san marcos creek district retail & office market analysis

THE LONDON GROUP Realty Advisors

San Marcos Creek District Retail & Office Market Analysis

Prepared For:

City of San Marcos

August 2015

The London Group Realty Advisors © 2015

Report Prepared by:

Gary London, President Nathan Moeder, Principal

Robert Martinez, Senior Analyst

El Cortez Building 701 Ash Street, Suite 101, San Diego, CA 92101

Phone: 619-269-4012 www.londongroup.com

Table of Contents

INTRODUCTION ....•..••••.••.....••......•........••.••.....•.......•..••••.••.....•••••....•..•.••••.....•.......••.••. 3

CONCLUSIONS & RECOMMENDATIONS ..•.•••...•..•.•••••••••.•..•.••..•••••.••••..•.•............••.•••.. 6 Supportable Space within Creekside .............................................................................................. ...... 7

Retail Space .................................................................................................. ................. ........... ........... ....................... ...... 7 Office Space .......................................................................... ...................................................................... ...................... 8

Land Use Design ............................................... ........... ................. .................. ................................ ..... 8

Initial Phases of Creek District ........................................................................ ....... ............................. 8

Summary of Market Analysis ........................................................................................ ........... 10 Approach to Analysis ................. ................................. ........................ .......................... .................. .... 10

Retail Market Analysis ........................................................................................... ... ......................... 10 Historical & Current Market ........................ ....................................... .... ........................... ........ ..................................... 10 Forecasted Demand ...................................................................................................... ................................................... 11

Office Market Analysis ....................................................................................... ... ........................ ..... 12 Historical & Current Market ................................................ .. ................................... .... .............................. .. .................. 12 Forecasted Demand .................................... ................. ................ .................................................................................... 13

RETAIL MARKET ANALYSIS .••..•....... .... ...••••...•.......•...•........••••..•...............•............. 14 Historical and Current Market Conditions ....................................................................... ...... ... 15

Under Construction & Proposed Projects ......................... .. ................................ ...................... 19

Retail Demand Forecast ... .......................... ... ............................................................................ 21 Housing Unit Growth ..................... .............................. ......................................... .................... ....... .. 21

Average Household Income Growth ....................................................... ............................... ............ 23

Demand for Retail Space .. ................................................................................... ....... .... ................... . 24

OFFICE MARKET AN"ALYSIS .....•••...........•.........••..••...•...•...........••••..................•..•.•.. 26 Historical and Current Market Conditions ............................. ....... ... ......... ............. ... ... ............. 27

Under Construction & Proposed Projects ..................... ....... ..................................................... 31

Office Demand Forecast. ................................... ..... .. ......... ........................................................ 33

Reconciliation of Supply and Demand ..................................................................................... . 36

APPENDIX •••..••..............••••••.•••••............•••••••••••.....•.•••••.••.••...•••.•..•..•....•..••••.•..•.. ...•... 38 Retail: Current & Historical Conditions ........... ......................................................................... 39

Retail: UC & Proposed Projects .................................... ................................................. .......... . 45

Retail Demand Forecasts ......................................................... ............. ..... ........ ........... ....... ...... 50

Office: Current & Historical Conditions ................. ... ............................................................... 56

Office: UC & Proposed Projects ....................... ...... .................................................................. 62

Office Demand Forecasts .............................................. ..... ....... ................................. .. ............. 67

Office Reconciliation Tables ..................................................................................................... 78

CoMP ANY PROFaE ....•.......•..•..................••..•..........•............••....•.................•..•....... 82

CONTACT INFORMATION •...•.•.••••......•....•.••••••.•••.....••••.•.••••..•••.•••••...•...•....•..•..•....•..• 83

San Marcos Creek District City of San Marcos

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INTRODUCTION

The London Group Realty Advisors has completed a comprehensive economic analysis which focuses on whether the San Marcos Creek District Specific Plan realistically addresses the commercial retail and office needs of the community. Adopted in 2007, the plan area consists of approximately 214 acres along San Marcos Creek, bounded on the north by San Marcos Boulevard, on the south and west by Discovery Street, and on the east by Grand A venue and SR-78.

The plan projects the development of 2,300 residential units and 1,854,000 square feet of , commercial, which is comprised of 589,000 square feet of office and 1,265,000 square feet of retail. The following map depicts the Creek District relative to the other areas targeted for development (University District and San Marcos Boulevard Focus Area).

The following table details the total development planned for these three districts, which includes 6,407 residential units and approximately five million square feet of commercial space.


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2,235,776 270.000 32049'.l

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This report addresses the fo llowing questions regarding the long-tcnn market opportunity for commercial i:ctail and office in the. Creek Districc:

• ls che plan valid, in lCmlS of market demand and opportunity for commer<:-ial, including rt..'tail and office space?

• How much commercial square footage cao reasonably be suppof1ed by the market and "capcured" within the Distric.t?

• How is the nearby University District as well as the mixed use toning on the non.h side of SMB complimentary or competitive with the Creek District?

• Whal are the characteristics and attributes of the District and arc they conducive. for commcrci3l?

+ What is the current and projected level of competitive supply in the area?

• How do 1he experiences or the major rc1ailcrs in 1his marlcet translal'c 10 prospective opportunities in the commun.ity?

+ What type of overall commercial uses arc appropriate within the conlcxt of 1he six,-cific plan and overall markel demand?

• What is the composition and size oflhc. target market?

• How can we target this matket so that its potential is maximiicd?

• What is the best planning tCSponsc to this infom1a1ion?

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Research for 1his projecl was completed in Augus1 2015. Conclusions and reeommcndations are strictJy those of The London Group Realty Advisors. Users of1his infonnation should recognize tba1 assump1jons and projections contained in l.rus report will vary from the actual experience in the marketplace. 1llerefore, The London Group Really Advisors is not rcs.poosiblc for the ac1ions taken or any limitations, financial or otherwise of property owners, investors, developers, lenders, public agencies, opcrntors or tenants,

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CONCLUSIONS & RECOMMENDATIONS

·me London Group Really Advisor.; has completed a comprehensive market analysis that analyzes the loog-tcnn growth and demand for commercial retail and office in lhe San Marcos Creek Oistricl Based on our analysisJ we have concluded that the plan needs 10 be rc~cvaluatcd so that it better renocu current and projected market-based land \JSC requirements.

Our study concludes that ther.e---is ln11ufficicn t demand that wlll be-.achievt..d o·ver tht next £l5 years (20 15 to ~050)1

10 support the amount of re1aH and office .space,that is contained in the combined U__o.iversity,Di.1tric1, Creek Oistriet iu1d..San 'Marcos .Bh•d f'ocu! Are&.

These three areas combined arc planned 10 tolalZ.-J:miUlOlfSquatdJCCt of rctall and:..2. Lm,illion square reet of 9ffice2•

Our analysis has determined that San Marcos is anticipated to ndd 7,266 housing units by 2050. Residents in thcse&filS arc es1imated to geoentle SI S7.9 million in new rc1ail cxpcodin1rcs. which will supp0r{371,t _ to..451-1207}qy_W:fccl of new retail space.

~ pcese11ts an oyersJJPWri2(J .,8 million to b.9 miUio.n..,sgual'C ree, of retail SR!l&e, as currently -pJanned.JSee Reu,il Market Anal)"is)

We projccc that S,619 office jobs will be added to Sao Marcos by 20SO, which will require J .2 million square feet of new office space. Based on the forccasted growth anticipated from lb§ combined three Sao Marcos plannina areas, tbcre will be an suimated ovenuPP.IY or 900,000 Sguaoo fees ofoffice. (See Office Mark.el Analysis)

As pan of our s.tudy we have also cvaluaH..-d the long-tenn supply and demand levels of the sum>1.mdiog five North County citi,cs to detennine whether San Marcos can increase matket capture due to shortages in other submarkeLS. Our 1.malysis has detennined that each of the four other NonJ, County s·ubmarkets (Carlsbad. Esoondido, Vista and Oceanside) will contain an adequate supply of fulure space tbal can accorrunodate forccasted growth.

It is our overarching n .. "Commendation that San Marcos re 0 concep1uali~c plans so that they arc in closer a.lignmenL with spendjngand occu~ncy capacities generated from t"orccasted plans for new housing growth, as well as 01hc.r factors, as detailed in this report. The foltowing sections offer insight and further recommcnda1ions based on the economic potential of lhc Crcck District.

1 Ow 11naly$i:11 is ~sod oo the 201 S lO ?OSO•time period that is ttO«ted 10 the SANO AG Scriu 13 f<lffi.::a,t, 2 Including medical office .spau.

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Supportable Space tt·ithin Creek.side

Retei/Space

The Creek: District is not sufficiently dense to support 1.3 million square fee1 of retail. To suppon this amount of space in the Creek, Oistric1 alone, San Marcos would have to add a 101aJ o( 2 000 households 10 the market. This is significantly more than lhe q ,266 units currently forecastcd by 2050.

Bnsed on the 2,300 residential units currently planned for the Creek DiMrict. only 120,000 to 140,000 square feet of retail space is supportable, aad this figure represents aU types of retail expendi1ures,l For the 1ypc of retail that caters to the daily needs of local residents (e.g. neighborhood expenditures), 011Jy one•thitd or 40,000 10 46.000 square feet i5 supportable.

For any significant aruount of retail to be viable in the Creek District it must attract retail expenditures from other commercial areas. This is of notable concern in light of the fact tllat most businesses ,dong the San Marcos Boulevard corridor have not achieved satisfactory sales revenues. There is no "net., upside to the Cily to fosccr retail cannibalit..ation from one area to anolhcr

This will not change i.n the foreseeable future, especially if the specific plnn is developed oul on a "parcclizcd'' basis wi1houl a master developer to create a larger project and develop the critical mass required.

As currently configured in the pltul with retail on the ground in dominan1ly re.sidential projects, 1bc retail will undoubtedly struggle, for at least two reasons:

I. There is an insufficient number of households 10 suppon lhe rctaj~ and

2. Configured as it is with retail below residential and spread throughout the planning district, there is insufficient retail density, normally achieved in a; shopping center.

With no large anchor, or "attractor", to draw customers tn !he area, the rcquire.inent to iuchzdc. commercial space on the ground levels of dominantly residential structures will result in either long tcmt vacancies or leasing of these spaces to Class B occupanis paying below market lea1c rates. This will likely foster lower sales and higher tenant turnover. It also results in prospective mixt"d-usc projec1s being harder to finance, because t11e rcsiden1ial clements must subsidize Lhe retail below.

ln effect, the ground level commcrcia.l requirement as envisioned in the Plan would have the impact of eliminating, delaying or marginalizing new development

1 These figures rcR«l tbe cuncot i~t or OC'llit1c lnlcmcl s11lc:s on "bricks ~od 11» r1llr'' rcc11il siorcs. We hive ,u,;coumed for 11% or annual rtiail ex.pendirutcs and bavc t;;,ppcd i1 at 20% (ot our longct-tenu forct".lJC.

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An infonned decision is required as to where tQ focus on-ice growth. There is a significant disconnect bclween what will be demanded and what LS being planned. Our research demonstrates demand for 1.2 miJlion..sql:&ate.fcet, bu1 a total of2. l million square feet is planned within the Creek

,_,Dil· il!,ii·:,t1.,_Uoivcrsi1y District and Sao Marcos 81vd. Focus Area. Combined, this is a projected 900 oo·o quare-foot oyers·upplY.,over the next 3S yea.rs.

We recommend that the University District be supported as tl1e pnonty for future office development While no commerciaJ office is yet under construction, because it is in initial phases of construction, this Oistric1 is likely to see commerti.il office development soooer. Because it is in close proximity to the university, it makes sense from a planning J)Cl"$pcctive to focus commercial dcvelopinent here. Universities have a way of supporting and fostering new employment, s1artups and relocated firms. Over time, 1hc other planning areas would capture spillover demand from the University District.

Land Use Design

We recommend tha1 lhe downtown ·•main street"' focus within the Creek District plan be abandoned. 1·0 be successful, it would require much more density tha.n in current plans to create the sense of place :ind subsidize the themi,ng clements, plazas and ga1hc:ring places. A critical mass that would include buildings that arc six to eight stories (or more) 10 activate the street level commercial would be required. High dcnsi1y is noccssary to gu.arantcc retailers a steady customt!r base throogllout all hour, of the day.

There is already a mafo street near the Creek Dis1ric1 - San Marcos Boulevard. h is in dire need or City nunuring. h should be supponed as the commercial corridor while the Creek Di.stri,ct is redesigned. Therefore. we recommend 1ba1 commercial land uses be rocused along San Marcos Boulevard and not diverted. San Marcos Boulevard can be redesigned to encourage pedestrian 1raffic through setbacks, landscaping, signage, expanded bike lanes, etc. The focus should be retail and commercial tha1 is 'acti\•e' along San Marcos Blvd - not on a parallel street that tequirt$ lrnffic to be diverted.

The aren be1wecn San Marcos Boulevard and !he creek would be dominantly, ff not exclusively, residential. Perhaps developers could be encouraged to support the walking Md trail systems adjacent co the creek by including some small cafes or neighborhood retail that would be developed on some strategic. comers. But the beuer goal is to create a pedestrian connection between the residences and the commercial aJong San Marcos Boulevard.

Initial Phases of Creek Di.)·1ric1

~ initial pha!iCS or the Creek District should revolve around an exciting plan that revi1aHzes San Marcos Boulevard as a pedestrian corridor with commercial development The plan s.hould include the dual goal of: I) revitalizing the c,xisting retail along San Marcos &ulevard; and 2) making the Creek District a highly desirable place to live.

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The emphasis should be on connecting the residential elements of the specific plan to commercial. The goal of achieving a mixed-use environment should be to integrate land uses by creating connections and public spaces. It is not necessary to integrate these elements into the same project or parcel. Laying out such a plan would excite developers because they can participate in creating a plan that encourages people movement, gathering and recreating throughout the larger community. This is much different that creating a parallel street of mandated ground level retail.

The near-term focus should be to create residential projects along the creek. We do not recommend allowing developers to quickly build out lower density townhome projects. Rather, higher density and higher quality development should be encouraged in the plan and through various bonus density techniques. The emphasis should be on the creation of premium lifestyles for the residents, including open space, outdoor amenities and walking/biking trails.

This is an opportunity to create a unique living environment, particularly because of the significant amount of developable acreage. In doing so, the Creek District becomes highly desirable place to live. And with that comes higher incomes and more retail spending that would accelerate retail development nearby. In later phases of development, ground floor retail on strategic comers with plazas or other connecting attributes would perhaps become feasible.

The land use recommendations for the Creek District in this report are economic observations based on market dynamics and identified development opportunities. Detailed site development yields, as well as specific product types and densities, can be achieved through further analysis and study.

Strategic Observations

In evaluating the current plan for the Creek District, we offer the following strategic observations:

Public Infrastructure Costs: The current plan estimate calls for $36.7 million in public infrastructure costs to be borne by developers. This is a significant cost that equates to nearly $9 per square foot of gross building area based on the current Creek District plan. This represents an increase in projects costs of 2.5% to 5.0%. It is critical to evaluate feasibility of any proposed plan to ensure that sufficient density is in place to absorb this fee in a way that does not result in a disincentive to develop.

Structured Parking: The Creek District's inclusion of structured parking will come as an added cost to development projects, and may not generate sufficient offsetting revenue. Therefore, density must be sufficient to subsidize the increased costs of building parking garages or underground parking.

Additional Development Projects/Areas: The Creek District is not the only area within San Marcos (or surrounding cities) that is positioning to accommodate new development. Within San Marcos, there is the University District, the Fenton project and the San Marcos Blvd. Focus Area, among other various development sites. We recommend that the Creek District plan be carefully evaluated within the context of these other projects and plans to ensure a complimentary fit. Perhaps the biggest goal is to create market distinction through targeted users and consumers, timing/phasing, thematic concept, design and synergy with the surrounding community


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Summary of Market Analysis

The purpose of this section is to summarize the comprehensive market analysis that addresses the future development capacity for commercial retail and office space as it relates to the Creek District master plan.

Approach to Analysis

To analyze the long-term demand for space, we utilized the SANDAG Series 13 forecast that projects housing, income and job growth through 2050. We utilized this growth trend as the basis for what future development is needed to accommodate, or house, future retail and office demand.

While we focus on the City of San Marcos as the focal submarket of our study, we also analyzed the forecasted supply and demand dynamics in the surrounding North County Cities for a more regional perspective on long-term growth through 2050. These cities include Carlsbad, Escondido, Vista and Oceanside.

Retail Market Analysis

The following bullet points summarize our retail market analysis, which address the historical growth in the market, current projects under construction and proposed, as well as the forecasted demand and reconciliation of supply to accommodate growth. For more information see the Retail Market Analysis section of this report.

Historical & Current Market

.. The retail inventory in San Marcos currently stands at 4.7 million square feet of which 4.2 million square feet is occupied. This results in a vacancy rate of 10.3%.

'* Since 2006, San Marcos decreased its retail inventory by approximately 10,000 square feet. The total net absorption ( or change in occupied space) in San Marcos was negative 262,621 square feet or 29,000 square feet per year during the 2006 to 2015 period. This was the greatest amount of negative net absorption among the five North County Submarkets.

• Carlsbad is the strongest retail market at a vacancy rate of only 3 .1 % ( 168,137 square feet vacant). San Marcos is currently experiencing the highest vacancy rate at 10.3% (481 ,773 square feet vacant).

.. Since 2006, Carlsbad experienced the greatest growth by adding approximately 655,823 square feet (absorption of 590,479 square feet). Escondido experienced similar growth by adding 567,193 square feet ( absorption of 570,250 square feet). While Vista added 220,032 square feet, there was little absorption (38,132 square feet). Both San Marcos and Oceanside experienced negative absorption at 262,621 square feet and 109,097 square feet, respectively.


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• Based on only those projects lhat are under construction or proposed., there arc a total of 1.S7 mmion square feet of future retail space in We five North County Submarkets. Carlsbad has the most retail space currently under consuuction or proposed at approximately 8S3,000 square feet. San Marcos currently bas approximately 190,000 squnre feet under cons11uc1jon or propo$ed. ThciC figures do not include land 1ha1 is vacant or underutilized that can accommodate retail developincnt in the fuu.1rc

Eer,;ct,s,red Dtrna11d

+ In retail market analysis, the basis for retail demand is "rooftops" or households that shop at retail establishments. ln total, there are 30,967 housing units that arc anticipated to be added in the five North County Submarltcts between 2015 and 20SO. San Marcos is anticipated to add 7,266 w1its, which represents 23% of tota.l growth. Vista is forccastcd to experience the most groW1h at 9,264 units (30% of 101aJ growth),

• In terms or household income, Carl$bacl is anticipated co continue to be 1hc mos1 amuenl in tcnns of income with an average income ofSl2S,909 by 20SO. San Marcos is forccasc to have the second highest average household income at S93.I 16 in 2050.''

• The following bullet points de1ail the supponable reiail square feet based on future growth,

o ~ n Marc.9s: The z,U6 bouseholdi, arc csti.outlcd to generate S1S7.9 million in new rctnil expe~ itures, which supPorts'37 583 to 451,207 sguare feet of new retail development.

o Carlsbad: The 4,105 household.$ are estimated to ge11er.ue $122 million in new re1ail expenditures, which supports 287,164 to 348,699 square feet of new retail development.

o Escondido: The 5,739 households arc estimated 10 generate $106 million in new retail expenditures, which suppons 249,442 to 302,894 square feet of new retail development.

o Ywf: 'fhe 9,264 households arc estimated to generate $180.2 million in new retail c.xpendilW'C$, which supports 423,902 to S14,738 square rcet of new retail development

o Oceanside: The 4,593 households arc estimated to generate $98.4 million in new re1ail expenditures, which suppons 231,48'3 10 281 ,087 square feel of oew retail development.

• Combined as a single region, these five North County Subm3rkcts arc anticipated to 11dd 30,967 homes be1wecn 2015 and 2050. This growth is estimated to gen<.,·rtne $664,S m.illion in annual retail expenditures, which supports approximately 1.6 million 10 1.9 million square feet of uew retail development.

'ln«>IJIC$ IU'C in cuncnt 201.S dollars.

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Office Market Analysis

The following bullet points summari.ze our office mark.el analysis, which address the historical growth in the market, current projects under construction and propo$Cd, as well as the fon.."Casted demand and reconciliation of supply to accommodate growth. For more information see.~ Marlcet Analysis section of this report.

lli.Woricol & Current Market

• The large.st office market in lhe North County Submarkeis ls Carlsbad at 6.8 million square feet. However. Garlsbad is currently experiencing a high vacancy rate at 18.7%. San Marcos is the smallest market of the five North County Submarkets with I .S8 million square fee1. Currently I .38 million squ,'lrc feet is occupied, which results in a vacancy tate of 12.3%.

• Although it is the smallest markel, San Marcos-has added the second largest amount of office space at 615,000 sq·uarc foet (38,000 square feet per year) since 1999. The total net absorption (or change in occupied space) in San Marcos for Lhe same time period was approximately 438,000 square feet or 27,000 square feet per year.

• Carlsbad has captured. by far. the most growih in the North County, Its inventory grew by a total of2.8 million square reel with 2.15 million square feet being absorbed. On an annual basis, this marke1 grew by approximately 177,000 square feet per year wi1h average annual absoiption of approximately 134,000 square feet.

• While having the smallest inventory of office space. San Mmos 1cchnically captured the second largest amount of new growth behind Carlsbad. However, outside of Carlsbad the remaining markets generally experienced the same amounl of growth. San Marcos increased by 615,000 square feet followed by Escondido (579,000 S.F.), Vista (459,000 S.F.) and Oceanside (396.000 S.F.).

• Based on only those projects 1ha1 arc under construc1ion or proposed, there arc a total of 2.5 million square feet of future office space in !he five North County Submarkcts. San Marcos currently has the most office space in the developmem pipelioc at approximately 1.S million square feec. The bulk of this inventory is planned for North City Center (1.2 million square feet). It iii important 10 note that the numbers ln these table exclude land 1ba1 is vacant lhat can accommodale oniee developmc-nt in the fu1ure.5

' For example, whiJe I.here arc only IOS,420 &qUatc feet of furu.rt- sp:tee in Oceanside. 1bcre are 114 aaes ofbnd off Rancho dd Oro Rd (across frmn €1 Coni,:on) th111 rq,rescn~ 4./:)7 million square feel of cmpktymtn1 sp.~-t.

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Forecasted Demand

• We can extrapolate the jobs that are located in office space by observing the ratios of office jobs in each employment sector. For the North County cities combined, these ratios result in 51,327 office jobs in 2015. As ofQTD 2015, there are 12.1 million SF of occupied office space. This results in an estimated 236 square feet per employee.

• Our forecast through 2050 projects office demand based on 200 square feet per employee, which is consistent with contemporary office trends and open workspace environments. Based on this metric, we forecast that 16,360 jobs will be added in the North County Submarkets by 2050. San Marcos is anticipated to add 5,619 office jobs, which is the largest capture (34%) of the North County cities.

• In terms of demand, the 16,360 new jobs in the North County Submarkets will support 3.27 million square feet of office space. Accounting for the currently vacant space that is yet to be absorbed, a total of 2. 7 million square feet of new office construction is required.

• As it relates to San Marcos, office space demand is forecasted to be 1.12 million square feet through 2050, which is based on 5,619 new office jobs. This submarket will required approximately 1.2 million square feet of new construction by 2050.


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RETAIL MARKET ANALYSIS

The purpose of this section is to detail our comprehensive retail market analysis. We analyzed the retail markets in North County, with particular emphasis on San Marcos. To analyze the forecasted development potential (e.g. supply and demand balance), we divided this analysis into the following sections:

• Historical and Current Market Conditions - in which we detail the historical growth of the retail markets, as well as the current supply of available space to accommodate future demand.

• Under Construction and Proposed Projects - in which we detail the projects that are currently under construction or proposed with some level of planning. This analysis excludes any zoned land that could represent additional future supply.

• Demand Forecast - in which we detail our forecast of demand for retail space. The forecast is predicated on the SANDAG Series 13 Forecast that includes projects for the 2015 to 2050 period.

• Reconciliation of Supply and Demand - in which we reconcile the supply of space with the square footage demanded to determine whether the future supply is adequate to accommodate future demand.


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Historical and Current Market Conditions

The following table details the current and historical market conditions in the North County Submarkets.6 The retail inventory in San Marcos currently stands at 4.7 million square feet of which 4.2 million square feet is occupied. This results in a vacancy rate of 10.3%.

Since 2006, San Marcos decreased its retail inventory by approximately 10,000 square feet. The total net absorption ( or change in occupied space) in San Marcos was negative 262,621 square feet or 29,000 square feet per year during the 2006 to 2015 period. This was the greatest amount of negative net absorption among the five North County Submarkets. Oceanside was the only other submarket that experienced negative net absorption at 109,000 square feet - less than half of San Marcos.

San Marcos

Current Conditions

Summary of Retail Inventory North Counn· Suh111arket.1 ( 2006-:!015)

Carlsbad

Current Conditions

Escondido

Current Conditions TotalRBA 4,688,378 Total RBA 5,350,652 Total RBA 9,792,276 Occupied SF 4 ,206,605 Occupied SF 5,182,515 Vacancy Rate 10.3% Vacancy Rate 3 .1%

Historical Growth 2006-2015 Historical Growth 2006-2015 Total Inventory Increase (10,222) Total Inventory Increase 655,823 Av. Inventory Increase Per J1? (1,136) Av. Inventorv Increase Per J1? 72,869 Total Net Absorption (262,621) Total Net Abso1ption 590,479 Av. Net Absorption Per J1? (29,180) Av. Net Absorption Per J1? 65,609

Vista Oceanside

Current Conditions Current Conditions TotalRBA 5,222, 133 Total RBA 7,687, 179 Occupied SF 4,807,601 Occupied SF 7,118,407 Vacancy Rate 7.9% Vacancy Rate 7.4%

Historical Gro"\\'th 2006-2015 Historical Growth 2006-2015 Total Inventory Increase 220,032 Total Inventory Increase 139,025 Av. lnvento1y Increase Per J1? 24,448 Av. Inventorv Increase Per J1? 15,447 Total Net Absorption 38,132 Total Net Absorption (109,097) A v. Net Absorption Per J1? 4,237 Av. Net Absorption Per J1? (12,122)

Source: The London Qoup Realty Advisors, Costar

6 Retail data in Costar begins in 2006, in contrast to office data that begins in 2009.


Occupied SF 9,332,755 Vacancy Rate 4.7%

Historical Growth 2006-2015 Total Inventory Increase 567,193 Av. Inventory Increase Per J1? 63,021 Total Net Absorption 570,250 Av. Net Absorption Per J1? 63,361

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The following chart depicts the current vacancy rate in each submarket. Carlsbad is the strongest retail market at a vacancy rate of only 3.1 % (168,137 square feet vacant). San Marcos is currently experiencing the highest vacancy rate at 10.3% (481,773 square feet vacant).

It is important to note that a vacancy rate that is below 10% is generally healthy for retail. Any vacancy rate that approaches 5.0% may represent empirical demand for additional retail space.

1700,000

Current Retail Market Conditions QTD 2015 North County Submarkets

12.0%

-,vacant S.F. -o-Vacancy %

600,000

1500,000

1400,000

300,000

200,000

100,000

0 San Marcos


Carlsbad Escondido Vista Oceanside

l 10.0%1

s.oo/o I

4.0%

2.0%

0.0%

Source: The London Group Realty Advisors, CoStar

o/83

The two charts on the following page depict the historical growth of the retail markets since 2006. Carlsbad experienced the greatest growth by adding approximately 655,823 square feet (absorption of 590,479 square feet). Escondido experienced similar growth by adding 567,193 square feet ( absorption of 570,250 square feet).

While Vista added 220,032 square feet, there was little absorption (38,132 square feet). Both San Marcos and Oceanside experienced negative absorption at 262,621 square feet and I 09,097 square feet, respectively.

It is important note that this data begins near the peak of the last economic cycle (2006-2008). While we do not utilize past market growth to dictate future demand, we do include this information for perspective on the market.

For more information on historical and current market conditions, please refer to the additional tables and charts in the Appendix (see Retail: Current & Historical Conditions).


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Total Retail Inventory Growth (2006-QTD 2015) North County Submarkets

,oo.,oo I

600,000

--- ---- ------ - - -

Cl Total RBA Growth !!I Total Absoprtion

400,000

220,032

200,000 139,025

38,132

0 (10,222)

(109,097)

(200,000) +----

(262,621)

(400,000) San Marcos Carlsbad Escondido Vista Oceanside


Average Annual Retail Inventory Growth (2006-QTD 2015) North County Submarkets

80,000

60,000

40,000

20,000 · - - - - - -

0 (1,136)

(20,000) +------

(29,180)

(40,000) San Marcos


72,869

Carlsbad

Cl RBA Annual Growth • Annual Absorption

15,447

4,237

(12,122)

Escondido Vista Oceanside

Source: The London Group Realcy Advisors, CoStar

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Under Construction & Proposed Projects

The following table depicts the future retail space that is currently under construction or proposed in each submarket. This figures represent known projects that are currently being planned and are in the "pipeline" for future development.

Based on only those projects that are under construction or proposed, there are a total of 1.57 million square feet of future retail space. Carlsbad has the most retail space currently under construction or proposed at approximately 853,000 square feet. This includes the large regional center being planned by Caruso Affiliated at Cannon Road that comprises approximately 585,000 square feet (currently anchored by Nordstrom). San Marcos currently has approximately 190,000 square feet under construction or proposed.

It is important to note, however, that these figures exclude any land that is vacant or underutilized that can accommodate retail development in the future. It also excludes any general plans or specific plans in the North County cities. For example, in San Marcos, there is approximately 676,000 square feet within the University District alone that is yet to be formerly proposed or planned. If this was included, then San Marcos would have approximately 866,000 square feet of future retail space.

For more information on the specific list of projects in each market see Office: UC & Proposed Projects in the Appendix.


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Future Retail S.F. - Under Construction & Proposed North County Submarkets

1,000,000

800,000

600,000

400,000

200,000

0 San Marcos


853,140

Carlsbad

fl Under Construction and Proposed S.F.

75,400 83,863



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Retail Demand Forecast

The purpose of this section is to detail our forecast of demand for retail space. In retail market analysis, the basis for retail demand is "rooftops" or households that shop at retail establishments. We utilized the SANDAG Series 13 Forecast that projects household growth from 2015 through 2050.

Housing Unit Growth

The following chart details the number of forecasted household growth in each of the North County Submarkets. In total, there are 30,967 housing units that are anticipated to be added in these five submarkets between 2015 and 2050. San Marcos is anticipated to add 7,266 units, which represents 23% of total growth. Vista is forecasted to experience the most growth at 9,264 units (30% of total growth).

10,000 l 9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0 ,-

7,266

San Marcos

San Marcos Creek District City of Sa11 Marcos

Forecased Household Growth (2015-2050) North County Submarkets

9,264 o Housing Unit Growth

5,739

4,105

Carlsbad Escondido Vista

4,593

Oceanside Source: The London Group Realty Advisors, SANDAG

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The following table details the growth in housing units from 2015 through 2050 as forecasted SANDAG. By 2050, San Marcos is expected to have the fewest number of households at 37,337. Oceanside is anticipated to have the greatest number of households at 70,942.

SANDAG Forccasted Housing Growth 2015-2050 '.'lmth County Submarkets

SAND AG Forecasted Housing Growth for San Marcos (Total Units)

San Marcos Mobile Home Multifamily Single Family- Detached Subtotal

Carlsbad Mobile Home Multifamily Single Family- Detached Subtotal

Escondido Mobile Home Muhifumily Single Family - Detached Subtotal

Vis ta

Mobile Home Muhifumily Single Family - Detached Subtotal

Oceanside Mobile Home Muhifumily Single Family - Detached Subtotal

2015 (Est.)

3,640 10,822 15,609 30,071

1,314 14,086 30,999 46,400

3,739 18,632 27,924 50,295

1,956 11 ,487 17,475 30,917

3,434 20,420 42,496 66,350

2020 2025

3,640 3,640 12,629 15,354 16,356 16,630 32,625 35,624

1,315 1,315 14,877 15,339 32,256 32,394 48,448 49,048

3,739 3,739 21,448 22,947 28,377 28,302 53,564 54,988

1,886 1,855 11 ,484 13,242 17,642 17,787 31,012 32,884

3,303 3,303 21,518 22,073 42,996 43,200 67,817 68,576

2030 2035 2040

3,640 3,640 3,559 15,426 15,456 17,105 16,692 16,699 16,737 35,758 35,795 37,401

1,315 1,315 1,315 15,738 15,939 16,167 32,576 33,007 33,009 49,629 50,261 50,491

3,739 3,739 3,739 23,109 23,316 23 ,417 28,408 28,512 28,604 55,256 55,567 55,760

1,855 1,855 1,855 14,264 15,532 17,327 17,909 17,920 18,098 34,028 35,307 37,280

3,303 3,303 3,299 22,880 23,729 23,812 43,323 43,363 43,501 69,506 70,395 70,612

2045 2050 Total

3,547 3,547 (93) 17,136 16,971 6,149 16,737 16,819 1,210 37,420 37,337 7,266

1,315 1,315 1 16,167 16,167 2,081 33,010 33,023 2,024 50,492 50,505 4,105

3,739 3,739 0 23,714 23,650 5,018 28,568 28,645 721 56,021 56,034 5,739

1,855 1,855 (101) 19,216 20,167 8,681 18,116 18,159 685 39,187 40,181 9,264

3,299 3,299 (135) 23,893 23,934 3,514 43,588 43,709 1,213 70,780 70,942 4,593

Total 224,032 233,466 241,120 244,111 241,325 251,s44 2s3,900 254,999 ! I 30,961 J

Source: The London Group Realty Advisors , SANDAG


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Average Household Income Growth

The North County Submarkets are forecasted to experience an increase in average household income. This is due to the changing demographics and lack of developable land that requires higher incomes to afford the cost of living in San Diego.

The following table summarizes the growth in average household income based in current 2015 dollars. Carlsbad is anticipated to still be the most affluent in terms of income with an average income of$125,909 by 2050. San Marcos is forecast to have the second highest average household income at $93,116 in 2050.

$140,000 l $130,000 ~

I

$120,000

$110,000 I

$100,000

$90,000

$80,000

$70,000

$60,000

$50,000

$40,000

Forecased Average Household Income Growth (2015$) (2015-2050)

$93,116

San Marcos

North County Submarkets

$125,909

$79,497

Carlsbad Escondido

0 2015 Av. Income

a 2050 Av. Income

$76,874

Vista

$90,041

Oceanside Source: The London Group Realty Advisors, SA~~AG _____ I


Page23of83

Demand for Retail Space

We have calculated the square footage of retail space that can be supported based forecasted housing unit and income growth. The following details our methodology:

, We -utilize the 2007 Census of Retail Trade from the U.S. Census Bureau, which demonstrates that 34.02% of income represents retail expenditures (excluding auto related and parts).

', Based on the U.S. Census Annual Retail Trade Survey, approximately 11.0% of retail expenditures are internet expenditures. We have subtracted internet expenditures from retail expenditures to determine the "net" available retail expenditure amount that is available to support "physical" retail space.

, We then divide the available retail expenditures in the market by the average sales volume required by retail centers and establishments. Based on the ULI Dollars and Cents of Shopping Centers, the 2015 adjusted annual average sales volume is $388 per square foot for Convenience, Neighborhood, Community, Super Community and Regional retail centers. We have utilized a range of $350 to $425 per square foot (midpoint of $388 per square foot).

The following bullet points and chart details the supportable retail square feet based on future growth. The detailed forecasts for each North City Submarket is included in the Appendix (see Retail Demand Forecasts).

• San Marcos: The 7,266 households are estimated to generate $157 .9 million in new retail expenditures, which supports 371,583 to 451,207 square feet of new retail development.

• Carlsbad: The 4,105 households are estimated to generate $122 million in new retail expenditures, which supports 287,164 to 348,699 square feet of new retail development.

• Escondido: The 5,739 households are estimated to generate $106 million in new retail expenditures, which supports 249,442 to 302,894 square feet of new retail development.

• Vista: The 9,264 households are estimated to generate $180.2 million in new retail expenditures, which supports 423,902 to 514,738 square feet of new retail development.

• Oceanside: The 4,593 households are estimated to generate $98.4 million in new retail expenditures, which supports 231,483 to 281 ,087 square feet of new retail development.

Combined as a single region, these five North County Submarkets are anticipated to add 30,967 homes between 2015 and 2050. This growth is estimated to generate $664.5 million in annual retail


o/83

expenditures, which supports approximately 1.6 million to 1.9 million square feet of new retail development.

i Forecased Retail Expenditures and Supportable Retail S.F. 2015-2050

1,200,000

1,000,000

800,000 j

600,000

I

4-00,000 j I

200,000 1

0

$157.9 M

451,207

San Marcos

North County Submarkets

r 1:11 Low Supportable Retail S.F.

c 1 High Supportable Retail S.F.

~ Retail Expenditure Growth

$106.0 M

348,699 302,894

Carlsbad Escondido

$180.2 M

514,738

Vista

r $200 Ml I

I $180 M I

~ $160 Ml I ; $140 Ml I

~ $120 Ml

: $100 M $98.4 M I

r $SOM

I $60M 281,087

$40M

$20M

Oceanside

I

Source: The London Group Realty Advisors, SAND AG, UL! Dollars & Cents of Shopping Centers, U.S. Census '------·- ----------


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OFFICE MARKET ANALYSIS

The purpose of this section is to detail our comprehensive office market analysis. We analyzed the office markets in North County, with particular emphasis on San Marcos. To analyze the forecasted development potential (e.g. supply and demand balance), we divided this analysis into the following sections:

+ Historical and Current Market Conditions - in which we detail the historical growth of the office markets, as well as the current supply of available space to accommodate future demand.

• Under Construction and Proposed Projects - in which we detail the projects that are currently under construction or proposed with some level of planning. This analysis excludes any zoned land that could represent additional future supply.

Demand Forecast - in which we detail our forecast for office space growth. The forecast is predicated on the SANDAG Series 13 Forecast that includes projects for the 2015 to 2050 period.

• Reconciliation of Supply and Demand - in which we reconcile the supply of space with the square footage demanded to determine whether the future supply is adequate to accommodate future demand.


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Historical and Current Market Conditions

The following table details the current and historical market conditions in the North County Submarkets. The largest office market in the North County Submarkets is Carlsbad at 6.8 million square feet. However, this while the largest, it is currently experiencing a high vacancy rate at 18. 7%. San Marcos is the smallest market of the five North County Submarkets at 1.58 million square feet. Currentlyl .38 million square feet is occupied, which results in a vacancy rate of 12.3%.

Although it is the smallest market, San Marcos has added the second most amount of office space at 615,000 square feet (38,000 square feet per year) since 1999. The total net absorption (or change in occupied space) in San Marcos for the same time period was approximately 438,000 square feet or 27,000 square feet per year.

San Marcos

CUJTent Conditions

Smnm,ir~· of Office Inventory North Co1111t1· S11h11wrkc1.1 ( 1 CJCJCJ-:lO 15)

Carlsbad

Current Conditions

Oceanside

Current Conditions TotalRBA 1,576,841 Tota!RBA 6,759,396 TotalRBA 1,774,279 Occupied SF 1,383,533 Vacancy Rate 12.3%

Historical Growth 1999-2015 Total Inventory Increase 614,941 Av. Inventory Increase P er YR 38,434 Total Net Absorption 438,031 Av. Net Absorption Per YR 27,377

Vista

Current Conditions TotalRBA 1,754,291 Occupied SF 1,462,928 Vacancy Rate 16.6%

Historical Grol'lth 1999-2015 Total Inventory Increase 458,872 Av. Inventory Increase P er YR 28,680 Total Net Absorption 250,754 Av. Net Absorotion Per YR 15,672

Source: The London Q-oup Realty Advisors, CoStar


Occupied SF

Vacancy Rate

Historical Growth 1999-2015 Total Inventory Increase Av. Inventory Increase Per YR Total Net Absorption Av. Net Absorption Per YR

Escondido

Current Conditions Tota! RBA

Occupied SF

Vacancy Rate

Historical Growth 1999-2015 Total Inventory Increase Av. Inventory Increase Per YR Total Net Absorption Av. Net Absorption Per YR

5,494,233

18.7%

2,833,567 177,098

2,147,743 134,234

2,520,675

2,239,411

11.2%

396,127 24,758 196,380 12,274

Occupied SF 1,525,483 Vacancy Rate 14.0%

Historical Growth 1999-2015 Total Inventory Increase 578,980 Av. Inventory Increase Per YR 36,186 Total Net Absorption 371,713 Av. Net Absorption Per YR 23,232

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The following chart depicts the current vacancy rate in each submarket. San Marcos currently experiences a comparatively low vacancy rate at 12.3%. However, at 1.58 million square feet, it has the smallest inventory of office space among the markets.

Carlsbad has historically been the premier North County office market, which includes 6.8 million square feet of space. The current vacancy in this market is 18.7% (1.3 million square feet). However, this is considered temporary as the market continues to recover.

[,, ... ,, .. !

Current Office Market Conditions QTD 2015 North County Submarkets

1 24.0%

11,400,000

l!!!!!IVacant S.F. ~Vacancy¾

I I I 11,200,000

l I

11,000,000

I I soo,ooo

i 600,000

400,000

200,000

0 San Marcos


1,265,163

Carlsbad

19.0%

14.0%1

9.0%

4.0% j

-1.0% Escondido Vista Oceanside


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The two charts on the following page depict the historical growth of the office submarkets. By far, Carlsbad has captured the most growth in the North County. Its inventory grew by a total of 2.8 million square feet with 2.15 million square feet being absorbed. On an annual basis, this market grew by approximately 177,000 square feet per year with average annual absorption of approximately 134,000 square feet.

While having the smallest inventory of office space, San Marcos technically captured the second most amount of new growth behind Carlsbad. However, outside of Carlsbad the remaining markets generally experienced the same amount of growth. San Marcos increased by 615,000 square feet followed by Escondido (579,000 S.F.), Vista (459,000 S.F.) and Oceanside (396,000 S.F.).

For more information on historical and current market conditions, please refer to the additional tables and charts in the Appendix (see Office: Current & Historical Conditions).


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,----

i 3,000,000 -

Total Office Inventory Growth (1999-QTD 2015) North County Submarkets

2,833,567

l:ITotal RBA Growth l!ITotal Absoprtion

I 2,soo,000

I I 2,000,000

t- ·---1

) __ _

I 1,500,000

1,000,000

614,941

500,000 + 396,12,- - - ·-

I O c • •

San Marcos Carlsbad Escondido Vista Oceanside

Source: The London Group Realty Advisors, CoStar ----L

r--- Average Annual Office Inventory Growth (1999-QTD 2015) North County Submarkets

------·1 200.000

I 180,000 L- -- -- - ... 111ML_. - - --- I l!lRBA Annual Growth --J.___ _ _ _ • Annual Absorption

160,000

140,000 + -- --120,000 r-100,000 i-80,000

60,000 l I

40,000

20,000 l 0

--·---

------

- ---·

San Marcos

--- - - . -- ---- - -

Carlsbad Escondido Vista Oceanside

Source: The London Group Realty Advisors, CoStar - - - - --- - ---

I


Page30 o/83

Under Construction & Proposed Projects

The following table depicts the future office space that is currently under construction or proposed in each submarket. This figures represent known projects that are currently being planned and are in the "pipeline" for future development.

Based on only those projects that are under construction or proposed, there are a total of 2.5 million square feet of future office space in the five North County Submarkets. San Marcos currently has the most office space in the development pipeline at approximately 1.5 million square feet. The bulk of this inventory is planned for North City Center (1.2 million square feet). For more information on the specific list of projects in each market see Office: UC & Proposed Projects in the Appendix.

It is important to note that the numbers in these table exclude land that is vacant that can accommodate office development in the future. 7 It also excludes any general plans or specific plans in the North County cities that aim to redevelop existing underutilized properties in the future. 8

7 For example, while there are only 108,420 square feet of future space in Oceanside, there are 114 acres of land off Rancho del Oro Rd (across from El Corazon) that represents 4.97 million square feet of employment space. 8 For example, it excludes the San Marcos Creek District plan and any office zoning along the San Marcos Blvd Focus Area.


Page JI of83

----- - - . -- --- ---------------- ---------- -~ Future Office S.F. - Under Construction & Proposed

North County Suhmarkets 1,600,000

1,514,139

1,400,000 l!l Under Construction and Proposed S.F.

1,200,000

1,000,000 1----------~------------------ - - --

800,000

60MOO I

400,000

200,000

San Marcos


706,742

Carlsbad

113,000 108,420

37,000



Page32 o/83

Office Demand Forecast

Our forecast for office space demand is based on the SAND AG Series 13 forecast, which includes projections for long-term job growth from 2015 through 2050. The table on the following page details the forecast for the five North County Cities (San Marcos, Carlsbad, Escondido, Vista and Oceanside). The number of jobs is forecast to increase from 242,686 in 2015 to 310,890 in 2050. This is a total increase of 68,204 jobs.

We can extrapolate the jobs that are located in office space by observing the ratios of office jobs in each employment sector. For the North County cities combined, these ratios result in 51,327 office jobs in 2015. As of QTD 2015, there are 12.1 million SF of occupied office space. This results in an estimated 236 square feet per employee.

Our forecast through 2050 projects office demand based on 200 square feet per employee, which is consistent with contemporary office trends and open workspace environments. Based on this metric, we forecast that 16,360 jobs will be added in the North County Submarkets by 2050.

The detailed forecasts for each North County city is located in the Appendix (see Office Demand Forecasts).


Page33 o/83

SA\'DAG fiorccastcd Joi> Gro\\th and & Estimated Oflicc Jobs Combined 1'\011h County Cities (San l\larcos. Carlsbad. Escondido. \'ista. Oceanside)

2015-2050

SAND AG Forecasted Job Growth

2015 (Est.) 2020 2025 2030 2035 2040 Agriculture and Mining 1,306 1,257 1,2 17 1,192 1,167 1,155 Construction 13,764 15,012 15,736 16,341 17,059 17,385 Education and Healthcare 23,080 25,934 27,368 28,591 30,026 30,693 Finance and Real Estate 10,119 11,296 12,046 12,589 13,248 13,652 Government 27,417 29,599 30,793 31,844 33,089 33,546 Infunnation System; 4 ,164 5,282 6,040 6,727 7,536 7,808 Liesure and Hospitality 29,5 14 33,730 36,298 38,079 40,272 41,486 Manufucturing 28,343 29,700 29,623 29,464 29,355 29,233 Office Services 7,638 8,734 9,385 9,887 10,510 10,855 Professional and Business Services 29,550 31 ,786 33,065 33,912 34,919 35,595 Retail Trade 31,121 32,730 33,580 34,168 34,894 35,387 Self..Employed 21,633 22,612 23,280 23,876 24,565 24,817 Transporation, Warehousing, and Utilities 3,666 4,664 5,319 5,872 6,545 6,800 Wholesale Trade 11,372 12,411 13,059 13,613 14,277 14,550 Grand Total 242,686 264,747 276,809 286,155 297,462 302,962

Estimated Office Employment Growth

% Office

Space Users1 2015 (Est) 2020 2025 2030 2035 2040 Agricuhure and Mining 1% 13 13 12 12 12 12 Construction 2% 275 300 315 327 341 348 Education and Healthcare 10% 2,308 2,593 2,737 2,859 3,003 3,069 Finance and Real Estate 70% 7,083 7,907 8,432 8,812 9,274 9,556 Governm:nt 50% 13,708 14,800 15,397 15,922 16,545 16,773 Infunnation System; 15% 625 792 906 1,009 1,130 1, 171 Leisure and Hospitality 1% 295 337 363 381 403 415 Manufucturing 3% 850 891 889 884 88 1 877 Office Services 100% 7,638 8,734 9,385 9,887 10,510 10,855 Professional and Business Services 50% 14,775 15,893 16,533 16,956 17,460 17,798 Retail Trade 5% 1,556 1,637 1,679 1,708 1,745 1,769 Self..Employed 5% 1,082 1,131 1,164 1,194 1,228 1,241 Transportation, Warehousing, and Utilities 15% 550 700 798 881 982 1,020 Wholesale Trade 5% 569 621 653 681 714 728 Grand Total 51,327 56,348 59,261 61,513 64,225 65,631

2045 2050 1,149 1,145

17,685 17,913

31,303 31,757

13,961 14,198

34,088 34,507 8,112 8,348

42,353 42,967

29,083 28,949

11,169 11,415 35,919 36,160

35,691 35,906 25,106 25,321

7,085 7,276

14,825 15,028

307,529 310,890

2045 2050 11 11

354 358 3,130 3,176

9,773 9,939 17,044 17,254

1,2 17 1,252

424 430 872 868

11 , 169 11 ,415

17,960 18,080 1,785 1,795

1,255 1,266

1,063 1,091 741 751

66,797 67,687

1Estimates based on previous commercial office studies performed by The London Group. For the North County cities combined (San Marcos, Carlsbad,

Escondido, Vista, and Oceanside), these ratios result in 51,327 office jobs in 2015. As of QTD 2015, there are 12.1 million SF of occupied office space. This results in an estimated 236 square feet per employee.

Source: The London Group Realty Advisor.;, SANDAG


Page34of83

I I

The following chart delineates the 16,360 new office jobs that are anticipated to be added during the 2015-2050 time period. San Marcos is anticipated to add 5,619 office jobs, which is the largest capture (34%) of the North County cities.

The chart also details the office square footage required to house the new office job growth. San Marcos is forecasted to demand 1.1 million square feet of space to house its office job growth. In total, approximately 3.3 million square feet of office space is required to support the new office job growth of 16,360 new jobs in the North County cities.

Forcasted Office Jobs and Space Growth (2015-2050) North County Submarkets

;1,soo,000 l jl,600,000

l!!!!!!!!IOffice S.F.

-O-Office Jobs

I

11,400,000 ' ·;

I

..... I I

s,ooo I

I 11,200,000 I

1,123,755 r 4,ooo I

I

' 11,000,000

I 800,000

600,000

400,000

200,000

0 San Marcos


-396,923

Carlsbad Escondido

511,507 485,079

3,000

I 2,000 I

, 1,000

I ._______,__ -.-'-------'- l o I Vista Oceanside /


Page35 of83

Reconciliation of Supply and Demand

We have reconciled the forecasted office demand with the supply of currently planned or under construction office space. The detailed tables for each of the North County Submarkets are included in the Appendix (see Office Reconciliation Tables).

Based on the forecasts for the North County Submarkets, we have determined that a total of 2.7 million square feet of office space is demanded over the 2015-2050 period. Based on projects that are currently under construction or proposed, there are 2.48 million square feet representing future supply.

At first glance, this may look like a shortage of 220,000 square feet of office space in the region. But our analysis does not take into account land that is currently underutilized or zoned commercial that represents additional development opportunities. In Oceanside, for example, there are 114 acres ofland off Rancho del Oro Road ( across from El Corazon) that represents 4.97 million square feet of employment space. This future development potential is more than adequate to correct any temporary shortage.

The chart on the following page details the reconciliation of office supply and demand by submarket. San Marcos is forecasted to demand approximately 1.2 million square feet of office space. However, based on currently planned projects, there are a total of 1.5 million square feet representing future development. This results in excess supply by approximately 305,000 square feet. In fact, after 2050, this excess supply amount represents an additional 9.5 years of supply based on the 35 year annual absorption forecast.

The Carlsbad submarket also has long term excess supply available. A total of approximately 183,000 of new construction is required. This may seem like a small amount, however, the current vacancy rate sits at 18.7% and approximately 570,000 square feet of currently vacant space will be re-absorbed as well. Overall, Carlsbad has a forecasted excess supply of approximately 523,000 square feet, which represents a 24-year supply of space after 2050.

The temaining submarkets of Escondido, Vista and Oceanside demonstrate temporary shortages in office space. This is not surprising because Carlsbad and San Marcos has been the better office markets in recent years. As result, Carlsbad and San Marcos has more projects that are being conceptualized or planned for the future. The remaining submarkets will experience an increase in commercial projects as the economy continues to recover and developers show interest in office development in the longer-term future.


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I

1,800,000 1 1,600,000

- -- ----- ---

Reconciliation of Office Supply and Demand (2015-2050) North County Submarkets

Excess

~ 1,514,139

El DEMAND: Required New Construction to Support Office Demand (S.F.)

1 1,400,000 ' l!ISUPPLY:

I

1,200,000

1,000,000

800,000

600,000

400,000

1 200,000

0 -t-·

San Marcos

Excess

~ 706,742

183,837

Carlsbad

Temporary

\ Shyage J

408,585

37,000

Escondido '

Projects Under Const. or Proposed (S.F).

Temporary

\ Shyage J 439,525

113,000

I Vista

Temporary ~ort~

459~

108,420

Oceanside

I

Source: The London Group Realty Advisors, CoStar ~-- ----- ------ --- - - -- --- ----- --- - - - ---- - -------- -


Page37of83

APPENDIX


o/83

Retail: Current & Historical Conditions


Page39of83

,----

1 4,900,000

I 4,soo,ooo

I 4,100,000

4,600,000

4,500,000

I 4,400,000 -

I 4,300,000

I 4,200,000

4,100,000

4,000,000

San Marcos Historic Retail Occupancy 2006 - QTD 2015

=Total RBA !!!!!!!!! Occupied SF -0-Vacancy %

12.0%

10.0%

C 8.0%

6.0% I

4.0%

2.0%

I 3,900,000 +'---'- ..Y.-..,__......,.j__,___,Y---'- ..Y--'--t.,l---'---'Y-__,,_ ...,... _ _,__.,.j___.___JY-__J,- 4 O.O¾J

2006 4Q 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q 2013 4Q 2014 4Q QTD 2015 I L_ _ _ _ _ _ _ ___ Source: The London Group Realty Advisors, CoStar

Period 2006 4Q 2007 4Q 2008 4Q 2009 4Q 2010 4Q 201 14Q 2012 4Q 201 3 4Q 20144Q

QID 2015

TotalRBA 4,698,600 4,736,862 4,774,762 4,793,751 4,748,605 4,653,041 4,660,016 4,665,361 4,681 ,361 4,688,378

Total Inventory .Increase Av. Inventory Increase Per YR Total Net Absorption Av. Net Absorption Per YR

Historical Retail Market Conditions San l\larcos Submarket

Occupied SF Absorption Direct Vacant SF Sublet Vacant SF Total Vacant% 4,469,226 227,968 1,406 4.9% 4,517,503 48,277 216,853 2,506 4.6% 4,513,857 (3,646) 260,905 0 5.5% 4,386,402 (127,455) 377,234 30,115 8.5% 4,235,710 (150,692) 502,475 10,420 10.8% 4,296,841 61,131 338,000 18,200 7.7% 4,369,071 72,230 271,869 19,076 6.2% 4,213,280 (155,791) 452,081 0 9.7% 4,297,238 83,958 383,398 725 8.2% 4,206,605 (90,633) 481,048 725 10.3%

(10,222) (1 ,136)

(262,621) (29,180)



Page40 o/83

Carlsbad Historic Retail Occupancy 2006- QTD 2015

5,600,000 ~--- ------------------------ -----~ 4.5%

=TotalRBA

5,400,000 l!!!!I Occupied SF 4.0%

-<>-Vacancy¾

s,200,000

3.0%

2.5%

2.0%

1.5%

4,600,000

1.0%

I 4,400,000 0.5%

, _ -

2006 4Q 2007 4Q 2008 4Q 2009 4Q 20IO 4Q 20114Q 2012 4Q 2013 4Q 2014 4Q QTD 2015

Period

2006 4Q 2007 4Q 2008 4Q 2009 4Q 20104Q 2011 4Q 2012 4Q 2013 4Q 2014 4Q

QTD 2015

Total RBA

4,694,829 4,694,829 4,752,829 4,871 ,542 4,931,360 4,931 ,360 4,924,310 5,134,722 5,339,437 5,350,652

Total Inventory Increase Av. Inventory Increase Per YR Total Net Absorption Av. Net Absorption Per YR


Historical Retail Market Conditions

Carlsbad Submarket

Occupied SF Absorption Direct Vacant SF Sublet Vacant SF Total Vacant%

4,592,036 I 00,593 2,200 2.2% 4,604,052 12,016 88,134 2,643 1.9% 4,657,202 53,150 92,081 3,546 2.0% 4,671,909 14,707 166,125 33,508 4.1% 4,735,381 63,472 165,179 30,800 4.0% 4,763,266 27,885 137,294 30,800 3.4% 4,767,857 4,591 124,577 31,876 3.2% 4,993,349 225,492 109,497 31,876 2.8% 5,164,843 171,494 172,037 2,557 3.3% 5,182,515 17,672 168,137 0 3.1%

655,823 72,869

590,479 65,609



of83

Escondido Historic Retail Occupancy 2006 - QTD 2015

10,000,000 ~=====::;----- ------- ---------- ------,- 10.0%

=TotalRBA

9,800,000 !!!!!!Occupied SF

9,600,000 -<>-Vacancy%

9,400,000 -l----

9,200,000

9,000,000

8,800,000

8,600,000

8,400,000

8,200,000

8,000,000

9.0% I

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

2006 4Q 2007 4Q 2008 4Q 2009 4Q 2010 4Q 20114Q 2012 4Q 2013 4Q 2014 4Q QTD 2015

Source: The London Group Realty Advisors, CoStar ~---- - - --- - ---

Period 2006 4Q 2007 4Q 2008 4Q 20094Q 2010 4Q 20114Q 2012 4Q 2013 4Q 20I44Q

QTD2015

TotalRBA

9,225,083 9,411,624 9,412,542 9,744,057 9,740,651 9,732,035 9,795,128 9,785,629 9,794,544 9,792,276

Total Inventory Increase Av. Inventory Increase Per YR

Total Net Absorption Av. Net Absorption Per YR


Escondido Submarket

Occupied SF Absorption Direct Vacant SF Sublet Vacant SF Total Vacant% 8,762,505 460,930 1,648 5.0% 8,814,551 52,046 586,793 10,280 6.3% 8,721,473 (93,078) 686,269 4,800 7.3% 8,882,147 160,674 842,375 19,535 8.8% 8,870,221 (11,926) 844,657 25,773 8.9% 8,990,032 119,8 11 722,985 19,018 7.6% 9,236,638 246,606 536,870 21,620 5.7% 9,230,096 (6,542) 528,926 26,607 5.7% 9,258,477 28,381 520,340 15,727 5.5% 9,332,755 74,278 444,603 14,918 4.7%

567,193 63,02I

570,250 63,361



Page42 o/83

--- -- . - - - - - -- -

Vista Historic Retail Occupancy 2006 - QTD 2015 l

I s,300,000 ---~- -_ -_ -_ -_ -_ -_ -_ -_ -_ --------- ------- ----------~ 10.o¾I =TotalRBA

5,200,000 -Occupied SF

-<>-Vacancy%

5,100,000 +-----===== ===!~---

5,000,000

I

1 4,900,000

1 4,800,000

4,700,000

4,600,000

I 4,500,000

9.0% I

8.0% I

7.0¾

6.0¾

r s.o¾

4.0¾ I

3.0%

2.0¾

1.0¾

I 4,400,000 +1---'- -t,.L--'---,-L---I-- J.,.L-''-..J.L,.l--'--1.,-L--1-- J.,.L-l- ..a.,..t._-li.........ll.,.L------"--J.,.L-'- -lj. 0.0%

2006 4Q 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q 2013 4Q 2014 4Q QTD 2015

I_ -

Period TotalRBA 2006 4Q 5,002,101 2007 4Q 5,048,561 2008 4Q 5,037,166 2009 4Q 5,209,857 2010 4Q 5,225,586 2011 4Q 5,225,586 2012 4Q 5,221,136 2013 4Q 5,215,363 2014 4Q 5,218,103

QID 2015 5,222,133

Total Inventory Increase Av. Inventorv Increase Per YR Total Net Absorption Av. Net Absorption Per YR



Vista Submarket

Occupied SF Absorption Direct Vacant SF Sublet Vacant SF 4,769,469 4,889,516 4,803,247

4,856,795

4,764,483 4,812,376

4,818,257

4,729,799 4,784,482 4,807,601

220,032 24,448

38,132 4,237

120,047 (86,269)

53,548 (92,312)

47,893 5,881

(88,458)

54,683

23,119

227,648 4,984 143,781 15,264 222,389 11 ,530 351,062 2,000 454,743 6,360 410,650 2,560 376,270 26,609 458,955 26,609 431,061 2,560 411,956 2,576

Total Vacant%

4.7% 3.2%

4.6%

6.8% 8.8% 7.9%

7.7% 9.3%

8.3%

7.9%



Page43 o/83

- -- ----;:::::::=-=======--...::......::=-====-=-----=-=--~ -Oceanside Historic Retail Occupancy

2006 - QTD 2015 I s,000,000 ~--------------------------------~ 10.0%

I 7,800,000

17,400,000

7,200,000

I 7,000,000

16,800,000

6,600,000

=TotalRBA

l!!!!BI Occupied SF 9.0%

8.0%

7.0%

5.0%

4.0%

3.0% I

2.0%

1.0%

2006 4Q 2007 4Q 2008 4Q 2009 4Q 2010 4Q 2011 4Q 2012 4Q 2013 4Q 2014 4Q QTD 2015

Period 2006 4Q 2007 4Q 2008 4Q 2009 4Q 20104Q 2011 4Q 2012 4Q 2013 4Q 2014 4Q

QID2015

TotalRBA 7,548,154 7,597,804 7,612,233 7,646,904 7,703,610 7,720,428 7,720,428 7,689,176 7,673,283 7,687,179


Total Net Absorption Av. Net Absorption Per YR



Oceanside Submarket

Occupied SF Absorption Direct Vacant SF Sublet Vacant SF Total Vacant% 7,227,504 319,538 1,112 4.2% 7,205,610 (21 ,894) 390,172 2,022 5.2% 7,151 ,453 (54,157) 453,280 7,500 6.1 % 6,978,581 (172,872) 638,501 29,822 8.7% 7,052,807 74,226 641,424 9,379 8.4% 7,096,597 43,790 613,756 10,075 8.1% 7,152,101 55,504 561,381 6,946 7.4% 7,118,115 (33,986) 561,607 9,454 7.4% 7,155,811 37,696 507,922 9,550 6.7% 7,118,407 (37,404) 555,716 13,056 7.4%

139,025 15,447

(109,097) (12,122)



Page44of83

Retail: UC & Proposed Projects


Page45 o/83

Building Park/Name

North City

!Total RBA Under Construction

Building Park/Name

NIA NIA NIA NIA NIA NIA NIA NIA Nor1h City Old Califumia Old Califumia Palomar Station San Elijo Hills Town Center San Elijo Hills Town Center San Elijo Hills Town Center San Elijo Hills Town Center San Elijo Hills Town Center San Elijo Hills Town Center Shane Park Pla:za Shane Park Plaza Vineyard Plaza

General Retail General Re/ail (Neighborhood Cell/er)

General Re/ail (Strip Center/ Total RBA Prooosed

Proposed & Unclci- Construction Retail Space

San \l.ircos Subm:irket

Rentable Building Area

10,709

10,709

Rentable Building AreR

20,750 16,300 15,680

6,705

6,000 6,000 6,000 5,606

20,840

12,000 6,900

21,000 4,000 3,650

2,680

2,175 1,950 1,710 3,014

3,014

13,000

113,440 35,065

30,469 178 974

Under Construction

Building Location

N Side ofE Barham Dr at Carqrns Way

Proposed

Building Location

Between La Mirada and Linda Vista S ofW San Marcos Blvd at N Twin Oaks Valley Rd

NEC Rancho Santa Fe Rd. & Cherokee St. NEC Twin Oaks Valley Rd & Village Dr San Marcos Theater ColT!JleX - Proposed San Marcos Theater ColT!JleX - Proposed

S ofW San Marcos Blvd at N Twin Oaks Valley Rd NEC Rancho Santa Fe & Cherokee St.

N Side ofE Barham Dr at Redel Rd N Side W San Marcos Blvd at Via Vera Cruz N Side W San Marcos Blvd at Via Vera Cruz

N Side of Las Posas Rd at Armorlite Dr SEC Elfin Forest Rd & San Elijo Rd SEC Elfin Forest Rd & San Elijo Rd SEC Elfin Forest Rd & San Elijo Rd SEC Elfin Forest Rd & San Elijo Rd SEC Elfin Forest Rd & San Elijo Rd SEC Elfin Forest Rd & San Elijo Rd NWC of 8th and Rancho Santa Fe NWC of 8th and Rancho Santa Fe

NEC Mission & Vineyard

Source: The London Group Reahy Advisors, Costar


Property Type

General Retail

Property Type

General Retail (St$ Center) General Retail General Retail

General Retail (St$ Center) General Retail General Retail General Retail General Retail General Retail

General Retail (Neighborhood Center) General Retail (Neighborhood Center)

General Retail General Retail (Neighborhood Center) General Retail (Neighborhood Center) General Retail {Neighborhood Center) General Retail (Neighborhood Center) General Retail (Neighborhood Center) General Retail (Neighborhood Center)

General Retail (SI$ Center) General Retail General Retail

Year Built

2016

Year Built

NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA NIA

201 6

2016 NIA

o/83

Building Parle/Name

La Costa at Rancho Santa Fe La Costa Town Square NIA

General Retail RBA

General Retail (Community Center) RDA

Total RBA Under Construction

Building Parle/Name

Future Hoelm Audi Dealership La Costa Town Square La Costa Town Square La Costa Town Square NIA Promenade Shopping Center Robertson Ranch Robertson Ranch Robertson Ranch Robertson Ranch Robertson Ranch Robertson Ranch Robertson Ranch The Villag,: at Bressi Ranch The Village at Bressi Ranch The Village at Bressi Ranch The Village at Bressi Ranch The Village at Bressi Ranch The Village at Bressi Ranch

General Retail

General Retail (Neighborhood Ce111er)

General Retail (Community Center)

General Retail (Strip Ce/lier)

Total RBA Prooosed

Proposed & Under Construction Retail Space Carlsbad S111>111a1·ke1


8,480 3,600 12,000

20,480

3,600

24,080


54,688 6,000 4,200 3,600 8,347

585,000 35,000 14,000 8,300 7,500 6,000 4,500 4,500 39,425 16,400 8,000 8,000 7,800 7,800

648,035

87,425

13,800

79,800

829 060

Under Construction

Building Location

7710 Rarx:ho Santa Fe Rd 3452 Via Mercato

7 I 50 Rancho Santa Fe Rd

Proposed

Building Location

5425 Paseo del Norte NEC La Costa Ave & Rancho San Rd NEC La Costa Ave & Rancho San Rd NEC La Costa Ave & Rancho San Rd

2727 State St Cannon Rd

NEC El Camino Real & West NEC El Camino Real& West NEC El Camino Real& West NEC El Camino Real & West NEC El Camino Real & West NEC El Camino Real& West NEC El Camino Real & West

Palomar Airport Rd El Fuerte Rd El Fuerte Rd Gateway Rd Gateway Rd Gateway Rd

Source: The Lorxlon Group Realty Advisors, CoStar


Property Type

General Retail General Retail (Comrunity Center)

General Retail

Property Type

General Retail General Retail (Cormmity Center) General Retail (Corrm.mity Center) General Retail (Corrm.mity Center)

General Retail General Retail

General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center)

General Retail (Neighborhood Center) General Retail (N eigbborhood Center) General Retail (Neighborhood Center) General Retail (Neighborhood Center) General Retail (Neighborhood Center) General Retail (Neighborhood Center)

Year Built

2015 2015 2015

Year Built

NIA NIA NIA NIA NIA

2017 NIA NIA NIA NIA NIA N.'A NIA NIA NIA NIA NIA NIA NIA

of83

Building Park/Name

NIA

!Total RBA Under Construction

Building Park/Name

Centerpointe 78 Centerpointe 78

Mountain Meadow Village Centre Mo,mtain Meadow Village Centre Mountiin Meadow Village Centre Moimtain Meadow Village Centre Moimtain Meadow Village Cornn, Moimtain Meadow Village Centre Signature Pavilion

General Retail (Ne;ghborhood Center)

General Retail (Strip Center)

Total RBA Pro sed

Proposed & Under Conslrnction Rl'lail Space

Escondido Snbmarkl'I

Rentable

Building Area 4,200

4,200

Rentablc Building Area

45,000 3,200 4,400 4,000 4,000

2,400 1,800 1,400

5,000

53,200

18,000

71200

Under Construction

Building Location

N Side ofBrotherton Rd at Centre City Pkwy

Proposed

Building Location

999 N Broadway 999 N Broadway

E Side ofN Centre City Pkwy at Protea Gardens Rd E Side ofN Centre City Pkwy at Protea Gardens Rd E Side ofN Centre City Pkwy at Pro1ea Gardens Rd

999 N Broadway E Side ofN Centre City Pkwy at Protea Gardens Rd E Side ofN Centre City Pkwy at Protea Gardens Rd

344 W Valley Pky

Source: 1ho London Group Realty Advisors, CoStar

Building Park/Name

NIA NIA NIA NIA NIA North County Square

General Retail

General Retail (Power Center)

Total RBA Pro sed

Proposed & lnder Construction Retail Space

\'i,ta Submarkct


25,000

23,000 2 1,780

7,000

3,083 4,000

76,863

Z..222. 83,863

Proposed

Building Location

E Side of Vista Village Dr at Lado de Loma Dr N Side ofRonald Packard Pkwy at Grapevine Rd

130 Olive Ave NEC Business Park Dr & Poinsettia Ave

967 EVista Way N Side of University Dr at Sycamore Ave

Source: 1ho London Group Realty Advisors, CoStar

San Marcos Creek District City of Sall Marcos

Property Type

General Retail

Property Type

General Retail (Neighborhood Center) General Retail (Neighborhood Center)

General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center) General Retail (Strip Center) General Retail (Slrip Center) General Retail (Strip Center)

General Retail (Neighborhood Center)

Property Type

General Retail General Retail General Retail

General Retail (Power Center) General Retail General Retail

Year Built

2015

Year Built

NIA NIA

2016 2016 2016 2016 2016 2016 2016

Year Built

NIA NIA NIA NIA NIA NIA

o/83

Building Par1</Namc

BestPwa Camino Town & Cotm!ry Camino Town & Cotmtry Camino Town & Country Camino Town & Cotmtry Mission Marketplace NIA NIA NIA NIA NIA Palm Tree Plaza Pla,a Rancho Del Oro Plaza Rancho Del Oro

General Retail

General Retail (Neighborhood Center)

General Retail (Community Center) General Retail (Power Center)

Total RBA Prooosed

Proposed & L'nder Construction Retail Space Occ:rnsidc Suhmarkct


6,000 9,028 8,418 7,787 4,912 4,500

280,000 9,673 3,750 3,000 2,020 6,000 11,700 8,400

298,443

6,000 26,100

34.645 365,188

Proposed

Building Location

1702 Ocean5ide Blvd N Side of Camino Town at El Camino Real N Side of Camino Town at El Camino Real N Side Camino Town at El Camino Real

N S;;Je of Camino Town at El Camino Real 427 College Blvd

N Side ofHighway 76 at Foussat Rd 1430 S Melrose Dr 936 N Coast Hwy

1640 Oceanside Blvd 1430 S Melrose Dr

N Side ofCaMOn Rd at S Melrose Dr 4 170 Oc0an5ide Blvd 4170 Oceanside Blvd



Property Type Year Built

General Retail (Neighborhood Center) 2016 General Retail (Power Center) 2016 General Retail (Power Center) 2016 General Retail (Power Center) 2016 General Retail (Power Center) 2016 General Retail (Power Center) NIA

General Retail NIA General Retail NIA General Retail 201 6 General Retail NIA General Retail NIA

General Retail (Cornrunity Center) NIA General Retail (Comrunity Center) NIA General Retail (Comrunity Center) NIA

Page49 o/83

Retail Demand Forecasts


of83

2015 (Est.)

II of Households 30,071 Change in# ofHH (Growth) .... Average Income (2015S)

1 $72,930

Annual Change in lncom: .... Cum Change in Income ·-·-

% Retail Expendirurcs2 34.02%

Cum Total Retail Expcndihrcs .....

Internet & Electronic Purchases (%)3 11.0% Cum lntemel & Electronic Plrchases (S) ·-·-

C um. New Available Retail Expenditures

Cumulative Retail S.F. Required I Supportable S.F. (LOW)4 @ S425 ·---S1mnortable S.F. /HIGH/ @l $350 ·-·-

Noter:

Fou.·r,1,h.'d lkm.md to1 Rl'l:111 Sp.au· H,l\l'd on llou,d iold ( ,umth S,111 \l.1n·o,

2020

32,625 2,554

576,452 $195,239,748

S 195,239,74 8

34.02%

$66,429,762

14.1% ($9,366,596)

$57,063,165

134,266

163 038

134,266

163 038

2015-2050

2025

35,624 2,999

S79,0 16 $236,969,275

$432,209,024

34.02%

$147,057,875

18.0% ($26,470,417)

$ 120,587,457

283,735

344 536

149,469

181,498

2030

35,758 134

$81,580 $10,931,722

$443,140,746

34 .02%

SI 50,777,362

20.0% ($30,155,472)

$120,621,889

283,816

344,634

81

98

2035

35,795 37

S84,144 $3,113,326

$446,254,072

34.02% $151,836,662

20.0% ($30,367,332)

$121,469,329

285,810

347055

1,994

2,42 1

2040

37,401

1,606

$87,135 $139,938,282

S586, 192,354

34.02%

S 199,450,259

20.0% ($39,890,052)

$159,560,207

375,436

455 886

89,626

108,831

1 Income is in current dollars (2015$). 2015 :,,vcrage in con.:: from Clari1as. Otange in real incorrc based on SANDAG Series 13 Forecast,

2045

37,420

19

$90, 125

Sl,712,383 $587,904,737

34.02% $200,032,892

20.0% (S40,006,S78)

$160,026,314

376,533

457,218

1,097

1,332

2050

37,337 (83)

S93,116 ($7,728,640)

$580,176,097

34.02%

$197,403,245

20.0% ($39,480,649)

$157,922,596

371,583

451 207

(4,950)

6,011

1Sourc:es: The London Ooup Rc3lty Advisors; U.S. C.ensus Burt au , "2007 Census of Retail Trade", ·2fXfJ Census of Accorrrrodations & Food Services", "'YX11 American Conm.mity Survey"; C1arit&S 1Sourcc: U.S. Census Bureau, Annual Rerail Trade SuJVey. lncreasc in pcrccnragc is based on change of 2010-201S period. Percentage of e~nditurc.s is capped at 20%.

Total

7,266

$580,176,097

$197,403,245

($39,480,649)

$157,922,596

371,583

451,207

•source: UU Dollars .tnd Cents of Shopping Centers. The 2015 adjusted annual avcrasc sales volume is $38S per square foot forConvenicnee, Neighborhood, Corrmmity, SupcrColTlnlnily and Rcgion alrctailccn1cn.

We have elected to u1ili1.e a range of$350to $425 per square foot, of which S388 is the mdpoint.

Source: The London Goup Rcahy AdvisoB, SANDAG

San Marcos Creek District City of Sa,i Marcos

o/83

# ofHousehokls Change in # ofHH (Growth)

Average Income (20 15$)1

Amual Change in Income Cum Change in Income

¾ Retail Expendirures2

Cum Total Remil Expenditures

lnlcrnct & Electronic Purchases (%)3

Cum Internet & Electronic Purchases ($)

Cum New Available Retail Expenditures

Cwnulative Retail S.F. Required

Supportable S.F. (LOW)4 @ $425

Sunoortable S.F. (HIGH/ (ii) $350

Retail S.F. Re · d Per S-YR Period

Supportable S.F. (LOW)4 @ $425

S G 4

$350

Note,:

I

2015 (Est.)

46,400 ... ....

$104,119

--·-.......

34.02%

---·

11.0%

----

--------

FoH'l',l\h'd l>l·m.md IOI R,·t:111 Sp.u:t• R.,,cd on llou"Scholcl C1onth Ca1l,h.ul

2020

48,448 2,048

SIOS.832

$216,757,714

$216,757,714

34.02%

$73,751,187

14.1% ($10,398,917)

$63,352,270

149,064

181,006

149,064

181,006

211JS-211SII

2025

49,048 600

$108,770

565,261,888

$282,019,602

34.02%

$95,956,357

18.0% ($17,272,144)

$78,684,212

185,139

224,812

36,075

43,806

2030

49,629 581

$111,707 $64,901,976

$346,921,577

34.02%

$118,039,067

20.0% ($23,607,813)

$94,431,253

222,191

269,804

37,052

44,992

2035

50.261 632

$114,645 $72,455,580

$419,377,157

34.02%

S 142,691,869

20.0% ($28,538,374)

$114,153,495

268,596

326, 153

46,405

56,349

2040

50,491

230

$118,399 $27,231,880

$446,609,037

34.02%

S 151,957,438

20.0% ($30,39 I ,488)

$121,565,950

286,038

347,331

17,441

21,178

11ncome is in currcnt dollars (201SS). 2015 average incorn, fromClaritas. Oiange in real income based on SANDAGSeries 13 forecut.

2045

50.492 1

S122,154 $122,154

$446,731,191

34.02% $151,999,000

20.0%

($30,399,800)

S121,S99,200

286,116

347,426

78

95

2050

50,505

13

$125,909

$1,636,812

$448,368,003

34.02% $152,555,921

20.0%

(S30,511,184)

$122,044,737

287,164

348,699

1,048

1,273

1Sources: The London Goup Rnky Advisors; U.S. Census Bureau, "2007 Ce-nsus o(Relail Tr1.de". "2007Ccnsus of Accorrmodations & Food Scroices", ·2()()7 Amencan Cof?ITIJnity Suivey": Oaritas

)Source: U.S. Census Bureau. Annual RclailTr.tde Survey. lncreue in percentage is based on change of2010-201S period. Percentage ofc,ipcoditurcs is capped at 20¼.

Total

4,105

$448,368,003

$152,555,921

(S30,511,184)

$122,044,737

287,164

348,699

4Sourcc: UU Dollars and Cents of Shopping C.cntcrs. The 2015 adjus lcd annual avcnee sales volume ~ $388 per square root for Convenience, Ncjghborhood, C.orrmrnily, Super C.omnini1y and Regional retail centers.

We have elected to utilize a range ofS3SO to S42S per square foot, ofwhK:h S388 is the midpoint

Source: The London Ooup Really Advisors. SANDAG


of83

2015 (£st)

# of Households 50,295

Change in# ofHH (Growth) ----Average Income (20 I 5$)

1 $65,685 Arurual Change in Income ----Cum Change in !neon~ --··

% Retail Expendinres2 34.02%

Cum Total Retail Expendilllres ----

Internet & Electronic Purchases (%)3 11.0%

Cum Internet & Electronic Purchases (S) ----C wn. New Available R etail Expenditures

Cumulative Retail S.F. Reaui.red I Supponable S.F. (LOW)' @ S425 ----Swoortable S.F. (HIGH)' (al $350 ---·

Notes:

l·oH·l·:1, h:<I l>c..· mancl tm Rctoul Sp.in• Ba,cd on llm1,t.•hohl <, ,o\\1h E,ru111l11li,

2020

53,564

3,269

$65,965

$215,664,980

$215,664,980

34.02%

$73,379,388

14. 1%

(SI0,346,494)

$63,032,894

148,3 13

180 094

148,313

180 094

201 ,-20, 0

2025

54,988 1,424

$68,075

$96,939,287

$312,604,267

34.02%

$106,362,701

18.0% ($19,145,286)

$87,217,415

205,217

249,193

56,905

69099

2030

55,256 268

$70,185

$18,809,710

$33 1,413,977

34.02%

$] 12,762,650

20.0% ($22,552,530)

$90,210,120

2 12,259

257,743

7,042

8,551

2035

55,567 3 11

$72,296

$22,483,939

$353,897,916

34.02%

Sl20,412,746

20.0% ($24,082,549)

$96,330,197

226,659

275,229

14,400

17,486

2040

55,760 193

S74,696

SI 4,416,352

$368,314,268

34.02%

$125,3 17,868

20.0% ($25,063,574)

SI 00,254,294

235,892

286,441

9,233

11,212

1tncome is in cumnt dollars (201SS). 201S average income fromOaritas. O!ange in re1I incorn: bnsed on SA1''DAGSericJ 13 Forecas1.

2045

56,021 261

$77,097 $20,122,219

$388,436,486

34.02%

$132,164,395

20.0% ($26,432,879)

S105,731,516

248,780

302,090

12,888

15,649

2050

56,034

13

$79,497

$1,033,463

$389,469,949

34.02%

S 132,516,028

20.0%

($26,503,206)

$106,012,822

249,442

302,894

662

804

1sources: The London Group Realty Advisors; U.S. Census Bureau, "2007 Census of Retail Trade•, •2007 Census of Aceomrodations & Food Services'", "2007 American Comwnity Survey•; Claritas 1Source: U.S. Census Bureau.Annual Retail Trade Survey. Increase in percentage is based on chance of2010-201S period. Percentage ofc,cpcnditures is capped at 20%.

Total

5,739

S389,469,949

$132,516,028

($26,503,206)

$106,012,822

249,442

302,894

"'source: t.n..l Dollars and Cenu of Shopping Centers. The 2015 adjusted annual avemgc sales volume is $388 per square foot for Convenience, Neighborhood, Co1T1Woity, SuperCorrmmity and Regional retail centers .

We bavecJccted 10 u11lizc a range ofSJSO to S425 per square foot, ofwhic:h S388 is the mdpoint.

Source: The London Qoup Reahy Advisors, SANDAO

San Marcos Creek District City ofSa11 Marcos

of83

# ofHouseoolds Change in# ofHH (Growth)

Average lncome(20l5S)1

Amual Change ii Income Cum Change in Income

% Retail Expcndirures2

Cum Total Retail Expenditures

Internet & Ecctroni: Purchases (%)3

Cum Internet & Electroiu: Purchases (S)

Cum. New Available Retail Expenditures

Cumulative Retail S.F. Required

Supportable S.F. (WW)4 @ $425

Surmortable S.F. (HJGH)4 cal $350

Retail S.F. Re uired Per S-YR Period

Supportable S.F. (WW)' @ $425

S $350

Noces:

I

2015 (Est.)

30,917

----$62,567

--·· ....

34.02%

----

11.0%

-···

·-------

l·OH'\.',l\kd lknt1111t tor lh·t,111 Sp.in· B,1Hd 011 llumdiuld Ctonth \ i,1.1

2020

31,012 95

$64,156 56,094,807 $6,094,807

34.02% $2,073,740

14.1% ($292,397)

$1,781,343

4,191

5,090

4,191

5,090

!015-20511

2025

32,884 1,872

$66,347 $124,201,962 $130,296,769

34.02% $44,333,100

18.0% ($7,979,958)

$36,353,142

85,537

103,866

81,345

98,777

2030

34,028 1,144

$68,539 $78,408,096

$208,704,865

34.02% $71 ,011,229

20.0% ($14,202,246)

$56,808,983

133,668

162,311

48,131

58,445

2035

35,307 1,279

$70,730 $90,463,528

$299,168,393

34.02% $101,791,183

20.0% ($20,358,237)

$81,432,947

191,607

232,666

57,939

70,354

2040

37,280 1,973

572,778 $143,590,934 $442,759,327

34.02% $150,647,585

20.0% ($30,1 29,517)

S120,518,068

283,572

344 337

91,965

111,672

1Jn,omc is in current dollars (2015$). 2015 average incorn:; from03ritas, Cbange in real income based on SANDAGStries 13 Forecast

2045

39,187 1,907

$74,826 S 142,693,278 $585,452,605

34.02% $199,198,562

20.0% ($39,839,712)

$159,358,849

374,962

455,3 11

91,390

110,974

2050

40,181 994

$76,874 $76,412,887

$661,865,492

34.02% $225,197,826

20.0% ($45,039,565)

S180,158,261

423,902

514,738

48,940

59,427

2Sourccs: The London Qoup Re•ky Advisor,: U.S. Census Bureau, "2W/Census of Retail Trade•, "2007 Census of Accommdations & Food Services•, ·2cxn Arrerican Conrwnity Survey•; Oarilas

,Source: U.S. Ccns,n Bureau, Annual Rclail Trade Survey. Increase Ln pcrccn1agc is based on chingc ofZOI0-201 S period. Percentage of c;,,.penditurcs is capped at 20'/4.

Total

9,264

$661,865,492

$225,197,826

(545,039,565)

$180,158,261

423,902

514,738

"Source: UU Dollan and Cents of Shopping Ccoiers. The 20JS adjusted annual avcraac sale! volume LS $388 per square foot for Convenience, Neighborhood, Corrm.mity, Super Comruni1y and Regional rctaiJcenrers .

We have elcc1cd to ut iliz: a range ofS3SO to S42.S per square foo t, of which S388 is 1he midpoint

Sown: The London Croup Re.by Advisors, SANDAG


of83

2015 (Est.)

# of Households 66,350 Change in# ofHH (Growth) ·-·-Average lncorne (20 15$)1 $72,731 Annual Change in Income -··-Cwn Change in Incorne ----

% Retail ExpendinRs2 34.02% Cwn Total Retail Expenditures ----

Internet & Electronic Purchases (%)3 11.0% Cum Internet & Electronic Purchases (S) ----

Cu.m. New Available Retail Expenditures

Cumulative Re!2il S.F. Required I Supportable S.F. (LOW)' @ $425 ----s ,mnortable S.F. (HIGffi4 ~ $350 ----

Notes:

.. Oll't.:,1,ll· d Dl'm,111<1 fm l{d.1il Spal'f.' n .,,cc1 o n llou\C'ltuhl Gto\\th ( k(·,111, ulf.·

2020

67,817 1,468

$74,403

$109,186,027 $ I 09, 186,027

34.02% $37, I 50,23 1

14.1% ($5,238,183)

$31,912,048

75,087

91 177

75,087

9 1,177

2111 ;;-zu;;o

2025

68,576 759

S76,835 $58,317,493

$167,503,520

34.02% $56,992,590

18.0% (S 10.258,666)

$46,733,924

109,962

133 525

34,875

42,348

2030

69,506 930

$79,267

$73,717,881 $241,221,401

34.02% $82,074,886

20.0% ($16.414,977)

S6S,6S9,909

154,494

187,600

44,532

54,074

2035

70,395

889

$81,698 $72,629,910

$3 13,851,3 11

34.02% $106,787,004

20.0%

($21.357,401)

$85,429,603

201,01 l

244,085

46,517

56485

2040

70,612

2 17

$84,479 $18,332,038

$332,183,348

34.02% SI 13,024,427

20.0% ($22,604.885)

$90,419,542

212,752

258,342

11,741

14,257

1Income is in current dollars (201SS). 201S average income fromCtuitas . Cbange in real incnn>e based on SANDAGScrics 13 forecast.

2045

70,780

168

$87,260 $14,659,753

$346,843,102

34.02% SI 18,012,366

20.0% ($23,602,473)

$94,409,893

222,141

269,743

9,389

11,401

2050

70,942 162

$90,041 $14,586,712

$361,429,814

34.02% S122,975,453

20.0% ($24.595.091)

$98,380,362

231,483

281,087

9,342

11 ,344

2Sources: The London Goup Rulty Advisors; U.S. Census Bure,u, "2007 Census of Retail Tndc", "2007 Census of Accommdations & Food Services" ... 2007 American C.Ormwnity Survey•; Oaritu

,Source: U.S. Census Bureau, Ann\111 Retail Trade Survey. Increase in percentage is bucd on change of2010-2015 period. Pcrtenlagc of c,cpenditures is capped at 20'/4.

Total

4,593

$361,429,814

$122,975,453

($24,595,091)

$98,380,362

231,483

281,087

4Source: UU Dollar, 10d Cents of Shopping Centers. The 2015 adju5tcd annual avemse sales volume is S388 per square foot for Convenience, Neighborhood, Comwnity, SuperCorm'llnity and Regional retail centers.

Wt have elected 10 u1ili2e a range ofS350 to $425 pcr squ3rc foot, of which $388 is the midpoint.

Source: The Lendon Croup Realty Advisors. SANDAG


o/83

Office: Current & Historical Conditions


o/83

r . ---- - -- -- -- --San Marcos Historic Office Occupancy

1999 - QTD 2015 11.soo.ooo , ---~--=---~- ----------- ----- - , 25.0%

I =Total RBA

I 1,600,000

I 1 ··~•.•00

,-- 9!!10ccupicd S.F.

~-~:::_ __

I 1,200,000

- -- ----- ---- -- -- _J I

20.0'/o!

I · 10.0%

I 1,000,000

800,000

1999 2000 2001 2002 2003 2004 200S 2006 2007 2008 2009 2010 2011 2012 2013 2014 QTD 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 2015

5.0%

Source: The London Group Realty Advisors, CoStar _J ----- -- -- -- --- --·- ---·--·--- -

Historical Office :\larkct Conditions

San i\larcos Submarkct

Period TotalRBA Occul!ied SF Abso~tion Direct Vacant SF Sublet Vacant SF Total Vacant % 1999 4Q 961 ,900 945,502 2000 4Q 1,163,465 1,140,893 20014Q 1,176,411 1,145,4 17

2002 4Q 1,247,392 1,164,698 2003 4Q 1,247,392 1,178,620

2004 4Q 1,247,392 1,152,443 2005 4Q 1,247,392 1,186,79 1 20064Q 1,295, 152 1,223,707 2007 4Q 1,295,152 1,220,507 2008 4Q 1,415,079 1,190,723

2009 4Q 1,500,755 1,204,146 2010 4Q 1,508,181 1,242,959 20114Q 1,506,781 1,261,477 2012 4Q 1,576,841 1,330,712 2013 4Q 1,576,841 1,330,971 2014 4Q 1,576,841 1,379,377

QTD2015 1,576,841 1,383,533

Total Inventory Increase 614,941 Av. Inventory Increase Per YR 38,434 Total Net Absorption 438,031 Av. Net Absorption Per YR 27,377

Source: The London Group Realty Advisors, Costar

Sa11 Marcos Creek District City of Sa11 Marcos

195,391 4,524

19,281 13,922 (26,177) 34,348 36,916

(3,200) (29,784)

13,423 38,813 18,518 69,235

259 48,406 4,156

11 ,226 5,172 1.7%

22,572 0 1.9% 20,289 10,705 2.6%

82,694 0 6.6% 68,772 0 5.5% 85,926 9,023 7.6% 49,623 10,978 4.9% 71,445 0 5.5% 74,645 0 5.8% 222,797 1,559 15.9% 283,478 13,131 19.8% 259,207 6,015 17.6% 215,842 29,462 16.3% 239,032 7,097 15.6% 240,091 5,779 15.6% 192,428 5,036 12.5% 193,308 0 12.3%

of83

,--·-- - - - - -

7,000,000

I I 6,soo,ooo

I l 6,000,000

I 5,500,000

I s.000,000

1 4,500,000

I 4,000,000

, 3,500,000

I ' 3,000,000 I

I j 2,500,000

=TotalRBA

-Occupied SF

-0-Vacancy ¾

·-- -- ·---· -- ··- ··-- ----·-- - -- -1 Carlsbad Historic Office Occupancy

1999- QTD 2015

I -1

30.0o/.!

'

I 25.0¾i

20.0%

15.0o/. l I

f .... /41

I ,0% 1

, ....... ~ , ....... _._ ........ __.,~_.,.~__.,~--.,~-~-~~.~~..,.._~ ....... ......., ....... ~ . o.o¾ I lSMO~O 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 QTD

I 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 2015

Source: The London Group Realty Advisors, CoStar --------

Period Total RBA

1999 4Q 3,925,829 20004Q 4,098,506 2001 4Q 4,581 ,057 20024Q 4,745,371 2003 4Q 4,819,010 2004 4Q 4,830,850 2005 4Q 4,906,930 2006 4Q 5,456,777 2007 4Q 6,285,724 2008 4Q 6,399,759 2009 4Q 6,508,000 2010 4Q 6,587,287 2011 4Q 6,587,287 20124Q 6,587,287 2013 4Q 6,587,287 2014 4Q 6,587,287

QTD2015 6,759,396


Total Net Absorption Av. Net Absorotion Per YR

Historical Office i\larkd Conditions Carlsbad Suhmarl,et

Occu2ied SF Abso!Etion Direct Vacant SF Sublet Vacant SF Total Vacant%

3,346,490 469,039 110,300 14.8% 3,616,028 269,538 315,819 166,659 11.8% 3,655,183 39,155 880,941 44,933 20.2% 3,463,285 (191 ,898) 1,162,354 119,732 27.0% 3,862,185 398,900 824,157 132,668 19.9% 4,045,773 183,588 693,780 91 ,297 16.3% 4,349,724 303,951 522,158 35,048 11.4% 4,433,753 84,029 945,819 77,205 18.7% 4,882,302 448,549 1,344,654 58,768 22.3% 4,909,207 26,905 1,401 ,512 89,040 23.3%

4,966,711 57,504 1,454,852 86,437 23.7% 4,978,744 12,033 1,532,171 76,372 24.4% 5,207,806 229,062 1,320,163 59,3 18 20.9% 5,299,132 91,326 1,202,590 85,565 19.6% 5,493,134 194,002 1,074,876 19,277 16.6% 5,624,509 131,375 910,498 52,280 14.6% 5,494,233 (130,276) 1,134,330 130,833 18.7%

2,833,567 177,098

2,147,743 134,234


J


of83

2,000,000 l ' ........ -

1,600,000

I 1,400,000

I

1,200,000

1,000,000

=TotalRBA

9!!!!I Occupied SF

-0--Vacancy %

Vista Historic Office Occupancy 1999-QTD2015

- - • - - - - - ·- -- --- - ----- ; 25.0%1

--- - --- - - - - - -------- - - - --- 20.0¾ 1

j I

~ 15.0¾j

10.0%1

,~I I 800,000 1'--''--','--''--',,'--....... ......... _ ......... _ _ ......... ~ , ......... _., , ......... __._.__._.,,__.....,,__.~,~----...,.... ..... ...,~ ..... ...,~__.._...,....__.._...,.__._... 0.0% I

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 QTD • 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 2015 I


Historical Office i\larkl·t Conditions

Vista Submarket

Period TotalRBA Occueied SF Abso!}!tion Direct Vacant SF Sublet Vacant SF Total Vacant % I9994Q 1,295,419 1,212,174

20004Q 1,432,485 1,3 10,400 20014Q 1,432,485 1,316,515

20024Q 1,432,485 1,345,182 2003 4Q 1,432,485 1,353,382 20044Q 1,462,485 1,367,560 2005 4Q 1,483,515 1,417,188 20064Q 1,616,367 1,515,216 2007 4Q 1,630,094 1,506,023 20084Q 1,691,010 1,428,454 20094Q 1,754,291 1,431,964 20104Q 1,754,291 1,435,134 20114Q 1,754,291 1,454,517 20124Q 1,754,291 1,442,207 2013 4Q 1,754,291 1,386,675 20 14 4Q 1,754,291 1,437,203

Q1D2015 1,754,291 1,462,928

Total Inventory Increase 458,872 Av. Inventory Increase Per YR 28,680

Total Net Absorption 250,754 Av. Net Absorption Per YR 15,672



98,226 6,115

28,667 8,200 14,178 49,628 98,028 (9,193) (77,569) 3,510 3,170 19,383 (12,310) (55,532) 50,528

25,725

83,245 0 6.4%

122,085 0 8.5% 110,470 5,500 8.1% 87,303 0 6.1% 71,639 7,464 5.5%

59,677 35,248 6.5% 66,327 0 4.5% 101 ,151 0 6.3% 121,125 2,946 7.6% 249,899 12,657 15.5% 311,756 10,571 18.4% 304,642 14,515 18.2% 285,459 14,315 17.1% 297,769 14,315 17.8% 367,616 0 21.0% 317,088 0 18.1%

291,363 0 16.6%

o/83

2,100,000 I - -

2,500,000

I 2,300,000

I

1 2,100,000

1,900,000 I

, 1,700,000

i::=Total RBA

-occupied SF

-0-Vacancy %

Escondido Historic Office Occupancy 1999- QTD 2015

14.0¾I

l 12.0·1

10.0·1

"%1 6.0% !

I r 4.0% I

I

1,500,000

,, .. i .._,.._.,,.._,.._.,,.__..._.,.__ ....... ,.__ ...... ,.__.__.,.._.._.,..._.......,..._.__., ......... ......,.__.......,.__. ..... ~ .......... ,.... ...... ..,.... ...... ....,~ ...... ...,,.._ ...... -'!- 0.0%

1999 2000 2001 2002 2003 2004 200S 2006 2007 2008 2009 2010 2011 2012 2013 2014 QTD 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 4Q 201S

Source: The London Group Realty Advisors, CoStar ·- - - -----------------

Period TotalRBA

1999 4Q 2,124,548 2000 4Q 2,127,941 20014Q 2,136,724 2002 4Q 2,167,664 2003 4Q 2,225,529 20044Q 2,280,808 2005 4Q 2,280,808 2006 4Q 2,293,049 2007 4Q 2,395,350 2008 4Q 2,473,827 2009 4Q 2,473 ,827 2010 4Q 2,473,827 2011 4Q 2,517,827 20124Q 2,525,675 2013 4Q 2,525,675 2014 4Q 2,520,675

QID2015 2,520,675

Total Inventory Increase Av. !11ve11tory Increase Per YR Total Net Absorption Av. Net Absorption Per YR

Historical Officr :\larkrt Conditions

Escondido Suhmarkrt

OccuJ;!ied SF Abso!J!liOn Direct Vacant SF Sublet Vacant SF Total Vacant % 2,043,031 78,391 3,126 3.8% 2,049,087 6,056 77,111 1,743 3.7% 2,052,174 3,087 80,657 3,893 4.0% 2,079,324 27,150 83,525 4,815 4.1% 2,112,633 33,309 I I 1,153 1,743 5. 1% 2,134,867 22,234 144,547 1,394 6.4% 2,166,451 31,584 112,551 1,806 5.0% 2,146,550 (19,901) 142,706 3,793 6.4% 2,199,192 52,642 176,379 19,779 8.2% 2,194,761 (4,431) 274,766 4,300 11.3% 2,159,165 (35,596) 307,306 7,356 12.7% 2,123,422 (35,743) 348,105 2,300 14.2% 2,176,503 53,081 340,428 896 13.6% 2,183,090 6,587 337,885 4,700 13.6% 2, 197,546 14,456 324,210 3,919 13.0% 2,209,465 I 1,919 293,851 17,359 12.3% 2,239,411 29,946 279,525 1,739 11.2%

396,127 24,758 196,380 12,274

Source: The London Group Reahy Advisors, Costar


Page60of83

Oceanside Historic Office Occupancy 1999- QTD 2015

1,900,000 ,- -

1,700,000 4 i

i=lTotalRBA

-occupied SF

-0-Vacancy ¾

1,500,000 - -·------ --- ------

1,300,000 -- - -- - - · -- • - - - - -- -

1,100,000

900,000

700,000

500,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 QTD ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2ITT5

20.0%

- 15.0%

5.0%


Period TotalRBA

1999 4Q 1,195,299 20004Q 1,197,595 2001 4Q 1,197,595 2002 4Q 1,197,595 2003 4Q 1,221,285 20044Q 1,221 ,285 2005 4Q 1,221,225 20064Q 1,232,557 2007 4Q 1,265,152 2008 4Q 1,520,596 2009 4Q 1,546,281 2010 4Q 1,683,461 2011 4Q 1,683,461 2012 4Q 1,683,461 2013 4Q 1,740,937 2014 4Q 1,756,468

Q1D2015 1,774,279


Total Net Absorption Av. Net Absomtion Per YR

- - --- - - - - - - ··- - -- - -- - - -- - - -·. - J

Historic:11 Office :\larket Conditions Oceanside Suhmarket

Occueied SF Abso!(!tion Direct Vacant SF Sublet Vacant SF Total Vacant % 1,153,770 41 ,529 0 3.5% 1,154,554 784 43,041 0 3.6% 1,142,096 (12,458) 55,499 0 4.6% 1,114,886 (27,210) 74,014 8,695 6.9% 1,158,384 43,498 62,901 0 5.2% 1,136,804 (21,580) 81,681 2,800 6.9% 1,137,991 1,187 76,846 6,388 6.8% 1, 113,274 (24,717) 114,283 5,000 9.7% 1,115,188 1,914 142,008 7,956 11.9% 1,241,866 126,678 273,915 4,815 18.3% 1,210,165 (31,701) 331 ,301 4,815 21.7% 1,380,311 170,146 303,150 0 18.0% 1,391,228 10,917 287,865 4,368 17.4% 1,430,859 39,631 248,234 4,368 15.0% 1,503,304 72,445 232,042 5,591 13.6% 1,495,040 (8,264) 261,428 0 14.9% 1,525,483 30,443 248,796 0 14.0%

578,980 36, /86 371,713 23,232

Source: The London Group Realty Advisors, Costar


of83

Office: UC & Proposed Projects


of83

Proposed & Under Construction Office Space San Marcos Submarket

Proposed

Rentable Building Park/Name

Campus Pointe

Building Area Building Location

NIA NIA San Marcos Executive Centre

San Marcos Executive Centre The Core@ NORTI-I CI1Y

The Icon @ NORTI-I CI1Y West District @ NORlH CI1Y Center

University Corp Center

Class A

Class B

Total RBA Proposed

81 ,292 44,000

10,347 48,000

55,000 140,000

150,000

958,000

27,500

1,432,292

81,847

1,514,139



337 E Carmel St Diamond St @ Opal St

N Side ofW Borden Rd at Woodward St 600 Rancheros Dr 630 Rancheros Dr

NEC Twin Oaks Valley Rd & Bar Rd

N WC Twin Oaks Valley Rd & Hwy 78 SWC Hwy 78 & Twin Oaks Valley Rd

NWC Twin Oaks Valley Rd & Craven Rd

Building C_lass

Class A

Class B

Class B

Class A

Class A

Class A

Class A

Class A

ClassB

of83

Proposed & Under Construction Office Space Carlsbad Submarket

Building Park/Name

Atlas Atlas Tuscan Office Suites

Class B

Total RBA Under Construction

Building Park/Name

Innovation Center at Bressi Ranch Innovation Center at Bressi Ranch Innovation Center at Bressi Ranch Innovation Center at Bressi Ranch Innovation Center at Bressi Ranch I1movation Center at Bressi Ranch Innovation Center at Bressi Ranch Innovation Center at Bressi Ranch NIA North Coast Medical Plaza II Palomar Triad

Class A

Class B Total RBA Pro sed

Under Construction

Rentable Building Location

Building Are a 142,609 5909 Sea Otter Pl 90,000 5909 Sea Otter Pl 4,133 2753 Jefferson St

236.742 236,742

Proposed


61,000 60,500 53,000 51,500 42,000 42,000 40,500 39,500 10,000 50,000 20,000

51,500

418.500 470,000

Building Location

El Camino Real @ Town Garden Road El Camino Real@ Town Garden Road El Camino Real@ Town Garden Road El Camino Real @ Town Garden Road El Camino Real @ Town Garden Road El Camino Real@ Town Garden Road El Camino Real @ Town Garden Road El Camino Real@ Town Garden Road

3120 El Camino Real 6020 Hidden Valley Rd

2011 Palomar Airport Rd



Building Class

Class B Class B Class B

Building Class

Class B Class B Class B Class A

Class B Class B Class B Class B Class B Class B Class B

o/83

Proposed & Under Construction Office Space Escondido Submarket

Proposed

Building Park/Name

La Terraz.a Point


37,000

Building Location Building Class

Class A Total RBA Proposed

37,000 37,000


300 La Terraz.a Blvd

Proposed & Under Construction Office Space Vista Submarkct

Proposed

Rentable Building Park/Name Buildin Area

---- g Building Location

524 Civic Center Dr NIA 3,000 The Horizon at Carlsbad Oaks No1 50,000 The Horizon at Carlsbad Oaks N01 60,000


113,000 113,000

Source: The London Group Realty Advisors, Co Star


NEC Caribou Court & Whiptail Loop NEC Faraday Avenue & Whiptail Loop

Class A

Building Class


of83

Proposed & Under Construction Office Space Oceanside Submarket

Proposed

Rentable Building Park/Name

Building Area Building Location

El Camino Medical Plaza

Pacific Coast Medical Center

Pacific Coast Medical Center Pacific Coast Medical Center

Pacific Coast Medical Center Seagate Corporate Center

Seagate Corporate Center


32,514

5,052

27,318

5,532 5,504

17,500 15,000

108,420

108,420



2140 S El Camino Real

Old Grove Rd @ Rocky Point Dr

Old Grove Rd @ Rocky Point Dr 0 ld Grove Rd @ Rocky Point Dr

Old Grove Rd @ Rocky Point Dr Rancho Del Oro Rd @ Seagate Way

Rancho Del Oro Rd @ Seagate Way

Building Class

Class B

Class B

Class B

Class B


o/83

Office Demand Forecasts


o/83

~\,l>\(,l on.·,.1,tt'tl Jub<,1 uulh 1ml .. \. l ,11111.1lltl<Hhlt lulh S.111 \ l ,1n.o,

?111.;,.w.;.o

SAND AC Fortcas1~d Job Growth for Sao Manos

2015 (Est) 2020 2025 2030 Agricul!ureandMi,q 116 112 109 107 Construtti>n 1,947 2,213 2,442 2,574 Education and Healli:are 3,718 4,331 4,786 5,065 Finance and Real Estaie 1,168 1,503 1,811 1,940 Gol.'C~~ 8,757 9,228 9,588 9,832 lnimmtXm S~tcrrtl 401 690 907 1,060 Lieslff and Hospiality 3,930 4,899 6,035 6,445 Manuictlnlg 4,937 5,221 5,208 5,18 1 OfiEe Services 1,051 1,295 1,512 1,616 Prolessiooal and Busms Sm ices 4,595 5,137 5,707 5,840 Reta~Trade 4,098 4,415 4,795 4,930 Self-En1)bycd 3,218 3,482 3,678 3,814 1""'poration. Wan:housi,g, ond Utuiics 1,017 1,285 1,499 1,641 Wholesale Trade 1,505 1,754 1,919 2,087 Grand Total 40,459 45,565 S0,036 52,132

E,llmated Offi« ~lollllfDI Gro"th % Offlc:t

Spt,ce Usen1 2015(Est) 2020 2025 2030 Agricul!ure and Mim,g 1% I I I I ConstructX>n 2% 39 44 49 51 Educati:tn .nd f fealhcarc 10% 372 433 479 507 Filooce and Real Esta1e 70% 818 1,052 1,268 1,358 Govemrrent 50% 4,379 4,614 4,794 4.916 lnlorrmti:>n S)1tcrm 15% 60 104 136 159 Leiru'c ind Hospiality 1% 39 49 60 64 Mmi&c:nmg 3% 148 157 156 155 Office Services 100"/4 1,051 1,295 1,512 1,616 Prolc:ssional and Bwiaess Scn.'U.s 50% 2,297 2,569 2,854 2,920 Retail Trade 5% 205 221 240 247 Self-fn!lb)'<d 5% 161 174 184 191 T<an<portation, Warehousi,g, ind Utiliie$ 15% 153 193 225 246 Wholesale Trade 5% 75 88 98 104 Grand Total 9,797 10,993 12,0SS ll,536

2035 2040 2045 105 103 102

2,737 2,970 3,171 5,402 5,883 6,302 2,094 2,387 2,583

10,128 10,453 I0,816 1,240 1,431 1,649 6,957 7,945 8,580 5,162 5,136 5,103 1,745 1,992 2,201 5,995 6,513 6,709 5,098 5,504 5,720 3,967 4,139 4,343 1,813 2,004 2,221 2,244 2,432 2,621

54,687 58,892 62,121

203S 2040 2045 I I I

55 59 63 540 588 630

1,466 1,671 1,808 5,064 5,227 5,408

186 215 247 70 79 86

155 154 153 1,745 1,992 2,201 2,998 3,257 3,355

255 275 286 198 207 217 272 301 333 112 122 131

13,116 14,147 14,920

1Estl'Tla1es based on previous commercial omce studies pcr(ormed by The London Group. for the North County cities combr\Cd (San Marcos, CarJsbad.

2050 IOI

3,298 6,565 2,705

11,038 1,794 8,956 5,074 2,348 6,833 5,849 4,472 2,345 2,738

64,116

2050 I

66 657

1,894 5,519

269 90

152 2,348 3,417

292 224 352 137

15,416

Escoodi:lo, Vi.s1.i, aod Oceanside), these ratios resuk m 51,327 omcc j)bs fl 201S, A$ ofQID 20JS, there are 12.t nlilioo SF of occupied office $p,lCC. This. rcsuks I] an estfflated 236 square feet per employee.

Sourn:Tbc london Ooup htk)' Advdon, SANDAG

Sa11 Marcos Creek District City of San Marcos

Page68 of83

San Marcos Total Employment

Office Jobs Forecast I

Estimated Office Jobs

Forccas ted Growth Office Job Growth S.F. Per Fnipk>yee

Occupied S.F.

Other Commereial Jobs FoRcast I

Estimated Other Commercial Jobs

FoRcasted Growth Other Commercial Job Growth S.F. Per Empk>yee Conmercia1Space Required (S.F.)

Forrcastcd San 1\1:ucos Job Gumth & Commr1c1al S.F. (;11mth

2015-2050

201S@t.) 2020 ~ 2030 2035 2040

40,459 45,S65 S0,036 52,132 S4,687 S8,892

2015 2020 2025 2030 203S 2040 9,797 10,993 12,05S 12,536 13,116 14,147

1,195 1,062 48 1 580 1,031

200 200 200 200 200

239,045 212,464 96,162 116,098 206,208

201S 2020 202S 2030 2035 2040 30,661 34,573 37,981 39,596 41,571 44,745

3,911 3,409 1,615 1,975 3,174

333 333 333 333 333 1,302,371 1,135,090 537,858 657,512 1,056,929

Sourcc:The London G-oup Realty Advison, SANDAG


llii 2050 Total Change

62,121 64,116 23,657

2045 2050 14,920 15,416

Total 2015-2050

773 496 5,6 19 200 200

154,534 99,244 1,123,755

2045 2050 47,201 48,700

Total 201S-2050

2,456 1,499 18,038

333 333 817,958 499,094 6,006,812

Page69o/83

S \:\ IJ \(, I un•c.1,1, ii Juh <:,uulh 11111 ,\. ( .. 111n:1lctl (Hlict fu h, ( .1tl,h 111

201,-211,0

SANDAG Yoreusted Job Gro'lltb forCarubad

2015(E•l) 1010 1025 1030 Ajp'icutinandMi'q 144 140 136 135 Construc:tion 1,909 2,362 2,510 2,649 f.ducatiJnand Hcatthcare 4,555 5,271 5,571 5,849 Fimnce and Real Estate 4,688 5,039 5,185 5,3 17 Gove- 3,521 4,205 4,458 4,695 IM>mutXm S)1tcms 1,528 1.863 2,019 2,173 Liesure and Hosp itality 11,967 13,329 13,785 14,213 Manuflcnri,g 10,137 10,658 10,629 10,570 Office Scrvic<s 2,244 2,525 2,642 2,757 Professioml and Busi>= Scn'lce.s 11,752 12,589 12,935 13,284 RetaaTnide 7,984 8,483 8,625 8,763 ScU:Erri,byed 4,843 5,112 5,254 5,391 Transporation, Warehoming. and Utilities 1,170 1.473 1,619 1,743 Wholc<,leTrade 3 750 4 ,114 4,251 4,380 G,.ndTol>I 70,202 77,163 79,619 81,919

E.uimated Office ~loxment Crol\th o/. Office

Space Uun 1 1015(Esl) 1010 2015 1030 Ap'cuhrcandMiq 1% I ConstruclX>n 2% 38 47 50 53 EducaOOn and Hcatthcare 10% 455 527 557 585 Fimnce and Real Estate 70% 3,282 3,527 3,630 3,722 Govcnmert 50'/4 1,761 2,103 2,229 1,348 lnimm lion Systems IS% 229 279 303 326 Leisin and Hospiality 1% 120 13) 138 142 Marrufactu"iig 3% 304 320 319 317 OfficcSeMcs 100% 2,244 2,525 2,642 2,757 Prokssi:>ml and Busiles.s Scniccs 50'/4 5,876 6,195 6,468 6,642 Rct,i Trade S¾ 399 424 431 438 SeU:frri,byed S¾ 242 256 263 270 Tra11'ponatiol\ Wan,housing, and Utilcics IS% 175 221 243 261 Wholesale Trade s•/o 188 206 213 219 c .. nc! Tot>I 15,315 16,864 17,486 18,081

--

1035 1040 1045 1050 133 132 131 13 1

2,794 2,815 2,838 2,862 6,125 6,170 6,215 6,262 5,432 5,453 5,473 5,494 4,942 4,978 5,051 5,139 2,338 2,363 2,389 2,417

14,653 14 ,709 14,768 14,829 10,529 10,498 10,462 10,429 2,868 2,904 2,941 2,977

13,692 13,781 13,836 13,881 8,909 8,932 8,954 8,976 5,535 5,557 5,581 5,605 1,871 1,890 1,910 1,929 4,514 4,536 4,5~7 4,578

84,335 84,718 85, 106 85,509

2035 1040 1045 2050

56 56 57 57 613 617 622 626

3,802 3,817 3,831 3,846 2,471 2,489 2,526 2,570

351 354 358 36) 147 147 148 148 316 315 314 313

2,868 2,904 2,941 2,977 6,846 6,891 6,918 6,941

445 447 448 449 277 278 279 280 281 284 287 289 226 227 228 229

18,699 18,816 18,956 19,089

1Estfflalcs based on prcvi>us corrmcrcial ofTx:c studies performed by The London Group. For the North County cities combi,cd (San Marc.os, Carlsbad. Escondido. Vista, and Oceamidc), these ralios result Sl Sl.327 of'r.ce jobs il 2015. As of QTD 2015, there are 12.1 million SF of occupied office space. 11us re~ il in citmatcd 236 square feet per employee .

Sou.rte: ne Loadoa Ooup &ally Advitors, SA?\'DAG


of83

Cans bad Total Employment



Forecasted Gro~h Office Job Growth S.F. Per Erq>loyee Occupied S.F.

Other Commercial Jobs Forecast I

Estimated Other Conunercial Jobs

Forecasted Gro"th Other Comnercial Job Growth S.F. Per Erq>loyee Comnercial Space Required (S.F.)

l·orccastcd Carlsh:111 .lob G10\\lh & Conlllll' ll'ial S.F. (;11mth

20 I 5-2US11

2015 (Est.) 2020 2025 2030 203S 2040

70,202 77,163 79,619 81,919 84,335 84,718

2015 2020 2025 W.!! 2035 2040 15,315 16,864 17,486 18,081 18,699 18,826

1,549 622 595 618 128

200 200 200 200 200

309,749 124,332 119,076 123,560 25,538

2015 2020 2025 2030 2035 2040 54,887 60,299 62,133 63,838 65,636 65,892

5,413 1,834 1,705 1,798 255

333 333 333 333 333

1,802,365 610,835 567,638 598,801 85,018

Source:The London Qoup Really Advisors, SANDAG


2045 2050 Total Change

85,106 85,509 15,307

2045 2050

18,956 19,089 Total

2015-2050 130 132 3,773

200 200 25,942 26,480 754,677

2045 2050 66,150 66,420

Total 2015-2050

258 271 11,534

333 333

86,011 90,110 3,840,777

of83

S \, I>\(, I 01et "'l 11 Joh (;1on lh 11111 S •. r,11m:1lell Olli\l lub .. f,\11Ucf11ln 2111..:..111.;,o

SAN DAG ForecastedJobCro"'th for Escondido

2015 (EsL) 2020 2025 2030

Agncukln and M""ll 250 241 233 228

Comtruc1X>n 5,702 5,834 5,923 6,013 &Jucationand Hcalllrare 6,246 7,029 7,205 7,387 Fnao::e ard Real Estate 1,823 1,962 2,045 2,128 Govcmneol 4,583 4,929 5,074 5,225 Jnfomnti:m Systems 853 959 1,052 1,150 Liesure and Hospialily 4,775 5,248 5,488 5,735 Manufacturi'ig 3,126 3,222 3,214 3,197

OlliceSemces 1,888 1,977 2,039 2,103 Professional and BusllCss Sen-US 5,043 5,332 5,441 5,557 Re1ailTrade 8,492 8,656 8,736 8,819 Self-Erq,loyod 5,574 5,615 5,753 5,835 Transporation. Wan:holl'ling. and Uliliies 856 955 1,027 1,104 Wholesale Trade 1,217 1)13 I 390 1468

GraodTolal 50,426 53,332 54,620 55,949

Estimated Office E!3!Io2:nxnt Cro,,th % 0fflt.e

Space Uun1 2015 (EsL) 2020 2025 2030 A~candMini,g 1% 2 2 2 2 Consttuctim 2% 114 117 118 120 Education and Hcabhcare 10% 625 703 721 739 Fnance and Real Estate 10% 1,276 1,373 1,432 1,490 Govenmen: 50'/4 2,291 2,465 2,537 2,613 Infi>rm,ti,n S)<1Cm'l IS% 128 144 158 173

lcisll'C and Hospiality 1% 48 52 55 57 Manubcnri,g 3% 94 97 96 96 OlliceSemces 100% 1,888 1,977 2,039 2,103 Pro~ioml and Bu,iness Services 50'/4 2,521 2,666 2,721 2,779 Rc1aiTradc 5% 425 433 437 441 Self-En-ployed 5% 279 284 288 292 Tun.,ponation. War<hoUSWI&, and Utilries 15% 128 143 154 166

Wholesale Trade 51/. 61 66 70 73 G,.ndTolal 9,880 10,521 10,826 11,142

2035 2040 2045 224 221 219

6,124 6,155 6,189 7,599 7,667 7,739 2,241 2,289 2,338 5,403 5,452 5,501 1,264 1,292 1,322 6,048 6,122 6, 197 3, 186 3,170 3,150 2,184 2,198 2,213 5,619 5,715 5,751 8,922 8,959 8,996 5,933 5,956 5,980 1,196 1,216 1,238 1,565 I 591 1,617

57,568 58,003 58,456

2035 2040 2045 2 2

122 123 124 760 767 774

1,569 1,602 1,637 2,702 2,726 2,754

190 194 198 60 61 62 96 95 95

2, 184 2,198 2,213 2,840 2,858 2,876

446 448 450 297 298 299 179 182 186 78 80 81

11,524 11,634 11,749

1Estml1cs based on preVX>US commercial ofr.:c studies performed by The Londoo Group. For the North County cfJCs combined (San Marcos, Culsbad.

2050 2 18

6,225 7,810 2,387 5,565 1,353 6,273 3,132 2,227 5,788 9,032 6,006 1,261 1,643

58,920

2050 2

125 781

1,671 2,783

203 63 94

2,227 2,894

452 300 189 82

11,865

E!condido, Vista, and Oceanside), lllesc ratios result in S1;J27 office jobs n 201S. As ofQID 2015, 1hcro arc 12.1 million SF of occuJ»Cd office space. This results il an estw'nated 236 square reet per employee.

Sourn:Tbe L:u~don Ooup Rc1k7 Adwison:,SANI>AG


of83

Escondido Total Employment



Fore casted Gro\\th Office Job Growth S.F. Per Employee Occupied S.F.


Estimated OtberConunercial Jobs

Forecasted Gro,.th Other Connnercial Job Growth S.F. Per Employee CollI!lercial Space Required (S.F.)

Forccastcd Esrnndido .Job Gnl\\th & Conuncrdal S.F. (;1'0\,th

2015-2050

2015 (Est.) 2020 2025 1!lli! 2035 2040

50,426 53,332 54,620 55,949 57,568 58,003

~ 2020 2025 2030 2035 2040 9,880 10,521 10,826 11,142 11,524 11,634

641 305 316 382 109 200 200 200 200 200

128,205 61,012 63,182 76,4 16 21,850

2015 2020 2025 2030 2035 2040 40,545 42,811 43,794 44,807 46,044 46,369

2,265 983 1,013 1,237 326 333 333 333 333 333

754,320 327,319 337,359 4 11,894 108,475

Source: The London <soup Realty Advisors, SANDAG



58,456 58,920 8,494

~ 2050 11,749 11,865

Total 2015-2050

115 116 1,985 200 200

22,992 23,266 396,923

2045 2050 46,707 47,055

Total 2015-2050

338 348 6,510 333 333

112,567 115,774 2,167,708

o/83

:-,. \,I)\(, I Ol'\'l,l\h·1I Joh ( ,1oulh .111, I ,, I ,lmt1lltl ()llilt' Joh~ \1,1.1

201.:..211..,,,

SANDAG Forecasted Job Gromh for Vista

201S (Est.) 2020 201S 2030 Agricllh'e and Mirmg 116 110 107 104 Constnx:lion 2,817 3,012 3,168 3,310 Education and Healthcare S,117 5,508 S,808 6,083 Filancc and Real Estate 1,097 1,264 1,384 1,489 GoW:J"mY:1'1 3,034 3,375 3,632 3,869 Inimre.tion Sy&1emc; 778 974 1,153 1,317 Lc:~ue and Hospaalily 2,848 3,433 3,894 4,308 Manulacrumg 7,104 7,303 7,283 7,243 Office SeMCes 849 1.042 1,161 l.256 Prolcssional and Busiless Scnicd 3,059 3,252 3,409 3,SS9 RetaHrade 4,132 4,325 4,483 4.620 Self-En-ployed 3,100 3,304 3,456 3,593 TramportaOOn_ Warchousi1g, and Utili'ies 238 420 SS3 610 WholesaloTrade 3,262 3,428 3,562 3,683 Grand Total 37,SSO 40,750 43,053 45,104

Estitmtcd Office E~Joxmcnt Grol'lth ¾ Office

Space Usen1 2015(Est.) 2020 2025 2030 Agricultae and M"'"ll 1% I I I I Con.strucl ion 2% 56 60 63 66 &lucation and I fcallhcarc 10% 512 551 S81 608 Fmnce and Real !!<tau: 70% 768 885 969 1,042 Govemnent SO% 1,517 1,688 1,816 1,935 lnimmtion Systems IS% 117 146 173 198 Leisure and Hospirality 1% 28 34 39 43 Manuttcn.ring 3% 213 219 218 217 OfficeSeM'Cs 100'/4 849 1,042 1,161 1,256 Proi:ssioml ard B~ine.ss Sen"Ec.s SO% 1,529 1,626 1,705 1,780 Retul Trade 5% 207 216 224 231 Sclf-fnvlo)<d 5% 155 165 173 180 Transportatiol\ Warehousi:J& and Utiliies 15% 36 63 83 IOI WholesakTrade 5% 163 171 178 184 Gr.and Total 6,151 6,868 7,384 7,841

203S 204-0 204S 102 99 98

3,483 3,504 3,526 6,434 6,476 6,518 1,655 1,677 1,700 4,175 4,201 4,230 1,519 1,535 1,551 4,871 4,921 4,971 7,216 7,178 7,132 1,400 1,426 1,454 3,753 3,771 3,792 4,804 4,819 4,836 3,761 3,780 3,800

836 849 863 3,845 3,865 3,886

47,854 48,101 48,357

2035 2040 2045 I I I

70 70 71 643 648 652

1,159 1,174 1,190 2,088 2,101 2,115

228 230 233 49 49 so

216 21S 214 1,400 1,426 1,454 1,877 1,886 1,896

240 241 242 188 189 190 125 127 129 192 193 194

8,476 8,550 8,630

1Estma.tcs ban d on previous commercial office stud,jcs ~rfonncd by The London Cifoup. For the North County dies combined {San Marcot, Carlsbad,

20SO 97

3,547 6,558 1,724 4,258 1,567 S,022 7,090 1,482 3,810 4,852 3,819

876 3,907

48,609

20SO I

71 656

1,207 2,129

235 so

213 1,482 1,905

243 19 1 131 195

8,709

EscondXto, Viste, and Oceanside), the$c ratio$ resuk in 51,327 officcjob$ ll 2015. As ofQTD 2015, there arc 12.l million SF of occupied office spa.cc. This rcsuJts it an urinated 236 square (eel per employee.

Sour«: Tbc Londoa Ctoup Really Advitors, SA1''DAG


of83

Vista Total Employment



Fore casted Gromh Office Job Growth S.F. Per Enwloyee Occupied S.F.


Estimated Other Commercial Jobs

Forecasted Gnmth Other Corrrnercial Job Growth S.F. Per Employee Corrrnercial Space Required (S.F.)

Fo1ccastcd \ ista Joh Cro\\th & Commercial S.F. Cnmth 2015-2050

2015 (Est.) 2020 2025 ~ 2035 2040

37,550 40,750 43,053 45,104 47,854 48,101

2015 2020 ~ 2030 2035 ~ 6,151 6,868 7,384 7,841 8,476 8,550

7 17 516 457 634 74 200 200 200 200 200

143,313 103,220 91,430 126,892 14,880

2015 2020 2025 ~ ~ ~ 31,399 33,882 35,669 37,263 39,378 39,551

2,483 1,787 1,594 2, 116 173 333 333 333 333 333

826,985 595,038 530,752 704,475 57,476

Souree: The London Ooup Really Advisors, SANDAG

Sa11 Marcos Creek District City o/Sa11 Marcos

2045 1Qfil! Total Change

48,357 48,609 11,059

2045 2050 8,630 8,709

Total 2015-2050

80 79 2,558 200 200

16,050 15,722 511,507

2045 2050 39,727 . 39,900

Total 2015-2050

176 173 8,501 333 333

58,525 57,739 2,830,989

o/83


!'Ii\\ I)\( , I UH'(,1,1ul foh C ,n11,1h 111tl .. {;,, l.,1111111('11 Orliu· luh, 0d,lll\llh

.!111'-~0°'II

SANDAG Foretasted Job Gro~ for Octanside

2015(E,L) 2020 2025 2030 Agncu»e and Mmg 681 6S4 632 618

Comtruction 1,389 1,591 1,693 1,795

Education and Heak!x:aro 3,445 3,795 3,998 4,207

Fiwlce ard Real Estate 1,342 1,528 1,621 1,715

Govcnmenl 7,521 7,862 8,041 8,223

lnronroti>n Systffl'6 604 796 909 1.027 Liesure and Hospilality S,994 6,821 7,096 7,378 ManuJacl\nlg 3,039 3,296 3,289 3,273

Of!kc Services 1,607 1,895 2,031 2,155

ProfcssX>Oll and Burness Servi;es S,102 S,476 5,573 S,672 RetailTrade 6,415 6,851 6,941 7,036

Self.Eirployed 4,897 S,039 S,139 S,243

Trans:poratXln,. WarehousSl&, and Utooes 386 S31 621 714 Wholes,lc Trade 1,630 1802 1,8Q7 1995

GnodTotll 44,050 47,937 49,481 51,051

Estimated Office E~lo2:mcnt Cro'\\1h ¾ Offlce

Space Usen1 2015 (E.sL) 2020 2015 2030

A~andMm,g 1% 7 6 Construction 2% 28 32 34 36

EducaOOn and He.althcarc 10% 34S 380 400 421

Finance and Real E,1>1e 70'/4 939 1,070 1,135 1,201

GoYeRm:r< SO¾ 3,760 3,931 4,021 4,112 lni>rtmtion Sys1ems 15¾ 91 119 136 154

Leisure and Hospilalily 1% 60 68 71 74

Manuficn,ring 3% 91 99 99 98 Of6ce Services 100% 1,607 1,895 2,031 2,ISS Pn,i,ssional and Bu.sa,ess Services S0'/4 2,SSI 2,738 2,787 2,836

Retail Trade 5% 321 343 347 352 Sclf-Eirployed 5% 24S 252 257 262

Transponation, Warehou.si,g. and Util:r.:s 15% S8 80 93 !07

Wholcu lc Trode 5% 81 90 9S 100 GnndTot2I 10,183 11,102 11,511 11,913

2035 2040 2045 603 600 S99

1,921 1,941 1,961 4,466 4,497 4,529 1,826 1,846 1,867 8,441 8,462 8,484 1,175 1,187 1,201

7,743 7,789 7,837 3,262 3,251 3,236

2,313 2,335 2,360 S,800 5,815 S,831 7, 161 7,173 7,185 S,369 5,385 S,402

829 841 853 2 109 2,126 2,144

53,018 53,l48 53,489

2035 2040 2045 6 6 6

38 39 39 447 4SO 453

1,278 1,292 1,307

4,221 4,231 4,242 176 178 180 77 78 78

98 98 97 2,313 2,335 2,360 2,900 2,908 2,916

358 359 359 268 269 270 124 126 128 IOI 106 107

12,411 12,474 12,543

1Eslffllles based on previous commercial otncc srudics perfonncd by The London Goop. For the North County Clics combined (San Marcos, Carlsbad,

2050 S98

1,981 4,562

1,888 8,507

1,217

7,887 3,224

2,381

S,848 7,197

S,419

86S 2,162

53,736

2050

40 456

1,322

4,254 183

79

97 2,381 2,924

360 271 130

108

12,609

Escondido, Vista, aod Oceanside), these ratios result in 51,327 office jobs l'1 2015. As of Qm 201S, there airc 12. l million SF of occupied omcc s~cc. 11us rcsub n a.n cstina.ted 236 square feet per employee.

Source: The London G-oup ~d)' Adnton, SAJ,,,'DAG

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Oceanside Total Employment

Office Jobs Forecast l


Forecasted Growth Office Job Growth S.F. Per &q,loyee Occupied S.F.

Other Commercial Jobs Forecast l

Estimated Other Conunercial Jobs

Forecasted Growth Other Commercial Job Growth S.F. Per &q,Ioyee Connnercial Space Required (S.F.)

Forecastcd Oceanside .Joh Gro\\th & ( ommcrcial S.F. Gnmth 2015-2050

2015 (Est.) 2020 2025 2030 1!ill 2040

44,050 47,937 49,481 51,051 53,018 53,248

2015 ~ 2025 2030 2035 2040 10,183 11,102 11,511 11,913 12,411 12,474

919 408 402 498 63 200 200 200 200 200

183,781 81 ,692 80,388 99,598 12,690

2015 2020 2025 2030 2035 ~ 33,867 36,835 37,970 39,138 40,607 40,774

2,968 1,136 1,168 1,469 167 333 333 333 333 333

988,334 378,135 388,964 489,180 55,461

Source: The London Goup Realty Advisors, SANDAG



53,489 53,736 9,686

2045 2050 12,543 12,609

Total 2015-2050

69 66 2,425 200 200

13,714 13,216 485,079

2045 2050 40,946 41,127

Total 2015-2050

172 181 7,260 333 333

57,419 60,246 2,417,739

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Office Reconciliation Tables


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TotalRBA Vacant S.F.

Occupied S.F.

Change in Occupied Inventory I

Vacancy Rate

Beginning Future S.F.

New Develo11ment (Change in RBA) Remaining Future S .F.

Total Absorption (2015-2050)

Av. Annual Abso tion Remaining Future Supply in 2050 Remainin Years ofS

Notes: 1Based on SANDAGjob forecast.

Reconciliation: Office Supply & Demand

San Marrns (]{} I 5-2050)

2015 (Est.) 2020 2025 2030 2035 illQ

1,576,841 1,802,864 2,038,936 2,145,782 2,274,780 2,503,900 193,308 180,286 203,894 214,578 227,478 250,390

1,383,533 1,622,578 1,835,042 1,93 1,204 2,047,302 2,253,510

239,045 212,464 96,162 116,098 206,208 12.3% 10.0% 10.0% 10.0% 10.0% 10.0%

l ,514,139 1,288,1 16 1,052,044 945,198 816,200 (226,023) (236,071) (106,847) (128,998) (229,120)

1,514,139 1,288,116 1,052,044 945,198 816,200 587,080

1,123,755 32,1 07

305,104

9.5

Source: The London G-oup Realty Advisors, Costar

TotalRBA

Vacant S.F.

Occupied S.F.

Change in Occupied Inventory1

Vacancy Rate

Beginning Future S.F.

New Develo11rrent (Change in RBA) Remaining Future S.F.

Total Absorption (2015-2050)

Av. Annua!Abso tion Reirnining Future Supply in 2050 Reirninin Years ofS p


Source: The 1'lndon Group Realty Advisors, CoStar


Reconciliation: Office Supply & Demand Cm/shad (20/5-1050)

2015 (Est.) 2020 ~ ~ 2035 2040

6,759,396 6,759,396 6,759,396 6,759,396 6,856,611 6,884,986 1,265, 163 955,414 831,082 7 12,006 685,661 688,499 5,494,233 5,803,982 5,928,314 6,047,390 6,170,950 6, 196,488

309,749 124,332 119,076 123,560 25,538 18.7% 14.1% 12.3% 10.5% 10.0% 10.0%

706,742 706,742 706,742 706,742 609,527

Q Q Q (97,215) (28,376) 706,742 706,742 706,742 706,742 609,527 58 1,152

754,677

21,562 522,905

24.3


2,675,604 2,785,876 1,209,035 267,560 278,588 85,280

2,408,044 2,507,288 1,123,755

154,534 99,244 10.0% 10.0%

587,080 415,376 (171,704) .li.1Q...lli} 415,376 305, 104

~ m Total Change

6,913,8 1 I 6,943,233 183,837 691,381 694,323 (570,840)

6,222,430 6,248,910 754,677

25,942 26,480 10.0% 10.0%

581,152 552,327 (28,824) (29,422) 552,327 522,905

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TotalRBA VacantS.F. Occupied S.F.

Change in Occupied Inventm:y1

Vacancy Rate

Beginning Future S.F. New Development (Change in RBA) Remaining Future S.F.

Total Absorption (2015-2050) Av. Annual Abso tion Remaining Future Supply in 2050 Rcmainin Years ofS


Source: The London Goup Realty Advisors, Co Star

Reconciliation: Office Supply & Demand Em111dulu / :!IJ I 5-:!050)

2015 (Est) 2020 ~ 2030 2035

2,520,675 2,630,684 2,698,476 2,768,678 2,853,584 281,264 263,068 269,848 276,868 285,358

2,239,411 2,367,616 2,428,628 2,491,810 2,568,226

128,205 61,012 63,182 76,416 11.2% 10.0% 10.0% 10.0% 10.0%

37,000 (73,009) (140,801) (211 ,003) (110,009) (67,791) (70,202) (84,907)

37,000 (73,009) (140,801) (21 1,003) (295,909)

396,923 11,341

Reconciliation: Office Supply & Demand 1·1vta /]IJ/5-1050)

2040

2,877,862 287,786

2,590,076

21,850

10.0%

(295,909) (24,278)

(320,187)


2,903,409 2,929,260 408,585 290,341 292,926 11 ,662

2,613,068 2,636,334 396,923

22,992 23,266 10.0% 10.0%

(320,187) (345,734) (25,547) (25,851)

(345,734) (371 ,585)

2015 (Est.) 2020 2025 2030 2035 2040 2045 2050 Total Change

TotalRBA VacantS.F. Occupied S.F.

Change in Occupied Jnventozy1

Vacancy Rate

Beginning Future S.F. New Development (Change in RBA) Reirnining Future S.F.

Total Absorption (2015-2050) Av. Annual Absomtion Reirnining Future Supply in 2050 Remainine Years ofS1mnlv

Notes: 1 Based on SANDAGjob forecast.

Source: The London Goup Realty Advisors, CoSter


1,754,29 1 291,363

1,462,928

16.6%

11 3,000

5 11,507 14,614

1,784,712 1,899,401 2,000,989 178,471 189,940 200,099

1,606,241 1,709,461 1,800,891

143,313 103,220 91,430 10.0% 10.0% 10.0%

113,000 82,579 (32,110) (30,421) (114,689) (101,589) 82,579 (32,110) (133,698)

2,141,981 2, 158,514 2,176,347 2, 193,816 439,525 2 14,198 215,851 217,635 219,382 (7 1,981)

1,927,783 1,942,663 1,958,713 1,974,435 511,507

126,892 14,880 16,050 15,722 10.0% 10.0% 10.0% 10.0%

(133,698) (274,690) (291 ,223) (309,056) /140,991) (16,533) (17,833) (I 7,469) (274,690) (291,223) (309,056) (326,525)

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TotalRBA

VacantS.F. Occupied S.F.

Change in Occupied Inventory1

Vacancy Rate

Beginning Future S.F. New Developrrent (Change in RBA) Remaining Future S.F.

Total Absorption (2015-2050) Av. Annual Abso tion Reimining Future Supply in 2050

Remainin Years ofS




Reconciliation: Office Supply & Demand Ocrn11.1·1de (:0 I j-]050)

2015 (Est.) 2020 ~ 2030 ~ ~

1,774,279 1,899,183 1,989,951 2,079,271 2,189,936 2,204,036 248,796 189,918 198,995 207,927 218,994 220,404

1,525,483 1,709,264 1,790,956 1,871,344 1,970,942 1,983,632

183,781 81,692 80,388 99,598 12,690 14.0% 10.0% 10.0% 10.0% 10.0% 10.0%

108,420 (16,484) (107,252) (196,572) (307,237) (124,904) (90,769) (89,320) (1 10,664) (14,100)

108,420 (16,484) (107,252) (196,572) (307,237) (321,337)

485,079

13,859

~ lliQ Total Change

2,219,274 2,233,958 459,679 221,927 223,396 (25,400)

1,997,346 2,010,562 485,079

13,714 13,216 10.0% 10.0%

(321,337) (336,575) {15,238) {14,684)

(336,575) (351,259)

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COMPANY PROFILE

THE L ONDON GROUP

REPRESENTATIVE SERVICES

Market and Feasibility Studies Financial Structuring Asset Disposition Government Processing

REALTY ADVISORS

Development Services Fiscal Impact Strategic Planning Capital Access

Litigation Consulting Workout Projects MAI Valuation Economic Analysis

The London Group is a full service real estate investment and development consulting, capital access and publishing firm. We determine the answers to the questions: Should I purchase the property? If so, how much should I pay and what is my potential rate of return? What type of project should I invest in or develop? What type of deal should I structure?

To answer these questions we conduct market analysis, feasibility studies, provide financial structuring advice and general economic consulting. Often we 'package' the deal and provide access to capital sources. We also have capabilities in pre-development consulting including asset management and disposition and in providing team coordination, processing and disposition services (packaging and promotion).

The Real Estate & Economic Monitor is a newsletter published by The London Group providing market trend analysis and commentary for the serious real estate investor. The principals of the firm, Gary London and Nathan Moeder, bring acknowledged credentials and experience as advisors and analysts to many successful projects and assignments throughout North America. It is available and regularly updated on the World Wide Web at the following address: http://www.londongroup.com/.

The London Group also draws upon the experience of professional relationships in the development, legal services, financial placement fields as well as its own staff.

Clients who are actively investigating and investing in apartment projects, retail centers and commercial projects have regularly sought our advice and financial analysis capabilities.

We have analyzed, packaged and achieved capital for a wide variety of real estate projects including hotels, office buildings, retail shopping centers and residential housing communities. We are generalists with experiences ranging from large scale, master planned communities to urban redevelopment projects, spanning all land uses and most development issues. These engagements have been undertaken throughout North America for a number of different clients including developers, investors, financial institutions, insurance companies, major landholders and public agencies.


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CONTACT INFORMATION

This analysis was prepared by The London Group Realty Advisors commissioned by the City of San Marcos.

Research for this project was completed in August 2015. Conclusions and recommendations are strictly those of The London Group Realty Advisors. Users of this information should recognize that assumptions and projections contained in this report will vary from the actual experience in the marketplace. Therefore, The London Group Realty Advisors is not responsible for the actions taken or any limitations, financial or otherwise, of property owners, investors, developers, lenders, public agencies, operators or tenants.

This assignment was completed by the staff of The London Group Realty Advisors. Nathan Moeder, Principal, served as project director. Robert Martinez, Senior Analyst, conducted analysis and prepared the exhibits in this report. Gary London, President, provided strategic consultation and recommendations. For further information or questions contact us at:


The London Group Realty Advisors El Cortez Building

702 West Ash, Suite 101 San Diego, CA 92101 Phone: 619-269-4010

www.londongroup.com

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san marcos creek district retail & office market analysis

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