Presented toAmerican Society of Professional Estimators

Feb.19, 201312 Noon

Builders Exchange Conference Room

2013 Forecast

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1. Rules to Remember

2. National Trends

3. California

4. Bay Area

5. Local Trends

Table of Contents

3 Rules to Remember

• Construction is one the last industries to go into a recession and one of the last to come out.

• Real Estate and Construction are Dance Partners-what one industry does affects the other

• Overall employment is a key indicator for the health of the construction industry

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Annual Rate of Construction Spending US (Billions)1

Public ($) Private ($) Total ($)

2004 242.8 789.0 1031.8

2005 256.3 904.3 1160.6

2006 280.9 896.8 1177.7

2007 297.8 842.4 1140.2

2008 319.6 737.1 1053.7

2009 309.6 593.0 902.5

2010 301.0 486.9 787.9

2011 286.6 529.7 816.4

2012 276.2 589.8 866.0

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1Numbers come from December Annual Construction Report for the US Census Bureau, except for 2012 numbers which came from the November Report.

US Construction Spending (Millions)

Indicator 2011 2012 2013 (fore) % change 12-13

Private Non-Residential

258,002 294,458 323,590 9.9%

Public Non Residential

274,550 266,010 266,010 0.0

Total 532,552 560,468 589,600 5.2%

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Associated Building and Contractors, 1/4/2013 Press Release

Dodge ConstructionUS Outlook-2013

• Multi Family Housing up 16% in dollars and 14% in units

• Commercial Building will increase 12%. That’s still 40% below 2007 peak

• Single Family Housing up 24% in dollars and 21% in units.

• Manufacturing Building will grow 8% after 2012 decline

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AIA Consensus Construction Forecast 2013-2014

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Market Segment Consensus Growth Forecast 2013 2014

Overall Non Residential 5.0% 7.2%

Commercial/Industrial 8.6% 10.7%

Hotels 15.7% 12.6%

Industrial 5.0% 6.4%

Retail/Other Commercial 7.8% 9.6%

Office Buildings 7.3% 11.4%

Institutional 1.2% 4.7%

AIA Consensus Construction Forecast 2013-2014 (pt.2)

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Market Segment Consensus Growth Forecast 2013 2014

Religious 2.6% 4.9%

Healthcare Facilities 4.4% 4.8%

Amusement/Recreation 1.8% 5.5%

Education 1.1% 4.5%

Public Safety -1.7% 0.8%

Joint Venture Silicon Valley Highlights

• Silicon Valley quarterly employment increased 4% from Q2 2011 to Q2 2012-Highest ann.growth in 10 years.

• Public sector lost 1,130 jobs from 2007 to Q2 2012

• Number of housing starts remain low

• Construction Employment down 24.4% over last 5 years

but it’s up 11 from 2011-2012.

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Joint Venture Silicon Valley 2013 Annual Report

California New Housing Starts Forecast (thousands)

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1Eberhard School of Business, Metro Forecast, October 2012

Bay Area Forecast-Unemployment (%)

Metro Area 2011 2012 2013 2014 2015

San Francisco 8.2 7.0 6.1 5.1 4.2

San Jose 9.9 8.5 7.7 6.8 5.5

Oakland 10.4 9.1 8.4 7.6 6.4

Santa Cruz 12.1 11.1 10.6 10.0 9.0

Vallejo 11.4 10.2 9.4 8.6 7.5

California 11.8 10.7 9.8 8.8 7.5

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Eberhardt School of Business, October 2012 Metro Forecast

Office Vacancy Rates4Q 2012

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Cornish & Carey Commercial Insight, Vol. 4, issue 1, p 45

Region Inventory Vacancy Rate (%)

Silicon Valley 64,824,577 11.43%

Walnut Creek 18,014,769 17.3%

Sacramento 66,380,795 24.7%

Palo Alto 28,883,798 7.7%

Pleasanton 31,441,140 13.4%

San Francisco 81,042,842 7.4%

Emeryville 25,580,657 18.7%

San Mateo 35,907,638 14.1%

Marin County 7,848,182 21%

Sonoma County 8,485,658 19%

Santa Clara County Real Estate Trends-Retail

• Construction activity 150,000 sq. ft. in 2011.• 200,000 sq. ft. still under construction• Development pipeline-4.6 million sq. ft. which is 9%

of total retail inventory• 2012 will bring roughly 250,000 sq. ft to market

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Marcus & Millichap San Jose Metro Area Retail Research Report 3rd Quarter 2012

Santa Clara County Real Estate Trends-Commercial

• Vacancy rate 19.9% at end of 2012-4 yr. low• 500,000 sq. ft brought online in 2012• 1,700,000 sq. ft under way• 12,000,000 sq. ft in the pipeline (2,100,000 in

Mountain View)

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Marcus & Millichap San Jose Metro Area Commercial Research Report 3rd Quarter 2012

Santa Clara County Real Estate Trends-Commercial (pt.2)

• Companies are seeking a combined total of 7 million sq. ft. of office and research space in Silicon Valley.

• 45 companies are looking for at least 100,000 sq. ft.• Sublease space is at an all time low

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Colliers Annual Real Estate Forecast, Feb. 14, 2013

Santa Clara County Real Estate Trends-Apartments

• 5,400 units are being built now (5% of existing stock)

• 9,800 units in the pipeline.

• 2012-2,400 come online-expanding inventory by 2.2%

• 2013-3,000 units will be delivered

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Marcus & Millichap San Jose Metro Area Apartment Research Report 3rd Quarter 2012

Santa Clara County Construction Employment-Annual Average

In Thousands

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Bureau of Labor Statistics-San Jose, Santa Clara, Sunnyvale Statistical Area

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Plans in Online Plan Room By Month (2008-2012)

2271 plans posted in 2012

Total Plans in the Exchange by Year

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2012 Plans by City-SC County only

Campbell 7 Morgan Hill 13

Cupertino 26 Mountain View 18

Gilroy 17 Palo Alto 66

Los Altos 3 San Jose 136

Los Altos Hills 12 Santa Clara 23

Los Gatos 2 Santa Clara County 55

Milpitas 11 Saratoga 15

Moffett Field 3 Sunnyvale 24

19% of our plans are from Santa Clara County (432)

New Housing UnitsSan Jose Metro Area

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Other Trends

•Job creation rate in Santa Clara County has exceeded 4% for the past year. (vs. 1.3% nationally and 2.8% in the state). However, there is still excess office space available that needs to be absorbed.•The change in redevelopment funding will make local public works construction more difficult.•245,000 new construction jobs are expected to be created over the next four years, about 20% of California’s total non-farm job growth. It will still be nearly 120,000 jobs fewer than before the recession.

1Eberhard School of Business, Metro Forecast, October 20122-Mercury News, Dec. 21, p.D3

New Projects Coming

• Nvidia- 1 million sq. ft in Santa Clara• Samsung-680,000 sq.ft. in San Jose• Bass Pro Shops-145,000 sq. ft in San Jose• Apple , Google and Facebook-when are they going to stop?• BART, 49ers Stadium and Earthquakes stadium underway

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