Transcript Slide 1

Bay Area
Suburban Office/R&D
Market Overview
C. Michael Kamm, CEO
Cassidy Turley | Northern California
Bay Area Market
Recovery vs. Stagnation? Where Are We?
 Recovery?
Yes…for some a boom…
 Stagnation?
Yes…for some…but probably not for long…
 Commercial real estate demand still
comes down to job growth
Change in employment
From 2010 to 2011 (Thousands)
New York, NY
Houston, TX
Dallas, TX
Chicago, IL
DC Metro
Minneapolis, MN
Atlanta, GA
San Jose, CA
Phoenix, AZ
Tampa, FL
Charlotte, NC
Baltimore, MD
Denver, CO
Nashville, TN
San Francisco, CA
Columbus, OH
Raleigh, NC
Indianapolis, IN
San Diego, CA
Kansas City, MO
St. Louis, MO
Cincinnati, OH
Milwaukee, WI
Louisville, KY
Boston, MA
Dayton, OH
Oakland, CA
Edison, NJ
Newark, NJ
Sacramento, CA-8
-10
85
65
42
39
31
29
29
24
23
20
19
18
18
18
16
13
11
10
10
9
9
8
8
6
6
6
-2
-2
-3
0
10
20
30
40
50
60
70
80
90
Source; BLS
Source: Bureau of Labor Statistics
Market Momentum in 2012
Job Growth, 3 month moving average, % change
1.0%
Denver
Oakland
Houston
Dallas
Phoenix
San Jose
Columbus
NY City
Baltimore
Indianapolis
Strong
Raleigh
Boston
Momentum
Atlanta
Northern NJ
0.5%
Central NJ
San Francisco
DC Metro
San Diego
Cincinnati
Chicago
Moderate
Sacramento
0.0%
Nashville
Minneapolis
Kansas City
St. Louis, Charlotte, Milwaukee
Tampa
Dayton
Weak/Declining
-1.0%
Source: Bureau of Labor Statistics
Bay Area R&D
Inventory SF
|
Q1-2011
Q1-2012
194,116,011
192,687,318
33,663,765
34,094,855
17.3%
14.8%
$1.11
$1.24
1,901,289
3,739,550
Total Availabilities
Marin
Vacancy
Avg. Asking (NNN)
4Q Trailing Net Abs.
North I-680
East Bay
San
Francisco
Tri-Valley
San Mateo
Bay Area Office |
Inventory SF
Total Availabilities
Vacancy
Avg. Asking (FS)
4Q Trailing Net Abs.
Q1-2011
Q1-2012
252,844,686
253,622,896
40,047,637
34,094,855
15.84%
13.44%
$2.49
$2.70
4,659,032
6,730,991
Silicon Valley
Bay Area Office/R&D
Vacancy Rate Trend
25%
24.5%
19.0%
20%
15.9%
19.2%
14.8%
17.5%
15%
13.4%
10%
5%
0%
10.9%
2.1%
2.0%
2000
2001
2002
2003
2004
2005
2006
Office
2007
2008
2009
2010
2011
2012
R&D
Source: Cassidy Turley Research
Bay Area Office/R&D
Net Absorption Trend Combined (MM Sq. Ft.)
+34.0MM
-59.6MM
+33.9MM
-16.1MM
+15.6MM
40
30
20
10
0
-10
-20
-30
-40
2000
2001
2002
2003
2004
2005
2006
Office
2007
2008
2009
2010
2011 Q1 '12
R&D
Source: Cassidy Turley Research
Bay Area Office/R&D
Annual Change in Avg. Asking Rate
OFFC: +80%
R&D: +244%
50%
OFFC: -71%
R&D: -119%
OFFC: +41%
R&D: +51%
OFFC: -18%
R&D: -23%
OFFC: +8%
R&D: +10%
2009
2011
30%
10%
-10%
-30%
-50%
-70%
2000
2001
2002
2003
2004
2005
2006
Office
2007
2008
2010
2012
R&D
Source: Cassidy Turley Research
Office Rent Snapshot
Q1 2012 vs. Q1 2011, Y/Y % Change
Phoenix
San Francisco
San Mateo
Sacramento
New York
Northern NJ
San Jose
San Diego
Cincinnati
Nashville
Large Declines
Worse than -2%
St. Louis
Strong Growth
Greater than 4%
Houston
Suburban VA
Baltimore
Chicago
Kansas City
Moderate
1 to 4%
Small declines
0.5% to -2%
Louisville
Denver
Tampa
Oakland-East Bay
Dallas
Flat
Suburban MD
Columbus
Charlotte
Atlanta
Long Island
Raleigh
Boston
Dayton
Milwaukee
DC
Minneapolis
Indianapolis
Central NJ
Source: Cassidy Turley Research
Source: Cassidy Turley Research
Marin County
|
Q1-2011
Q1-2012
Inventory SF
9,701,824
9,702,000
Total Availabilities
1,911,659
1,392,000
19.7%
14.3%
Vacancy
Novato
18.4% | $2.18
Avg. Asking (NNN)
4Q Trailing Net Abs.
$2.41
$2.51
-25,198
520,086
San Rafael
12.8% | $2.44
Green./Larkspur
7.3% | $3.79
Corte Madera
9.9% | $3.00
Mill Valley
22.5% | $3.60
Saus./Tiburon
10.9% | $2.76
Source: Cassidy Turley Research
Vacancy Thematic:
<10%
10% - 14.9%
15% - 19.9%
20% - 24.9%
≥25%
San Mateo Cty
Daly City
19.3% | $2.22
Brisbane
|
Inventory SF
38.5% | $2.88
Q1-2011
Q1-2012
31,105,052
31,105,520
4,708,314
4,186,000
15.1%
13.5%
$2.88
$3.26
704,175
522,100
Total Availabilities
Vacancy
S. San Francisco
Avg. Asking (NNN)
30.6% | $3.53
San Bruno/ Millbrae
4Q Trailing Net Abs.
4.7% | $2.23
Burlingame
12.6% | $2.15
Foster City
9.3% | $3.07
San Mateo
Redwood Shores
14.2% | $2.65
7.4% | $3.25
Belmont/
San Carlos
26.4% | $2.56
Redwood City
10.7% | $3.32
Menlo Park
10.3% | $7.24
Source: Cassidy Turley Research
Vacancy Thematic:
<10%
10% - 14.9%
15% - 19.9%
20% - 24.9%
≥25%
San Mateo County Office
Historical & Forecast Vacancy & Rents (Class A)
FORECAST
Annual Growth
30%
Net
850K
Rent
20%
25%
Net
700K
Rent
10%
Net
640K
Rent
10%
$7
$6
$5
20%
$4
15%
$3
10%
$2
5%
$1
0%
$0
2001
2002
2003
2004
2005
2006
2007
Vacancy
2008
2009
2010
2011
2012
2013
2014
Avg. Asking Rate (FS)
Source: Cassidy Turley Research
Fremont
Silicon Valley
13.3% | $2.02
|
Q1-2011
Q1-2012
Inventory SF
63,831,604
64,035,000
Total Availabilities
10,496,421
8,516,000
16.44%
13.3%
$2.75
$2.70
2,055,633
2,183,301
Vacancy
Avg. Asking (NNN)
4Q Trailing Net Abs.
Palo Alto
4.5% | $5.50
Milpitas
13.7% | $1.69
Mt. View
5.7% | $3.71
N. San Jose
SJ-Airport
18.8% | $2.31
22.6% | $2.21
Sunnyvale
13.8% | $3.32
Santa Clara
Civic Center
19.9% | $2.04
11.1% | $1.62
San Jose-DT
Cupertino
3.3% | $3.05
23.0% | $2.31
W. San Jose
S. San Jose
9.2% | $1.94
13.9% | $1.71
Campbell
13.1% | $2.48
Los Gatos-Saratoga
10.9% | $2.95
Source: Cassidy Turley Research
Vacancy Thematic:
<10%
10% - 14.9%
15% - 19.9%
20% - 24.9%
≥25%
Silicon Valley Office/R&D
Historical & Forecast Vacancy & Rents
FORECAST
25%
Annual Growth
Net
7.5M
Rent
20%
Net
6.0M
Rent
15%
$5
Net
6.0M
Rent
10%
20%
$4
15%
$3
10%
$2
5%
$1
0%
$0
2001
2002
2003
2004
2005
2006
2007
Vacancy
2008
2009
2010
2011
2012
2013
2014
Avg. Deal Rate (NNN)
Source: Cassidy Turley Research
Silicon Valley Office/R&D
Silicon Valley Requirements – Historical Volume Tracking
12.4
140
Requirements
10.4
120
Volume SF
80
6.4
60
Requirements
Square Feet (Millions)
100
8.4
4.4
40
2.4
20
0.4
0
2001
2002
2003
2004
2005
2006
Q Ending Total
2007
2008
2009
2010
2011
Number of Tenants
 Demand near a 10-year high
 Average size of requirements has grown significantly
Source: Cassidy Turley Research
Silicon Valley Market Drivers
Apple…
 controls close to 7MM SF in
Cupertino, over 80% of that
market, pushing tenants east
 has leased 1.15M SF in
Sunnyvale over the last year.
 Is negotiating an another
±1M square feet in
Sunnyvale.
 Sunnyvale’s vacancy is
declining fast and rents are
rising forcing tenants to
move east
Source: Cassidy Turley Research
Office/R&D Vacancy as of March 16, 2012
Average Rates Q4 2010 & 2011
East Bay I-80
|
Q1-2011
Q1-2012
32,069,079
32,168,079
5,424,090
5,791,545
16.9%
18.0%
Avg. Asking (NNN)
$2.10
$2.15
4Q Trailing Net Abs.
31,540
-268,455
Inventory SF
Richmond
25.2% | $2.17
Total Availabilities
Vacancy
West Berkeley
Berkeley CBD
10.5% | $2.37
10.5% | $2.42
Emeryville
18.1% | $2.49
City Center
13.8% | $2.27
Lake Merritt
15.1% | $2.38
Jack London Sq.
Coliseum-Airport
28.0% | $1.74
12.5% | $1.50
N. Alameda
36.3% | $2.10
S. Alameda
26.8% | $1.74
Vacancy Thematic:
<10%
10% - 14.9%
Source: Cassidy Turley Research
15% - 19.9%
20% - 24.9%
≥25%
East Bay N. I-680 |
Q1-2011
Q1-2012
Inventory SF
16,826,924
16,826,924
2,972,475
2,637,603
17.67%
15.7%
$2.11
$2.08
-468,500
334,872
Total Availabilities
Vacancy
Avg. Asking (NNN)
4Q Trailing Net Abs.
Pleasant Hill
7.2% | $2.19
Concord
15.7% | $1.78
WC-Shadelands
23.5% | $1.63
WC-PH BART
20.9% | $2.40
WC-BART Area
16.5% | $2.54
Lamorinda
WC-Downtown
9.4% | $2.98
11.5% | $2.36
Source: Cassidy Turley Research
Vacancy Thematic:
<10%
10% - 14.9%
15% - 19.9%
20% - 24.9%
≥25%
Tri-Valley
|
Inventory SF
Total Availabilities
Q1-2011
Q1-2012
22,034,339
22,034,339
4,030,554
3,676,547
18.3%
16.7%
$1.73
$1.89
-71,075
354,007
Vacancy
Avg. Asking (NNN)
San Ramon
4Q Trailing Net Abs.
14.3%% | $1.80
Dublin
15.9% | $1.73
Livermore
27.7% | $1.41
Pleasanton
19.8% | $1.77
Source: Cassidy Turley Research
Vacancy Thematic:
<10%
10% - 14.9%
15% - 19.9%
20% - 24.9%
≥25%
Greater East Bay Office
Historical & Forecast Vacancy & Rents
FORECAST
20%
$4
Annual Growth
Net
300K
Rent
10%
Net
700K
Rent
10%
Net
1.6M
Rent
5%
15%
$3
10%
$2
5%
$1
0%
$0
2001
2002
2003
2004
2005
2006
2007
Vacancy
2008
2009
2010
2011
2012
2013
2014
Avg. Asking Rate (FS)
Source: Cassidy Turley Research
Includes Alameda & Contra Costa Counties
Bay Area Industrial Market
Vacancy Rate Trend
12%
10.4%
9.8%
10%
8.7%
8%
7.1%
7.5%
6%
4.4%
4%
1.9%
4.0%
2%
1.7%
0%
2000
2001
2002
2003
2004
2005
Warehouse
2006
2007
2008
2009
2010
2011
2012
Manufacturing
Source: Cassidy Turley Research
Bay Area Market
Changes Ahead
Bay Area Market
Changes Ahead
 Recovery? Absolutely…
 Tech growth remains aggressive with office and R&D the beneficiaries
Geography remains limited to 101 Corridor, but is expanding in South Bay
 Stagnation? Yes, for some, but probably not for long…
 Both warehouse and manufacturing remain in flat to near-flat growth mode
- East Bay industrial still struggling to compete with Stockton price points
 Office and R&D product away from tech influence remains mostly flat
- Outlying markets generally weakest for job growth and office demand