1. The Tenant Advisor
December 2010
Inside this issue:
How to Minimize the Cost of Office Space
Houston: A Tale of Two Office Markets
The Way People Work is Changing
The Market Dynamics for Large Office Space
Users Could Turn Quickly
Elements of a High Performance Office Space
Plus: Office Relocation Checklist
The Tenant Advisor is on the web @
www.coydavidson.com

2. Contents
If You Only Do Three Things
How to Minimize the Cost of Office Space
Houston: A Tale of Two Office Markets
The Flight to Quality
The Way People Work is Changing
The Need for Collaboration is
Client Success Story: The Methodist Hospital
Methodist West Houston Hospital Campus Set to Open
The Market Dynamic for Large Office Space Users Could Turn Quickly
Office Vacancies are at Cyclical Highs, but Shortages Loom
Elements of High Performance Office Space
5 Building Selection Criteria for a High Performance Team
Office Relocation Checklist
A Step-by-Step Guide
All articles contained herein are the opinion of the author and not those of either Colliers Appelt Womack Inc. or Colliers International (collectively, "Colliers"). Colliers neither
endorses, sponsors nor necessary shares the opinions of the author, regardless of whether any article is posted by any employee, officer, agent, or representative of
Colliers. Colliers has not authorized or verified any statement of fact made in a article, and any such statement does not constitute a statement of fact by Colliers. Colliers is
not responsible for the monitoring or filtering of this newsletter, nor does Colliers claim ownership or control over any the newsletter content

3. It's been over two years since the Credit Crisis and nearly three years since the
start of The Great Recession. Although the recession officially ended in June 2009,
most markets around the country are still waiting for some signs of life as the
Coy Davidson
economy continues to struggle with job creation, the required prescription for ailing
Senior Vice President commercial real estate market.
Office Services Group
Direct: 713.830.2128
As 2011 approaches, another challenging year is behind us, and while the
coy.davidson@colliers.com economy is improving albeit slowly, many companies are taking a closer look at
www.coy.davidson.com their real estate as a means to not only control costs but also to increase
productivity and be more competitive in this new economy.
Understanding where we are in the real estate market cycle and the specific
nuances of the current market phase will play an important role in developing an
effective real estate strategy for your workplace going forward. For example, we
are seeing recurring evidence of a bifurcated market where the trend of a “flight to
quality” is tightening up specific markets and real estate asset classes.
The recent economic climate has offered a tremendous opportunities for office
tenants to trade up to higher quality buildings and secure attractive leasing terms
at a perceived value. As a result the availability of large blocks of Class A office
space is beginning to diminish
Texas is leading the way in new job creation, and while Houston has lagged
Dallas, and Austin in that regard, the recession’s impact was not as severe on the
office market. The current state of Houston’s office market fundamentals would
suggest the window of opportunity for office tenants still very much exists but could
close sooner than many parts of the country.
I am pleased to provide you with this issue of the of my newsletter, which is
tailored for the corporate office space user and addresses these topics. You can
view all these articles and other related topics on my blog “The Tenant Advisor” at
www.coydavidson.com.
I hope you find the content informative.
Coy Davidson
Coy Davidson
Senior Vice President
Colliers International | Houston

4. The Tenant Advisor
I f Yo u O n l y D o T h r e e T h i n g s
How to Minimize the Cost of Office Space
Understanding the 3 L’s Three Things You Must Do leverage in lease
negotiations requires the
Every office tenant wants Location: Requirement
proper timing and
the highest quality office number one is to get into
approach.
space available that fits the marketplace and
within their operating conduct a credible market Layout: Requirement
budget. The ability to search to identify viable number three is to maintain
achieve this objective and cost effective business cost control over the design
requires an understanding locations, even if you and construction process.
consider it likely you will The efficiency of your office
of what drives costs and
renew your lease. Location space and the cost to build
how to manage them. The
drives costs for both labor it out is the third major
probability of success will
and rental costs and the contributor to your
be increased by utilizing
Landlord strives to lease occupancy costs. Today,
professional expertise space at the maximum many companies are
throughout the leasing current market conditions increasingly focusing
process. will bear. These values can on space utilization with the
vary significantly among objective of doing more “The ability to minimize
market areas or a particular with less. Securing the
occupancy costs
building owners situation. requires and
proper volume of office
understanding of what
Selecting the right space via efficient design,
drive costs and how to
location requires a space standards
manage them.”
comprehensive evaluation and construction
of the marketplace which management can yield
may uncover hidden significant cost savings.
opportunities. A credible
Who You Need on Your
market search creates
Team
competition for your
tenancy, which is beneficial You need three
There are three factors that for requirement number professionals disciplines to
impact the cost of your two. identify, negotiate, design
office space: and build-out the office
Leasing: Requirement
1. The Location you space that best serves your
number two is to structure a
choose financial and operational
transaction that
objectives. They include:
2. The Lease Structure compliments your
and Negotiations objectives and negotiate  Broker/Tenant Rep
favorable financial terms
3. The Layout of your based on current market  Architect/Space Planner
Space conditions. Great deals are  Construction Manager
Understanding these not just simply found, but
are structured with an In addition you will
factors and the close
effective negotiation n e e d l e g a l
interplay among each is
strategy. In today’s market, counsel experienced in real
critical in getting the most
Landlords are offering more estate to assist with the
value out of your office
flexible terms and lease contract. Hiring a
space. If a tenant fails in
aggressive concession team of experienced
this regard it is typically
packages to retain and professionals who work
because they did not
attract tenants. Taking full hand-in-hand will insure the
properly address one of
advantage of market best possible occupancy
these factors.
conditions and creating solution at the best value.

5. The Tenant Advisor
H o u s t o n : A Ta l e o f Tw o O ff i c e M a r k e t s
The Flight to Quality landlords of top tier assets High Quality Landlords core office in gateway
based on completed have a Distinct Advantage cities, as this is perceived
transactions and an in this Economic Climate as the next market segment
increased deal flow, that an to improve substantially.
The flight to quality also
improving economy, albeit Cities most often
applies to the quality of the
slowly is pushing many mentioned included New
building ownership. What I
tenants past the stage of York, Washington DC,
term as a high-quality
indecision and into action. Boston, San Francisco, Los
Landlord relates to a
One of the more Angeles, and (to a lesser
healthy financial position for
encouraging signs that we extent) Dallas and Houston.
the building owner, as well
are seeing with our clients The recent report that
as superior property
is the move to quality Brookfield Office Properties
management. The benefit
assets and ownership. The is under contract to
of having a quality landlord
concept of “flight to quality” purchase the 1.2 million
is important, as they have
whereby tenants with lease square foot Heritage Plaza
the adequate capital to
expirations in a challenging in downtown Houston, at a
wea ther t he curre nt
economic climate are able price of $285 per square
economic cycle, maintain
to leverage deflating asking foot is evidence of this in
the building properly, as
Houston has proven to be rents and liberal leasing our own backyard.
well as fund the tenant
one of the more resilient incentives into more
improvement obligations of
office markets in the United premium office space under
lease transactions.
States and the pain inflicted a cost structure equivalent
by the “Great Recession” to what they were Credit is King
has been much less severe previously paying.
In Houston, the downward
than many major market
The evidence of the flight to pressure on Class A rental
around the country. That
quality is two-fold, as we rates while noticeable has
being said, Houston has
are seeing move from not been severe. We are
not been immune to the
Class B projects to Class A, seeing more liberal
impact of the most recent
as well as tenants who concession packages and a
recessionary economic
were previously in older more creative deal making
cycle.
Class A project move to the perspective from most l
At the end of the third newer Class A projects andlords, especially for
quarter, year-over-year coming on-line, or that have credit-worthy tenants. This
Class A Rental asking been completed in the last is seen in longer term In Houston, the CBD,
rental rates dropped 2.0 couple of years. leases with healthy tenant Galleria, Greenway Plaza
percent in the CBD to finish allowances, abated and the Energy Corridor
Bifurcated Market
$35.16 psf, while while parking charges and a are generally considered
suburban Class A space This trend of flight to quality tenant motivated to lease “core submarkets”.
decreased a minimal 0.2 creates somewhat of a space that provides a high
I believe the Houston
percent to $27.30 per bifurcated market forcing quality work environment
market will continue to
square foot. Year-to-date, landlords of the lower for their employees.
soften somewhat until more
Houston city-wide, has quality space to slash their
“Flight to Quality” Extends robust job growth returns,
recorded negative 311,225 asking rents significantly
to the Investment Market bu t th e wind o w of
square feet of net absorp- and offering substantial
opportunity to “trade up” to
tion, after recording 1.1 periods free rent in a The general perception that
higher quality office assets
million square feet of nega- scramble for tenants. With, the higher quality assets
at a perceived value will be
tive absorption in 2009. positive net absorption yet are performing better
t h e f i r s t t o
to appear, it is simply a extends to sales activity as
Despite slow leasing close, particularly for larger
case of musical chairs in an well. Nationally, we are
activity overall, there is a tenants. How soon, is the
attempt to increase seeing investment capital
positive attitude from ultimate question.
occupancy levels. flow into Class A, urban

6. The Tenant Advisor
T h e Wa y P e o p l e Wo r k i s C h a n g i n g
The Need for Collaboration is time. The way people are collaboration via Social
Changing Office Design working is changing. Smart Media have emerged in the
companies are providing workplace.
In today’s competitive
their employees with space
environment, sharing The trend is toward a more
that actually supports this
information and expertise open, flexible floor plan and
new work style.
can be critical in driving both while many companies still
individual and organizational In the past, employees maintain a private office
s u c c e s s . F r o m typically worked in silos environment for at least
forward-thinking business independent from co-workers some of their office space,
“The agile office is one that
leaders to younger workers the majority of the time, but workstations are getting promotes collaboration and
smaller and the dividers are innovation while still
getting shorter as a result of observing employees' needs
workers' need to collaborate for concentrated work time.’
more. Even the layout of
workstations is changing to
enhance space utilization
and density.
The Need for Flexibility
For years tenant reps have
been attempting to structure
flexibility into our client's
lease agreements through
expansion, contraction,
sublease and lease
termination options. The I
who have grown up in the now collaborate more in importance of these options
Web-based world, working groups. Collaboration is more for lease flexibility has not
collaboratively is now than weekly meetings in diminished. However today
business as usual. conference rooms. Today, there is an increasing
informal meeting areas, premium being placed on
The agile office is one that
lounges, rolling tables, flexibility with the space itself
promotes collaboration and
benching, hoteling for offsite through office design to meet
i n n o v a t i o n wh i l e s t i l l
employees, video constantly changing space
observing employees' needs
conferencing and even needs.
for concentrated work
Client Success Story: The Methodist Hospital
West Houston Hospital Campus Set to Open
Back in 2007, I represented The
Methodist Hospital System in
the acquisition of 86 acres at
Barker Cypress and Interstate
10 for development of their West
Houston Hospital Campus.
This month the 478,500 square foot full service hospital
and adjacent 150,000 square foot medical office building
opens for business. I am very excited to se this project
reach completion.

7. The Tenant Advisor
The Market Dynamics for Large Office Space Users Could Turn Quickly
Office Vacancies are at Cyclical Highs, But Shortages Loom
By: Ross Moore, Chief
Economist, Colliers
International USA.
Despite The third quarter
national office vacancy rate
moved marginally lower
during the July - September
period, but at 16.3%,
vacancies were still near
cyclical highs and at levels
experienced following the
tech bust of 2001-2002.
Most observers would
agree it is a tenants' market
characterized by abundant
supply and depressed
rents. Landlords are
generally very flexible on
terms and remain
extremely aggressive both
in their efforts to attract new
as well as retain existing
tenants. One part of the several years, the space What does this mean for required. Landlords may be
market, however, that could that is available today is Rents and Office able to move tenants
turn quickly into a landlord's scattered across many Development? around to accommodate
market is office buildings buildings and many floors, any large requirements in
Economics 101 taught most
that house large tenants as opposed to new the market but this just
of us that when demand
where office users often construction which is delays the inevitable. The
exceeds supply, prices go
occupy 200,000 square feet almost always found in U.S. office market is about
up. With such a scenario
or more. large blocks of contiguous to embark on a unique
almost upon us, higher
space. Furthermore, big period characterized by
Very Few Large Blocks of rents are almost
tenants can't rely on large economic expansion with
Office Space Currently guaranteed, perhaps not
speculative developments no significant office
Available and Almost No imminently, but certainly
that might provide relief in development other than
Construction Underway within a few years. This will
coming years due to the downtown Manhattan. This
mark the beginning of the
If you look at current data dearth of downtown office will be an interesting time,
next development cycle,
on large blocks of available development underway. At and possibly a profitable
usually with a limited num-
office space in select the end of the third quarter time for landlords, but very
ber of build-to-suits leading
downtown markets. What just 10.7 million square feet challenging for certain
the way. In the interim,
can be observed is that was under construction, tenants.
however, rents for the
beyond Manhattan, many however, nearly 25 percent Ross Moore is the Colliers
limited number of large
cities have just a handful of was 1 World Trade Center International’s Chief Economist
blocks of space available to
options available to large in downtown Manhattan, with a focus on providing
lease can only go up.
tenants. While this is not leaving very little for the b o t t o m- u p a n d t o p - d o w n
Modest economic growth is analysis of commercial real
completely unusual, what is balance of the 53
a prerequisite for the estate markets across the United
different this time around is downtown markets tracked
unfolding of such events States. In addition to his North
with relatively little new by Colliers. America wide reports, Ross also
but a key point is an
supply over the past authors all global research
economic boom is not
produced by Colliers.

9. The Tenant Advisor
E l e m e n t s o f a H i g h P e r f o r m a n c e O ff i c e S p a c e
5 Building Selection Criteria for a High Performance Team
There is no question that access is a key issue in productive staff. Also
projected occupancy costs making the proper building important is natural light.
are a primary factor in selection. The reality is, at Selecting a building that is
building selection for office the end of the day people well designed and allows
tenants. Companies will are time poor and the ability for a space plan that
only select buildings that fit for your employees to get maximizes natural light has
within their projected to your building as quickly shown to improve
operating budget and have and as efficiently as productivity according to
the required volume of possible is an important numerous studies. In fact,
office space to meet their productivity factor. the California Energy
needs. However, today Choosing a location is Commission issued a
companies are paying primarily a workforce and report on the relationship
closer attention to how customer demographic between windows and
office space and real estate driven decision, but office worker performance
impacts the performance selecting a particular that concludes that basic
and productivity of their building with good access design choices such as
workforce. As a result, to freeways and public more natural light, more
companies are placing an transportation, as well as a windows and better
increasing emphasis on convenient parking garage ventilation can dramatically
Today, in order to insure a
high performance additional factors beyond is important for a productive effect worker alertness,
workplace it is critical that the economics and the workforce. productivity and
building selection is aligned availability of space when performance.
Retail Amenities
with Human Resource selecting an office building.
Going Green
strategies Today office tenants are
Image
placing a higher priority on The corporate space user
The choice of building is being close to retail is increasing their focus on
increasingly important for amenities whether they are sustainability as a means to
staff considerations. The actually located in the reduce occupancy and
quality of your building and building, complex or very operational costs as well as
office space is an important nearby. This includes both their commitment to be
factor for both recruitment restaurants and service good stewards of the
and retaining quality retail such as banking and environment. There is a
employees. Today, in order postal services. The ability growing desire among
to insure a high to access these amenities corporate leaders to
performance workplace it is without getting in your car achieve environmental
critical that building is considered a significant sustainability through
selection is aligned with boost to productivity. LEEDS certified design
Human Resource principles, effective energy
Building Systems and Design
strategies. The building and management and building
your office space portrays The more comfortable efficiency. We are
the image that reflects your people are in their increasingly hear our
organization both to your workspace, the more clients tell us they only
employees and your productive they will be. The want to consider buildings
customers. When a number one complaint most that are LEED certified as
customer enters your tenants have regarding sustainability moves from
premises, your office space their office space is related niche to normal. Today, a
is the first impression they to temperature issues. green design is a key factor
have of the culture of your Selecting a new or in recruiting talented
organization. renovated building with the employees particularly
proper HVAC systems, and Millenials, and GenX-ers
Access
the ability to maintain a
Whether you choose a comfortable workspace
CBD or Suburban location, makes for a more

10. The Tenant Advisor
O F F I C E R E L O C AT I O N C H E C K L I S T
PRELIMINARY
 Notify present landlord of termination date
 Advise staff of date and location of move
 Solicit RFP's, interview and engage moving company
 Create a master change-of-address list
PRE-MOVE: GENERAL
 Reserve elevators and loading docks for moving day
 Bid and award moving contract
 Bid and award telephone and computer cabling
 Inventory existing furniture
 Code furniture and equipment on a color-coded floor plan
 Audit keys
 Order any new office furniture and equipment
 Order new stationery
 File change-of-address forms with post office and forward mail
 Check your insurance coverage for the move
 Obtain the Certificate of Occupancy and any other required permits or licenses
 Advise suppliers (telephone, bottled water, coffee service) of new address
 Mail moving notices
 Banks and financial institutions
 Photocopiers
 Clients and customers
 Professional organizations
 Credit accounts and credit cards
 Insurance companies
 Accounts receivable and payable
 Newspaper and magazine subscriptions
 Telephone company and internet service provider
 Prospects and special services
 Hold a meeting at new premises three weeks prior to move. Bring in all parties involved (design/ construction / mover /
cabling company / information technology specialist) to ensure all details are covered and all responsibilities clear
 Schedule public relations effort, including plans for news releases and an “office-warming” party
 Change locks / access codes on new premises as close to moving day as possible to secure access
 Decide on security procedures for the move
 Arrange for listing on lobby directory of new building
 Arrange for post-move cleaning

11. The Tenant Advisor
PRE-MOVE: INTERNAL
 Organize a “staff moving committee” if appropriate and delegate responsibilities
 Schedule and prepare agenda for your employee move orientation meeting
 Finalize new seating plan and identify each location
 Prepare labels for moving furniture and boxes to new locations
 Assign move supervisors in each department
 Develop a master relocation project schedule
 Schedule and implement a clean-up program (purge files, dispose of trash)
 Schedule staff for unpacking, including stocking supply cabinets, storerooms, file rooms, and removing tags from all
furniture and equipment to ensure your company will be operational as rapidly as possible after move
 Arrange for off-site storage of old files
 Pack contents of all filing cabinets and desks, ensuring everything is properly labeled
 Arrange for staff to tour new premises a few weeks prior to move
 Schedule post-move training for security, fire, and life safety procedures at the new facility
 Distribute access cards and keys for new premises
MOVING DAY
 Arrange with the building manager to have the air conditioning on during the move
 Remove computer equipment (server) and phone system prior to arrival of movers and commence reinstallation at
new site
 Draft an emergency contact list for vendors such as elevator maintenance, building management, utilities, telecommu-
nications and moving company
POST MOVE
 Install and test telephone system
 Distribute new phone list and map showing the locations of departments
 Install and test all computers
 Do a detailed walk-through of the premises and report any damage to moving company
 Transfer your insurance to the new location. Obtain Certificates of Insurance from your insurance company
 Confirm termination of old leases
 Collect parking passes, security cards and keys for the old facility. Confirm the return of any deposits held by the land-
lord for these items
 Audit final invoices against contracts
 Complete and file all warranty information for all new furniture and equipment
 Update fixed asset accounting system for any new furniture and equipment purchased
 Confirm the change-of-address corrections made
 Schedule press release and client announcement

12. Accelerating Success
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