3

2008-2009 Economic & Technology Forecast

January 24, 2008

2

PROGRAM

Historical OverviewThe Economy in 2007Forecast 2008-2009Real Estate Outlook

Economic Development TrendsAustin in Five Years

AUSTIN IN 1997

“Austin: A thriving clone of the Valley”“Austin area flooded by… desirables”“In salaries, Austin lags behind”“Austin sees new airport as gate to development”“Austin will struggle to keep its identity intact”

HIST

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AUSTIN IN 2002

“Investment in Austin companies down for 6th straight qtr”“Existing home sales and median house price toppled”“Serious crime ticks up in Austin”“Austin called a ‘great city of the arts’”“How will Austin reboot its economy?”

HIST

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AUSTIN IN 2007

Austin Tops in Business Vitality, America’s Favorite Cities“Construction plans hard-pressed to keep up with traffic”“Next big thing: a grander skyline”“2007: the year high-end retail discovered Austin”“Top city for Cleantech,” “10 Greenest Cities in America”

HIST

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PROGRAM

Historical OverviewThe Economy in 2007Forecast 2008-2009Real Estate Outlook

Economic Development TrendsAustin in Five Years

2007 AT A GLANCE - US & TEXAS

$1.06 trillionGDP$13.13 trillion$29.4 billion$4.53 trillion

2,860,000301,800,000

4.6%1.3%

1,788,000137,930,000

U.S.

$1.41 billionVenture Capital$382 billionRetail Sales497,000New Population24,000,000Population4.3%Unemployment2.3%Annual Growth230,400New Jobs10,267,000EmploymentTexas

THE

ECON

OMY

IN 20

07

JOB GROWTH - NATIONAL

1.3%0.8%

1.7%1.7%

2.7%2.8%

4.0%New Jobs

Source: Bureau of Labor Statistics

Industry Growth 2006-2007

U.S.San Diego

Portland

Boston

Raleigh/Durham

Seattle

Austin

1,788,00010,700

16,900

28,400

20,900

47,900

29,100

THE

ECON

OMY

IN 20

07

JOB GROWTH - TEXAS

2.3%

1.8%

2.3%

2.9%

3.0%

3.5%

4.0%New Jobs

Source: Bureau of Labor Statistics

Industry Growth 2006-2007

TexasEl Paso

San Antonio

Dallas/Ft. Worth

Houston

Lubbock

Austin

230,4004,800

18,300

81,900

74,100

4,500

29,100

THE

ECON

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IN 20

07

2007 AT A GLANCE - AUSTIN

$74.6 billionGDP$673 millionVenture Capital$26.5 billionRetail Sales12,000 (-31%)Housing Starts1,580,000 (42,000)Population3.6%Unemployment4.0%Annual Growth29,100New Jobs749,100Employment

THE

ECON

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IN 20

07

NEW JOBS BY INDUSTRY, 2007

100700

1,6001,700

2,0002,1002,100

2,6002,600

3,900

5,5004,200

GovernmentLeisure & HospitalityConstructionProfessional ServicesRetail TradeWholesale TradeOther ServicesEducation & Health Svcs.Financial ActivitiesManufacturingTransportationInformation

Growth Rate

Total Job Growth

29,100 (4.0%)Source: Bureau of Labor Statistics

3.7%5.7%8.9%2.6%3.5%6.9%2.4%2.7%3.7%2.2%4.8%0.5%

Industry New Jobs

THE

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IN 20

07

WAGES IN GROWTH INDUSTRIES

$17,200

$49,200

$53,300

$37,400

$71,500

Projected Emp. Growth

Source: Bureau of Labor Statistics

Industry 2007 Average Wage

Leisure & Hospitality

Transportation

Government

Prof. Services

Wholesale Trade

6.7%

8.4%

7.1%

6.4%

8.2%

Average U.S. Wage: $44,600

Average Austin Wage: $46,800

THE

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IN 20

07

VENTURE CAPITAL FUNDING

$673.17372Total$40.81313Other$17.633Media & Entertainment$31.743IT Services$45.233Biotechnology$67.944Electronics/Instrument

$101.033Industrial/Energy$125.966Medical Devices/Equip$139.32222Software$159.31515Semiconductors

Investment($M)DealsCompanies Sector

THE

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PROGRAM

Historical OverviewThe Economy in 2007Forecast 2008-2009Real Estate Outlook

Economic Development TrendsAustin in Five Years

AUSTIN JOBS FORECAST, 2008-2009

100600700

1,1002,100

2,7003,3003,5003,800

5,2006,500

11,100GovernmentProfessional ServicesLeisure & HospitalityRetail TradeEducation & Health Svcs.Wholesale TradeManufacturingOther ServicesTransportationInformationFinancial ActivitiesConstruction

Growth Rate

Total Job Growth41,100

Source: AngelouEconomics

7.1%6.4%6.7%4.9%4.7%8.2%4.5%7.1%8.4%3.2%1.3%1.0%

Industry New Jobs

FORE

CAST

2008

-200

9

POPULATION FORECAST

35,50043,200

58,900

42,000 40,000 45,000

010,00020,00030,00040,00050,00060,00070,000

'04 '05 '06 '07 '08 '09

Net New People Forecast

Source: AngelouEconomics, U.S. Census Bureau

FORE

CAST

2008

-200

9

New YorkWashington

L.A.San Diego

San Jose

San Francisco

HoustonHoustonSan AntonioSan Antonio

CA

Seattle

TXDallas/Ft. WorthDallas/Ft. Worth

TN Overseas

ChicagoChicago

Source: IRS

AUSTIN MSA MIGRATION PATTERNS

Metro AreaNet In-migrationNet Out-migration

FORE

CAST

2008

-200

9

THE PEOPLE OF AUSTIN

Diverse, well-educated, and new to town– Top 10 nationally for singles, retirees, Hispanics…

Tech-savvy– The highest percentage of DVR users in U.S. (31%)– Top market for reading and contributing to blogs

Environmentally conscious– No. 2 nationally for fitness and walking– Top-ranked green energy program in the U.S.

FORE

CAST

2008

-200

9

BillionsForecast

$20.9 $22.3$24.8 $26.5 $28.1 $30.0

7%6%7%

11%

7%6%

$0$5

$10$15$20$25$30$35

2004 2005 2006 2007 2008 20090%

5%

10%

15%

20%Growth Rate

Sources: AngelouEconomics, Office of Texas Comptroller

AUSTIN METRO RETAIL SALESFO

RECA

ST 20

08-2

009

7%13%5%8%

’07-’08 Growth

$1.5 Trillion in Spending269 Million Shipments$265 Billion Chip Sales$213 Billion Revenue

20078%Software

’08-’09 GrowthIndustry

6%11%6%

ITPCsSemiconductor

TECH INDUSTRY GROWTH

Steady growth, with shift from desktop to laptop/mobile computingMajority of growth from developing world

FORE

CAST

2008

-200

9

PROGRAM

Historical OverviewThe Economy in 2007Forecast 2008-2009Real Estate Outlook

Economic Development TrendsAustin in Five Years

0.8 0.60.71.2

13%14%19% 18%

0.0

0.5

1.0

1.5

0%5%10%15%20%25%

Absorption (Millions of SF) Vacancy Rate

20052004 2006 2007Source: AngelouEconomics, Colliers Oxford, NAI/CIP, Grubb & Ellis

AUSTIN METRO OFFICE MARKETRE

AL E

STAT

E OU

TLOO

K

Absorption(Millions of SF) Vacancy Rate

0.1 1.81.71.6

18%21%

14%9%

0.0

0.5

1.0

1.5

2.0

0%5%10%

15%20%25%

Source: AngelouEconomics, Colliers Oxford, NAI Austin, Grubb & Ellis

AUSTIN METRO INDUSTRIAL MARKET

20052004 2006 2007

REAL

EST

ATE

OUTL

OOK

AUSTIN METRO RETAIL MARKETTotal Market (Millions of SF) Vacancy Rate

18.6 18.8 19.3 20.1

7%6%

7%6%

17.518.018.519.019.520.020.5

2004 2005 2006 20074%

5%

6%

7%

8%

Source: AngelouEconomics, Colliers Oxford, NAI/CIP, Grubb & Ellis

REAL

EST

ATE

OUTL

OOK

Months of Inventory

22.6 26.930.3 28.6

12.7 15.5 18.0 12.40

10

20

30

40

2004 2005 2006 20070

2

4

6

8MLS SalesNew Housing StartsMonths of Inventory

Homes(Thousands)

Source: Texas A&M Real Estate Center, Residential Strategies, Inc.

AUSTIN METRO HOUSING MARKETRE

AL E

STAT

E OU

TLOO

K

Occupancy Rate

Rental RatePer SF

93%92%90% 95%

$0.96$0.94

$0.83$0.81

85%

90%

95%

100%

2004 2005 2006 2007$0.70

$0.80

$0.90

$1.00Occupancy RateRental Rate

Source: Austin Investor Interests, O’Connor & Associates

AUSTIN METRO APARTMENT MARKETRE

AL E

STAT

E OU

TLOO

K

2008-2009

1.6 million sq. ft.OfficeExpected AbsorptionMarket

10,500 units25,000 units

1.4 million sq. ft.2.3 million sq. ft.

Multi-FamilySingle FamilyRetailIndustrial

REAL ESTATE FORECASTRE

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PROGRAM

Historical OverviewThe Economy in 2007Forecast 2008-2009Real Estate Outlook

Economic Development TrendsAustin in Five Years

ECONOMIC DEVELOPMENT OPPORTUNITIES

Clean EnergyIT & Software / Creative MediaDiagnostics & Medical Devices

Data CentersExport-oriented Manufacturing

Warehousing & DistributionECON

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DEV

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MENT

TRE

NDS

CLEAN ENERGYWhy target:– Average wage $82,000

Market drivers:– Oil: $100/barrel– Upcoming climate change policies,

state renewable portfolio standardsAustin’s Advantage:– Clean Energy Incubator, Austin VC Networks– Austin Energy willing to test ideas, innovate– Proactive public policy (City of Austin, Austin

WorkSource)

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MENT

TRE

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CLEAN ENERGY MARKET

$21 $18 $16$1

$81

$61$69

$16

$0

$20

$40

$60

$80

$100

Biofuels Wind Solar Fuel Cells

20062016

U.S. Market (Billions)

Source: CleanEdge

ECON

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DEV

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MENT

TRE

NDS

SOFTWARE & CREATIVE MEDIAWhy Target:– Average wage is $95,000

Market Drivers:– Geospatial technologies (Google Maps)– Gaming (video games, gambling)– Mobile devices (iPhone, smart phones)– Continued value in content, social networking,

convergenceAustin’s Advantage:– Recognition as national technology hub– Creative sector continues to blur these technologies– South by Southwest, Austin Game Developers Conference

ECON

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MENT

TRE

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MEDICAL DEVICES & DIAGNOSTICSWhy Target?– Average wage is $65,000– Excellent employment growth

Market Drivers:– Weight-control and anti-aging– Home healthcare systems– Drug delivery systems– Stem Cell research

Austin’s Advantage:– New Medical Research Center– Strengths in bridging technology gaps

ECON

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DEV

ELOP

MENT

TRE

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DATA CENTERSWhy Target?– Average wage is $74,000– High capital investments

Market Drivers:– Consolidation, M&A – Small/medium businesses– Sarbanes/Oxley, HIPAA– Increasing move to network storage– Website usage, search engines, ecommerce

Austin’s Advantage:– Technology-centric region with skilled labor

ECON

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PROGRAM

Historical OverviewThe Economy in 2007Forecast 2008-2009Real Estate Outlook

Economic Development TrendsAustin in Five Years

JOB GROWTH FORECAST, 2008-2009AU

STIN

IN F

IVE

YEAR

S

14,500

24,80027,600

17,000

24,10029,100

0

10,000

20,000

30,000

2004 2005 2006 2007 2008 2009

Forecast

AUSTIN IN 2012

“Villa Muse brings significant creative capital to Austin”“Celebration underway for 25th Annual SXSW”“Construction begins on streetcar, regional rail”“CBD population triples from 2000”, Metro population at 1.8 M“Austin clean energy, technology companies power the world”

AUST

IN IN

FIV

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END SLIDE

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