among privateAmerican universities. Rice Universitycompleted renovations on Keck Hall infall 2000. The $14 million renovationadded new research and teachinglaboratories. The second phaseincluded a 13,740-square-footaddition. The new HumanitiesBuilding was dedicated in October2000. The Jones Graduate School ofManagement Building is scheduled forcompletion in summer 2002. TheFondren Library will be expanded.

18

HOUSING

Housing Affordability – First Quarter 2001

Percent ofHouseholds THAI for

That Can Afford First-timeMedian-priced Home THAI* Homebuyers

Fort Bend 80 2.05 1.54Houston 62 1.35 1.15Montgomery County 66 1.49 1.19

*The THAI is the ratio of median household income to the income required to buy the median-priced home using currently available mortgagefinancing. Standard financing is a 30-year loan covering 80 percent of the cost of the home. A THAI of 1.00 indicates that the median householdincome is just enough to qualify for a loan sufficient to purchase the median-priced home.


Houston MSA Single-family Permits(in units)


0

5,000

10,000

15,000

20,000

25,000

30,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

19

Average Sales Price of Single-family Home,Houston Area


Single-family Home Sales Volume, Houston Area, 2000(Number of Units)


$50,000

$80,000

$110,000

$140,000

$170,000

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

Houston Fort Bend Co. Montgomery Co.

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gu

st

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tem

ber

Oct

ob

er

No

vem

ber

Dec

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er

Houston Fort Bend Co. Montgomery Co.

20

Price Distribution of MLS Homes Sold, Houston Area(in percent)


Houston Fort Bend Montgomery

Less than $60,000 11.1 3.1 8.8

60,000–79,999 15.6 12.3 10.1

80,000–99,999 16.0 14.8 12.4

100,000–119,999 10.6 11.4 11.9

120,000–139,999 10.3 12.4 12.1

140,000–159,999 7.3 9.4 8.0

160,000–179,999 5.9 9.0 6.1

180,000–199,999 4.1 6.0 5.6

200,000–249,999 6.3 9.0 8.2

250,000–299,999 4.2 4.9 5.8

300,000 or more 8.6 7.7 11.1

Houston Final Plats, 2000

Number of Number ofSubdivision Lots Created Subdivision Lots Created

Inside City Limits Outside City LimitsWoodlands Village of Alden Bridge 1,253 Oak Place Court 472Driscoll Place 674 Summerwood 471Woodlands Village of Indian Springs 284 Asbury Rose Subdivision 455Villages of Silverado 267 Eagle Springs 345Highland Timbers 246 Gleannlock Farms 344Memorial Heights 228 Woodbridge of Fort Bend County 294Coles Crossing 227 Westfield 265Candlelight Place 214 Greens at Willow Fork 206Woodlands Village of Sterling Ridge 175 Rose Place 203Cinco Ranch West 171 Park at Mission Glen 194Malone Gardens 167 Alana Park 185Eaglewood 165 Woodlands Village of Grogan’s Mill 176Flores Ranch Estates 150 Oak Grove Garden Homes 175Newman Street Garden Homes 131 Savoy Two 175Langham Crossing 128 Millennium Homes on Rodrigo 173Grand Lakes 121 Alavarez Dickson Subdivision 172Old Farm Crossing 119 JS Holman Outlot 172Pine Oak Estates 119 Saddlebrook Gromley Addition 172Taghi Subdivision 119 Park at Hartman 171Falcon Point 116 Premier Communities at Shaver 171Royal Oaks Country Club 110 Rodrigo Court 168Alfalah 106 New Forest 166

Lakes of Parkway 160Maco Estates 160Lakes of Eldridge North 158Woodlands Carlton Woods at Village of Sterling Ridge 157

21

Townhomes Inside City Limits Outside City Limits (con't)Sutton Gillette Townhomes 749 Northridge Park 155Drew Street Townhomes 168 Bridgegate 152Lakeside Townhomes 100 Augusta Pines 150McIlhenny Street Townhomes 52 Community Chapel/Liberty Road Manor 150Champion Village Townhomes 51 Cypresswood Crescent 150Rose Court Townhomes 31 Fuqua Gardens 145Gray Avenue Townhomes 23 Gramercy Place 144West Court Townhomes 22 Villages of Northpointe 144Feagan Street Townhomes 20 Katy Prairie Estates 137Gillette-Oneil Townhomes 13 Oak Park Trails 137Dolores Street Townhomes 12 Wortham Landing 135Gibson Street Townhomes 12 Waterside Estates 131Sandman Townhomes 12 Park Forest 130Four Eleven West Pierce Townhomes 11 Woodlands Village of Carlton Woods 128Park Street Townhomes 11 Parkside at Perry 125McVaugh McGowan Townhouses 10 Dorrington Manor 124

Drake Place 124Townhomes Outside City Limits Grand Oaks 124Detering II Townhomes 574 Lindsey Acres 121Miramar Street Townhomes 244 Devonshire Woods 120Southampton-Live Work Townhomes 213 Feagan Street Courtyard Homes 120Lillian Court Townhomes 156 Woodspring Forest 120SEIMA Town and Patio Homes 144 John A. McGowan House Subdivision 119Windfern Townhomes 140 Lillian Courtyard Gardens 119Bremond Street Townhomes 131 Peckham Street Garden Homes 119O’Neil-Gillette Townhomes 112 South University Place 119Dorrington Townhomes 106 Lakes of Sterling Gate 117Floyd Townhomes 106 Louetta Lakes 114Michigan Street Townhomes 102 Lakewood Grove 113Minola Avenue Townhomes 96 Meadows of Northwest Park 113Oak Place Townhomes 93 Villages of Bear Creek 113McDuffie Street Townhomes 84 Glenhaven Estates Subdivision 111LaBranch Street Townhomes 80 McClendon/Pinnacle Addition 110Reinerman Townhomes 68 Hutchinson Subdivision 106Standford Place Townhomes 60 Mellon Addition 106Mason Street Townhomes 32 Liang Dott Subdivision 105French Village Townhomes 28 West Oaks Mews 105Big Creek Luxury Townhomes 26 Darien Street Cove 104

Meadows of Clear Creek 104Northwood Pines 104NEC Southmore and Jackson 103Postwood Green 102Stone Forest 102Northlake Forest 102Waterside Village 101Briarhurst Park 101

Source: City of Houston Planning Department

Houston Final Plats, 2000 (continued)Number of Number of

Subdivision Lots Created Subdivision Lots Created

22

In the first quarter of 2001, 6,242new homes were permitted in theMSA. In 2000, 23,917 single-family

home permits were issued in theHouston MSA at an average value of$136,500. In 1999, 22,248 single-family homes were permitted at anaverage value of $130,500.

In Houston, the number of existinghomes reported sold during 2000 wasup 1.4 percent from 1999. A total of51,433 homes sold through the MLSduring 1999 at an average price of$137,200, compared with 2000, when52,147 homes sold at an average priceof $153,500. During 2000 there wasan average of 4.2 months of inventoryon the market.

In Fort Bend County, 6,924 homessold in 1999, compared with 7,240homes in 2000. The average price rosefrom $149,100 in 1999 to $161,300 in2000. There was an average 4.3-month inventory of homes for sale.

In Montgomery County, a total of4,512 homes were reported soldthrough the MLS during 2000, up from4,247 in 1999. The average home in2000 sold for $164,900, comparedwith $151,600 in 1999, and theaverage inventory in 2000 was 6.4months.

The Woodlands was the most activeresidential community during 2000,with more than 1,500 new homesstarted. Builders in the developmentinclude Lennar, Life Forms, Emerald,Plantation, Ryland, Newmark,Morrison, David Weekley, Village,Ashton Woods and Darling.

In the Woodlands, Ryland homesstarted construction in late 2000 onhomes priced from $90,000 to the low$100,000s. The homes have 1,100 to1,400 square feet with three or fourbedrooms. Carlton Woods has startedconstruction on phase one with 159lots. The homes will have an averageprice of $318,000. When completedthe subdivision will have 520 lots anda golf course. Phase two began in May2001.

Cinco Ranch was the second mostactive community started in 2000. Thedevelopment will have 710 homespriced from $127,000 to $1 million atWestheimer Parkway and Peek Road.

Kingwood had 445 home starts in2000 with prices from $87,000 to $1million. The community is just east ofU.S. 59 and north of Humble.

Sienna Plantation, a 10,500-acremaster-planned community in Mis-souri City in Fort Bend County, had279 homes started with prices from$136,000 to $1 million. The project isat Highway 6 and Fort Bend Parkway.When built out, the development willhave 20,000 homes. The first of thegolf courses that are part of thedevelopment opened during spring2000.

Coles Crossing had 327 homesstarted in 2000 with prices rangingfrom $126,000 to $325,000. Thecommunity is at U.S. 290 and Barker-Cypress Road. Canyon Gate atStonegate, at U.S. Highway 290 andBarker-Cypress Road, had 288 homesstarted with prices from $140,000 to$292,000.

Gleannlock Farms had 297 homesstarted with prices from $172,000 to$750,000. The community is off FM249 and Spring Cypress Road andincludes an equestrian center and 27-hole golf course.

New Territory started 271 homespriced from $138,000 to $800,000.The community is located in Fort BendCounty and includes 40 neighbor-hoods.

Greatwood, at U.S. 59 and CrabbRiver Road in Sugar Land, had 267homes started in 2000 priced from$142,000 to $1 million.

Black Horse Ranch will have 550homes and is located at House HahlRoad and Old Hempstead Highway.

Stablegate is a planned 220-homedevelopment at Telge Road andStablegate Drive.

Beazer Homes is building 120homes at Buffalo Speedway and WestFuqua. The 1,000- to 1,800-square-foot homes will be priced from$70,000 to $100,000.

In Fort Bend County, at U.S. 59 andGrand Parkway, a 545-acre expansionof the Riverpark project is under wayand will add 1,200 new homes to thearea. Waterside Estates is a new 600-acre development on the GrandParkway. Grand Mission is at FM 1093and Harlem Road. The 2,000 homedevelopment will have lots availablein January 2002. Orchard Lakes is atFM 1464 and Oyster Creek. Homeswill sell from $170,000 to more than$500,000.

Eagle Springs is a 4,000 homedevelopment at Atascocita Road and

West Lake Houston Parkway. The firsthomes will be completed in 2001 andrange in price from $140,000 to$300,000. Fall creek is nearby with1,260 acres under development. FallCreek will have 1,550 new single-family homes at Dusty and Beltway 8.Home prices will range from $160,000to $750,000. Summerwood developed300 home lots during 2000 in the samearea.

In far northwest Houston, an 8,000-acre, master-planned community isplanned at Katy-Hockley Road on U.S.290. Home sales are expected to beginin 2003.

On Westheimer, one mile west ofthe tollway, 500 acres are underdevelopment for an upscale residentialcommunity that includes an 18-holegolf course. Home prices will average$500,000. The first homeownersmoved in during 2000.

Stonemill Courts will have 64 homespriced below $126,000. The firsthomes will be completed in spring2001.

At Richmond and Wilcrest, theRoyal Oaks Country Club is underconstruction. The club is part of the$500 million Royal Oaks neighbor-hood that will include 900 homespriced from $275,000 to $1 million.

In Katy, two master-plannedcommunities are under way. GraysonLakes broke ground in 2001 on 325acres at Katy-Flewellen and Katy-Gaston. The project will have 500homes with the first lots available inthe second quarter of 2001. Homeswill be priced from $175,000 to$350,000. Seven Meadows will have2,500 homes around the Meadow-brook Farms golf course at GrandParkway and FM 1093.

Near Katy, a 265-acre community isplanned with homes priced from$120,000 to $250,000. The 800-homeK&S Falcon Ranch is located onWestheimer Parkway west of theGrand Parkway.

Dominion Estates will include 39single-family homes and 44 town-homes. The townhomes will rangefrom 1,400 to 1,900 square feet andwill sell for $45,000 to $60,000. Theproject broke ground in October 1999.Plans include 500 to 700 homes overthe next ten years.

The Mews is a 400-home develop-ment in Kingwood targeted to couples

23

MULTIFAMILY

Houston MSA Multifamily Building Permits


without children. Homes will bepriced from $240,000 to $320,000.The project is surrounded by the backnine holes of the Lake Course atKingwood Country Club. The firstresidents will take occupancy in 2001with construction expected to becompleted by the end of 2001.

Augusta Pines will have 600 upscalehomes and an 18-hole golf course.Homebuilding started in early 2001 onthis project in far north Harris Countysouth of The Woodlands. A total of 161homes will be included in the first phasewith prices starting at $350,000. Thedevelopment also will include gardenhomes priced at $225,000 and more.

In Memorial Heights, the Park atMemorial Heights will have 150single-family and townhomes pricedfrom $300,000 to $650,000. Occu-pancy is under way.

Doubletree Glen will have 364homes. Construction began in spring2001. The project is located at Impe-rial Valley Drive and Humble-Westfield Road in north Houston.

Clayton Oaks at Highway 6 andWestheimer Road will have 176 homespriced in the $120,000s. To date, about600 homes have been built in ClaytonOaks.

Southampton Townhomes is a 28-unit project under construction at

Bissonnet and Buffalo Speedway. Thethree-story homes are priced from$309,000 to $359,000. A 16-townhomedevelopment is planned at SouthBoulevard and Kirby.

At Commerce Street near U.S. 59,120 townhomes will be built starting infall 2001. The metal-skinned homeswill begin at $150,000.

Washington Brownstones beganconstruction in June 2001, withcompletion set for early 2002. The 20units are priced from $209,000 to$239,000.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

24

Houston Apartment Statistics, March 2001

Texas MetroHouston Average

Average rent per square foot $0.73 $0.69Average rent for units built since 1990 $0.99 $0.95Average occupancy (in percent) 95.2 94.7Average occupancy for units built since 1990 (in percent) 95.8 92.3

Source: Apartment MarketData Research

During 1999, 9,525 multifamilyunits were permitted; during2000 this figure fell to 6,765.

In the first quarter of 2001, 1,587 newunits were permitted.

Between January 2000 and March2001, occupancy rates rose 1.4percentage points overall and 7.1percentage points for apartments builtsince 1990. Rents rose by ten centsoverall and one cent for units builtsince 1990.

A total of 42 apartment projects with10,982 units were completed in 2000.Twenty-six projects with 7,579 unitswere under construction at the end of2000, according to O’Connor andAssociates. During 1999, 16,888 unitswere completed. Seventeen projectswith 4,285 units were proposed at theend of 2000. Map 2 shows the loca-tions of multifamily housing permitsissued.

A 704-unit apartment complex wasscheduled to break ground in the firstquarter of 2001 in west Houston. TheRoyal Luxor Court will rent for anaverage of 88 cents per square foot.The first phase, with 352 units, isexpected to have units available inOctober 2001. The complex is atRichmond Avenue and EldridgeParkway.

Gables Meyer Park II broke groundon 296 apartments. The $27 millionproject will rent units for $1.09 persquare foot.

The Estates at Memorial Heights is aplanned 432-unit apartment projectlocated at Memorial Parkway andStudemont Street near downtownHouston. Construction began in early2001.

A 264-unit, four-story upscalecomplex is planned on MemorialDrive east of Shepherd Drive. Con-struction was expected to begin in thefirst quarter of 2001 after a HoustonCommunity College System adminis-tration building on the site wasdemolished. The project is expected tobe completed by mid-2002. The rentalrates will average $1.23 per squarefoot.

The Lofts at Ballpark is underconstruction next to Enron Field. Theproject has 374 units. Sabine StreetLofts, a 198-unit apartment complex atSabine Road and Memorial Drive, willbe completed by early summer 2001.

Ballpark Place was expected tobreak ground in 2001. The 34-storydevelopment overlooking Enron Fieldwill include 255 apartments.

The Humble building at the cornerof Main and Dallas is being convertedinto 82 apartments and two hotels. Theproject will open in fourth quarter2001.

Post Midtown Square Phase II is a13-story, 200-unit complex underconstruction. Units will rent from $800to $2,500 per month. A 282-unitcomplex is planned in Midtown atFannin and San Jacinto. Rental rateswill be $1.35 per square foot.

The former Tennison Hotel will beconverted into lofts. One Bayou Placewill have 27 units in the seven-storybuilding. The former Gulf PublishingBuilding has been demolished to makeway for a 32-story apartment building.

In Southwest Houston, GablesResidential Trust is building a 296-unitapartment project at Loop 610 andSouth Post Oak. The $27 million

project will open in late 2001 withrents at $1.06 per square foot.

The Hanover Company is planning a33-story apartment tower in the Galleriaarea. The 356-unit project will becalled 1200 Post Oak. Constructionbegan in April 2001 and is expected tobe completed in fall 2002.

A 19-story residential tower isplanned on Montrose Boulevard atBissonet. The project's 288 units willrent for $1,200 to $2,500 per month.

Buckhead Investment Partners hasthree apartment projects underconstruction. The projects, located atBammel-North Houston Road near FM1960, Watkins Way in Friendswoodand at FM 529 and Highway 6 inCopperfield, are expected to becompleted by spring 2001.

AMLI at Kings Harbor in Kingwoodis under construction. The 300-unitcomplex is located on the waterfront ofLake Houston. Construction is ex-pected to be completed in the fourthquarter of 2001.

Washington Courtyards opened inOctober 2000. The 74-unit apartmentcomplex has some units set aside forlow-income residents. Tidwell Estatesis a 132-unit apartment complex innortheast Houston. The mixed-incomecomplex opened in October 2000.

CondominiumsVilla d’Este opened in summer 2000

in the Galleria area. The 100-unitproject had an average sales price of$800,000. The project has been such asuccess that several other projects areplanned in the area. A 30-storycondominium building with 170 to200 units is planned just north of the

25

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Source: Houston Building Permit Office


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Galleria. Units will range in price from$300,000 to $3 million. No construc-tion date has been set. Montebello is aplanned 30-story condominium towerin the Galleria area on Uptown ParkBoulevard. The 112-unit tower isexpected to start construction by theend of 2001 with completion in 2003.

At Texas and Bastrop, The Stanfordis a planned 40-unit condominiumproject. Construction is expected tostart in early 2002. Units will be pricedfrom $235,000 to $496,000.

At Travis and Walker downtown, theCommerce Towers is being convertedinto 132 condominium units pricedfrom $220,000 to $2 million. Con-struction is under way.

The old Wadell Furniture warehousewill become Sampson Lofts, an 86-unitproject. The project is located atSampson and McKinney. Constructionis expected to be completed by the endof 2001. The units will be priced lessthan $100,000.

The Colonnade at Memorial is aplanned high-rise condominiumproject north of the Galleria near NorthPost Oak Lane and Memorial Drive.The 13-story building will have 64units priced from $300,000 to more

than $1 million. Completion isexpected in spring 2002.

Memorial Cove Lofts is a four-story,20-unit condominium loft buildingunder construction at Memorial Driveand Glen Cove. Units will be pricedfrom $274,900 to $700,000.

A $30 million, 80-unit, eight-storycondominium project is underconstruction on Memorial Drive andHouston Avenue. Construction beganin spring 2001 with completion in fall2002. The units will sell from$150,000 to $500,000.

An 89-unit condominium tower isunder construction in the Rice Villagearea. 2520 Robinhood at Kirby is thename of the 17-story tower. Prices willrange from $271,000 to more than $1million.

The Mark is a 30-story, 300-unitproject under construction at Sag Roadand Richmond. The project is sched-uled for completion in July 2001 andhas units priced from $150,000 to$390,000.

On Kirby Drive in the Southamptonarea, an 11-story, $24 million condo-minium tower is planned. The unitswill be priced from $350,000 to morethan $1 million.

The Westheimer is a seven-storyluxury condominium project onWestheimer near Dunlavy. The projectwill have 47 units priced from$190,000 to $500,000. Constructionwill be completed in summer 2001.

The Tanglewood is a six-story, 62-unit condominium tower that startedconstruction in May 2001. Thecondominiums on Fountainview nearSan Felipe are priced from $200,000 tomore than $1 million.

At Buffalo Speedway and Bissonnet,South Boulevard Place is an 11-storycondominium tower under construc-tion. The 64 units are scheduled to beready in late 2001 and will be pricedfrom $360,000 to $1 million.

Pine Hollow tower at Woodway andPost Oak is being converted fromrentals to condominiums and has beenrenamed Campton at Post Oak. Pricesbegin at $289,000.

The Gables River Oaks is beingconverted into condominiums. The228-unit complex at Welch and SanFelipe is being renamed The Renais-sance at River Oaks. Units will bepriced from $130,000.

26

SENIORS HOUSING

MANUFACTURED HOUSING

Houston MSA Manufactured Home Sales

Proportion of NewManufactured Single-family HomesHomes Sold (in percent)

1997 4,860 21.31998 5,704 20.81999 5,577 20.02000* 3,908 17.6

*Through third quarter 2000

Source: Texas Manufactured Housing Association

According to the Texas Depart-ment of Social Services, thereare more than 4,800 assisted-

living units in Houston. The Bucking-ham, an $87 million retirementcommunity, is planned at Westheimerand Fondren. The project will have206 independent-living apartments.Construction is scheduled to becompleted in 2002.

Grand Court Sugar Land-Greatwoodand Grand Court South Shore Harboropened in late 2000 with both inde-pendent- and assisted-living units.

The Concierge, an 89,000-square-foot, long-term care facility opened in2000.

Lakewood Village Mobile HomeSubdivision platted 93 lots inHouston in May of 2000.

Imperial Valley Manufactured Hous-ing Community had 57 lots platted inAugust 2000. Gaylord Mobile HomePark platted 13 lots in January 2000.

27

RETAIL MARKET

Hotel Occupancy and Rental Rates

1999 2000*Houston Texas Houston Texas

Occupancy rate (in percent) 62.5 63.7 65.9 67.2Average daily rental rate $85.42 $85.11 $87.14 $86.75

*Through November 2000Source: PKF Consulting

Square Feet Square FeetCompleted Under Construction

Inner Loop 140,000 138,405Northeast 264,900 0Far North 500,000 0Near Northwest 267,322 270,000Far Northwest 82,322 93,000Near West 828,291 88,000Far West 432,151 0Far Southwest 170,000 652,487Far Southeast 336,780 696,000Near Southeast 0 700,000Totals 3,021,766 2,637,892

Source: CB Richard Ellis

Retail Construction Statistics, Year End 2000

28

Occupancy AverageLocation (in percent) Daily Rate

Central business district 71.9 $151.83Galleria-Post Oak 72.9 122.38Texas Medical Center 79.5 82.14Intercontinental 69.7 79.53Hobby Airport 68.2 68.11Clear Lake 61.0 78.09Southwest Houston 59.2 71.08Stafford-Sugar Land 51.5 59.75Westchase 63.7 79.22Katy Freeway 63.7 71.77Northwest 62.7 65.74Astrodome-South Main 48.7 64.21East-Baytown 60.1 49.93

*Through November 2000Source: PKF Consulting

Hotel Occupancy and Rental Rates in HoustonSubmarkets, 2000*

Rental rates increased in allproperty types to an average of$18.40 per square foot in 2000.

Regional malls averaged $38 persquare foot, community centers $17,neighborhood centers $18 and existingstrip centers $16. Houston’s overallshopping center occupancy rates are at89 percent, according to CB RichardEllis. The Inner Loop had a vacancyrate of 7 percent, Near North, 2percent and Far Southwest, 14.7percent. Map 3 shows Houston retailbuilding permit locations.

Construction of 6.37 million squarefeet of retail space will be completedin the greater Houston area in 2001,according to Wulfe and Company.This represents a 65 percent increaseover 2000 when more than threemillion square feet of space becameavailable. Ninety percent of the newconstruction is expected to be forchain store retailers. Twenty newsupermarkets will be constructed andopened, including nine for H-E-B, fivefor Albertsons, three for Kroger andthree for Randalls.

Wal-Mart is planning to open fiveneighborhood markets. One north

Houston store will be located atChampion Forest at Spring Cypressand will open in fall 2001. The store atBeechnut and Kirkwood in westHouston will open in late fall. A storeat Kempwood and Gessner will openin summer 2001, as will a location atHighway 6 and Rippling Water. Alocation at Grant at Eldridge innorthwest Houston will open in early2002. In addition, the company plansto open seven new 200,000-square-foot-plus supercenter stores and atleast three new Sam’s Clubs. OneSam’s Club will be located at Highway6 and U.S. 90A in Fort Bend County.The store is scheduled for completionis spring 2002.

Target has three new SuperTargetsunder construction and Kmart willopen two new stores. Costco isentering the Houston market and plansto open two wholesale club stores.One will be located near WillowbrookMall and the second at the KatyFreeway and Bunker Hill.

Lowe’s plans six new home centersduring 2001. Home Depot plans fournew stores. Great Indoors plans toopen two stores and Garden Ridge

one. This sector will account for 18percent of new retail space in 2001,according to Wulfe and Company.

Kohl’s plans to open 15 departmentstores in the Houston area. The storeswill have between 90,000 and100,000 square feet.

Restaurant sales are projected toincrease 7.5 percent during 2001 to$5.6 billion, according to the TexasRestaurant Association.

Stage stores closed six stores inHouston. Montgomery Ward will beclosing in the Houston area in 2001.Two Sears stores closed in the firstquarter of 2001.

Hotels-MotelsThe Stafford Sugar Land area

experienced the largest increase indaily rental rates for hotel rooms —10.4 percent. The next largest growthrate was the Central Business Districtat 4.9 percent.

Occupancy rates were up for almostall of the subareas. The Texas MedicalCenter area had the largest increase,5.8 percent, followed by the centralbusiness district at 4.7 percent,according to PKF Consulting.

29

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The 259-room Crowne Plaza Down-town in Cullen Center opened in April2001. The building underwent a $25million renovation. Several otherhotels are under construction in thedowntown area including a 114-roomHoliday Inn Express, a 76-room BestWestern, a 171-room Residence Innand a 191-room Courtyard by Marriott.Starwood Hotels and Resorts openedthe 252-room St. Regis Hotel in 2000.

A number of other hotels areproposed in the downtown area. Onewould be at Texas Avenue at theWorld Trade Center and another in theformer Sam Houston Hotel. TheTennison Hotel at Washington Avenueand Bagby Street may be turned into aboutique hotel.

A 1,200-room Hilton hotel isplanned at Crawford and Polk near theGeorge R. Brown Convention Center.The convention hotel is scheduled toopen in October 2003.

At U.S. 59 and Franklin near EnronField, the 314-room Magnolia Hotelwill open in fall 2002 in the formerPost-Dispatch Building.

Chateau Court will include a six-story hotel and retail village just northof the Compaq headquarters at FM1960 and Highway 249. The 171-room

Hilton Gardens hotel will open inwinter 2001.

Shoney’s Inn opened at Interconti-nental Airport with 71 rooms in spring2000. The Jesse H. Jones Rotary HouseInternational in Houston is expected toadd 125 rooms at a cost of $13.6million. The 12-story addition isexpected to open in 2001.

A 55-room Microtel opened inJanuary 2000 in Clear Lake. A 59-unitHawthorne Suites is under construc-tion at Will Clayton Parkway inHouston and will open in fall 2001.Hilton Homewood opened a nine-room hotel in 2001 at I-45 near theWoodlands Mall.

Retail DevelopmentAt Memorial Drive and Washington

Avenue Walgreens plans a store. A20,000-square-foot retail center isbeing developed and will open in fall2001 at the same intersection.

The General Cinema theater atMeyerland Plaza closed in October2000 but will be reopened by Enter-tainment Film Works.

H-E-B plans to open nine largegrocery stores by 2002. In 2000 a storeopened at Fairmont and Jana insoutheast Houston. A second location

opened at Fountainview andWestheimer. A store is planned for2001 on Gulfgate. A location atHighwand Knolls and Mason Roadopened in early 2001, as did a locationat Fry Road and I-10. A location in farnortheast Houston in Atascocita willopen in 2001. Austin Parkway atHighway 6 will see a new store in2001. A store at Beechnut and Beltway8 is planned for 2002. A 143,000-square-foot shopping center is plannedon Westheimer between Kirkwoodand Royal Oaks Blvd. The center willbe anchored by H-E-B.

Albertsons will be part of theRoanoke Crossroads at Texas Highway114 and U.S. 377. Auchan opened asecond store in southeast Houston inSeptember 2000. The store has235,000 square feet. Randalls FoodMarket will open a store in midtown inspring 2002. Fry’s is planning to opena 100,000-square-foot electronicsstore at I-45 and West Road in early2001.

River Oaks Dodge plans a newdealership at Silber Road and the KatyFreeway. The Bank of Memorialopened a branch in March 2001 onMemorial Drive in Town and CountryVillage. In Highland Village a 39,000-

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square-foot Crate and Barrel is beingadded.

At Westheimer and Voss an Albert-sons store is planned, as is a Michael’sArts and Crafts store and a 13,000-square-foot strip center. Constructionon the center began in February 2001.

The Gulfgate Center is beingredeveloped. H-E-B and Lowe’s HomeImprovement Warehouse have bothbroken ground on the site. Theremainder of the 700,000-square-footsite will be filled with smaller tenants.

The Marq’E Entertainment Centercontinues to add new retailers. The275,000-square-foot center on theKaty Freeway has a 22-screen movietheater, Imax theater, restaurants andother retailers. A 30,000-square-footskateboarding facility, comedy cluband bowling alley opened in late 2000.

Dillard’s plans to move from theTown and Country Mall to the Memo-

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OFFICE MARKET

rial City Mall in 2002. Saks FifthAvenue closed its Town and Countrystore in January 2000. Foley’s brokeground on a 300,000-square-foot storeat the Memorial City Mall. The store isexpected to open in late 2001. A Lord& Taylor store is expected to open inspring 2002. The Galleria is undergo-ing a $25 million renovation that willbe completed in June 2002.

Near Enron Field, e-Square atWalker street will have more than 20restaurants and retail shops occupying100,000 square feet. The first phaseopened in September 2000 andincluded three clubs and a restaurant.

Downtown, a new Landry’s SeafoodRestaurant, aquarium and entertain-ment facility will be built on the banksof Buffalo Bayou. The $21 millionproject will be completed in 2002.

On Kirby, a new Borders Books andMusic Café opened in fall 2000. At

Loop 610 and Post Oak, a newEuropean-style shopping centeropened with specialty retail stores. TheShops at Village Walk at Westheimerand Weslayan opened in fall 2000.

In the Woodlands, the WaterwayPromenade is under construction nearI-45. The center will be located along a1.25-mile-long waterway and willinclude home furnishing stores,restaurants and entertainment.Construction on the waterway beganin spring 2000.

A $30 million Sports Lodge willbreak ground in August 2001. Thecenter will include NHL-size iceskating facilities and an olympictraining center for gymnastics. Thecenter will be located at Beltway 8 andClay Road.

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Office Property Statistics, First Quarter 2001

Central business districtTotal space (in square feet) 32,972,151Under construction (in square feet) 1,367,964Occupancy (in percent) 91.5

1960 Area Total space (in square feet) 4,176,109 Under construction (in square feet) 77,000 Occupancy (in percent) 89.1

Allen Parkway-MontroseTotal space (in square feet) 3,896,109Under construction (in square feet) 0Occupancy (in percent) 89.7

Conroe/Montgomery CountyTotal space (in square feet) 464,243Under construction (in square feet) 0Occupancy (in percent) 81.2

Far SouthwestTotal space (in square feet) 5,776,962Under construction (in square feet) 0Occupancy (in percent) 76.4

Fort Bend CountyTotal space (in square feet) 849,431Under construction (in square feet) 0Occupancy (in percent) 89.2

Greenspoint-North BeltTotal space (in square feet) 10,119,544Under construction (in square feet) 0Occupancy (in percent) 85.9

GreenwayTotal space (in square feet) 10,535,528Under construction (in square feet) 0Occupancy (in percent) 90.6

Gulf Freeway-Pasadena Total space (in square feet) 1,200,134 Under construction (in square feet) 0 Occupancy (in percent) 83.4

Katy FreewayTotal space (in square feet) 15,479,460Under construction (in square feet) 102.500Occupancy (in percent) 85.8

Source: Grubb & Ellis

Kingwood-East-NortheastTotal space (in square feet) 1,262,331Under construction (in square feet) 0Occupancy (in percent) 89.9

Medical-South MainTotal space (in square feet) 1,619,938Under construction (in square feet) 0Occupancy (in percent) 85.5NASA-Clear LakeTotal space (in square feet) 4,624,003Under construction (in square feet) 0Occupancy (in percent) 82.1

Near SouthwestTotal space (in square feet) 3,905,026Under construction (in square feet) 0Occupancy (in percent) 84.0

Northwest FreewayTotal space (in square feet) 7,821,966Under construction (in square feet) 0Occupancy (in percent) 88.7

Sugar LandTotal space (in square feet) 3,088,881Under construction (in square feet) 70,896Occupancy (in percent) 88.1

Uptown-GalleriaTotal space (in square feet) 28,037,576Under construction (in square feet) 0Occupancy (in percent) 84.5

WestchaseTotal space (in square feet) 8,822,595Under construction (in square feet) 173,400Occupancy (in percent) 81.3

Woodlands-ConroeTotal space (in square feet) 1,805,944Under construction (in square feet) 275,706Occupancy (in percent) 86.3

TotalsTotal space (in square feet) 146,458,255Under construction (in square feet) 2,076,466Occupancy (in percent) 86.8

Map 4 shows Houston’s officebuilding permit locations.The Houston office market

has more than 146 million square feetof space and an overall vacancy rate of13.2 percent. The vacancy rate in thesuburbs was 14.6 percent in the firstquarter of 2001, according to Grubband Ellis.

Rental rates have remained stable inthe Houston market, according toGrubb and Ellis. The average rentalrate during 2000 was $23.79 persquare foot for Class A space and$17.68 for Class B space. In theCentral Business District the averagerental rate for Class A space was$25.96; Class B space was $20.07.

The average rent in the suburbs was$22.46 for Class A and $17.32 forClass B space.

During 2000, approximately 1.5million square feet of office space wascompleted, compared with 4.5 millionin 1999. However, with a boom inoffice construction in the centralbusiness district, 2001 will exceed

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2000 construction figures. In additionto the two million square feet of spacein speculative and build-to-suit forlease projects, there is 19.8 millionsquare feet of space under construc-tion in owner-occupied developmentin the first quarter of 2001.

Medical OfficesThe Texas Medical Center is

completing major projects. A newnine-story, $137.2 million basicscience research building will be built.Hermann Pavilion, a 12-story,800,000-square-foot building, openedin spring 2000 at a cost of $200million. The Baylor Center for Com-parative Medicine, built underground,opened in February 2000 and cost $40million. The M.D. Anderson FacultyCenter is under construction with325,000 square feet of office space at acost of $49 million.

A 17-story medical professionalbuilding will be built on Main Streetnear the Texas Medical Center. Theproject will have 220,000 square feetof medical office space on top of eightlevels of parking and 32,000 squarefeet of street-level retail. The buildingis expected to be completed in spring2002.

The Nabisco bakery located atHolcombe Boulevard and AlmedaRoad has been sold to the TexasMedical Center. The 627,000-square-foot property will be converted intooffice and lab space.

Texas Children’s Hospital will builda pediatric emergency center in TheWoodlands. St. Luke’s EpiscopalHealth System will build a 263,000-square-foot, 82-bed medical center.Construction began in February 2001with completion scheduled for 2003.

Columbia Women’s Hospital ofTexas remodeled and added to itsexisting hospital on Fannin. The $13million expansion added 91,000square feet and was completed inFebruary 2000. Houston’s NorthwestMedical Center underwent a $13million, 13,900-square-foot expansionand renovation project, which wascompleted in early 2001.

Memorial Hermann HealthcareSystems built a new office and healthclub building on Southwest Freeway.The $8 million project has 73,330square feet. HealthCare Village, a350,000-square-foot complex forsurgery, with offices and a pharmacy,

opened during 2000 at Fallbrook andFM 1960. The hospital is planning a$44 million professional building andparking garage at the Memorial CityHospital. Christus St. Joseph Hospitalis planning a $4.2 million renovationto increase beds available.

Office ConstructionA number of new office towers are

under construction in the centralbusiness district. Enron is building a1.2-million-square-foot building onLouisiana Street. The building will becompleted in 2001.

Five Houston Center is a 577,000-square-foot, 27-story office buildingunder construction in downtownHouston. The building is expected tobe completed in third quarter 2002.Ernst and Young will be a major tenant.Six Houston Center is under consider-ation.

Reliant Energy plans to occupy500,000 square feet in the planned1000 Main building. The 36-storytower will provide 1.3 million squarefeet. The building is expected to becompleted in early 2003.

Hines is planning a 32-story tower atTexas and Milam. Calpine Corp. willbe the main tenant in the tower that isexpected to be completed in fourthquarter 2003. Century Development isplanning a 38-story tower at Main andTravis. Renaissance Tower on MainStreet reopened in 2001.

At the Texas Medical Center, theSoutheast Texas BioTechnology Parkwill be developed on 64 acres. Theproject is expected to have 15 build-ings with two million square feet ofspace at Old Spanish Trail and KnightRoad. The first building will breakground in summer 2001 and becompleted in 2003.

The Woodlands has more than fivemillion square feet of office space thatis 98 percent occupied. AnadarkoPetroleum is completing an 800,000-square-foot building in The Wood-lands. Town Center Professional Plaza,a 31,000-square-foot building, wascompleted in The Woodlands in early2001. Chevron Phillips Chemicalplans a 200,000-square-foot officebuilding.

A 123,000-square-foot officebuilding broke ground in April 2001 inthe Greenspoint area. The two-storybuilding, called North Belt Office

Center II, is at Greens Parkway andGreens Crossing Boulevard.

At I-45 and Beltway 8 the InfomartTechnology Park is planned. The parkwill have as much as one millionsquare feet in ten buildings. The firstbuilding, with 108,000 square feet, isexpected to be completed in August2001.

A one-million-square-foot, 33-storyoffice tower is planned on the South-west Freeway near Buffalo Speedwayin Greenway Plaza. The new buildingis expected to be completed in late2003.

The Westchase area has more than12 million square feet of space. In2000, 113 new companies leasedmore than one million square feet inthe area. A 173,000-square-footbuilding is planned in the Oak Park atWestchase business park.

At Westheimer and Beltway 8 anoffice development is planned on a100-acre tract. BMC Software willconstruct two buildings totaling850,000 square feet in the Westchasearea. Briar Forest Crossing began a $4million renovation project in Novem-ber 2000. The renovation was sched-uled to be completed in April 2001.

At Beltway 8 and Clay, the West Beltbusiness park broke ground in thesecond quarter of 2001. The 120-acrepark will have more than a dozen low-rise office and office-technologybuildings. The project will total morethan 1.2 million square feet of space.By winter 2001, a 102,500-square-footbuilding and a 75,000-square-footbuilding will be completed.

At Sam Houston Parkway and ClayRoad, a 215,000-square-foot officebuilding broke ground in January forCameron, an oil and gas equipmentservices firm. The nine-story buildingwill be adjacent to a parking garage.

In the Northwest Crossing businesspark at Hollister and West Little Yorkalong the Highway 290 corridor, a115,000-square-foot office-flex centeris planned. Phase one will include a62,000-square-foot building followedby a 53,000-square-foot expansion.

At West Little York and HollisterRoad, a 61,800-square-foot office-service center is under construction.The project is expected to be com-pleted in June 2001.

In October 2000, a new 218,600-square-foot office complex opened on

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Sam Houston Parkway at Bellaire. OneBriarlake Plaza, a 20-story office toweris under construction along the SamHouston Tollway in the Westchasearea. Oak Park at Westchase is addinganother building. Jacobs Engineeringcompleted a 300,000-square-footbuilding in early 2001.

Phase II of the Reserve at GreensCrossing was completed in the firstquarter of 2001, adding 157,788square feet of space.

At Loop 610 and Post Oak, Landry’scompleted an eight-story, 115,000-

square-foot headquarters building inspring 2001.

Fort Bend County is seeing asignificant amount of office construc-tion. Sugar Creek Place II is a proposed70,000-square-foot office building atU.S. 59 and Commerce Green Boule-vard. Healix Ltd. Is planning torelocate its headquarters into thebuilding. The Beltway 8 Business Parkat U.S. 59 and Beltway 8 has brokenground and will have 400,000 square

feet of office and industrial space whencompleted in two years.

TRTON Ltd. plans to build a150,000-square-foot headquarters andmanufacturing facility in the FreeportBusiness Park in Stafford.

In Montgomery County a three-story, 150,000-square-foot officebuilding is expected to begin construc-tion in summer 2001 on I-45. This willbe followed by an eight-story,200,000-square-foot building.

INDUSTRIAL MARKET

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Industrial Property Statistics

Source: Grubb & Ellis

Central business districtTotal space (in square feet) 4,290,696Under construction (in square feet) 0Occupancy (in percent) 96.9

East southeast farTotal space (in square feet) 10,731,735Under construction (in square feet) 0Occupancy (in percent) 95.8

Fort BendTotal space (in square feet) 7,971,524Under construction (in square feet) 0Occupancy (in percent) 86.6

North farTotal space (in square feet) 22,023,555Under construction (in square feet) 1,774,000Occupancy (in percent) 91.6

North middleTotal space (in square feet) 5,765,759Under construction (in square feet) 0Occupancy (in percent) 95.0

North nearTotal space (in square feet) 8,508,370Under construction (in square feet) 0Occupancy (in percent) 93.6

Northeast farTotal space (in square feet) 7,864,992Under construction (in square feet) 0Occupancy (in percent) 98.3

Northeast nearTotal space (in square feet) 19,683,986Under construction (in square feet) 60,000Occupancy (in percent) 90.5

Northwest farTotal space (in square feet) 58,638,463Under construction (in square feet) 2,401,669Occupancy (in percent) 92.2

Northwest nearTotal space (in square feet) 35,279,929Under construction (in square feet) 204,100Occupancy (in percent) 92.6

South farTotal space (in square feet) 10,730,237Under construction (in square feet) 0Occupancy (in percent) 89.8

South nearTotal space (in square feet) 32,660,678Under construction (in square feet) 0Occupancy (in percent) 92.0

Southeast middleTotal space (in square feet) 11,802,701Under construction (in square feet) 24,000Occupancy (in percent) 95.9

Southeast nearTotal space (in square feet) 37,939,265Under construction (in square feet) 37,000Occupancy (in percent) 92.0

Southwest farTotal space (in square feet) 21,560,610Under construction (in square feet) 229,578Occupancy (in percent) 92.6

Southwest nearTotal space (in square feet) 17,870,402Under construction (in square feet) 200,000Occupancy (in percent) 93.9

West farTotal space (in square feet) 18,870,402Under construction (in square feet) 200,000Occupancy (in percent) 92.6

TotalsTotal space (in square feet) 337,133,047Under construction (in square feet) 5,082,147Occupancy (in percent) 92.6

Houston has more than 337million square feet of indus-trial space. Of that total, 249

million is in warehouse and distribu-tion space, 25 million in R&D and flexspace and 62 million in general indus-trial space. During 2000, more thantwo million square feet of industrialspace was completed, compared with5.8 million in 1999.

In 2001, 5.1 million square feet ofspace is expected to be completed. In

the first quarter of 2000 more than fivemillion square feet of space was underconstruction, according to Grubb andEllis. During 2000, industrial absorp-tion was almost four million squarefeet.

Overall the industrial vacancy ratefell to 7.4 percent for first quarter 2000.The average rental rate for warehouseand distribution space was 35 centsper square foot while R&D and flexspace rented for 55 cents per square

foot. Map 5 shows the location ofindustrial building permits issued inHouston.

The northwest industrial corridornear Compaq Computer Corporationhad major industrial expansion. TheLegacy Center on Fallbrook Drivecame online during the first quarter of2001, adding 461,000 square feet ofwarehouse space.

Granite Properties is developing a300,000-square-foot warehouse in

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northwest Houston for VictoryPackaging. The building is at WestLittle York Road and Fairbanks NorthHouston Road.

Alamo Crossing Commerce Centerwas located at U.S. 290 and FlintlockRoad. The park will have more thanone million square feet of speculativeindustrial space. Ground broke on fourof the five buildings, which areexpected to be completed by the endof summer 2001.

Bondensen Business Park will have365,000 square feet of office anddistribution space. The park willinclude a 140,000-square-footwarehouse and six smaller buildings.The park is located at the Sam HoustonTollway and West Little York.

In the Legacy Park business park innorthwest Houston, Betz RealtyInvestors will build four office-warehouse buildings with 167,000square feet of space. The project,located at the Sam Houston Tollwayand Fallbrook, broke ground in May2001 and will be completed in fall2001.

A number of industrial constructionprojects are under way around Inter-continental Airport. Two 350,000-square-foot buildings are under con-struction in the Intercontinental CargoCenter on Greens Road between

Milner and Morales roads. In March2001, ground broke on an expansionin the North Texas commercialdevelopment park. The JA Green AirCargo Distribution Center has threebuildings with 350,000 square feetunder construction.

On Old Katy Road, the West PortIndustrial Park has begun constructionon a 66,752-square-foot second phase.When completed the park will have500,000 square feet of warehousespace.

Federal Express is building a108,900-square-foot distributioncenter at the Sam Houston Tollwayand West Little York Road.

The Beltway 8 Business Park at theSam Houston Tollway and U.S. 59 isunder construction. The first phaseincludes four buildings with 260,000square feet.

Greens Crossing Business Parkadded 450,000-square-foot and90,000-square-foot warehouses. Asmuch as one million square feet ofwarehouse space could be completedin the park over the next five years.

A new business park is underdevelopment in northwest Houston.Cole Creek Business Park, on U.S. 290at the Tollway, will have five to sevenwarehouses with one million squarefeet of space when completed.

In the Northpoint East Business Park,a $3 million, 100,000-square-footdistribution facility was completed. A278,460-square-foot warehouse anddistribution center was built on MarketStreet.

Twelve 12,000-square-foot ware-houses are planned on Almeda Roadsouth of Loop 610. The first buildinghas been completed and two addi-tional buildings are under construction.

Novo Blinds is building a largewarehouse office building in northwestHouston. The project is located onRailhead and will have a 40,000-square-foot office building and a352,000-square-foot warehouse.

The Business Center at Blalock willhave a 198,000-square-foot buildingcompleted in October 2001. Town andCountry Business Park has a 206,000-square-foot building under construc-tion. The building is one of sevenplanned for the park.

The Anchor Hocking Glass Plant inJacinto City is undergoing an $80million renovation. The plant willreopen in summer 2002 as LonghornGlass Corporation.

Near Baytown, Home Depot isconstructing a 755,000-square-footwarehouse in the Cedar CrossingIndustrial Park. The building will becompleted in late 2001.

CONCLUSION

701-50-1487

Houston’s economy has ben-efited from reorganization ofthe oil industry that brought

jobs to the area. While other areas ofthe state are expecting to see aslowdown in real estate activity,Houston is expected to have a stableeconomy and see an increase in

construction activity. With the strengthof oil prices and a strong exporteconomy, Houston’s economy isexpected to remain strong in 2001.

Construction activity in all sectors isexpected to continue. Fort Bend andMontgomery counties are seeingtremendous growth in housing and

retail. There is significant interest indowntown redevelopment, with loftand condominium projects throughoutthe inner loop. The downtown officemarket is booming, with three majoroffice construction projects under way.The state’s largest city is expected tocontinue to see growth in 2001.

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