1. COLLIERS INTERNATIONAL | HOUSTON MEDICAL OFFICE | 2ND QUARTER 2010
MID-YEAR 2013 | MEDICAL OFFICE
Accelerating success.
HOUSTON MEDICAL OFFICE
MARKET INDICATORS
2ND HALF
2012
1ST HALF
2013
CITYWIDE NET
ABSORPTION (SF) 202K 467K
CITYWIDE SF DELIVERED 186K 30K
CITYWIDE AVERAGE
VACANCY 12.9% 11.3%
CLASS A
AVERAGE VACANCY 8.6% 8.2%
CITYWIDE AVERAGE
RENTAL RATE $23.12 $23.02
CLASS A AVERAGE
RENTAL RATE $29.35 $28.40
COLLIERS HEALTHCARE SERVICES GROUP - HOUSTON, TEXAS
HEALTHCARE MARKET COMMENTARY
Houston’s Medical Office Market Vacancy Drops
160 Basis Points in the First Half of 2013
Houston medical office buildings recorded 467,000 SF of positive net
absorption in the first half of 2013, the majority of which (365,000 SF)
occurred in the first quarter. By property class, Class A posted the
largest amount of positive net absorption in the first half of the year,
followed by Class C properties, posting 393,000 SF and 65,200 SF,
respectively. The citywide average vacancy rate decreased 160 basis
points and the average quoted rental rate decreased slightly to $23.02
from $23.11 per SF between December 31, 2012 and June 30, 2013.
Houston’s medical office market is expected to benefit from both short-
and long-term regional trends. Disciplined development, with only 6
new buildings added to inventory in 12 months, will relieve the
pressure in filling the existing vacant lease space.
Overall, Houston’s economy remains among the strongest in the U.S.
The Houston metropolitan area added 91,600 jobs between May 2012
and May 2013, an increase of 3.4%, Further, Houston’s unemployment
fell to 6.4% from 6.8% one year ago and area home sales increased
significantly, growing by 28.0% over the year.
5%
7%
9%
11%
13%
15%
17%
(200,000)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Absorption New Supply Vacancy
ABSORPTION, NEW SUPPLY & VACANCY RATES
Houston
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UNEMPLOYMENT 5/12 5/13
HOUSTON 6.8% 6.4%
TEXAS 6.8% 6.5%
U.S. 7.9% 7.3%
JOB GROWTH
ANNUAL
CHANGE
# OF JOBS
ADDED
HOUSTON 3.4% 91.6K
TEXAS 2.7% 297.9K
U.S. 1.2% 1.7M
JOB GROWTH & UNEMPLOYMENT
(Not Seasonally Adjusted)

2. HEALTHCARE MARKET COMMENTARY | MID-YEAR 2013 | COLLIERS INTERNATIONAL HOUSTON
COLLIERS INTERNATIONAL | P.
Vacancy & Availability
Houston’s medical office market
occupancy increased during the
first half of 2013 with the citywide
average vacancy rate decreasing
by 160 basis points to 11.3%
from 12.9%.
By property class, Class A
vacancy rates posted the largest
decrease during the first half of
2013, 530 basis points to 8.5%
from 13.8% in 4Q 2012. Class C
vacancy rates decreased 130 bps
to 11.2% from 12.5%, while Class
B vacancy rates increased 20
basis points to 12.8% from
12.6%.
Sublease space has not had a
significant impact on current
vacancy rates, remaining below
0.5% of total vacant space over
five years. Of the 3.0M SF of
vacant space on the market at
mid-year 2013, only 50,700 SF
was sublease space.
Disciplined medical office
development activity has helped
prevent major upheavals in
current occupancy levels. There
were only eight (8) new buildings
(1.2M SF) added to the market
during 2012 and just one (1)
building (30,000 SF) delivered in
the first half of 2013. The largest
project completed within the past
two years was the University of
Texas MD Anderson Cancer
Center Administration Building
located at 7007 Bertner Avenue
in the Texas Medical Center
(895,600 SF owner occupied).
Currently, the medical office
construction pipeline is empty.
Absorption & Demand
Houston’s medical office market
recorded 467,400 SF of positive
net absorption in the first half of
2013.
By property class, Class A posted
the largest amount of positive net
absorption in the first half of
2013, with 393,176 SF, followed
by Class C properties posting
65,237 SF of positive net
absorption. Class C posted only
8,986 SF of positive net
absorption in the same period.
Most of the Class A absorption
occurred in Q1 2013 when MD
Anderson moved in it’s new
building on Bertner Avenue in the
South Main/Medical Center
submarket.
Rental Rates
Quoted full-service rental rates
for all medical office property
classes averaged $23.02 per SF
at mid-year 2013, a decrease
from $23.13 per SF recorded
year-end 2012. Medical office
building landlords continued to
offer lease concessions including
free rent to credit worthy tenants,
but have decreased the amount
of tenant improvement packages.
By property class, on a bi-annual
basis, the average Class A rental
rate of $28.40 per SF decreased
from $29.35 per SF, Class B
increased to $22.91 from $22.77
per SF, and the average Class C
rate increased from $17.21 to
$17.83 per SF.
MEDICAL OFFICE
CLASS A & B VACANCY VS. RENTS
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
4%
6%
8%
10%
12%
14%
16%
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Q1-12
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Class A Vacancy Class B Vacancy
Class A Rents Class B Rents
Class A
7,340,192
27.5%
Class B
14,239,726
54.9%
Class C
4,997,698
18.7%
Class A
Class B
Class C
(100,000)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Q1-12
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Class A Class B Class C
MEDICAL OFFICE
NET ABSORPTION BY CLASS
MEDICAL OFFICE
EXISTING INVENTORY BY CLASS
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3. HEALTHCARE MARKET COMMENTARY | MID-YEAR 2013 | COLLIERS INTERNATIONAL HOUSTON
COLLIERS INTERNATIONAL | P.
Sales Activity
Transaction activity remained
slowed slightly between year-end
2012 and mid-year 2013, with 30
properties changing hands
compared to 57. According to
CoStar Comps, Houston medical
building sales transactions in the
first half of 2013 had a total dollar
volume of $46.3M, averaging
$297 per SF with a 6.5%
capitalization rate.
Many of the transactions were
multi-property portfolio sales,
however, there were several
single property transactions that
occurred.
The 46,380 SF 290 Medical/Office
Plaza in the FM 1960/Hwy 249
submarket was purchased by the
Bronner Family Trust in January
for $9.6M.
The 30,000 SF Memorial
Hermann Covenant Care Building
in the Northeast Near submarket
was purchased by American
Realty Capital Healthcare Trust,
Inc. for $13.3M.
There are currently 116 properties
listed for sale and 4 pending
transactions.
Leasing Activity
Houston’s medical office leasing
activity reached 330,419 SF in the
first half of 2013. By property
class, Class B product led the
market with 254,972 SF leased,
followed by Class C at 48,600 SF,
then Class A at 26,847 SF.
Although the majority of new
leases signed in the first half of
the year were in the 1,000 - 5,000
SF range, there were a few larger
lease transactions.
St. Joseph Physician Services
leased 13,500 SF at 2000
Crawford St in the Midtown
submarket. St. Joseph Medical
Center leased 5,200 SF at
Heights Tower in the North Loop
West submarket.
Additional transactions under
5,000 SF include: Orion’s lease of
4,900 SF at Bayshore Medical
Building in the Gulf Freeway/
Pasadena submarket and Legacy
Community Health’s lease of
4,700 SF at the Bellaire Medical
Professional Building in the
Bellaire submarket.
RBA: 46,380 SF
Built: 2008
Buyer: Bronner Family Trust
Seller: FM 1960 Medical Village
Physicians, L.P.
Sale Date: Jan 2013
Sale Price: $9.6M
RBA: 30,000 SF
Built: 2012
Buyer: American Realty Capital
Healthcare Trust, Inc.
Seller: Lasco Development
Sale Date: Jun 2013
Sale Price: $13.3M
Cap Rate: 6.75%
290 Medical/Office Plaza
FM 1960/Hwy 249 Submarket
SALES TRANSACTIONS
Memorial Hermann Covenant
Care Building
Northeast Near Submarket
3
RBA: 7,194 SF
Built: 2012
Buyer: TBD
Seller: Fmc Houston Partners Lp
Sale Date: Under Contract
List Price: $1.7M
Cap Rate: 7.25%
Fresenius Medical Care
Northeast Outlier Submarket
Source: Costar Group; Real Capital Analytics

4. HEALTHCARE MARKET COMMENTARY | MID-YEAR 2013 | COLLIERS INTERNATIONAL HOUSTON
COLLIERS INTERNATIONAL | P.
The Texas Medical Center (TMC) – the world’s largest medical center – represents one of Houston’s major
economic drivers and core industries with an estimated regional annual economic impact of $15 billion.
TMC is also one of Houston’s largest employers with 106,000 employees, including physicians, scientists,
researchers and other advanced degree professionals in the life sciences.
The internationally-renowned, 1,345-acre TMC is the world’s largest medical complex with 54 member
institutions, including leading medical, academic and research institutions, all of which are non-profit and
dedicated to the highest standards of research, education and patient and preventive care. Over 70,000
students – including more than 20,000 international students – are affiliated with TMC, including high
school, college and health profession graduate programs. More than 7.2 million patients visited in 2012,
including approximately 16,000 international patient visits.
In addition to the medical facilities and institutions of higher learning, TMC is also home to more than 290
professional buildings. Overall, the complex covers over 18 miles of public and private streets and
roadways, with 45.8M SF of existing patient, education, and research space. TMC has continued to grow
and expand over the past several decades with the majority of growth occurring in the past ten years. The
Center is located in the 110-acre University of Texas Research Park, a joint effort between the University of
Texas Health Science Center, M.D. Anderson and General Electric Healthcare. TMC spent $7.1 billion in
building and infrastructure investments between 2008 and 2012, and spent over $3.4 billion on research
and over $960 million on charity care in 2012.
TMC Patient Care Institutions
DePelchin Children’s Center
The Menninger Clinic
The University of Texas M.D. Anderson Cancer Center
Texas Children’s Hospital
Memorial Hermann Hospital System
The Methodist Hospital
St. Luke’s Episcopal Hospital
Lyndon B. Johnson General Hospital
Quentin Mease Community Hospital
Ben Taub General Hospital
The Institute for Rehabilitation and Research
The Hospice at the Texas Medical Center
Texas Heart Institute
Shriners Hospitals for Children – Houston
Veterans Affairs Medical Center in Houston
TMC Academic and Research Institutions
Sabin Vaccine Institute
The University of Houston – Victoria School of Nursing
Texas Children’s Hospital Neurological Research Institute
Baylor College of Medicine
The University of Texas Health Science Center at Houston
The University of Texas M.D. Anderson Cancer Center
University of Houston College of Pharmacy
Rice University
Texas A&M University Health Science Center
Prairie View A&M University College of Nursing
Texas Woman’s University Institute of Health Sciences
Texas Southern University College of Pharmacy and
Health Sciences
Harris County Psychiatric Center
Houston Academy of Medicine
TEXAS MEDICAL CENTER
The University of Texas M.D. Anderson Cancer Center in the Texas Medical Center, ranked #1 in
U.S. News & World Reports “Americas Best Hospitals 2013” for cancer care.
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5. HEALTHCARE MARKET COMMENTARY | MID-YEAR 2013 | COLLIERS INTERNATIONAL HOUSTON
COLLIERS INTERNATIONAL | P.
HOUSTON AREA
HOSPITAL
LOCATIONS
5
TEXAS MEDICAL
CENTER

6. HEALTHCARE MARKET COMMENTARY | MID-YEAR 2013 | COLLIERS INTERNATIONAL HOUSTON
COLLIERS INTERNATIONAL | P.
Accelerating success.
COLLIERS INTERNATIONAL
1223 W. Loop South
Suite 900
Houston, Texas 77027
Main +1 713 222 2111
LISA R. BRIDGES
Director of Market Research | Houston
Direct +1 713 830 2125
Fax +1 713 830 2118
lisa.bridges@colliers.com
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