1 Prepared for Edge Fund Advisors THE ECONOMY AND THE OFFICE MARKETS OF WASHINGTON, BOSTON, NEW...

1

Prepared for Edge Fund Advisors

THE ECONOMY AND THE OFFICE MARKETS OFWASHINGTON, BOSTON, NEW YORK,

AND SAN FRANCISCO

ByGregory H. Leisch, CREAlexander (Sandy) Paul

December 2, 2009

THE NATIONAL ECONOMY

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct. Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct.-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

Pa

yro

ll J

ob

s in

00

0's

Source: Bureau of Labor Statistics, Delta Associates; December 2009.

U.S. PAYROLL JOB LOSSES HAVE MODERATED

2008 20092007

LEADING ECONOMIC INDICATORS HAVE TURNED UP

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct.

95

96

97

98

99

100

101

102

103

104

Lea

din

g E

con

om

ic I

nd

icat

or

Ind

ex

Source: The Conference Board, Delta Associates; December 2009. Note: 2004 = 100.

2008 20092007

U.S. INITIAL UNEMPLOYMENT CLAIMS: PREDICTOR OF RECESSION’S END

300,000

400,000

500,000

600,000

700,000

Sea

son

ally

Ad

just

ed U

ne

mp

loym

ent

Cla

ims

(Fo

ur

We

ek M

ovi

ng

Ave

rag

e)


Peak in Initial Unemployment Claims

Note: Through November 14, 2009.

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Un

emp

loy

men

t R

ate

and

An

nu

aliz

ed G

DP

Ch

an

ge

Source: Bureau of Labor Statistics, Bureau of Economic Analysis, Delta Associates; December 2009.

Percent Change in GDP Unemployment Rate

Recession

U.S. ECONOMIC TRENDS AND FORECAST

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%


Recession

Un

emp

loy

men

t R

ate

and

An

nu

aliz

ed G

DP

Ch

an

ge



81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Un

emp

loy

men

t R

ate

and

An

nu

aliz

ed G

DP

Ch

an

ge



Recession Recovery

32 months: Recession + Recovery





Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3-2%

0%

2%

4%

6%

8%

10%

Ch

an

ge

in E

mp

loy

ee

Ou

tpu

t p

er

Ho

ur

Source: Bureau of Economic Analysis, Delta Associates; December 2009.

U.S. PRODUCTIVITY IS HIGH

2003 2004 2005 2006 2007 2008 2009

U.S. CONSUMER SENTIMENT IS LOW

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09*

45

55

65

75

85

95

105

115Chart Title

Co

nsu

me

r S

en

tim

en

t In

de

x

Source: University of Michigan, Delta Associates; December 2009. * Through October 2009.

Note: 1966 = 100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q30%

1%

2%

3%

4%

5%

6%

Pe

rso

na

l Sa

vin

gs

Ra

te

Source: Bureau of Economic Analysis, Delta Associates; December 2009.

U.S. PERSONAL SAVINGS RATE IS HIGH

2005 2006 2007 2008 2009

THE WASHINGTON AREA REGIONAL

ECONOMY

Was Den DFW Bos Hou S. Fla SF Bay

Phx Atl Chi NY LA Basin

-300

-250

-200

-150

-100

-50

0

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB LOSSES

- 23.9


LARGE METRO AREAS 12 MONTHS ENDING OCTOBER 2009

District of Columbia only = + 0.6

Construction

Retail

Information

Financial

Manufacturing

Other

Wholesale

Leisure/Hospitality

Trans/Utilities

Professional/Bus Services

Education/Health

Government

-20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000

Chart Title

Job Change


+22,600

-46,500

PAYROLL JOB CHANGEWASHINGTON METRO AREA 12 MONTHS ENDING OCTOBER 2009

2007

Dec.

Jan. Feb.

Mar.

Apr.

May

Jun. Jul. Aug.

Sep.

Oct.

Nov.

Dec.

Jan. Feb.

Mar.

Apr.

May

Jun. Jul. Aug.

95

100

105

110

115

120

Co

inc

iden

t In

dex

Source: Dr. Stephen Fuller, Delta Associates; December 2009.

2008 2009

COINCIDENT INDEX OF ECONOMIC INDICATORSWASHINGTON METRO AREA

NY Was Bos Den DFW Chi Hou SF Bay

Phx Atl S. Fla LA Basin

-140

-100

-60

-20

20

60

100

140

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB CHANGE

+ 40.4


LARGE METRO AREAS JANUARY 31 THROUGH OCTOBER 31, 2009

Source: Dr. Stephen Fuller, Delta Associates; December 2009. GRP = Gross Regional Product

Core Industries % GRP

Federal Government 32%

(Federal Procurement = 15% of total GRP)

Technology 16%

Building Industry 6%

International Business 5%

Tourism / Hospitality 2%

Total Core Industries 61%

Other 39%

Total GRP 100%

CORE INDUSTRIESWASHINGTON METRO AREA 2008

$7.7

$1.6

$5.0

$0.3$1.0

Source: Deutsche Bank, CNN, MSNBC, Bloomberg, NY Times, Delta Associates; December 2009.

Total = $15.6

Federal Reserve

FDIC

Treasury Department

HUD

Stimulus Initiatives

Bailout/Guarantee Initiatives

FEDERAL BAILOUT/GUARANTEE INITIATIVESTRILLIONS OF DOLLARS 2008 - 2010

District of Columbia Suburban Maryland* Northern Virginia* 0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

12,000

25,73527,507N

um

ber

of

Job

s

Source: Recovery.gov, Delta Associates; December 2009. *Delta Associates’ estimate based on state-wide job creation and regional population share.

PROJECTED JOBS CREATED/SAVED THROUGH THEAMERICAN RECOVERY AND REINVESTMENT ACT

WASHINGTON METRO AREA THROUGH 2011

CREDIT CRISIS: IMPACTED SUBMARKETS?

Financial Firms Mainly Located in:• Tysons Corner

• Reston

• Bethesda / Chevy Chase

Financial Recovery Agency Locations:• CBD / East End

• NoMa

• Rosslyn-Ballston Corridor

WASHINGTON METRO AREA

Source: Delta Associates; December 2009.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-40

-20

0

20

40

60

80

100

120

140

District Sub. MD No. Virginia

30-Year Annual Average = 47,600/Year

Source: Dr. Stephen Fuller, Delta Associates; December 2009. Note: 2009 is estimated at -21,000 jobs.

PAYROLL JOB CHANGEWASHINGTON METRO AREA

Th

ou

s an

ds

of

New

Pa y

r ol l

Jo

bs

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

-40

-20

0

20

40

60

80

100

120

140

District Sub. MD No. Virginia

5-Year Projected Average = 40,400/Year


Source: Dr. Stephen Fuller, Delta Associates; December 2009. Note: 2009 is estimated at -21,000 jobs.

PAYROLL JOB CHANGEWASHINGTON METRO AREA

Th

ou

s an

ds

of

New

Pa y

r ol l

Jo

bs

THE WASHINGTON AREA OFFICE MARKET

NY Bos LA Was Hou SF Bay S Fla Chi Den OC Atl DFW Phx0%

5%

10%

15%

20%

25%

10.5% 10.7%11.8%

12.6%13.2% 13.3%

14.3% 14.6% 14.8% 15.1%16.4%

17.8%

21.2%

Chart Title

NationalVacancy Rate: 14.0%

OFFICE VACANCY RATESSELECT METRO AREAS THIRD QUARTER 2009

Ove

ral l

Va

can

cy

Rat

e

Source: CoStar, Delta Associates; December 2009.

OFFICE NET ABSORPTIONSELECT METRO AREAS JANUARY – SEPTEMBER 2009

Hou DFW Den Was Phx Chi Bos NY SF Bay LA/OC-9

-8

-7

-6

-5

-4

-3

-2

-1

0 Chart Title-0.5


Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)

Nation: negative 48 million SF

OFFICE NET ABSORPTIONWASHINGTON METRO AREA 1981 – THIRD QUARTER 2009

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09*-2

0

2

4

6

8

10

12

14

16

Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)

Long-Term Average = 7.9 MSF

* Through 3rd quarter 2009.Source: Delta Associates; December 2009.

NY Was Hou LA/OC Chi Bos DFW Phx Den SF Bay0

2

4

6

8

10

12

14

16

18

SF Available SF Pre-Leased

OFFICE SPACE UNDER DEVELOPMENT

Mil

lio

ns

of

SF

SELECT METRO AREAS SEPTEMBER 2009


Nation: 74 million SF at 44% pre-leased

0

2

4

6

8

10

12

14

16

18

OFFICE SPACE DEMAND & DELIVERIESWASHINGTON METRO AREA SEPTEMBER 2009 – DECEMBER 2014

26.0 million SF

Deliveries

=

Demand

Total = 13.3 million SF

U/C or U/R: 8.2 million SF

Planned and maydeliver by 12/14: 5.1 million SF

Inside the Beltway Outside the Beltway

=

=

Mil

lio

ns

of

Sq

uar

e F

eet


OFFICE VACANCY RATESINSIDE THE BELTWAY 2001 – 2014

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2%

4%

6%

8%

10%

12%

14%

Ove

rall

Va

can

cy

Rat

e

Metro


Vacancy 9.6% 11.6% 11.2% 9.2% 7.9% 8.5% 9.1% 10.5% 13.2% 13.8% 13.1% 11.8% 10.3% 9.1%

10.4%

7.0%

12.5%

Rent Equilibrium Zone = 7.9% to 8.1%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2%

4%

6%

8%

10%

12%

14%

10.2%

6.9%

13.0%

OFFICE VACANCY RATESDISTRICT OF COLUMBIA 2001 – 2014


Metro Vacancy 9.6% 11.6% 11.2% 9.2% 7.9% 8.5% 9.1% 10.5% 13.2% 13.8% 13.1% 11.8% 10.3% 9.1%


Ove

rall

Va

can

cy

Rat

e

OFFICE RENT GROWTH PER YEARWASHINGTON METRO AREA 2000 – 2014

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Inside the Beltway

Outside the Beltway

Average of Past 15 Years: 3.8%

Eff

ect

ive

Ren

tal

Rat

e C

ha

ng

e/S

F/Y

r.



Office

20132012201120102009

WHEN IS THE MARKET’S “SWEET SPOT”?WASHINGTON METRO AREA

= Market Transition = Landlord/Seller Market= Tenant/Buyer Market

THE BOSTON AREA REGIONAL ECONOMY



-300

-250

-200

-150

-100

-50

0

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB LOSSES

- 63.5



City of Boston plus inner suburbs only = -

45.8


Construction

Manufacturing

Financial

Retail

Wholesale

Government

Information

Other

Trans/Utilities

Leisure/Hospitality

Education/Health

-20,000 -15,000 -10,000 -5,000 0 5,000 10,000

Chart Title

Job Change


+11,400

-74,900

PAYROLL JOB CHANGEBOSTON METRO AREA 12 MONTHS ENDING OCTOBER 2009

2007

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

160

165

170

175

180

Co

inc

iden

t In

dex

Source: Federal Reserve Bank of Philadelphia, Delta Associates; December 2009.

2008 2009

COINCIDENT INDEX OF ECONOMIC INDICATORSCOMMONWEALTH OF MASSACHUSETTS



-140

-100

-60

-20

20

60

100

140

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB CHANGE

+ 35.2





Technology 14%

Prof./Bus./Fin. Services 10%

Federal & State Government 8%

Medical & Education Services 7%

Construction 6%

Transportation & Warehousing 4%


Other 51%

Total GRP 100%

CORE INDUSTRIESBOSTON METRO AREA 2008

Series10

10,000

20,000

30,000

40,000

50,000

49,889

Nu

mb

er o

f Jo

bs



BOSTON METRO AREA THROUGH 2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-80

-60

-40

-20

0

20

40

60

80


Source: Dr. Stephen Fuller, Delta Associates; October 2009. Note: 2009 is estimated at -55,200 jobs.

PAYROLL JOB CHANGEBOSTON METRO AREA

Th

ou

s an

ds

of

New

Pa y

r ol l

Jo

bs

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

-80

-60

-40

-20

0

20

40

60

805-Year Projected Average = 14,800/Year


Source: Dr. Stephen Fuller, Delta Associates; October 2009. Note: 2009 is estimated at -55,200 jobs.

PAYROLL JOB CHANGEBOSTON METRO AREA

Th

ou

s an

ds

of

New

Pa y

r ol l

Jo

bs

THE BOSTON AREA OFFICE MARKET


5%

10%

15%

20%

25%

10.5% 10.7%11.8%

12.6%13.2% 13.3%

14.3% 14.6% 14.8% 15.1%16.4%

17.8%

21.2%

Chart Title



Ove

ral l

Va

can

cy

Rat

e




-8

-7

-6

-5

-4

-3

-2

-1

0 Chart Title

-3.7


Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)


OFFICE NET ABSORPTIONBOSTON METRO AREA 1981 – THIRD QUARTER 2009

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09*

-8

-6

-4

-2

0

2

4

6

8

10

12

14

Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)




2

4

6

8

10

12

14

16

18



Mil

lio

ns

of

SF




0

2

4

6

8

10

OFFICE SPACE DEMAND & DELIVERIESBOSTON METRO AREA SEPTEMBER 2009 – DECEMBER 2014

9.0 million SF

Deliveries

=

Demand




=

=

Mil

lio

ns

of

Sq

uar

e F

eet


OFFICE VACANCY RATESBOSTON METRO AREA 2001 – 2014

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2%

4%

6%

8%

10%

12%

14%

16%

Ove

rall

Va

can

cy

Rat

e

Metro


Vacancy 10.6% 14.0% 14.5% 13.4% 12.4% 9.6% 11.2% 10.0% 11.4% 12.0% 11.6% 11.1% 10.5% 9.7%

10.7%9.7%

12.0%

Rent Equilibrium Zone = 8.9% to 10.1%City of Boston = 7.6%

OFFICE RENT GROWTH PER YEARBOSTON METRO AREA 2000 – 2014

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-15%

-10%

-5%

0%

5%

10%

15%

20%


Eff

ect

ive

Ren

tal

Rat

e C

ha

ng

e/S

F/Y

r.



Office

20132012201120102009

WHEN IS THE MARKET’S “SWEET SPOT”?BOSTON METRO AREA


THE NEW YORK AREA REGIONAL ECONOMY



-300

-250

-200

-150

-100

-50

0

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB LOSSES

- 218.2



New York City only = - 109.9


Financial

Construction

Manufacturing

Retail

Wholesale

Trans/Utilities

Information

Government

Other

Leisure/Hospitality

Education/Health

-80,000 -60,000 -40,000 -20,000 0 20,000 40,000

Chart Title

Job Change


+31,900

-250,100

PAYROLL JOB CHANGENEW YORK METRO AREA 12 MONTHS ENDING OCTOBER 2009

2007

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

160

165

170

Co

inc

iden

t In

dex

Source: Federal Reserve Bank of New York, Delta Associates; December 2009. 1992 = 100

2008 2009

COINCIDENT INDEX OF ECONOMIC INDICATORSNEW YORK CITY



-140

-100

-60

-20

20

60

100

140

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB CHANGE

+ 96.1



Source: Delta Associates; December 2009. GRP = Gross Regional Product


Prof./Fin./Tech. Services 14%

Government 10%

Education & Health Services 8%

Manufacturing & Distribution 6%

Construction 3%

Tourism / Hospitality 2%


Other 55%

Total GRP 100%

CORE INDUSTRIESNEW YORK METRO AREA 2008

Note: Core industry percentages do not total to 45% due to rounding.

New York Portion of Metro Area New Jersey Portion of Metro Area0

50,000

100,000

150,000

200,000

169,800

50,700

Nu

mb

er o

f Jo

bs

Source: Recovery.gov, Delta Associates; December 2009. Note: Delta Associates’ estimate based on ratio of state-wide job creationand state-wide population to metro area population share.


NEW YORK METRO AREA THROUGH 2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-220

-180

-140

-100

-60

-20

20

60

100

140

180

Th

ou

san

ds

of

New

Pa y

r ol l

Jo

bs

PAYROLL JOB CHANGE


NEW YORK METRO AREA


Note: 2009 is estimated at -210,000 jobs.

15-Year Annual Average = 60,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

-220

-180

-140

-100

-60

-20

20

60

100

140

1805-Year Projected Average = 44,000/

Year

Th

ou

san

ds

of

New

Pa y

r ol l

Jo

bs

PAYROLL JOB CHANGE


NEW YORK METRO AREA


Note: 2009 is estimated at -210,000 jobs.

15-Year Annual Average = 60,000

THE NEW YORK AREA OFFICE MARKET


5%

10%

15%

20%

25%

10.5% 10.7%11.8%

12.6%13.2% 13.3%

14.3% 14.6% 14.8% 15.1%16.4%

17.8%

21.2%

Chart Title



Ove

ral l

Va

can

cy

Rat

e




-8

-7

-6

-5

-4

-3

-2

-1

0 Chart Title

-5.8


Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)


OFFICE NET ABSORPTIONNEW YORK METRO AREA 1981 – THIRD QUARTER 2009

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09*

-30

-25

-20

-15

-10

-5

0

5

10

15

Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)


* Through 3rd quarter 2009.Source: REIS, CoStar, Delta Associates; December 2009.

In normal growth years, average net absorption equals 5-10 million SF per

year


2

4

6

8

10

12

14

16

18



Mil

lio

ns

of

SF




0

4

8

12

16

20

24

28

OFFICE SPACE DEMAND & DELIVERIESNEW YORK METRO AREA SEPTEMBER 2009 – DECEMBER 2014

20.0 million SF

Deliveries

=

Demand




New York Metro

=

=

Mil

lio

ns

of

Sq

uar

e F

eet


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2%

4%

6%

8%

10%

12%

14%

10.5%10.1%

11.5%

OFFICE VACANCY RATESNEW YORK METRO 2001 – 2014


Metro Vacancy 8.2% 10.7% 11.2% 10.6% 8.9% 7.5% 8.5% 9.0% 10.8% 11.5% 11.1% 10.8% 10.4% 10.1%


Ove

rall

Va

can

cy

Rat

e

City of New York = 8.2%

OFFICE RENT GROWTH PER YEARNEW YORK METRO AREA 2000 – 2014

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-16%

-12%

-8%

-4%

0%

4%

8%

12%

16%Average of Past 15 Years: 3.5%

Eff

ect

ive

Ren

tal

Rat

e C

ha

ng

e/S

F/Y

r.




Office

20132012201120102009

WHEN IS THE MARKET’S “SWEET SPOT”?NEW YORK METRO AREA

THE SAN FRANCISCO BAY REGIONAL

ECONOMY



-300

-250

-200

-150

-100

-50

0

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB LOSSES

- 133.6



City of San Francisco plus inner suburbs only

= - 49.2


Construction

Manufacturing

Retail

Leisure/Hospitality

Government

Financial

Wholesale

Information

Other

Trans/Utilities

Education/Health

-30,000 -25,000 -20,000 -15,000 -10,000 -5,000 0 5,000 10,000

Chart Title

Job Change


+2,000

-135,600

PAYROLL JOB CHANGESAN FRANCISCO BAY 12 MONTHS ENDING OCTOBER 2009

2007

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul. Aug.

Sep.

150

155

160

165

170

Co

inc

iden

t In

dex

Source: Federal Reserve Bank of Philadelphia, Delta Associates; December 2009.

2008 2009

COINCIDENT INDEX OF ECONOMIC INDICATORSSTATE OF CALIFORNIA



-140

-100

-60

-20

20

60

100

140

Pa

yro

ll J

ob

s in

00

0's

PAYROLL JOB CHANGE

- 50.5





Prof./Bus./Fin./Tech Services 25%

Federal and State Government 13%

Education and Health Services 7%

Construction 6%

Manufacturing 5%

Hospitality 3%


Other 41%

Total GRP 100%

CORE INDUSTRIESSAN FRANCISCO BAY 2008

SF/Oakland Portion of Bay Area San Jose Portion of Bay Area0

10,000

20,000

30,000

40,000

50,000

46051

19,598

Nu

mb

er o

f Jo

bs



SAN FRANCISCO BAY THROUGH 2011

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-200

-160

-120

-80

-40

0

40

80

120

160


Source: Delta Associates; December 2009. Note: 2009 is estimated at -143,600 jobs.

PAYROLL JOB CHANGESAN FRANCISCO BAY

Th

ou

s an

ds

of

New

Pa y

r ol l

Jo

bs

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

-200

-160

-120

-80

-40

0

40

80

120

160

5-Year Projected Average = 9,000/Year30-Year Annual Average = 17,800/Year

Source: Delta Associates; December 2009. Note: 2009 is estimated at -143,600 jobs.

PAYROLL JOB CHANGESAN FRANCISCO BAY

Th

ou

s an

ds

of

New

Pa y

r ol l

Jo

bs

THE SAN FRANCISCO BAY OFFICE MARKET


5%

10%

15%

20%

25%

10.5% 10.7%11.8%

12.6%13.2% 13.3%

14.3% 14.6% 14.8% 15.1%16.4%

17.8%

21.2%

Chart Title



Ove

ral l

Va

can

cy

Rat

e




-8

-7

-6

-5

-4

-3

-2

-1

0 Chart Title

-6.5


Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

)


OFFICE NET ABSORPTIONSAN FRANCISCO BAY 1981 – THIRD QUARTER 2009

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09*

-8

-6

-4

-2

0

2

4

6

8

10

12

14

Net

Ab

s orp

tio

n (

Mil

l io

ns

of

SF

) Long-Term Average = 4.5 MSF



2

4

6

8

10

12

14

16

18



Mil

lio

ns

of

SF




0

2

4

6

8

OFFICE SPACE DEMAND & DELIVERIESSAN FRANCISCO BAY SEPTEMBER 2009 – DECEMBER 2014

6.5 million SF

Deliveries

=

Demand




=

=

Mil

lio

ns

of

Sq

uar

e F

eet


OFFICE VACANCY RATESSAN FRANCISCO BAY 2001 – 2014

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Ove

rall

Va

can

cy

Rat

e

Metro


Vacancy 10.7% 16.0% 17.2% 15.2% 12.1% 11.9% 10.4% 11.1% 13.5% 14.3% 14.5% 14.0% 13.3% 12.5%

13.3% 12.5%

14.5%


City of San Francisco = 11.8%

OFFICE RENT GROWTH PER YEARSAN FRANCISCO BAY 2000 – 2014

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-25%

-15%

-5%

5%

15%

25%

35%

45%


Eff

ect

ive

Ren

tal

Rat

e C

ha

ng

e/S

F/Y

r.



Office

20132012201120102009

WHEN IS THE MARKET’S “SWEET SPOT”?SAN FRANCISCO BAY


87

Prepared for Edge Fund Advisors

THE ECONOMY AND THE OFFICE MARKETS OFWASHINGTON, BOSTON, NEW YORK,

AND SAN FRANCISCO

ByGregory H. Leisch, CREAlexander (Sandy) Paul

December 2, 2009

1 Prepared for Edge Fund Advisors THE ECONOMY AND THE OFFICE MARKETS OF WASHINGTON, BOSTON, NEW...

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Transcript of 1 Prepared for Edge Fund Advisors THE ECONOMY AND THE OFFICE MARKETS OF WASHINGTON, BOSTON, NEW...