San Francisco Bay Area Commercial Real Estate 2015 Forecast Your comprehensive guide to trends impacting the commercial real estate market. We are pleased to share with you our San Francisco Bay Area Commercial Real Estate 2015 Forecast. This report is an annual review and forecast that summarizes the trends impacting commercial real estate in each of the major Bay Area markets. This guide offers forward-looking analysis in addition to summaries of recent activity for office, R&D, industrial, retail, investment and multi-family real estate throughout the Bay Area. We examine both leasing and investment trends as well as the underlying economic fundamentals that drive our marketplace. This report represents only a fraction of our research capabilities. Working in unison with our brokerage staff, DTZ research maintains the region’s largest database of properties, tenants, landlords, buyers, sellers, availabilities, and deal comparables of all types. Our research department publishes detailed quarterly snapshots and reports covering all of our markets and we provide custom analytics for our clients. Contact your DTZ broker to get on our research mailing list to regularly receive research publication notifications. Table of Contents Message from DTZ 5 Company Overview 6 Economic Outlook 10 Commercial Real Estate Outlook 20 Infographics 48 Top Lease Transactions by Market 50 Credits and Terms 55 Challenging the Conventional 4 www.dtz.com DTZ 2015 FORECAST To Our Valued Clients, Heading into 2014 we were confident that it would be a Make no mistake about it. You will still be dealing with the strong year for the Bay Area’s economy, for commercial real same people and the same dedication to excellence that estate in the region and for our firm. And while we thought earned us the moniker “The Challenger Brand,” but as DTZ the bar would be set high, all of us may be a little surprised you will now have access to a global, best-in-class Corporate at just how strong a year it was for the economy, for the Services platform, with broader coverage and depth of region, for commercial real estate, and certainly for us. in-house Facilities Management services. You will have access to expanded Tenant Representation capabilities in We’ve been publishing an annual forecast report of the Bay the Americas as well as Europe and Asia. And our Capital Area for years. Seemingly, ages ago we were one of the Markets platform will expand to Europe and Asia, where strongest players in the region. Just five years ago came our DTZ is dominant in key markets. It is ranked #1 in China for national affiliation with Cassidy Turley and for a number of investment sales transactions with over 50% market share years we published this report as one of the region’s most and is ranked #3 in London and the United Kingdom. This dominant firms, Cassidy Turley BT Commercial. It was also will vastly expand our reach and capabilities whether we as a proud member of one of the fastest growing and most are talking about finding global investment opportunities successful brands in the history of our industry. By last year for you or gaining access to foreign investors. our forecast book was released under the Cassidy Turley banner; the small upstart firm that we had joined just a few This was a decision that we made following a period of years before was now a unified entity known throughout the intensive due diligence. You can be assured that we will industry as “the Challenger Brand.” And now, as we head continue the traditions of Cassidy Turley by maintaining into 2015, we find ourselves once again releasing our annual our roots of superior local service and close personal report, the inaugural edition under our new banner, DTZ. relationships even while we expand our capabilities throughout the world. Our professional’s focus on We know that all of these different brand names may operational excellence and client service, as well as our sound confusing, but the story is actually as simple as it clients’ continued confidence in our people and platform, gets. That story is one of growth and of us building our positioned us for this opportunity to combine with DTZ. capabilities to better serve you, first locally, then nationally Together, the combined companies will create a game- and now globally. We’re still the same people and the same changing organization – for you, our clients, and for the company. But our growth has never been about becoming entire industry. the biggest; it’s been about becoming the best. So while it may be true that we are bigger now, we are more proud of Best wishes for a prosperous and productive 2015! the fact that we are even better now. By joining forces with DTZ, we have immediately created a top three global commercial real estate services firm. Our combined company now has more than 28,000 employees across more than 265 offices in 50 countries with revenues Mike Kamm of more than $2.9 billion. Whereas Cassidy Turley had a President, US Western Region legacy of strong local market leadership and presence in the U.S., our merger with DTZ gives us full-service capabilities throughout Europe and Asia as well as enhances our domestic Corporate Services and Facilities Management platform. Most importantly, it allows for us to help you, our Gregory Moss Challenging the Conventional clients, more effectively anywhere in the world. Regional Managing Principal, Northern California SAN FRANCISCO BAY AREA COMMERCIAL REAL ESTATE 2015 FORECAST 5 A global leader DTZ is a global leader in commercial real estate services. With beginnings in 1784, our legacy of strong local market leadership today extends to serve clients with progressive, full-service property solutions around the world. Tenants, occupiers and investors rely on DTZ’s industry-leading advisory, brokerage and management expertise. Our 265 offices in 50 countries offer our clients global reach and the complete range of services on any scale, large or small. We deliver outstanding quality and customized solutions with speed, creativity and effective results. Our talented team, 28,000 strong, operates in a service culture of exceptional client care. Every one of us is dedicated to creating the best solutions and the most rewarding experiences for our clients everywhere. 265 50 $63B* offices countries transaction volume 28K $2.9B* 3.3B sf employees revenue management portfolio *(U.S. dollars) Country coverage DTZ Office Locations DTZ Global Headquarters Australia Malaysia Chicago, Illinois Bahrain Mexico Belgium Netherlands Canada New Zealand China (Hong Kong Norway & Taiwan) Pakistan Croatia Papua New Guinea Czech Republic Poland Denmark Qatar Estonia Romania Fiji Saudi Arabia Finland Singapore France Slovakia Germany South Africa Hungary Spain India Sweden Indonesia Switzerland Italy Thailand Japan Turkey Jordan Ukraine Kazakhstan United Arab Emirates Korea United Kingdom Latvia United States Lithuania Vietnam Luxembourg 6 www.dtz.com A global leader DTZ is a global leader in commercial real estate services. With beginnings in 1784, our legacy of strong local market leadership today extends to serve clients with progressive, full-service property solutions around the world. Tenants, occupiers and investors rely on DTZ’s industry-leading advisory, brokerage and management expertise. Our 265 offices in 50 countries offer our clients global reach and the complete range of services on any scale, large or small. We deliver outstanding quality and customized solutions with speed, creativity and effective results. Our talented team, 28,000 strong, operates in a service culture of exceptional client care. Every one of us is dedicated to creating the best solutions and the most rewarding experiences for our clients everywhere. 265 50 $63B* offices countries transaction volume 28K $2.9B* 3.3B sf employees revenue management portfolio *(U.S. dollars) Country coverage DTZ Office Locations DTZ Global Headquarters Australia Malaysia Chicago, Illinois Bahrain Mexico Belgium Netherlands Canada New Zealand China (Hong Kong Norway & Taiwan) Pakistan Croatia Papua New Guinea Czech Republic Poland Denmark Qatar Estonia Romania Fiji Saudi Arabia Finland Singapore France Slovakia Germany South Africa Hungary Spain India Sweden Indonesia Switzerland Italy Thailand Japan Turkey Jordan Ukraine Kazakhstan United Arab Emirates Korea United Kingdom Latvia United States Lithuania Vietnam Luxembourg SAN FRANCISCO BAY AREA COMMERCIAL REAL ESTATE 2015 FORECAST 7 Core services DTZ powerfully combines specialist real estate brokerage, investment consultancy and leasing agency services with day-to-day property and facilities management for both investors and occupiers across all commercial property types. Our clients can select from a vast menu of core, comprehensive lifecycle services, from brokerage transactions, investment and portfolio management through integrated facilities management, maintenance and janitorial, energy and sustainability services. We are fully accountable to each project we undertake, from preliminary planning through closeout and beyond. We take pride in our full-service capabilities throughout the lifecycle of the project or asset, always on time and often beating the budget. Our unbeatable track record of customer satisfaction and our long-term, loyal client partnerships are rooted in our delivery of the right solutions on time, at the right time. Agency/project leasing Capital markets Energy & sustainability services Landlord representation Debt placement Energy audit and consultancy Office, industrial,