Research & Forecast Report

OAKLAND METROPOLITAN AREA OFFICEQ1 2016

Overall vacancy dropped 0.3 percent by the close of the first quarter in 2016; rental rates rose substantially to $2.61. Continued demand and lack of supply expected in the coming months will result in an increase in overall asking rates. Moving forward, at the current levels, the overall vacancy rate should remain stable.

Vacancy vs. Asking Full Service Rental RatesOakland Metropolitan Area | All Classes

$1.90

$2.00

$2.10

$2.20

$2.30

$2.40

$2.50

$2.60

$2.70

$2.80

0%

5%

10%

15%

20%

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

3Q2015

4Q2015

1Q2016

Vacancy Rate Average Asking Rent

2.05

96.2

10-Year Nominal

Interest Rate

Unemployment Rate

5.0% 5.1%

1.78

2.05

96.2

10-Year Nominal

Interest Rate

Unemployment Rate

5.0% 5.1%

1.78

2.05

96.2

10-Year Nominal

Interest Rate

Unemployment Rate

5.0% 5.1%

1.78

Summary Statistics Q1 2016 Oakland Metropolitan AreaOffice Market

Previous Quarter

Current Quarter

Overall Vacancy 7.8% 7.5%Net Absorption 289,896 87,415Construction Completed - -Under Construction - -Overall Asking Rents $2.33 $2.61 Class A Asking Rents $3.58 $3.75 Class B/C Flex Asking Rents $1.99 $2.33

U.S. National Economic IndicatorsU.S. Unemployment Rate 5.0% 5.0%California Unemployment Rate 5.7% 5.5%Alameda County Unemployment Rate 4.4% 4.3%Contra Costa Unemployment Rate 4.6% 4.5%U.S. Labor Force Participation Rate 62% 63%U.S. Consumer Price Index 2.40% 2.20%U.S. Interest Rate - 10 Yr Treasury 2.30% 1.78%U.S. Business Confidence Index 99.10% 99.20%U.S. Consumer Confidence Index 96.50% 96.20%

> Leasing activity: 701,339 square feet year-to-date

> Vacancy: 7.5 percent

> Net absorption: + 87,415 square feet year-to-date

2016 began with some turbulence as the market showed some signs of a long overdue correction according to tech media.

Technology companies are the backbone of the current digital economy and the idea that the industry is going to experience a major slowdown and disappear overnight is not only premature, it’s ill-considered. Even if the markets were to slow in 2016, Oakland has witnessed a more diverse selection of tenants migrating from San Francisco since 2012, and the direct impact would be well below these jittery expectations.

The business cycle in Oakland has historically been much smoother than that of its West Bay Sister, removing much of the sting from the unwelcomed troughs in business cycles. Uber’s presence in Oakland will be the first major impact that the tech industry has unleashed on

A Profitable and Tumultuous Start to the New Year

Market Trends Relative to prior period Q1 2016 Q2 2016*

Vacancy

Rental Rate

Net Absorption

Construction

*Projected

United States

Unemployment Rate10-Year Nominal

Interest RateConsumer Confidence

Market Indicators

the East Bay. Until the riding company graces us with their presence in 2017, we are waiting to see how this move will transform not only Oakland’s office market, but Oakland’s character. Real estate has historically performed well in the conditions we find ourselves in at the moment. Moderate-growth and low interest rate environments are most likely to persist.

Suburban Oakland’s office market vacancy rate decreased from 3.5 percent to 3.4 percent in the first quarter, down 0.1 percent. Oakland’s low supply and high demand for office space pressed average asking rental rates to $3.43 per square foot, up 10.3 percent since the fourth quarter of 2015. Net absorption in Oakland’s Downtown office market was 87,415 square feet for the first quarter. This first quarter absorption figure was lower than the 289,896 square feet of absorption experienced in the fourth quarter of 2015, primarily due to the lack of space.

Despite the tremendous level of demand for Oakland office product, the lack of new construction and the shortage of product being converted into office space saw Downtown’s market vacancy rate decrease from 3.6 percent to 3.1 percent. Most developers are asking the important question, are there sufficient legs to this economy to justify building in this cycle? Surely the change in fundamentals

along the East Bay, along with substantially higher asking rates, can no longer be refuted by the cynics, therefore we anxiously wait for construction cranes to ease our palpable eagerness for office development.

Sansome Street Advisors bought 405 14th Street in Oakland, which is conveniently located directly on BART and AC Transit lines one block from City Center. The property was over 90 percent leased at the time they invested in the asset. Gerding Eden purchased The Atrium at 1650 65th Street in Emeryville for $248 per square foot.

The residential market in the East Bay is an important topic. Unemployment in Alameda County is down to 4.3 percent and Contra Costa County is down to 4.5 percent. The migration of the Bay Area labor force, hence residents, to Oakland and the East Bay has seen increased demand for housing. The East Bay has become a more affordable and popular option as housing costs continue to rise in the Bay Area. The spillover effect has pushed up rents in Oakland, as the supply-demand mismatch continues. With several projects in the entitlement pipeline, it is of paramount importance that housing is provided to attract and retain the new residents migrating over to the East Bay.

The office real estate market faces challenges in 2016 with shrinking vacancy and slower global economic growth, tied to China’s economic slowdown and a possible collapse in commodity markets. Despite these indicators, the East Bay in particular is

poised to weather a modest correction and Colliers is optimistic that 2016 will be another great

and profitable year.

Oakland Metropolitan Area

Business Category % SqftMedical Research 3.16% 17,682 Healthcare Services 3.62% 20,245 Financial Services 4.30% 24,068 Graphic Design & Advertising 4.29% 23,973 Architectural Services 4.56% 25,522 Information Analytics 5.57% 31,139 Consultants 6.13% 34,267 Technology 9.09% 50,847 Insurance 7.33% 40,981 Publishers 7.91% 44,249 Law Firm 9.40% 52,580 Physicians & Surgeons 10.48% 58,616 Non-Profits 13.74% 76,862 Other 10.41% 58,239

Tenants Migrating to Oakland By Industry2012 - PRESENT

*The Above Data is Based on a Sample Set of 559,270 SF (Not all transactions)

Less than 10% of migration from the Technology IndustryDiverse tenant profile, which limits exposure in market cycles

2 Oakland Research & Forecast Report | 2016 Q1 | Office | Colliers International

980

880 880

W GRAND AVE

TELEGRAPH

SAN PABLO AVE

MARTIN LUTHER KING JR. W

AY

HARRISON ST

4TH ST

2ND ST

EMBARCADERO

Water Street

JEFFERSON ST

WASHINGTON ST

7TH ST

CONVENTION CENTER

9TH ST

LAKEMERRITT

10TH ST

CLAY ST

WEBSTER ST

14TH ST

15TH ST

17TH ST

LAKESIDE DRIVE

BROADWAY

19TH ST

21ST ST

RICHMOND

BERKELEY

EMERYVILLE

ALAMEDA

OAKLAND

SANLEANDRO

SANLORENZO

HAYWARD

UNIONCITY

SANFRANCISCO

BAY

80

80

580

880 680

Significant Lease Activity

MedAmerica Inc.

2100 Powell Street, Emeryville

January 2016

72,367 SF - Expansion

Integral Group LLC

427 13th Street, Oakland

January 2016

17,571 SF - Renewal

Unknown

1111 Broadway, Oakland

February 2016

24,070 SF - Unknown

Geosyntec

1111 Broadway, Oakland

February 2016

23,978 SF - Direct

Significant Sale ActivityPROPERTY ADDRESS SALE DATE SIZE BUYER TYPE

1650 65th Street, Emeryville January 2016 127,000 Gerding Edlen Investment

405 14th Street, Oakland March 2016 80,000 Sansome Street Advisors Investment

2001 Broadway, Oakland March 2016 59,427 HP Investors Investment

1936 University Avenue, Berkeley January 2016 41,000 Graham Street Realty Investment

2000 Franklin Street, Oakland January 2016 34,000 California Endowment Owner/User

4301 Lakeside Drive, Oakland January 2016 26,568 Making Waves Foundation Owner/User

3 Oakland Research & Forecast Report | 2016 Q1 | Office | Colliers International

4 Oakland Research & Forecast Report | 2016 Q1 | Office | Colliers International

Market Comparisons – OaklandOFFICE MARKET

MARKET COMPARISONS

OFFICE MARKET

CLASS BLDGSTOTAL

INVENTORY SF

DIRECTVACANT

SF

DIRECTVACANCY

RATE

SUBLEASEVACANT

SF

SUBLEASEVACANCY

RATE

TOTALVACANT

SF

VACANCYRATE

CURRENTQUARTER

VACANCYRATEPRIOR

QUARTER

NETABSORPTION

CURRENTQTR SF

NETABSORPTION

YTDSF

AVG ASKINGFULL SERVICE

CBD SECTION

OAKLAND - DOWNTOWN

A 30 10,206,445 197,182 1.9% 8,346 0.1% 205,528 2.0% 2.9% 88,394 88,394 $4.09

B/C & Flex 114 5,407,729 270,576 5.0% 15,226 0.3% 285,802 5.3% 5.1% (11,132) (11,132) $3.01

Total 144 15,614,174 467,758 3.0% 23,572 0.2% 491,330 3.1% 3.6% 77,262 77,262 $3.46

OAKLAND - JACK LONDON SQUARE

A 4 355,600 39,639 11.1% - 0.0% 39,639 11.1% 0.0% (39,639) (39,639) $4.40

B/C & Flex 41 1,285,539 59,050 4.6% 1,400 0.1% 60,450 4.7% 2.3% (30,520) (30,520) $2.53

Total 45 1,641,139 98,689 6.0% 1,400 0.1% 100,089 6.1% 1.8% (70,159) (70,159) $3.27

CBD TOTAL

A 34 10,562,045 236,821 2.2% 8,346 0.1% 245,167 2.3% 2.8% 48,755 48,755 $4.14

B/C & Flex 155 6,693,268 329,626 4.9% 16,626 0.2% 346,252 5.2% 4.6% (41,652) (41,652) $2.93

Total 189 17,255,313 566,447 3.3% 24,972 0.1% 591,419 3.4% 3.5% 7,103 7,103 $3.43

SUBURBAN SECTION

RICHMOND

A - - - - - - - - - - - -

B/C & Flex 98 3,480,353 113,483 3.3% - 0.0% 113,483 3.3% 4.0% 26,568 26,568 $1.86

Total 98 3,480,353 113,483 3.3% - 0.0% 113,483 3.3% 4.0% 26,568 26,568 $1.86

BERKELEY - DOWNTOWN

A 9 558,882 1,852 0.3% - 0.0% 1,852 0.3% 1.1% 4,156 4,156 $3.42

B/C & Flex 28 974,473 35,479 3.6% - 0.0% 35,479 3.6% 1.7% (19,145) (19,145) $2.83

Total 37 1,533,355 37,331 2.4% - 0.0% 37,331 2.4% 1.5% (14,989) (14,989) $2.86

BERKELEY - WEST

A - - - - - - - - - - - -

B/C & Flex 41 1,517,619 277,090 18.3% - 0.0% 277,090 18.3% 18.7% 6,437 6,437 $2.94

Total 41 1,517,619 277,090 18.3% - 0.0% 277,090 18.3% 18.7% 6,437 6,437 $2.94

EMERYVILLE

A 15 2,668,348 196,135 7.4% 17,927 0.7% 214,062 8.0% 8.2% 3,869 3,869 $3.63

B/C & Flex 44 1,683,088 236,666 14.1% - 0.0% 236,666 14.1% 11.5% (43,457) (43,457) $2.60

Total 59 4,351,436 432,801 9.9% 17,927 0.4% 450,728 10.4% 9.4% (39,588) (39,588) $3.09

ALAMEDA - MARINA VILLAGE

A - - - - - - - - - - - -

B/C & Flex 51 1,600,673 158,363 9.9% 19,000 1.2% 177,363 11.1% 18.9% 124,513 124,513 $2.21

Total 51 1,600,673 158,363 9.9% 19,000 1.2% 177,363 11.1% 18.9% 124,513 124,513 $2.21

ALAMEDA - HARBOR BAY

A - - - - - - - - - - - -

B/C & Flex 28 1,684,784 469,542 27.9% 11,158 0.7% 480,700 28.5% 27.1% (24,394) (24,394) $2.09

Total 28 1,684,784 469,542 27.9% 11,158 0.7% 480,700 28.5% 27.1% (24,394) (24,394) $2.09

OAKLAND - AIRPORT

A 2 455,697 37,206 8.2% - 0.0% 37,206 8.2% 8.2% - - $1.84

B/C & Flex 34 1,576,808 340,160 21.6% - 0.0% 340,160 21.6% 21.7% 1,765 1,765 $1.52

Total 36 2,032,505 377,366 18.6% - 0.0% 377,366 18.6% 18.7% 1,765 1,765 $1.55

SUBURBAN TOTAL

A 26 3,682,927 235,193 6.4% 17,927 0.5% 253,120 6.9% 7.1% 8,025 8,025 $3.37

B/C & Flex 324 12,517,798 1,630,783 13.0% 30,158 0.2% 1,660,941 13.3% 13.8% 72,287 72,287 $2.20

Total 350 16,200,725 1,865,976 11.5% 48,085 0.3% 1,914,061 11.8% 12.3% 80,312 80,312 $2.36

MARKET TOTALA 60 14,244,972 472,014 3.3% 26,273 0.2% 498,287 3.5% 3.9% 56,780 56,780 $3.75

B/C & Flex 479 19,211,066 1,960,409 10.2% 46,784 0.2% 2,007,193 10.4% 10.6% 30,635 30,635 $2.33

TOTAL 539 33,456,038 2,432,423 7.3% 73,057 0.2% 2,505,480 7.5% 7.8% 87,415 87,415 $2.61

QUARTERLY COMPARISON AND TOTALSQ1-16 539 33,456,038 2,432,423 7.3% 73,057 0.2% 2,505,480 7.5% 7.8% 87,415 87,415 $2.61

Q4-15 539 33,456,038 2,484,207 7.4% 82,120 0.2% 2,592,895 7.8% 8.5% - 1,587,681 $2.33

Q3-15 539 33,456,038 2,729,609 8.2% 126,614 0.4% 2,856,223 8.5% 10.2% - 1,297,785 $2.31

Q2-15 539 33,456,038 3,268,246 9.8% 142,564 0.4% 3,410,810 10.2% 12.1% - 743,198 $2.30

Q1-15 539 33,456,038 3,863,047 11.5% 193,081 0.6% 4,056,128 12.1% 12.4% - 97,880 $2.23

Oakland Metropolitan Office Market | First Quarter 2016COLLIERS INTERNATIONAL

Asia: 39 ANZ: 192 Canada: 34 EMEA: 112Latin America: 24United States: 153

Copyright © 2016 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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MARKET CONTACTS:Ken MeyersieckManaging Director | OaklandCA License No. 00939525+1 510 433 5802ken.meyersieck@colliers.com

Antony Prokopiou, CPRCSenior Research Analyst | Oakland+1 510 433 5836antony.prokopiou@colliers.com

Marlon BurnsResearch Analyst I | Oakland+1 510 433 5832marlon.burns@colliers.com$2.5

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