1. 2014
Southern California Commercial Real Estate
Overview and Outlook
Al Pontius
Senior Vice President and National Director
February 2014

2. U.S. Employment vs.
Southern California Employment
Southern California
United States
Y-O-Y Percent Change
6%
3%
0%
-3%
-6%
Trailing 12 Months Job Growth*
Southern California:
United States:
+2,322,000
19
91
19
92
19
9
19 3
9
19 4
9
19 5
96
19
97
19
9
19 8
9
20 9
00
20
01
20
02
20
0
20 3
0
20 4
05
20
06
20
07
20
0
20 8
0
20 9
10
20
11
20
1
20 2
13
*
-9%
+115,500
* Through December
Southern California includes Los Angeles, Orange County, Inland Empire and San Diego MSAs
Sources: Marcus & Millichap Research Services, BLS

3. U.S. Retail Sales Well Past Recession
Upward Momentum Slowing
Monthly Retail Sales Excl. Auto and Gas
Long-Term Total Retail Sales
$310
$952/person
15%
+14%
Retail Sales (Bil.)
10%
5%
0%
-5%
Recession
Year-Over-Year Change
20%
-10%
$869/person
$250
$220
-15%
10
14
*
06
02
98
94
90
86
82
$190
78
74
$280
* Through January
Sources: Marcus & Millichap Research Services, U.S. Census Bureau
02
04
06
08
10
12
14*

4. Single-Family Housing and Condo Market
Improving Despite Recent Slowdown
Median Home Prices
650
Condo
$225
$200
$175
20
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
20 12
13
*
$150
Y-O-Y
Change
+11%
+10%
Single-Family and Condo
550
Y-O-Y
Change
450
-1%
350
250
20
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
20 12
13
*
Single-Family
Home Sales (000s)
Median Price (000s)
$250
Existing Home Sales
* Through December
Sources: Marcus & Millichap Research Services, National Association of Realtors

5. Southern California Economic Overview

6. Migration Into Southern California
Net Migration (000s)
320
200
80
-40
* Forecast
Southern California includes Los Angeles, Inland Empire, Orange County, and San Diego MSAs
Sources: Marcus & Millichap Research Services, U.S. Census Bureau
13
15
*
11
09
07
05
03
01
99
97
95
93
91
89
87
85
83
81
79
77
75
73
71
-160

7. Employment Growth Trends
2000-2011
2012
2013
2014*
Y-O-Y Percent Change
8%
4%
0%
-4%
-8%
Los Angeles
Inland Empire
Orange County
San Diego
08-09:
-378,500
-143,800
-163,300
-91,400
-8,663,000
2010:
+27,800
+5,900
+16,400
+11,000
+1,058,000
2011:
+31,200
+6,900
+15,400
+13,200
+2,083,000
2012:
+85,100
+34,400
+37,100
+29,500
+2,236,000
2013:
+45,100
+13,500
+34,000
+22,900
+2,322,000
2014*:
+81,000
+27,500
+39,100
+32,400
+2,700,000
* Forecast
Sources: Marcus & Millichap Research Services, U.S. Census Bureau
United States

8. Single-Family Home Price Trends
2000-2011
2012
2013
2014*
2005-11:
-48%
-57%
-31%
-42%
-28%
2011-13:
30%
39%
22%
24%
24%
Median Home Price (000s)
$800
$600
$400
$200
$0
Los Angeles
Inland Empire
Orange County
* Forecast
Sources: Marcus & Millichap Research Services, National Association of Realtors
San Diego
United States

9. Apartment Market Overview and Outlook

10. Apartment Construction Trends
2007-2011
2012
2013
2014*
Unit Completions (000s)
10
8
0.6%
2.1%
5
1.3%
3
0.7%
0
Los Angeles
Inland Empire
* Forecast
Sources: Marcus & Millichap Research Services, MPF Research
Orange County
San Diego

11. Apartment Vacancy Rate Trends
2007-2011
2012
2013
2014*
Average Vacancy Rate
12%
9%
6%
3%
0%
Los Angeles
Inland Empire
Orange County
* Forecast
Sources: Marcus & Millichap Research Services, MPF Research
San Diego
United States

12. Apartment Effective Rent Trends
2007-2011
2012
2013
2014*
Y-O-Y Percent Change
15%
10%
5%
0%
-5%
Los Angeles
Inland Empire
Orange County
* Forecast
Sources: Marcus & Millichap Research Services, MPF Research
San Diego
United States

13. Apartment Cap Rate Trends
2005-2011
2012
2013*
Average Cap Rate
8%
7%
6%
5%
4%
Los Angeles
Inland Empire
Orange County
San Diego
* Estimate
Includes sales $1,000,000 and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
United States

14. Office Market Overview and Outlook

15. Office Construction Trends
2007-2011
2012
2013
2014*
Completions (Mil. Sqft.)
4.8
3.6
2.4
1.0%
1.2
0.2%
0.5%
0.3%
0.0
Los Angeles
Inland Empire
* Forecast
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Orange County
San Diego

16. Office Vacancy Rate Trends
2007-2011
2012
2013
Inland Empire
Orange County
2014*
Average Vacancy Rate
24%
18%
12%
6%
0%
Los Angeles
* Forecast
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
San Diego
United States

17. Office Asking Rent Trends
2008-2011
2012
2013
2014*
Y-O-Y Percent Change
10%
5%
0%
-5%
-10%
Los Angeles
Inland Empire
Orange County
* Forecast
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
San Diego
United States

18. Office Cap Rate Trends
2005-2011
2012
2013*
10%
Average Cap Rate
8%
6%
4%
2%
Los Angeles
Inland Empire
Orange County
San Diego
* Estimate
Includes sales $1,000,000 and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
United States

19. Retail Market Overview and Outlook

20. Retail Construction Trends
2007-2011
2012
2013
2014*
Completions (Mil. Sqft.)
8.0
6.0
4.0
2.0
0.4%
0.5%
0.5%
0.3%
0.0
Los Angeles
Inland Empire
* Forecast
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Orange County
San Diego

21. Retail Vacancy Rate Trends
2007-2011
2012
2013
Inland Empire
Orange County
2014*
Average Vacancy Rate
12%
9%
6%
3%
0%
Los Angeles
* Forecast
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
San Diego
United States

22. Retail Asking Rent Trends
2008-2010
2012
2013
2014*
Orange County
San Diego
Y-O-Y Percent Change
10%
0%
-10%
-20%
-30%
Los Angeles
Inland Empire
* Forecast
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
United States

23. Retail Cap Rate Trends
2005-2011
2012
2013*
10%
Average Cap Rate
8%
6%
4%
2%
Los Angeles
Inland Empire
Orange County
San Diego
* Estimate
Includes sales $1,000,000 and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
United States

24. Industrial Market Overview and Outlook

25. Industrial Construction Trends
2007-2011
2012
2013
2014*
Completions (Mil. Sqft.)
32
24
3.5%
16
8
0.3%
0.0%
0
Los Angeles
Inland Empire
* Estimate
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Orange County
0.2%
San Diego

26. Industrial Vacancy Rate Trends
2007-2011
2012
2013
Inland Empire
Orange County
2014*
Average Vacancy Rate
16%
12%
8%
4%
0%
Los Angeles
* Estimate
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
San Diego
United States

27. Industrial Asking Rent Trends
2008-2011
2012
2013
2014*
Y-O-Y Percent Change
20%
10%
0%
-10%
-20%
Los Angeles
Inland Empire
Orange County
* Estimate
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
San Diego
United States

28. Industrial Cap Rate Trends
2005-2011
2012
2013*
12%
Average Cap Rate
9%
6%
3%
0%
Los Angeles
Inland Empire
Orange County
San Diego
* Estimate
Includes sales $1,000,000 and greater
Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
United States

29. 2014
Southern California Commercial Real Estate
Overview and Outlook
Al Pontius
Senior Vice President and National Director
February 2014