The CoStar
Office Report
MID-YEAR 2007
San Diego Office Market
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
Table of Contents
Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A
Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B
Terms & Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C
Market Highlights & Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CoStar Markets & Submarkets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Employment & Tenant Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Employment & Unemployment Analysis
Tenant Profiles
Inventory & Development Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Construction Activity Map
Inventory & Development Analysis
Select Top Deliveries
Select Top Under Construction Properties
Figures at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Figures at a Glance by Class & Market
Figures at a Glance by Class & Submarket
Figures at a Glance Grouped by CBD vs Suburban
Historical Figures at a Glance
Leasing Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Leasing Activity Map
Leasing Activity Analysis
Select Top Lease Transactions
Sales Activity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Sales Activity Analysis
Select Top Sales Transactions
Select Same Building Sales
Select Land Sales
Analysis of Individual CoStar Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Central Suburban Market
Downtown Market
Hwy-78 Corridor Market
I-15 Corridor Market
North Cities Market
North County West Market
South/Southeast Corridor Market
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT A
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
Methodology
The CoStar Office Report, unless specifically stated otherwise, calculates office statistics using CoStar
Group’s entire database of existing and under construction office buildings in each metropolitan area.
Included are office, office condominium, office loft, office medical, all classes and all sizes, and both
multi-tenant and single-tenant buildings, including owner-occupied buildings. CoStar Group's national
database includes approximately 33.6 billion square feet of coverage in 1.2 million properties. All rental
rates reported in the CoStar Office Report have been converted to a Full Service equivalent rental rate.
For information on subscribing to CoStar’s Advisory reports, or for information
on CoStar’s other products and services, please contact us at 1-877-7COSTAR,
or visit our web site at www.costar.com
© Copyright 2007 CoStar Group, Inc. All Rights Reserved. Although CoStar makes efforts to ensure the accuracy and reliability of the
information contained herein, CoStar makes no guarantee, representation or warranty regarding the quality, accuracy, timeliness or
completeness of the information. The publication is provided ‘as is’ and CoStar expressly disclaims any guarantees, representations or
warranties of any kind, including those of MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
CoStar Group, Inc.
2 Bethesda Metro Center • Bethesda, MD USA 20814 • (800) 204-5960 • www.costar.com • NASDAQ: CSGP
B THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
Terms & Definitions
Availability Rate: The ratio of available space to total rentable Deliveries: Buildings that complete construction during a specified
space, calculated by dividing the total available square feet by the period of time. In order for space to be considered delivered, a
total rentable square feet. certificate of occupancy must have been issued for the property.
Available Space: The total amount of space that is currently Delivery Date: The date a building completes construction and
being marketed as available for lease in a given time period. It receives a certificate of occupancy.
includes any space that is available, regardless of whether the Developer: The company, entity or individual that transforms raw
space is vacant, occupied, available for sublease, or available at land to improved property by use of labor, capital and entrepre-
a future date. neurial efforts.
Build-to-Suit: A term describing a particular property, developed Direct Space: Space that is being offered for lease directly from
specifically for a certain tenant to occupy, with structural features, the landlord or owner of a building, as opposed to space being
systems, or improvement work designed specifically for the needs offered in a building by another tenant (or broker of a tenant)
of that tenant. A build-to-suit can be leased or owned by the ten- trying to sublet a space that has already been leased.
ant. In a leased build-to-suit, a tenant will usually have a long Existing Inventory: The square footage of buildings that have
term lease on the space. received a certificate of occupancy and are able to be occupied
Buyer: The individual, group, company, or entity that has pur- by tenants. It does not include space in buildings that are either
chased a commercial real estate asset. planned, under construction or under renovation.
Cap Rate: Short for capitalization rate. The Cap Rate is a calcula- Flex Building: A type of building designed to be versatile, which
tion that reflects the relationship between one year’s net operating may be used in combination with office (corporate headquarters),
income and the current market value of a particular property. research and development, quasi-retail sales, and including but
The Cap Rate is calculated by dividing the annual net operating not limited to industrial, warehouse, and distribution uses. A typi-
income by the sales price (or asking sales price). cal flex building will be one or two stories with at least half of the
CBD: Abbreviation for Central Business District. (See also: rentable area being used as office space, have ceiling heights of 16
Central Business District) feet or less, and have some type of drive-in door, even though the
Central Business District: The designations of Central Business door may be glassed in or sealed off.
District (CBD) and Suburban refer to a particular geographic area Full Service Rental Rate: Rental rates that include all operating
within a metropolitan statistical area (MSA) describing the level expenses such as utilities, electricity, janitorial services, taxes and
of real estate development found there. The CBD is characterized insurance.
by a high density, well organized core within the largest city of a Gross Absorption: The total change in occupied space over a
given MSA. given period of time, counting space that is occupied but not
Class A: A classification used to describe buildings that generally space that is vacated by tenants. Gross absorption differs from
qualify as extremely desirable investment-grade properties and leasing Activity, which is the sum of all space leased over a certain
command the highest rents or sale prices compared to other period of time. Unless otherwise noted Gross Absorption includes
buildings in the same market. Such buildings are well located direct and sublease space.
and provide efficient tenant layouts as well as high quality, and in Growth in Inventory: The change in size of the existing square
some buildings, one-of-a-kind floor plans. They can be an archi- footage in a given area over a given period of time, generally due
tectural or historical landmark designed by prominent architects. to the construction of new buildings.
These buildings contain a modern mechanical system, and have Industrial Building: A type of building adapted for such uses as
above-average maintenance and management as well as the best the assemblage, processing, and/or manufacturing of products
quality materials and workmanship in their trim and interior fit- from raw materials or fabricated parts. Additional uses include
tings. They are generally the most attractive and eagerly sought warehousing, distribution, and maintenance facilities. The pri-
by investors willing to pay a premium for quality. mary purpose of the space is for storing, producing, assembling,
Class B: A classification used to describe buildings that generally or distributing product.
qualify as a more speculative investment, and as such, command Landlord Rep: (Landlord Representative) In a typical lease trans-
lower rents or sale prices compared to Class A properties. Such action between an owner/landlord and tenant, the broker that
buildings offer utilitarian space without special attractions, and represents the interests of the owner/landlord is referred to as the
have ordinary design, if new or fairly new; good to excellent Landlord Rep.
design if an older non-landmark building. These buildings typical- Leased Space: All the space that has a financial lease obligation.
ly have average to good maintenance, management and tenants. It includes all leased space, regardless of whether the space is
They are less appealing to tenants than Class A properties, and currently occupied by a tenant. Leased space also includes space
may be deficient in a number of respects including floor plans, being offered for sublease.
condition and facilities. They lack prestige and must depend Leasing Activity: The volume of square footage that is commit-
chiefly on a lower price to attract tenants and investors. ted to and signed under a lease obligation for a specific building
Class C: A classification used to describe buildings that gener- or market in a given period of time. It includes direct leases,
ally qualify as no-frills, older buildings that offer basic space and subleases and renewals of existing leases. It also includes any
command lower rents or sale prices compared to other buildings pre-leasing activity in planned, under construction, or under
in the same market. Such buildings typically have below-average renovation buildings.
maintenance and management, and could have mixed or low Market: Geographic boundaries that serve to delineate core areas
tenant prestige, inferior elevators, and/or mechanical/electrical that are competitive with each other and constitute a generally
systems. These buildings lack prestige and must depend chiefly accepted primary competitive set of areas. Markets are building-
on a lower price to attract tenants and investors. type specific, and are non-overlapping contiguous geographic
Construction Starts: Buildings that began construction during a designations having a cumulative sum that matches the boundar-
specific period of time. (See also: Deliveries) ies of the entire Region (See also: Region). Markets can be further
Contiguous Blocks of Space: Space within a building that is, or is subdivided into Submarkets. (See also: Submarkets)
able to be joined together into a single contiguous space.
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT C
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
Multi-Tenant: Buildings that house more than one tenant at a Seller: The individual, group, company, or entity that sells a par-
given time. Usually, multi-tenant buildings were designed and ticular commercial real estate asset.
built to accommodate many different floor plans and designs for SF: Abbreviation for Square Feet.
different tenant needs. (See also: Tenancy). Single-Tenant: Buildings that are occupied, or intended to be
Net Absorption: The net change in occupied space over a given occupied by a single tenant. (See also: Build-to-suit and Tenancy)
period of time. Unless otherwise noted Net Absorption includes Sublease Space: Space that has been leased by a tenant and is
direct and sublease space. being offered for lease back to the market by the tenant with
Net Rental Rate: A rental rate that excludes certain expenses that the lease obligation. Sublease space is sometimes referred to as
a tenant could incur in occupying office space. Such expenses sublet space.
are expected to be paid directly by the tenant and may include Submarkets: Specific geographic boundaries that serve to delin-
janitorial costs, electricity, utilities, taxes, insurance and other eate a core group of buildings that are competitive with each
related costs. other and constitute a generally accepted primary competitive
New Space: Sometimes called first generation space, refers to set, or peer group. Submarkets are building type specific (office,
space that has never been occupied and/or leased by a tenant. industrial, retail, etc.), with distinct boundaries dependent on
Occupied Space: Space that is physically occupied by a tenant. different factors relevant to each building type. Submarkets are
It does not include leased space that is not currently occupied non-overlapping, contiguous geographic designations having a
by a tenant. cumulative sum that matches the boundaries of the Market they
Office Building: A type of commercial building used exclusively are located within (See also: Market).
or primarily for office use (business), as opposed to manufactur- Suburban: The Suburban and Central Business District (CBD)
ing, warehousing, or other uses. Office buildings may sometimes designations refer to a particular geographic area within a metro-
have other associated uses within part of the building, i.e., retail politan statistical area (MSA). Suburban is defined as including all
sales, financial, or restaurant, usually on the ground floor. office inventory not located in the CBD. (See also: CBD)
Owner: The company, entity, or individual that holds title on a Tenancy: A term used to indicate whether or not a building is
given building or property. occupied by multiple tenants (See also: Multi-tenant) or a single
Planned/Proposed: The status of a building that has been tenant. (See also: Single-tenant)
announced for future development but not yet started Tenant Rep: Tenant Rep stands for Tenant Representative. In a
construction. typical lease transaction between an owner/landlord and tenant,
Preleased Space: The amount of space in a building that has been the broker that represents the interests of the tenant is referred to
leased prior to its construction completion date, or certificate of as a Tenant Rep.
occupancy date. Time On Market: A measure of how long a currently available
Price/SF: Calculated by dividing the price of a building (either space has been marketed for lease, regardless of whether it is
sales price or asking sales price) by the Rentable Building Area vacant or occupied.
(RBA). Under Construction: The status of a building that is in the process
Property Manager: The company and/or person responsible for of being developed, assembled, built or constructed. A building is
the day-to-day operations of a building, such as cleaning, trash considered to be under construction after it has begun construc-
removal, etc. The property manager also makes sure that the vari- tion and until it receives a certificate of occupancy.
ous systems within the building, such as the elevators, HVAC, and Vacancy Rate: A measurement expressed as a percentage of the
electrical systems, are functioning properly. total amount of physically vacant space divided by the total
Quoted Rental Rate: The asking rate per square foot for a par- amount of existing inventory. Under construction space generally
ticular building or unit of space by a broker or property owner. is not included in vacancy calculations.
Quoted rental rates may differ from the actual rates paid by Vacant Space: Space that is not currently occupied by a tenant,
tenants following the negotiation of all terms and conditions in regardless of any lease obligation that may be on the space.
a specific lease. Vacant space could be space that is either available or not avail-
RBA: Abbreviation for Rentable Building Area. (See also: able. For example, sublease space that is currently being paid for
Rentable Building Area) by a tenant but not occupied by that tenant, would be considered
Region: Core areas containing a large population nucleus, that vacant space. Likewise, space that has been leased but not yet
together with adjacent communities have a high degree of eco- occupied because of finish work being done, would also be con-
nomic and social integration. Regions are further divided into sidered vacant space.
market areas, called Markets. (See also: Markets) Weighted Average Rental Rate: Rental rates that are calculated by
Relet Space: Sometimes called second generation or direct space, factoring in, or weighting, the square footage associated with each
refers to existing space that has previously been occupied by particular rental rate. This has the effect of causing rental rates
another tenant. on larger spaces to affect the average more than that of smaller
Rentable Building Area: (RBA) The total square footage of a spaces. The weighted average rental rate is calculated by taking
building that can be occupied by, or assigned to a tenant for the the ratio of the square footage associated with the rental rate on
purpose of determining a tenant’s rental obligation. Generally each individual available space to the square footage associated
RBA includes a percentage of common areas including all hall- with rental rates on all available spaces, multiplying the rental rate
ways, main lobbies, bathrooms, and telephone closets. by that ratio, and then adding together all the resulting numbers.
Rental Rates: The annual costs of occupancy for a particular Unless specifically specified otherwise, rental rate averages include
space quoted on a per square foot basis. both Direct and Sublet available spaces.
Sales Price: The total dollar amount paid for a particular property Year Built: The year in which a building completed construction
at a particular point in time. and was issued a certificate of occupancy.
Sales Volume: The sum of sales prices for a given group of build- YTD: Abbreviation for Year-to-Date. Describes statistics that are
ings in a given time period. cumulative from the beginning of a calendar year through what-
ever time period is being studied.
D THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
OVERVIEW
San Diego’s Vacancy Increases to 10.9%
Net Absorption Positive 589,875 SF in the Quarter
T he San Diego Office market ended the second quarter to positive 614,776 square feet in the first quarter 2007, positive
2007 with a vacancy rate of 10.9%. The vacancy rate 127,947 in the fourth quarter 2006, and negative (206,504) in the
was up over the previous quarter, with net absorption third quarter 2006.
totaling positive 589,875 square feet in the second quarter.
Vacant sublease space decreased in the quarter, ending the quarter The Class-B office market recorded net absorption of posi-
at 1,051,088 square feet. Rental rates ended the second quarter tive 363,794 square feet in the second quarter 2007, compared to
at $31.95, an increase over the previous quarter. A total of 27 negative (187,275) square feet in the first quarter 2007, positive
buildings delivered to the market in the quarter totaling 763,399 198,017 in the fourth quarter 2006, and negative (15,406) in the
square feet, with 4,397,028 square feet still under construction at third quarter 2006.
the end of the quarter.
The Class-C office market recorded net absorption of posi-
Absorption tive 53,201 square feet in the second quarter 2007 compared to
Net absorption for the overall San Diego office market was negative (28,953) square feet in the first quarter 2007, positive
36,004 in the fourth quarter 2006, and positive 157,696 in the
positive 589,875 square feet in the second quarter 2007. That third quarter 2006.
compares to positive 398,548 square feet in the first quarter 2007,
positive 361,968 square feet in the fourth quarter 2006, and nega- Net absorption for San Diego’s central business district was
tive (64,214) square feet in the third quarter 2006. positive 230,372 square feet in the second quarter 2007. That
compares to negative (110,800) square feet in the first quarter
Tenants moving out of large blocks of space in 2007 include: 2007, negative (1,782) in the fourth quarter 2006, and positive
Conexant Systems moving out of 85,497 square feet at Conexant 38,964 in the third quarter 2006.
Bldg; NextWave Wireless, Inc. moving out of 56,816 square feet
at Corporate Plaza Bldg A; and Qualcomm, Inc. moving out of Net absorption for the suburban markets was positive
34,615 square feet at Pacific Technology Center. 359,503 square feet in the second quarter 2007. That compares
to positive 509,348 square feet in first quarter 2007, positive
Tenants moving into large blocks of space in 2007 include: 363,750 in the fourth quarter 2006, and negative (103,178) in
Broadcom Company moving into 94,794 square feet at Discovery the third quarter 2006.
Corporate Center - Bldg. A; Amylin Pharmaceuticals, Inc. moving
into 71,510 square feet at 9880 Campus Point Dr; and ViaSat Vacancy
moving into 60,000 square feet at Legacy NorthPointe - Bldg E The office vacancy rate in the San Diego market area
- ViaSat Corporat.
increased to 10.9% at the end of the second quarter 2007. The
The Class-A office market recorded net absorption of posi- vacancy rate was 10.8% at the end of the first quarter 2007,
tive 172,880 square feet in the second quarter 2007, compared 10.3% at the end of the fourth quarter 2006, and 9.7% at the
end of the third quarter 2006.
Vacancy Rates by Class 1999-2007
Class A Class B Class C Total Market
20%
18%
16%
Vacancy Rate 14%
12%
10%
8%
6%
4% 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007
4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q 4q 2q
1999
2q
Source: CoStar Property®
Absorption©2007 COSTAR GROUP, INC. & Deliveries THE COSTAR OFFICE U.S.REPORT Vacancy Comparison 1
Past 8 Quarters Past 8 Quarters
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
OVERVIEW
Class-A projects reported a vacancy rate of 16.3% at the end of the fourth quarter 2006 and 1,165,389 square feet at the end
of the second quarter 2007, 15.8% at the end of the first quarter of the third quarter 2006.
2007, 15.0% at the end of the fourth quarter 2006, and 14.2% San Diego’s Class-A projects reported vacant sublease space
at the end of the third quarter 2006. of 588,145 square feet at the end of second quarter 2007, down
Class-B projects reported a vacancy rate of 10.8% at the from the 625,044 square feet reported at the end of the first
end of the second quarter 2007, 10.9% at the end of the first quarter 2007. There were 600,156 square feet of sublease space
quarter 2007, 10.3% at the end of the fourth quarter 2006, and vacant at the end of the fourth quarter 2006, and 506,872 square
9.5% at the end of the third quarter 2006. feet at the end of the third quarter 2006.
Class-C projects reported a vacancy rate of 5.7% at the Class-B projects reported vacant sublease space of 390,657
end of the second quarter 2007, 6.0% at the end of first quarter square feet at the end of the second quarter 2007, down from the
2007, 5.8% at the end of the fourth quarter 2006, and 6.0% at 512,897 square feet reported at the end of the first quarter 2007.
the end of the third quarter 2006. At the end of the fourth quarter 2006 there were 525,802 square
The overall vacancy rate in San Diego’s central business dis- feet, and at the end of the third quarter 2006 there were 564,168
trict at the end of the second quarter 2007 decreased to 12.8%. square feet vacant.
The vacancy rate was 14.6% at the end of the first quarter 2007, Class-C projects reported increased vacant sublease space
11.6% at the end of the fourth quarter 2006, and 10.8% at the from the first quarter 2007 to the second quarter 2007. Sublease
end of the third quarter 2006. vacancy went from 59,327 square feet to 72,286 square feet dur-
The vacancy rate in the suburban markets increased to ing that time. There was 45,481 square feet at the end of the
10.6% in thCleassseCcond quarter 2007. TheTovtaalcMaanrckeyt rate was 10.3% fourth quarter 2006, and 94,349 square feet at the end of the
at the end of the first quarter 2007, 10.1% at the end of the fourth third quarter 2006.
quarter 2006, and 9.6% at the end of the third quarter 2006. Sublease vacancy in San Diego’s central business district
Largest Lease Signings stood at 89,091 square feet at the end of the second quarter
The largest lease signings occurring in 2007 included: the 2007. It was 95,413 square feet at the end of the first quarter
2007, 99,983 square feet at the end of the fourth quarter 2006,
220,092 square-foot lease signed by Amylin Pharmaceuticals, Inc. and 70,409 square feet at the end of the third quarter 2006.
at Bridge Pointe Corporate Center in the North Cities market; the
168,066 square-foot lease signed by QUALCOMM at Parkway Sublease vacancy in the suburban markets ended the sec-
Business Center _ Bldg A in the North Cities market and the ond quarter 2007 at 961,997 square feet. At the end of the first
158,076-square-foot lease signed by General Atomics at Parkway quarter 2007 sublease vacancy was 1,101,855 square feet, was
Business Center – Bldg A in the I-15 Corridor market.. 1,071,456 square feet at the end of the fourth quarter 2006, and
was 1,094,980 square feet at the end of the third quarter 2006.
Sublease Vacancy Rental Rates
The average quoted asking rental rate for available office
02 2003 ket 2d04e0qT3chreeaas2me02d0qo4tuont12o,004f0q54v1a,c0a8n2802t0q5ssquubaler2ae04s0qe5feseptab2c02ye0q6itnhethe2en040qdS6aonf Dt2hi02ee0qg7soecmoanrd-
q 2q space, all classes, was $31.95 per-square-foot per year at the end
of the second quarter 2007 in the San Diego market area. This
quarter 2007, from 1,197,268 square feet at the end of the first represented a 0.6% increase in quoted rental rates from the end
quarter 2007. There was 1,171,439 square feet vacant at the end
U.S. Vacancy Comparison of the first quarter 2007, when rents were reported at $31.77
per-square-foot.
Past 8 Quarters
The average quoted rate within the Class-A sector was
San Diego United States $37.00 at the end of the second quarter 2007, while Class-B rates
stood at $30.31, and Class-C rates at $22.11. At the end of the
14.0%
12.0% first quarter 2007, Class-A rates were $37.29 per-square-foot,
Vacancy Rate 10.0% Class-B rates were $29.87, and Class-C rates were $22.12.
The average quoted asking rental rate in San Diego’s CBD
8.0% was $32.88 at the end of the second quarter 2007, and $31.84 in
6.0% the suburban markets. In the first quarter 2007, quoted rates were
$32.83 in the CBD and $31.65 in the suburbs.
4.0%
Deliveries and Construction
2.0% During the second quarter 2007, 27 buildings totaling
0.0% 763,399 square feet were completed in the San Diego market
2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q area. This compares to 10 buildings totaling 1,045,032 square
Source: CoStar Property•
2 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
6%
4% MID-YEAR 2007 – SAN DIEGO
San Diego Office Market1999 1999 2000 2000 2001 2001 2002 2002
2q 4q 2q 4q 2q 4q 2q 4q
OVERVIEW Source: CoStar Property®
feet that were completed in the first quarter 2007, 20 buildings Absorption & Deliveries
totaling 985,711 square feet completed in the fourth quarter
2006, and 696,492 square feet in 13 buildings completed in the Past 8 Quarters
third quarter 2006.
Net Absorption Deliveries
There were 4,397,028 square feet of office space under con- 1.2
struction at the end of the second quarter 2007. 1.05
1.01 0.99
Some of the notable 2007 deliveries include: Qualcomm 1.0
Towers, a 450,000-square-foot facility that delivered in first quar- 0.76
ter 2007 and is now 100% occupied, and DiamondView Tower, a 0.87 0.70
306,750-square-foot building that delivered in first quarter 2007
and is now 86% occupied. 0.8 0.71 0.59
The largest projects underway at the end of second quarter Millions SF 0.6 0.49 0.45 0.36 0.40
2007 were La Jolla Commons Office Tower, a 347,019-square- 0.4 0.41
foot building with 0% of its space pre-leased, and Cardinal 0.34 0.36
Health, a 318,000-square-foot facility that is 100% pre-leased.
0.2
Inventory
Total office inventory in the San Diego market area amount- 0.0
ed to 99,838,822 square feet in 4,445 buildings as of the end of (0.2) (0.06)
the second quarter 2007. The Class-A office sector consisted of
25,964,833 square feet in 210 projects. There were 1,473 Class-B 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
buildings totaling 47,428,073 square feet, and the Class-C sector
consisted of 26,445,916 square feet in 2,762 buildings. Within Source: CoStar Property•
the Office market there were 278 owner-occupied buildings
accounting for 7,318,614 square feet of office space. Total office building sales activity in 2007 was down com-
pared to 2005. In the first three months of 2007, the market saw
Sales Activity 15 office sales transactions with a total volume of $454,404,000.
Tallying office building sales of 15,000 square feet or larger, The price per square foot averaged $283.67. In the same first
three months of 2005, the market posted 21 transactions with a
San Diego office sales figures fell during the first quarter 2007 in total volume of $897,437,136. The price per square foot averaged
terms of dollar volume compared to the fourth quarter of 2006. $313.54.
In the first quarter, 15 office transactions closed with a total Cap rates have been higher in 2007, averaging 6.62% com-
volume of $454,404,000. The 15 buildings totaled 1,601,874 pared to the same period in 2005 when they averaged 6.50%.
square feet and the average price per square foot equated to
$283.67 per square foot. That compares to 21 transactions total- One of the largest transactions that has occurred within the
ing $535,865,657 in the fourth quarter 2006. The total square last 4 quarters in the San Diego market is the sale of 401 W A St
footage in the fourth quarter was 1,863,719 square feet for an in San Diego. This 553,715 square foot office building sold for
average price per square foot of $287.52. $181,000,000, or $326.88 per square foot. The property sold on
3/7/2007.
Reports compiled by: Paula Bonner CoStar Property® and COMPS®
Research Manager, and Luke Andreen Research Associate.
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 3
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
MARKETS
CoStar Markets & Submarkets
In analyzing metropolitan areas in the U.S., CoStar has developed geographic designations to help group properties together, called
Regions, Markets and Submarkets. Regions are the equivalent of metropolitan areas, or areas containing a large population nucleus,
that together with adjacent communities have a high degree of economic and social integration. Regions are then divided into
Markets, which are core areas within a metropolitan area that are known to be competitive with each other in terms of attracting
and keeping tenants. Markets are then further subdivided into smaller units called Submarkets, which serve to delineate a core group
of buildings that are competitive with each other and constitute a generally accepted competitive set, or peer group.
Markets Submarkets
Central Suburban
City Heights/University
Downtown Kearny Mesa
Hwy-78 Corridor Mission Gorge
I-15 Corridor Mission Valley
North Cities Old Town
Point Loma
North County West Rose Canyon/Morena
South/Southeast Corridor Uptown/Hillcrest
Downtown*
Oceanside
San Marcos/Vista
Escondido
Rancho Bernardo/Poway
Scripps Ranch
Del Mar Hts/Carmel Valley
Governor Park
La Jolla
Miramar
Sorrento Mesa
Torrey Pines/Sorrento Val
UTC
Carlsbad
North Beach Cities
East County
South San Diego
* Submarkets comprising the CBD. For statistics reference the CBD vs Suburban Figures at a Glance Page. ©2007 COSTAR GROUP, INC.
4 THE COSTAR OFFICE REPORT
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
EMPLOYMENT AND TENANT
Total Employment by Industry Total Employment Growth
Percent of Total Employment by Industry Total Number of Jobs Added Per Year
7% 8% Natural Resources & 3.0% San Diego U.S. Average
0% Mining
Construction
16% Manufacturing
17% Trade, Transportation & 2.0%
Utilities
Information Percent Growth
3% Financial Activities 1.0%
4% Professional & Business
12%
6% Services
Education & Health
Services 0.0%
Leisure & Hospitality
Other Services
17% Government -1.0%
10% 2003 2004 2005 2006 2007
Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics
Office* Employment Growth Office* Employment Growth
Cumulative Growth in Office* Jobs Over the Past 5 Years Number of Office* Jobs Added Per Year
Employment Inventory San Diego U.S. Average
Market Growth Growth Difference 4.0%
Atlanta 7.90% 5.10% 2.80%
Boston 5.20% 2.30% 2.90% 3.0%
Chicago 7.00% 3.40% 3.60%
Dallas/Ft Worth 15.10% 5.40% 9.70% Percent Growth 2.0%
Denver 6.50% 3.80% 2.70% 1.0%
Los Angeles 5.80% 1.80% 4.00%
New York City 6.60% 1.20% 5.40% 0.0%
Seattle/Puget Sound 13.30% 3.60% 9.70% -1.0%
Tampa/St Petersburg 19.20% 6.60% 12.60%
Washington 12.60% 7.90% 4.70% -2.0%
San Diego 6.10% 8.50% -2.40% 2003 2004 2005 2006 2007
Source: Department of Labor, Bureau of Labor Statistics Source: Department of Labor, Bureau of Labor Statistics. * Office employment is defined as jobs in the Information,
Financial Activities, and Professional & Business Services industries
Historical Unemployment Rates
San Diego U.S. Average
7.0%
6.0%
Percent Unemployment 5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2003 1q 2003 2q 2003 3q 2003 4q 2004 1q 2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q
Source: Department of Labor, Bureau of Labor Statistics.
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 5
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
EMPLOYMENT AND TENANT
Tenant by Size Range Tenants by Lease Expiration
Based on Total Number of Tenants Based on Total Square Footage of Tenants
75,000 SF & Up 1.7% 2013 3.5%
50,000-74,999 SF 1.2% 2012 7.7%
25,000-49,999 SF 3.0%
2011 12.3%
10,000-24,999 SF 11.0%
2010 15.8%
5,000-9,999 SF 16.4%
2,500-4,999 SF 22.4% 2009 15.0%
Up to 2,499 SF 44.3% 2008 15.1%
0% 10% 20% 30% 40% 50% 0% 5% 10% 15% 20%
Percentage of Tenants
Percentage of Tenants
Source: CoStar Tenant®
Source: CoStar Tenant®
Tenants by Industry SF Per Employee by Industry
Based on Total Square Footage of Tenants Based on All Tenants
Finance/Ins/RE 22.5% Law Firms 400.3
Services 15.2% Services 294.1
Manufacturing 13.7% Manufacturing 291.9
Business-Service 11.3% Accountants 286.4
Law Firms 8.9% Government 284.6
Medical 8.9% Medical 281.5
Retailers/Wholes 4.0% Engineers/Archit 277.0
Government 3.9% Finance/Ins/RE 275.0
Engineers/Archit 3.5% Retailers/Wholes 273.5
Agri/Mining/Util 3.5% Business-Service 268.3
Communications 2.7% Transportation 251.4
Accountants 1.5% Agri/Mining/Util 184.1
Transportation 0.5% Communications 171.0
0% 5% 10% 15% 20% 25% 0 50 100 150 200 250 300 350 400 450
Percentage of Tenants SF Per Employee
Source: CoStar Tenant® Source: CoStar Tenant®
6 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
INVENTORY & DEVELOPMENT
Construction Highlights in Select CoStar Markets
Color Coded by Under Construction Square Footage as a Percentage of Existing Inventory
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Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 7
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
INVENTORY & DEVELOPMENT
Historical Deliveries 1982 - 2007
Deliveries Average Delivered SF
6.0 5.6
5.0 5.1
4.1 4.0 4.1
3.5
4.0 3.5 3.4 3.6 3.8
2.8
Millions of SF 3.0 2.2 3.2 2.4 2.8
2.8 2.1
2.6
2.0
0.9 1.0 1.1
0.5
1.0 0.4 0.6 0.4
0.1
0.0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: CoStar Property® * Future deliveries based on current under construction buildings.
Construction Activity Markets Ranked by Under Construction Square Footage
Under Construction Inventory Average Bldg Size
Market # Bldgs Total RBA Preleased SF Preleased % All Existing U/C
I-15 Corridor 13 1,287,976 723,540 56.2% 20,276 99,075
Central Suburban 13 950,790 0 0.0% 18,231 73,138
North Cities 5 920,066 318,000 34.6% 52,901 184,013
North County West 47 532,483 254,337 47.8% 15,761 11,329
Hwy-78 Corridor 17 381,593 47,812 12.5% 12,270 22,447
South/Southeast Corridor 20 244,120 125,556 51.4% 10,113 12,206
Downtown 1 80,000 60,800 76.0% 51,448 80,000
Totals
116 4,397,028 1,530,045 34.8% 22,461 37,905
Source: CoStar Property®
Recent Deliveries Future Deliveries
Leased & Un-Leased SF in Deliveries Since 2003 Preleased & Un-Leased SF in Properties Scheduled to Deliver
Leased Un-Leased 1,800 Preleased Un-Leased
3.0
1,600
2.5
1,400
2.0 1,200 T
Millions of SF
Thousands of SF 1,000
1.5
800
1.0 600
400
0.5
200
0.0 2004 2005 2006 2007 0 2007 4q 2008 1q 2008 2q
2003 2007 3q
Source: CoStar Property® Source: CoStar Property®
8 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
INVENTORY & DEVELOPMENT
Historical Construction Starts & Deliveries
Square Footage Per Quarter Starting and Completing Construction
Construction Starts Deliveries
1.6 1.46
1.4
1.25
1.2 1.02 1.01 1.040.99 1.05
1.05 0.70
0.76
Millions of SF 1.0 0.87 0.65
0.82
0.71
0.8
0.6 0.58 0.54
0.44
0.50
0.4 0.33 0.38 0.35 0.36 0.34 0.41
0.21
0.28 0.30
0.2 0.14
0.0 2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
2004 1q
Source: CoStar Property®
Recent Deliveries by Project Size Breakdown of Year-to-Date Development Based on RBA of Project
Building Size # Bldgs RBA SF Leased % Leased Avg Rate Single-Tenant Multi-Tenant
< 50,000 SF 27 393,984 189,817 48.2% $35.97 107,454 286,530
50,000 SF - 99,999 SF 6 445,306 255,526 57.4% $34.76 115,356 329,950
100,000 SF - 249,999 SF 2 212,391 10,884 5.1% $34.64 0 212,391
250,000 SF - 499,999 SF 2 756,750 713,805 94.3% $41.15 450,000 306,750
>= 500,000 SF 0 0 0 0.0% $0.00 00
Source: CoStar Property®
Recent Development by Tenancy Existing Inventory Comparison
Based on RBA Developed for Single & Multi Tenant Use Based on Total RBA
2007 Deliveries Currently Under Construction By Class By Space Type
37% 10% 26%
19%
Multi 63% 90% Single % Multi 81%
Source: CoStar Property® Single Multi 26% Single
Class A Class B Class C
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 9
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
INVENTORY & DEVELOPMENT
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������������������������ THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
10
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
INVENTORY & DEVELOPMENT
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������������������������ THE COSTAR OFFICE REPORT 11
©2007 COSTAR GROUP, INC.
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
FIGURES AT A GLANCE
Class A Market Statistics Mid-Year 2007
Existing Inventory Vacancy YTD Net YTD Under Quoted
Total SF Absorption Deliveries
Market # Bldgs Total RBA Direct SF 537,398 Vac % Const SF Rates
Central Suburban 494,144 1,059,242 16.6% (141,566) 31,222
Downtown 28 3,233,678 12,660 18.2% 137,035 306,750 895,869 $35.44
Hwy-78 Corridor 1,001,266 670,379 4.0%
I-15 Corridor 14 5,816,662 9,409 1,227,059 29.0% 14,713 0 0 $35.09
North Cities 672,903 10.3% 115,081 350,178
North County West 4 316,523 601,786 54,526 32.8% 578,033 450,000 208,336 $33.91
South/Southeast Corridor 859,500 4,234,167 15.9% 143,972
Totals 22 2,311,634 630,316 16.3% 27,871 1,161,754 $38.21
56,489 40,202
100 11,894,034 49,601 787,656 1,322,324 544,851 $39.87
3,646,022
37 2,048,433 YTD 95,000 $33.83
Deliveries
5 343,869 43,830 $28.54
18,000
210 25,964,833 0 2,949,640 $37.00
Source: CoStar Property® 15,461
66,523
Class B Market Statistics Mid-Year 2007
0
Existing Inventory Vacancy YTD Net 332,107 Under Quoted
Total SF Absorption
Market # Bldgs Total RBA Direct SF 1,196,441 Vac % 44,113 Const SF Rates
Central Suburban 1,133,006 367,836 9.5% 96,729 476,204
Downtown 336 12,597,011 167,321 (14,394) 54,921 $26.73
Hwy-78 Corridor 339,721 849,984 10.0% YTD
I-15 Corridor 52 3,685,800 167,321 1,528,911 9.2% 6,213 Deliveries 80,000 $29.53
North Cities 825,607 747,705 (35,548)
North County West 120 1,817,177 1,348,750 274,066 14.1% (139,655) 0 173,257 $28.94
South/Southeast Corridor 660,309 5,132,264 10.7% 244,685 0
Totals 209 6,023,621 266,893 12.7% 18,489 4,903 126,222 $29.67
4,741,607 176,519 0
299 14,249,983 8.7% 0 375,215 $33.57
10.8% 0
337 5,905,121 5,000 437,483 $30.61
9,903
120 3,149,360 200,290 $28.18
YTD
1,473 47,428,073 Deliveries 1,447,388 $30.31
Source: CoStar Property® 49,222
306,750
Class C Market Statistics Mid-Year 2007
20,364
Existing Inventory Vacancy YTD Net 416,701 Under Quoted
Total SF Absorption 450,000
Market # Bldgs Total RBA Direct SF 653,291 Vac % 476,079 Const SF Rates
Central Suburban 627,228 183,255 5.9% (9,580)
Downtown 1,112 11,078,616 180,255 96,900 5.9% (3,069) 89,315 0 $20.96
Hwy-78 Corridor 80,960 171,033 6.2% (1,605) 1,808,431
I-15 Corridor 179 3,102,219 165,110 168,381 6.4% 6,845 0 $25.66
North Cities 156,504 57,527 6.3% 19,050
North County West 178 1,571,981 56,077 178,586 4.6% 7,990 0 $22.97
South/Southeast Corridor 170,553 1,508,973 4.4% 4,617
Totals 311 2,654,163 5.7% 24,248 0 $22.69
1,436,687
146 2,687,053 0 $25.50
210 1,250,588 0 $26.49
626 4,101,296 0 $19.06
2,762 26,445,916 0 $22.11
Source: CoStar Property®
Total Office Market Statistics Mid-Year 2007
Existing Inventory Vacancy YTD Net Under Quoted
Total SF Absorption
Market # Bldgs Total RBA Direct SF 2,387,130 Vac % Const SF Rates
Central Suburban 2,254,378 1,610,333 8.9% (54,417)
Downtown 1,476 26,909,305 1,521,242 276,881 119,572 950,790 $27.74
Hwy-78 Corridor 1,691,396 12.8%
I-15 Corridor 245 12,604,681 257,690 2,924,351 7.5% 19,321 80,000 $32.88
North Cities 1,592,503 1,478,135 86,378
North County West 302 3,705,681 2,364,754 507,178 15.4% 457,428 381,593 $29.50
South/Southeast Corridor 1,346,702 10.1% 280,546
Totals 542 10,989,418 10,875,404 16.1% 79,595 1,287,976 $32.69
487,047 988,423
545 28,831,070 9,824,316 6.7% 920,066 $35.94
10.9%
584 9,204,142 532,483 $31.70
751 7,594,525 244,120 $25.62
4,445 99,838,822 4,397,028 $31.95
Source: CoStar Property®
12 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
FIGURES AT A GLANCE
Class A Submarket Statistics Mid-Year 2007
Existing Inventory Vacancy YTD Net YTD Under Quoted
Market # Bldgs Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
143,972
Carlsbad 34 1,880,520 610,772 651,220 34.6% (2,527) 0 95,000 $33.51
City Heights/University 00 0 0 0.0% 0 0 0 $0.00
Del Mar Hts/Carmel Valley 306,750
Downtown 41 3,390,600 173,210 393,321 11.6% 91,056 0 197,832 $46.73
East County 14 5,816,662 1,001,266 1,059,242 18.2% 137,035 0 0 $35.09
Escondido 0 $27.17
Governor Park 2 126,465 3,019 4,944 3.9% (700) 31,222 43,830 $39.91
Kearny Mesa 1 12,139 5,651 5,651 46.6% 6,477 0 78,777 $28.82
La Jolla 3 208,528 52,605 52,605 25.2% (12,060) 0 $34.25
Miramar 13 1,029,560 227,102 236,467 23.0% (112,803) 0 0 $35.10
Mission Gorge 4 304,882 1,800 1,800 6,346 0 804,780
Mission Valley 1 447,273 0.6% 0 $0.00
North Beach Cities 00 0 0 0.0% 0 0 0 $0.00
Oceanside 13 2,091,189 0 0 0.0% 0 0 0 $36.48
Old Town 3 167,913 258,318 292,207 14.0% (28,763) 0 0 $41.74
Point Loma 00 19,544 21,683 12.9% 30,398 350,178 91,089 $36.57
Rancho Bernardo/Poway 00 0 0 0.0% 0 0 0 $0.00
Rose Canyon/Morena 2 112,929 0 0 0.0% 0 0 32,610 $33.52
San Marcos/Vista 17 1,960,679 8,724 8,724 7.7% 0 0 0 $38.41
Scripps Ranch 00 535,986 601,165 30.7% 108,102 450,000 0 $0.00
Sorrento Mesa 4 316,523 0 0 0.0% 0 40,202 1,082,977 $33.43
South San Diego 4 338,816 9,409 12,660 4.0% 14,713 0 0 $33.24
Torrey Pines/Sorrento Val 23 3,720,247 60,149 63,563 18.8% 502 0 175,726 $32.77
Uptown/Hillcrest 3 217,404 318,410 403,799 10.9% 432,754 0 0 $31.87
UTC 1 79,074 46,582 49,582 22.8% 57,189 0 $0.00
00 0 0 0.0% 0 1,322,324 0 $0.00
Totals 27 3,743,430 0 0 0.0% 0 0 $43.44
313,475 375,534 10.0% 59,937 YTD 0
210 25,964,833 347,019 $37.00
3,646,022 4,234,167 16.3% 787,656 Deliveries
283,107 2,949,640
0
Source: CoStar Property® 0
0
Class B Submarket Statistics 7,555 Mid-Year 2007
40,911
Existing Inventory Vacancy YTD Net 0 Under Quoted
18,000
Market # Bldgs Total RBA Direct SF Total SF Vac % Absorption 0 Const SF Rates
0
Carlsbad 148 3,693,850 551,730 616,956 16.7% 153,571 0 386,674 $28.23
City Heights/University 17 524,450 46,236 51,002 9.7% 21,328 0 0 $24.40
Del Mar Hts/Carmel Valley 24 804,433 57,659 68,540 8.5% 4,515 49,000 0 $41.35
Downtown 52 3,685,800 (14,394) 15,461 $29.53
East County 51 952,000 339,721 367,836 10.0% 4,248 0 80,000 $21.79
Escondido 85 999,988 31,110 31,110 3.3% 21,249 0 66,000 $29.95
Governor Park 16 649,853 46,004 65,455 6.5% 13,752 25,612 42,600 $36.67
Kearny Mesa 40,973 43,588 6.7% 84,759 0 $26.19
La Jolla 136 6,043,082 7.4% 14,740 0 0 $33.81
Miramar 36 1,013,500 441,163 449,764 3.0% (29,987) 0 48,000 $24.50
Mission Gorge 20 850,579 30,504 30,504 3,855 0 $23.86
Mission Valley 15 509,036 17.3% (50,240) 36,558 0 $27.26
North Beach Cities 62 3,080,214 147,543 147,543 7.2% 91,114 0 0 $36.85
Oceanside 36,582 36,582 3,735 0 0 $28.62
Old Town 189 2,211,271 14.4% 4,206 0 0 $30.32
Point Loma 40 558,905 414,051 443,477 5.9% 20,763 476,204 50,809 $28.19
Rancho Bernardo/Poway 12 291,449 108,579 130,749 158,215 $30.58
Rose Canyon/Morena 22 668,217 12.2% (116,588) 0 $26.96
San Marcos/Vista 97 4,047,733 68,187 68,187 9.5% (2,452) 0 $29.22
Scripps Ranch 22 307,275 25,479 27,724 2,478 83,622 $26.78
Sorrento Mesa 80 1,258,272 98,194 115,836 17.3% 59,791 0 $30.23
South San Diego 27 975,900 547,528 552,454 13.6% 15,042 $28.64
Torrey Pines/Sorrento Val 98 4,675,678 30,885 30,885 10.1% (185,355) 0 $38.58
Uptown/Hillcrest 69 2,197,360 99,134 99,134 14,241 375,215 $26.66
UTC 47 2,900,519 232,075 232,075 7.9% 134,290 $35.61
50 1,173,288 515,025 645,635 23.8% (176,390) 0
Totals 58 3,355,421 235,783 242,956 13.8% 14,510 6,921 $30.31
274,558 301,558 11.1% 0
1,473 47,428,073 40,416 41,171 10.4% 219,070
282,488 291,543 1,447,388
3.5% 176,519
4,741,607 5,132,264 8.7%
10.8%
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 13
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
FIGURES AT A GLANCE
Class C Submarket Statistics Mid-Year 2007
Existing Inventory Vacancy YTD Net YTD Under Quoted
Market # Bldgs Total RBA Direct SF Total SF Vac % Absorption Deliveries Const SF Rates
0
Carlsbad 75 440,043 39,914 39,914 9.1% (7,718) 0 0 $23.67
City Heights/University 205 1,171,241 50,212 50,212 4.3% 6,535 0 0 $20.61
Del Mar Hts/Carmel Valley 0.0% 0 0
Downtown 00 0 0 5.9% 0 0 0 $0.00
East County 179 3,102,219 180,255 183,255 5.2% (3,069) 0 0 $25.66
Escondido 317 2,273,871 118,349 118,349 5.8% 6,233 0 0 $17.49
Governor Park 209 1,228,540 0.0% 12,378 0 0 $20.84
Kearny Mesa 70,050 71,850 6.5% 0 0
La Jolla 00 0 0 1.6% 0 0 0 $0.00
Miramar 130 2,282,378 19.7% 17,692 0 0 $20.44
Mission Gorge 132,548 148,243 12.2% 20,911 0 0 $30.86
Mission Valley 80 757,717 12,429 12,429 11.8% (5,188) 0 0 $18.39
North Beach Cities 22 354,073 69,675 69,675 2.2% (79,684) 0 $18.96
Oceanside 83 1,074,543 5.3% (18,599) 4,903 0 $21.54
Old Town 62 1,482,722 131,437 131,437 1.9% 15,708 0 0 $37.15
Point Loma 135 810,545 167,878 175,446 1.4% 20,884 0 0 $33.94
Rancho Bernardo/Poway 60 357,742 6.7% 0 0 $21.07
Rose Canyon/Morena 48 595,307 16,163 17,613 4.0% 7,803 0 0 $20.27
San Marcos/Vista 100 1,165,439 19,096 19,096 6.4% 5,407 0 0 $25.67
Scripps Ranch 89 1,164,238 11,530 11,530 8.0% (10,845) 0 0 $20.66
Sorrento Mesa 167 1,351,159 16,551 16,551 9.6% 11,208 0 0 $20.44
South San Diego 118 1,214,239 74,228 78,351 3.3% (22,489) 0 $19.16
Torrey Pines/Sorrento Val 13 261,385 51,562 54,362 2.9% 5,312 5,000 0 $22.75
Uptown/Hillcrest 26 605,695 61,864 77,804 3.3% (16,992) 0 0 $24.69
UTC 309 1,827,425 20,832 20,832 2.9% (1,616) 0 0 $26.29
15 934,568 46,446 58,323 21,334 0 $23.84
Totals 317 1,955,827 52,204 60,237 5.7% 40,058 0 $38.74
26,939 26,939 (1,015) 9,903
3 35,000 65,510 65,510 $22.11
24,248 YTD
2,762 26,445,916 1,015 1,015
Deliveries
1,436,687 1,508,973 427,079
0
Source: CoStar Property® 0
306,750
Total Office Submarket Statistics 7,555 Mid-Year 2007
40,911
Existing Inventory Vacancy YTD Net 0 Under Quoted
49,222
Market # Bldgs Total RBA Direct SF Total SF Vac % Absorption 0 Const SF Rates
0
Carlsbad 257 6,014,413 1,202,416 1,308,090 21.7% 143,326 0 481,674 $30.48
City Heights/University 222 1,695,691 96,448 101,214 6.0% 27,863 0 0 $22.20
Del Mar Hts/Carmel Valley 4,195,033 461,861 95,571 49,000 $45.15
Downtown 65 12,604,681 230,869 11.0% 20,364 197,832 $32.88
East County 245 3,352,336 1,521,242 1,610,333 12.8% 119,572 0 80,000 $19.52
Escondido 370 2,240,667 154,403 9,781 0 $30.00
Governor Park 295 152,478 142,956 4.6% 375,790 109,830 $34.49
Kearny Mesa 858,381 121,705 96,193 6.4% 40,104 0 121,377 $27.58
La Jolla 19 9,355,020 834,474 11.2% 1,692 0 $33.17
Miramar 279 2,076,099 93,578 44,733 8.9% 0 0 $23.62
Mission Gorge 120 1,651,925 800,813 217,218 2.2% (10,352) 450,000 852,780 $19.84
Mission Valley 1,583,579 168,019 13.1% 41,997 81,760 $30.10
North Beach Cities 43 6,654,125 44,733 911,130 10.6% (35,175) 0 0 $37.29
Oceanside 98 3,189,729 217,218 170,045 13.7% (75,829) 0 0 $30.73
Old Town 137 168,019 87,283 5.3% (97,602) 0 0 $27.70
Point Loma 327 916,647 840,247 39,254 9.5% 137,220 91,089 $26.59
Rancho Bernardo/Poway 100 886,756 144,286 141,111 4.4% 24,619 1,808,431 50,809 $34.20
Rose Canyon/Morena 60 1,946,585 7.2% 12,009 190,825 $23.40
San Marcos/Vista 124 7,172,650 87,283 1,231,970 17.2% 26,170 0 $28.97
Scripps Ranch 203 1,658,434 37,009 85,247 5.1% (19,331) 0 $27.20
Sorrento Mesa 189 2,789,034 123,469 6.8% 1,166,599 $30.98
South San Diego 202 1,576,101 1,157,742 189,598 20.1% 8,756 0 $28.37
Torrey Pines/Sorrento Val 44 9,001,620 82,447 316,470 12.3% (5,298) 190,768 $36.92
Uptown/Hillcrest 147 4,242,189 170,407 1,107,757 8.3% 65,605 0 $24.66
UTC 381 3,914,161 313,056 352,775 8.4% 230,407 375,215 $40.27
63 3,129,115 879,881 328,497 3.4% 69,814 134,290
Totals 367 7,133,851 334,569 106,681 9.4% (155,056) 0 $31.95
88 301,497 668,092 54,568 6,921
99,838,822 105,926 10.9% 277,992 347,019
4,445 596,978 10,875,404
988,423 4,397,028
9,824,316
Source: CoStar Property®
14 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
FIGURES AT A GLANCE
Class A Market Statistics Mid-Year 2007
Existing Inventory Vacancy YTD Net YTD Under Quoted
Total SF Absorption Deliveries
Market # Bldgs Total RBA Direct SF Vac % Const SF Rates
306,750
CBD 14 5,816,662 1,001,266 1,059,242 18.2% 137,035 0 $35.09
Suburban 196 20,148,171 2,644,756 3,174,925 15.8% 650,621 1,015,574 2,949,640 $37.41
210 25,964,833 3,646,022 4,234,167 16.3% 787,656 1,322,324 2,949,640 $37.00
Totals
YTD
Source: CoStar Property® Deliveries
Class B Market Statistics 0 Mid-Year 2007
Existing Inventory Vacancy YTD Net Under Quoted
Total SF Absorption
Market # Bldgs Total RBA Direct SF Vac % Const SF Rates
CBD 52 3,685,800 339,721 367,836 10.0% (14,394) 80,000 $29.53
Suburban 1,421 43,742,273 4,401,886 4,764,428 10.9% 190,913 476,204 1,367,388 $30.36
1,473 47,428,073 4,741,607 5,132,264 10.8% 176,519 476,204 1,447,388 $30.31
Totals
YTD
Source: CoStar Property® Deliveries
Class C Market Statistics 0 Mid-Year 2007
Existing Inventory Vacancy YTD Net Under Quoted
Total SF Absorption
Market # Bldgs Total RBA Direct SF Vac % Const SF Rates
CBD 179 3,102,219 180,255 183,255 5.9% (3,069) 0 $25.66
Suburban 2,583 23,343,697 1,256,432 1,325,718 5.7% 27,317 9,903 0 $21.82
2,762 26,445,916 1,436,687 1,508,973 5.7% 24,248 9,903 0 $22.11
Totals
YTD
Source: CoStar Property® Deliveries
Class A & B Market Statistics 306,750 Mid-Year 2007
Existing Inventory Vacancy YTD Net Under Quoted
Total SF Absorption
Market # Bldgs Total RBA Direct SF Vac % Const SF Rates
CBD 66 9,502,462 1,340,987 1,427,078 15.0% 122,641 80,000 $33.57
Suburban 1,617 63,890,444 7,046,642 7,939,353 12.4% 841,534 1,491,778 4,317,028 $33.26
1,683 73,392,906 8,387,629 9,366,431 12.8% 964,175 1,798,528 4,397,028 $33.29
Totals
YTD
Source: CoStar Property® Deliveries
Total Office Market Statistics 306,750 Mid-Year 2007
Existing Inventory Vacancy YTD Net Under Quoted
Total SF Absorption Const SF Rates
Market # Bldgs Total RBA Direct SF Vac %
CBD 245 12,604,681 1,521,242 1,610,333 12.8% 119,572 80,000 $32.88
Suburban 4,200 87,234,141 8,303,074 9,265,071 10.6% 868,851 1,501,681 4,317,028 $31.84
4,445 99,838,822 10.9% 988,423 1,808,431 4,397,028 $31.95
Totals 9,824,316 10,875,404
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 15
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
FIGURES AT A GLANCE
Class A Market Statistics Mid-Year 2007
Existing Inventory Vacancy Net Deliveries UC Inventory Quoted
Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates
2007 2q 210 25,964,833 3,646,022 4,234,167 16.3% 172,880 5 375,222 25 2,949,640 $37.00
2007 1q 205 25,589,611 3,406,781 4,031,825 15.8% 614,776 5 947,102 26 2,815,621 $37.29
2006 4q 200 24,642,509 3,099,343 3,699,499 15.0% 127,947 5 368,439 31 3,762,723 $36.53
2006 3q 195 24,274,070 2,952,135 3,459,007 14.2% (206,504) 5 435,336 31 3,429,366 $35.91
2006 2q 190 23,838,734 2,501,543 2,817,167 11.8% 633,396 3 653,330 27 2,978,644 $34.88
2006 1q 187 23,185,404 2,619,054 2,797,233 12.1% 310,631 3 218,732 28 3,488,002 $34.64
2005 4q 184 22,966,672 2,557,123 2,889,132 12.6% 288,628 2 196,531 24 3,092,953 $33.96
2005 3q 182 22,770,141 2,640,899 2,981,229 13.1% 137,744 4 602,074 17 2,410,270 $33.42
2005 2q 178 22,168,067 2,109,553 2,516,899 11.4% 320,143 2 153,148 21 3,012,344 $32.99
2005 1q 176 22,014,919 2,306,961 2,683,894 12.2% 3 117,516 14 2,226,344 $32.16
2004 4q 173 21,897,403 2,182,141 2,559,263 11.7% (7,115) 2 347,703 16 2,303,658 $31.65
2004 3q 171 21,549,700 2,319,273 2,768,932 12.8% 557,372 2 207,415 15 1,951,309 $30.96
2004 2q 169 21,342,285 2,521,738 3,038,573 14.2% 477,056 0 12 1,420,796 $30.96
2004 1q 169 21,342,285 2,656,577 3,215,435 15.1% 176,862 0 0 1,181,414 $30.00
169 21,342,285 2,866,697 3,449,233 16.2% 233,798 4 0 8 $29.84
2003 165 20,910,710 3,141,075 3,991,608 19.1% 973,950 10 431,575 6 973,519 $30.82
2002 (302,589) 969,947 4 431,575
Source: CoStar Property®
Class B Market Statistics Mid-Year 2007
Existing Inventory Vacancy Net Deliveries UC Inventory Quoted
Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates
2007 2q 1,473 47,428,073 4,741,607 5,132,264 10.8% 363,794 21 383,274 91 1,447,388 $30.31
2007 1q 1,452 47,044,799 4,599,887 5,112,784 10.9% (187,275) 4 92,930 101 1,690,581 $29.87
2006 4q 1,448 46,951,869 4,306,777 4,832,579 10.3% 198,017 1,479,437 $28.91
2006 3q 1,433 46,334,597 3,849,156 4,413,324 15 617,272 74 1,759,059 $28.72
2006 2q 1,426 46,076,258 3,611,652 4,139,579 9.5% (15,406) 7 258,339 63 1,450,077 $28.47
2006 1q 1,420 46,024,299 3,391,382 3,868,441 9.0% (219,179) 6 49 1,113,903 $27.82
2005 4q 1,411 45,836,173 3,501,036 3,888,656 8.4% 208,341 9 51,959 39 $27.03
2005 3q 1,404 45,738,540 3,983,137 4,519,414 8.5% 728,391 8 188,126 27 903,387 $26.47
2005 2q 1,398 45,561,467 4,267,699 4,715,383 9.9% 373,042 7 136,714 27 901,956 $25.95
2005 1q 1,390 45,210,942 4,545,413 4,994,712 10.3% 629,854 8 268,554 28 811,994 $25.53
2004 4q 1,379 44,975,557 4,405,968 4,909,445 11.0% 150,118 350,525 26 846,810 $25.40
2004 3q 1,377 44,941,097 4,501,713 4,979,274 10.9% 104,289 11 235,385 30 919,838 $25.37
2004 2q 1,374 44,906,861 4,548,957 5,092,896 11.1% 147,858 2 24 838,424 $25.49
2004 1q 1,370 44,764,764 4,540,603 5,219,487 11.3% 268,688 4 34,460 21 603,870 $24.76
1,363 44,457,739 4,741,524 5,563,071 11.7% 650,609 4 76,248 14 400,465 $24.14
2003 1,341 43,874,854 4,522,847 5,292,618 12.5% 312,432 8 142,097 14 495,731 $24.82
2002 12.1% 1,035,894 326,025 16 545,182
23 594,215
27 1,434,809
Source: CoStar Property®
Total Office Market Statistics Mid-Year 2007
Existing Inventory Vacancy Net Deliveries UC Inventory Quoted
Period # Blds Total RBA Direct SF Total SF Vac % Absorption # Blds Total RBA # Blds Total RBA Rates
2007 2q 4,445 99,838,822 9,824,316 10,875,404 10.9% 589,875 27 763,399 116 4,397,028 $31.95
2007 1q 4,420 99,093,243 9,522,432 10,719,700 10.8% 398,548 10 1,045,032 128 4,511,105 $31.77
2006 4q 4,410 98,048,211 8,901,777 10,073,216 10.3% 361,968 20 107 5,252,063 $31.04
2006 3q 4,390 97,062,500 8,284,084 (64,214) 13 985,711 5,198,328 $30.59
2006 2q 4,377 96,366,008 7,727,898 9,449,473 9.7% 454,118 696,492 96 4,436,538 $29.80
2006 1q 4,369 95,664,686 7,660,449 8,688,767 9.0% 360,751 9 705,289 78 4,604,722 $29.48
2005 4q 4,358 95,260,022 7,582,726 8,441,563 8.8% 1,012,954 12 406,858 68 3,999,157 $28.73
2005 3q 4,351 95,007,479 8,157,450 8,397,650 8.8% 493,784 11 337,245 52 3,316,226 $28.09
2005 2q 4,342 94,229,832 7,892,414 9,158,061 9.6% 1,056,135 11 870,628 45 3,828,338 $27.68
2005 1q 4,335 93,771,498 8,551,100 8,874,198 9.4% 10 503,673 50 3,077,154 $26.99
2004 4q 4,322 93,423,411 8,211,444 9,471,999 10.1% 64,865 14 352,901 41 3,223,496 $26.81
2004 3q 4,319 93,042,848 8,498,220 9,188,777 9.8% 708,622 382,163 46 2,789,733 $26.54
2004 2q 4,314 92,801,197 8,644,533 9,516,836 10.2% 510,338 4 283,663 39 2,024,666 $26.63
2004 1q 4,313 92,712,731 8,819,916 9,785,523 10.5% 428,453 6 142,097 33 1,581,879 $25.99
4,309 92,464,082 9,100,451 10,125,510 10.9% 675,863 4 327,625 22 1,469,250 $25.81
2003 4,288 91,458,990 9,379,953 10,552,724 11.4% 1,516,396 9 1,047,790 20 $26.30
2002 11,064,028 12.1% 711,570 28 2,432,887 20 976,757
41
Source: CoStar Property®
16 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
LEASING ACTIVITY
Leasing Highlights in Select CoStar Markets
Color Coded by Vacancy Rate
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Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 17
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
LEASING ACTIVITY
Historical Rental Rates
Based on Full-Service Equivalent Rental Rates
Class A Class B Class C Total Market
$40.00
$35.00
Dollars/SF/Year $30.00
$25.00
$20.00
$15.00
2q
3q
4q
1q
2q
3q
4q
1q
2q
3q
4q
1q
2q
3q
4q
1q
2q
3q
4q
1q
2q
3q
4q
1q
2q
3q
4q
1q
2q
3q
4q
1q
2q
1999
1999
1999
2000
2000
2000
2000
2001
2001
2001
2001
2002
2002
2002
2002
2003
2003
2003
2003
2004
2004
2004
2004
2005
2005
2005
2005
2006
2006
2006
2006
2007
2007
Source: CoStar Property®
Vacancy by Available Space Type Vacancy by Class
Percent of All Vacant Space in Direct vs. Sublet Percent of All Vacant Space by Class
San Diego United States San Diego United States
15%
10% 8% 14%
47% 48%
39%
37%
90% 92%
Direct Sublet
Direct Sublet Class A Class B Class C Class A Class B Class C
Source: CoStar Property® Source: CoStar Property®
U.S. Rental Rate Comparison Future Space Available
Based on Full-Service Equivalent Rental Rates Space Scheduled to be Available for Occupancy*
San Diego United States 2.5
$33.00
$31.00 2.03
$29.00 2.0
1.69
$27.00
Dollars/SF/Year 1.5
Millions
$25.00
$23.00 1.0
$21.00
$19.00 0.5
0.18
$17.00
$15.00 0.0
2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
2007 3q 2007 4q 2008 1q 2008 2q 2008 3q 2008 4q
Source: CoStar Property® * Includes Under Construction Spaces Source: CoStar Property®
18 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
LEASING ACTIVITY
Select Top Office Leases Based on Leased Square Footage For Deals Signed in 2007
Building Submarket SF Qtr Tenant Name Tenant Rep Company Landlord Rep Company
1 Bridge Pointe Corporate Centre UTC 220,092 1st Amylin Pharmaceuticals, Inc. Bioscience Properties, Inc. Cushman & Wakefield of San Diego/Eq
2 Pacific Center I & III Sorrento Mesa 168,066 2nd QUALCOMM The Staubach Company Grubb & Ellis|BRE Commercial
3 ParkwayBusinessCenter-PhaseI-BldgA Rancho Bernardo/Poway 155,076 2nd General Atomics N/A Burnham Real Estate
4 Kilroy Centre Del Mar - Bldg 2 Del Mar Hts/Carmel Valley 117,948 1st NextWave Wireless, Inc. Irving Hughes Cushman & Wakefield of San Diego
5 Computer Sciences Corporation Kearny Mesa 80,000 2nd American Internet Services Irving Hughes CB Richard Ellis
6 Eastgate Pointe UTC 66,434 1st Illumina, Inc. Cushman & Wakefield of San Diego CB Richard Ellis
7 10240 Sorrento Valley Rd* Sorrento Mesa 65,248 1st WebSense, Inc. Capstone Commercial Arden Realty, Inc.
8 4755 Eastgate Mall* UTC 63,412 2nd QUALCOMM Incorporated The Staubach Company The Irvine Company
9 5935 Darwin Ct Carlsbad 52,260 1st Reef Sandals CB Richard Ellis Grubb & Ellis|BRE Commercial
10 Computer Sciences Corporation Kearny Mesa 51,400 2nd SDG & E Burnham Real Estate CB Richard Ellis
11 7473 Lusk Blvd Sorrento Mesa 50,163 2nd Helicon Theraputics, Inc. N/A Colliers International
12 Kilroy Sabre Springs - Bldg 2 Rancho Bernardo/Poway 48,882 2nd N/A N/A Cushman & Wakefield of San Diego
13 3333 N Torrey Pines Ct Torrey Pines/Sorrento Val 43,788 2nd SouthwestFisheriesScienceCenter(NOAA) The Staubach Company Colliers International
14 Towne Centre Tech Park - Bldg 1* UTC 41,551 1st CoStar Group, Inc. Grubb & Ellis|BRE Commercial N/A
15 DiamondView Tower Downtown 33,563 2nd N/A N/A CB Richard Ellis
16 Aventine* UTC 29,786 2nd New York Life Insurance Cushman & Wakefield of San Diego Burnham Real Estate
17 La Terraza Professional Plaza Escondido 27,264 2nd Wells Fargo Colliers International Grubb & Ellis|BRE Commercial
18 Ventana Real - Building I Carlsbad 27,250 2nd Euro RSCG DRTV N/A Grubb & Ellis|BRE Commercial
19 Palomar Center Carlsbad 27,127 1st N/A N/A CB Richard Ellis
20 Gateway Chula Vista - Bldg 2 South San Diego 24,853 1st OfficeoftheDistrictAttorney,CountyofSD The Staubach Company MountainWest Real Estate
21 One Pacific Heights Sorrento Mesa 24,773 1st Parexel International Irving Hughes Burnham Real Estate
22 401 W A St Downtown 24,185 2nd N/A N/A SENTRE Partners
23 ESET Building Downtown 23,566 2nd ESET, LLC Irving Hughes Burnham Real Estate
24 101 W Broadway Downtown 20,670 2nd N/A N/A The Irvine Company
25 San Diego Tech Center - Bldg 1 Sorrento Mesa 20,543 1st N/A N/A Maguire Properties
26 Aston View Corporate Center Carlsbad 20,000 1st N/A N/A Grubb & Ellis|BRE Commercial
27 Pacific Center II* Mission Valley 19,245 2nd Jefferson-Pilot Communications Company N/A Maguire Properties
28 Golden Eagle Plaza Downtown 19,092 1st U.S. General Services Administration N/A N/A
29 Pacifica Tower UTC 19,038 2nd Goodwin Procter, LLP Studley The Irvine Company
30 Genesee Executive Plaza UTC 18,400 1st 1st Pacific Bank of California Irving Hughes Cushman & Wakefield of San Diego
31 5353 Mission Center Rd Mission Valley 18,381 2nd Azusa Pacific University NAI San Diego Grubb & Ellis|BRE Commercial
32 Golden Eagle Plaza Downtown 18,341 1st N/A Irving Hughes Irving Hughes
33 DiamondView Tower Downtown 17,753 2nd N/A N/A CB Richard Ellis
34 DiamondView Tower Downtown 17,725 2nd N/A N/A CB Richard Ellis
35 DiamondView Tower Downtown 17,350 1st Cox Communications, Inc. N/A CB Richard Ellis
36 DiamondView Tower Downtown 17,137 2nd N/A N/A CB Richard Ellis
37 Hazard Center Office Tower Mission Valley 16,996 2nd N/A N/A Grubb & Ellis|BRE Commercial
38 10140 Campus Point Dr UTC 16,825 1st SAIC Technologies N/A Grubb & Ellis|BRE Commercial
39 Genesee Executive Plaza* UTC 15,959 1st IGO Medical Group of San Diego N/A N/A
40 7473 Lusk Blvd Sorrento Mesa 15,500 2nd Helicon Theraputics, Inc. N/A Colliers International
Source: CoStar Property®
* Renewal
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 19
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
SALES ACTIVITY
The Optimist Sales Index Average of Two Highest Price/SF's and Two Lowest Cap Rates Per Quarter
Cap Rate Price/SF
7.0% $600
6.0% $500
Cap Rate Percentage 5.0% $400
4.0% Dollars/SF
Price/SF
$300
3.0%
2.0% $200
1.0% $100
0.0% $0
2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q
Source: CoStar COMPS®
Sales Volume & Price Sales Analysis by Building Size
Based on Office Building Sales of 15,000 SF and Larger Based on Office Building Sales From April 2006 - March 2007
Sales Volume Price/SF Bldg Size # RBA $ Volume Price/SF Cap Rate
$1,000 $350
$300
$900 $250 < 50,000 SF 180 1,672,455 $ 443,883,674 $ 265.41 5.84%
$200
Millions of Sales Volume Dollars $800 $150
$100
$700 $50
$0
$600 50K-249K SF 34 3,841,608 $ 1,083,689,657 $ 282.09 6.19%
$500
$400
$300
$200 250K-499K SF 1 338,905 $ 95,500,000 $ 281.79 5.76%
$100
$0 >500K SF 3 1,678,767 $ 568,500,000 $ 338.64 -
2002 2002 2003 2003 2004 2004 2005 2005 2006 2006
2q 4q 2q 4q 2q 4q 2q 4q 2q 4q
Source: CoStar COMPS® Source: CoStar COMPS®
U.S. Price/SF Comparison U.S. Cap Rate Comparison
Based on Office Building Sales of 15,000 SF and Larger Based on Office Building Sales of 15,000 SF and Larger
San Diego US 10.5% San Diego US
$370
$320 9.5%
$270 Cap Rate Percentage 8.5%
Dollars per SF $220
7.5%
$170
$120 6.5%
$70 5.5%
$20 2002 2003 2003 2004 2004 2005 2005 2006 2006 4.5% 2002 2003 2003 2004 2004 2005 2005 2006 2006
4q 2q 4q 2q 4q 2q 4q 2q 4q 4q 2q 4q 2q 4q 2q 4q 2q 4q
2002 2002
2q 2q
Source: CoStar COMPS® Source: CoStar COMPS®
20 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
SALES ACTIVITY
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��������������������� THE COSTAR OFFICE REPORT 21
©2007 COSTAR GROUP, INC.
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
SALES ACTIVITY
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Select Land Sales Based on Commercially Zoned Land Sales Occurring From April 2006 - March 2007
450 2nd Ave, San Diego 5897 Copley Dr, San Diego Carmel Mountain, S of Vista Sorrento, San Diego
Sale Price: $36,500,000 Sale Price: $30,400,000 Sale Price: $20,500,000
Acres: 1.38 Acres: 7.70
Price/SF: $608.34 Price/SF: 20.56 Acres: $61.12
Closing Date: 05/02/2006 Closing Date: 06/29/2006
Zoning: MPD, San Diego Zoning: $33.94 Price/SF: IL2-1, San Diego
Intended Use: Commercial Intended Use: Office
Buyer: Bosa Development California II, Inc. Buyer: 08/08/2006 Closing Date: Torrey Hills Office Partners LP
Seller: McKinnon Properties, Inc Seller: Cognac Torrey Hills LLC
M-1B, San Diego Zoning:
Industrial Intended Use:
Terraces at Copley Point Pre-Development Buyer:
San Diego Unified School District Seller:
cnr Gateway Rd & Innovation Way, Carlsbad cnr El Camino Real & Costa Del Mar Rd, Carlsbad 160 Calle Magdalena, Encinitas
Sale Price: $14,316,500 Sale Price: $10,500,000 Sale Price: $9,600,000
Acres: 11.96 Acres: 3.13 Acres: 4.40
Price/SF: $27.48 Price/SF: $77.01 Price/SF: $50.09
Closing Date: 07/28/2006 Closing Date: 09/15/2006 Closing Date: 09/13/2006
Zoning: PC, Carlsbad Zoning: PC, Carlsbad Zoning: C, Encinitas
Intended Use: Office Intended Use: PC Zoned Acreage Intended Use: Office
Buyer: Bressi Ocean Collection LLC Buyer: Arenal Road LLC Buyer: City of Encinitas
Seller: Carlsbad-BC Partners LP Seller: KSL La Costa I LLC Seller: 160 Calle Magdalena LLC
Source: CoStar COMPS® THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
22
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
CENTRAL SUBURBAN MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
0.600 Delivered SF Absorption SF Vacancy 9.0%
Millions SF 0.500 8.5% Percent Vacant
0.400 8.0%
0.300
0.200 7.5%
0.100 7.0%
0.000
(0.100) 6.5%
2004 1q 2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
3.00 Direct SF Sublet SF $28.00
$27.50
2.50
$27.00
Millions SF 2.00 Dollars/SF/Year
$26.50
1.50 $26.00
1.00 $25.50
0.50 $25.00
0.00 $24.50
2006 1q
2006 2q 2006 3q 2006 4q 2007 1q 2007 2q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property®
Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $27.74
2007 2q (24,025) $27.85
2007 1q 1,476 26,909,305 2,387,130 8.9% (30,392) 2 49,222 13 950,790 $26.44
2006 4q 62,369 $26.09
2006 3q 1,474 26,860,083 2,313,883 8.6% 00 13 620,012 $25.97
2006 2q (1,317) $25.89
2006 1q 1,474 26,860,083 2,283,491 8.5% (43,155) 6 202,830 11 572,012 $25.42
2005 4q 71,301 $25.45
2005 3q 1,468 26,657,253 2,143,030 8.0% 47,913 4 83,835 15 644,842 $25.23
2005 2q $25.33
2005 1q 1,464 26,573,418 2,057,878 7.7% 8,094 00 17 606,366 $25.27
2004 4q 506,715 $24.79
2004 3q 1,464 26,573,418 2,014,723 7.6% 156,983 00 16 588,366 $24.67
2004 2q (21,311) $23.92
2004 1q 1,464 26,573,418 2,086,024 7.9% 00 5 233,835 $23.81
2003 4q 93,604 $23.45
2003 3q 1,465 26,609,003 2,169,522 8.2% 41,871 1 50,663 4 231,018
80,050
1,464 26,558,340 2,126,953 8.0% (209,136) 6 422,587 3 209,663
160,424
1,458 26,135,753 2,211,081 8.5% 4 127,213 7 473,250
1,454 26,008,540 2,240,851 8.6% 00 11 600,463
1,455 26,010,140 2,221,140 8.5% 1 26,000 9 513,791
1,454 25,984,140 2,288,744 8.8% 1 82,236 8 442,158
1,453 25,901,904 2,248,379 8.7% 3 78,600 5 210,906
1,453 25,854,280 2,280,805 8.8% 3 123,275 3 159,236
1,451 25,742,335 1,959,724 7.6% 00 6 282,511
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 23
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
DOWNTOWN MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
0.500 Delivered SF Absorption SF Vacancy 16.0%
Millions SF 0.400 14.0% Percent Vacant
0.300 12.0%
0.200 10.0%
0.100 8.0%
0.000 6.0%
(0.100) 4.0%
2.0%
(0.200) 0.0%
2004 1q 2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
2.00 Direct SF Sublet SF $33.00
1.80 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
1.60 $32.50
1.40
Millions SF 1.20 Dollars/SF/Year $32.00
1.00
0.80 $31.50
0.60
0.40 $31.00
0.20
0.00 $30.50
2006 1q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property® Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $32.88
2007 2q 230,372 $32.83
2007 1q 245 12,604,681 1,610,333 12.8% (110,800) 00 1 80,000 $32.36
2006 4q $32.81
2006 3q 245 12,604,681 1,840,705 14.6% (1,782) 1 306,750 1 80,000 $32.23
2006 2q 38,964 $31.55
2006 1q 244 12,297,931 1,423,155 11.6% 11,326 1 109,389 2 386,750 $30.10
2005 4q 19,554 $29.28
2005 3q 243 12,188,542 1,311,984 10.8% 29,086 1 47,040 3 496,139 $28.84
2005 2q 21,524 $27.58
2005 1q 242 12,141,502 1,303,908 10.7% 88,035 00 4 543,179 $27.62
2004 4q (22,834) $25.91
2004 3q 242 12,141,502 1,315,234 10.8% (38,328) 00 4 543,179 $25.72
2004 2q 31,868 $25.66
2004 1q 243 12,143,696 1,336,982 11.0% 66,274 00 3 463,179 $25.43
2003 4q 96,964 $25.18
2003 3q 244 12,152,532 1,374,904 11.3% (75,516) 1 381,043 3 463,179
(39,499)
244 11,862,970 1,106,866 9.3% 00 4 844,222
245 11,886,970 1,218,901 10.3% 00 2 490,432
246 11,891,784 1,200,881 10.1% 00 2 490,432
246 11,891,784 1,162,553 9.8% 00 1 381,043
246 11,891,784 1,194,421 10.0% 00 1 381,043
246 11,891,784 1,260,695 10.6% 00 1 381,043
248 11,939,784 1,405,659 11.8% 00 1 381,043
249 11,942,484 1,332,843 11.2% 00 00
Source: CoStar Property®
24 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
HWY-78 CORRIDOR MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
Millions SF 0.120 Delivered SF Absorption SF Vacancy 10.0% Percent Vacant
0.100 2004 3q 2004 4q 2005 3q 2005 4q 2006 1q 2006 4q 2007 1q 9.0%
0.080 8.0%
0.060 7.0%
0.040 6.0%
0.020 5.0%
0.000 4.0%
(0.020) 3.0%
(0.040) 2.0%
(0.060) 1.0%
0.0%
2004 1q 2004 2q 2005 1q 2005 2q 2006 2q 2006 3q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
0.35 Direct SF Sublet SF $30.00
0.30 $29.00
$28.00
0.25 Dollars/SF/Year $27.00
Millions SF 0.20 $26.00
0.15 $25.00
0.10 $24.00
0.05 $23.00
0.00 $22.00
2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property® Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $29.50
2007 2q 10,435 $27.25
2007 1q 302 3,705,681 276,881 7.5% 8,886 1 4,903 17 381,593 $26.57
2006 4q $25.99
2006 3q 301 3,700,778 282,413 7.6% 67,895 1 15,461 6 156,255 $24.94
2006 2q 45,180 $24.87
2006 1q 300 3,685,317 275,838 7.5% 66,025 1 10,538 7 171,716 $23.04
2005 4q 10,423 $22.28
2005 3q 299 3,674,779 333,195 9.1% 25,049 1 111,639 6 149,997 $21.85
2005 2q (48,811) $21.73
2005 1q 298 3,563,140 266,736 7.5% 19,983 00 5 241,272 $20.84
2004 4q $21.81
2004 3q 298 3,563,140 332,761 9.3% 7,491 3 68,973 4 201,272 $22.44
2004 2q 81,537 $22.87
2004 1q 295 3,494,167 274,211 7.8% (45,672) 1 4,000 4 180,612 $22.16
2003 4q $22.42
2003 3q 294 3,490,167 295,260 8.5% 3,874 00 5 184,612
(50,758)
294 3,490,167 246,449 7.1% (12,058) 1 14,850 4 72,973
27,040
293 3,475,317 251,582 7.2% 4 17,030 3 57,364
289 3,458,287 242,043 7.0% 1 30,000 5 31,880
288 3,428,287 293,580 8.6% 00 6 61,880
288 3,428,287 247,908 7.2% 00 6 61,880
288 3,428,287 251,782 7.3% 00 2 44,850
288 3,428,287 201,024 5.9% 00 1 14,850
288 3,428,287 188,966 5.5% 1 22,766 00
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 25
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
I-15 CORRIDOR MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
Millions SF 0.350 Delivered SF Absorption SF Vacancy 18.0% Percent Vacant
0.300 2004 3q 2004 4q 2005 3q 2005 4q 2006 1q 2006 4q 2007 1q 16.0%
0.250 14.0%
0.200 12.0%
0.150 10.0%
0.100 8.0%
0.050 6.0%
0.000 4.0%
(0.050) 2.0%
(0.100) 0.0%
(0.150)
(0.200)
2004 1q 2004 2q 2005 1q 2005 2q 2006 2q 2006 3q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
1.80 Direct SF Sublet SF $33.00
1.60 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
1.40 $32.00
1.20
1.00 Dollars/SF/Year $31.00
0.80
Millions SF 0.60 $30.00
0.40
0.20 $29.00
0.00
$28.00
$27.00
2006 1q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property® Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $32.69
2007 2q 21,525 $32.23
2007 1q 542 10,989,418 1,691,396 15.4% 64,853 3 225,640 13 1,287,976 $31.27
2006 4q 24,393 $31.13
2006 3q 539 10,763,778 1,487,281 13.8% (152,789) 3 191,061 16 1,513,616 $29.49
2006 2q 19,337 $29.44
2006 1q 536 10,572,717 1,361,073 12.9% (60,365) 3 113,929 18 1,621,055 $28.65
2005 4q 143,253 $26.99
2005 3q 533 10,458,788 1,271,537 12.2% 100,277 00 17 1,444,595 $26.75
2005 2q (75,742) $25.74
2005 1q 533 10,458,788 1,118,748 10.7% (35,581) 1 56,202 13 973,680 $25.59
2004 4q 283,204 $25.33
2004 3q 532 10,402,586 1,081,883 10.4% 11,703 2 113,706 13 988,971 $25.68
2004 2q 53,727 $24.61
2004 1q 530 10,288,880 907,812 8.8% 206,984 2 56,725 10 877,304 $24.85
2003 4q (22,613) $25.58
2003 3q 528 10,232,155 994,340 9.7% 37,055 4 257,876 5 226,633
524 9,974,279 836,741 8.4% 00 9 484,509
524 9,974,279 760,999 7.6% 00 6 314,601
524 9,974,279 725,418 7.3% 00 6 314,601
524 9,974,279 1,008,622 10.1% 3 50,248 4 257,876
522 9,966,043 1,012,089 10.2% 00 3 50,248
522 9,966,043 1,065,816 10.7% 00 3 50,248
522 9,966,043 1,272,800 12.8% 1 23,485 1 12,759
521 9,942,558 1,226,702 12.3% 00 1 23,485
Source: CoStar Property®
26 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
NORTH CITIES MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
0.600 Delivered SF Absorption SF Vacancy 16.0%
Millions SF 0.500 14.0% Percent Vacant
0.400 12.0%
0.300 10.0%
0.200 8.0%
0.100 6.0%
0.000 4.0%
2.0%
(0.100) 0.0%
2004 1q 2004 2q 2004 3q 2004 4q 2005 1q 2005 2q 2005 3q 2005 4q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
3.50 Direct SF Sublet SF $37.00
3.00 $36.00
2.50 $35.00
Millions SF 2.00 Dollars/SF/Year $34.00
1.50 $33.00
1.00 $32.00
0.50 $31.00
0.00 $30.00
2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property® Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $35.94
2007 2q 62,237 $35.60
2007 1q 545 28,831,070 2,924,351 10.1% 395,191 00 5 920,066 $34.62
2006 4q 210,858 $33.54
2006 3q 545 28,831,070 2,986,588 10.4% (26,087) 1 450,000 5 920,066 $32.83
2006 2q 307,971 $32.47
2006 1q 544 28,381,070 2,931,779 10.3% 260,416 4 272,560 5 1,312,851 $32.15
2005 4q 517,528 $31.19
2005 3q 540 28,108,510 2,870,077 10.2% 333,524 4 375,336 8 1,238,392 $30.55
2005 2q 292,946 $29.47
2005 1q 536 27,733,174 2,468,654 8.9% (41,831) 1 540,000 9 1,097,896 $29.05
2004 4q 356,559 $29.29
2004 3q 535 27,193,174 2,236,625 8.2% 449,012 00 9 1,592,896 $29.24
2004 2q 121,801 $28.77
2004 1q 535 27,193,174 2,497,041 9.2% 155,903 2 71,403 9 1,592,896 $28.42
2003 4q 175,489 $28.96
2003 3q 533 27,121,771 2,943,166 10.9% 124,035 2 134,631 10 1,593,299
531 26,987,140 3,142,059 11.6% 00 10 1,571,370
531 26,987,140 3,435,005 12.7% 1 34,600 6 1,196,034
530 26,952,540 3,358,574 12.5% 2 347,703 6 1,226,560
528 26,604,837 3,367,430 12.7% 2 207,415 7 1,034,263
526 26,397,422 3,609,027 13.7% 00 7 747,577
526 26,397,422 3,730,828 14.1% 1 83,653 5 589,718
525 26,313,769 3,803,078 14.5% 1 22,000 4 560,078
524 26,291,769 3,956,567 15.0% 1 208,464 5 582,078
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 27
SAN DIEGO – MID-YEAR 2007
San Diego Office Market
NORTH COUNTY WEST MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
0.600 Delivered SF Absorption SF Vacancy 18.0%
2004 3q 2004 4q 2005 3q 2005 4q 2006 1q 2006 4q 2007 1q 16.0%
0.500 14.0%
12.0%
0.400 10.0%
8.0%
Millions SF 0.300 6.0% Percent Vacant
4.0%
0.200 2.0%
0.0%
0.100
0.000
(0.100)
2004 1q 2004 2q 2005 1q 2005 2q 2006 2q 2006 3q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
1.60 Direct SF Sublet SF $32.00
1.40 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
1.20 $31.50
1.00
Millions SF 0.80 Dollars/SF/Year $31.00
0.60
0.40 $30.50
0.20
0.00 $30.00
$29.50
2006 1q 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property® Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $31.70
2007 2q 250,439 $31.63
2007 1q 584 9,204,142 1,478,135 16.1% 30,107 20 476,079 47 532,483 $31.63
2006 4q 35,100 $31.67
2006 3q 564 8,728,063 1,252,495 14.4% (57,627) 00 67 1,008,562 $31.03
2006 2q 19,489 $30.42
2006 1q 564 8,728,063 1,282,602 14.7% 29,904 5 276,465 41 895,825 $29.14
2005 4q $29.03
2005 3q 559 8,451,598 1,041,237 12.3% 146,065 1 60,000 40 1,063,815 $28.14
2005 2q 114,013 $27.20
2005 1q 558 8,391,598 923,610 11.0% 149,575 4 72,228 21 794,955 $27.14
2004 4q $26.93
2004 3q 554 8,319,370 870,871 10.5% 91,110 4 140,679 14 523,102 $26.28
2004 2q 33,469 $24.61
2004 1q 550 8,178,691 760,096 9.3% 1 34,460 11 444,725 $24.73
2003 4q 8,697 $23.47
2003 3q 549 8,144,231 871,701 10.7% 117,852 00 7 292,267
120,814
549 8,144,231 985,714 12.1% 1 27,894 7 292,267
66,264
548 8,116,337 1,107,395 13.6% 158,384 3 164,237 5 207,857
545 7,952,100 1,034,268 13.0% 00 6 327,131
545 7,952,100 1,067,737 13.4% 00 6 327,131
545 7,952,100 1,076,434 13.5% 2 56,861 3 164,237
543 7,895,239 1,137,425 14.4% 1 11,000 4 172,912
542 7,884,239 1,247,239 15.8% 5 48,920 5 183,912
537 7,835,319 1,264,583 16.1% 00 7 98,031
Source: CoStar Property®
28 THE COSTAR OFFICE REPORT ©2007 COSTAR GROUP, INC.
MID-YEAR 2007 – SAN DIEGO
San Diego Office Market
SOUTH/SOUTHEAST CORRIDOR MARKET
MARKET HIGHLIGHTS – CLASS “A, B & C”
Deliveries, Absorption & Vacancy Historical Analysis, All Classes
0.200 Delivered SF Absorption SF Vacancy 9.0%
2004 3q 2004 4q 2005 3q 2005 4q 2006 1q 2006 4q 2007 1q 8.0%
0.150 7.0%
6.0%
0.100 5.0%
4.0%
Millions SF 0.050 3.0% Percent Vacant
2.0%
0.000 1.0%
0.0%
(0.050)
(0.100)
(0.150)
2004 1q 2004 2q 2005 1q 2005 2q 2006 2q 2006 3q 2007 2q
Source: CoStar Property®
Vacant Space Quoted Rental Rates
Historical Analysis, All Classes Historical Analysis, All Classes
0.70 Direct SF Sublet SF $26.00
$25.50
0.60 $25.00
$24.50
0.50 Dollars/SF/Year $24.00
$23.50
Millions SF 0.40 $23.00
$22.50
0.30 $22.00
$21.50
0.20 $21.00
0.10
0.00 2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
2006 1q 2006 2q 2006 3q 2006 4q 2007 1q 2007 2q
Source: CoStar Property® Source: CoStar Property®
Existing Inventory Vacancy Net Delivered Inventory UC Inventory Quoted
Absorption Rates
Period # Bldgs Total RBA Vacant SF Vacancy % # Bldgs Total RBA # Bldgs Total RBA $25.62
2007 2q 38,892 $24.42
2007 1q 751 7,594,525 507,178 6.7% 40,703 1 7,555 20 244,120 $23.95
2006 4q (36,865) $23.80
2006 3q 752 7,604,790 556,335 7.3% 89,462 4 81,760 20 212,594 $22.73
2006 2q 73,125 $23.35
2006 1q 748 7,523,030 515,278 6.8% 29,518 00 23 291,854 $23.00
2005 4q 104,060 $22.88
2005 3q 748 7,523,030 478,413 6.4% (34,837) 2 18,642 7 160,548 $22.60
2005 2q 74,623 $22.33
2005 1q 746 7,504,388 549,233 7.3% (90,473) 3 36,859 9 179,190 $21.87
2004 4q 13,492 $20.99
2004 3q 744 7,471,496 589,466 7.9% (38,874) 3 83,500 8 166,936 $21.74
2004 2q 23,054 $21.35
2004 1q 741 7,387,996 535,484 7.2% 65,906 5 170,657 10 206,606 $19.32
2003 4q 34,490 $19.49
2003 3q 738 7,257,620 509,168 7.0% 34,422 3 46,415 11 325,218
736 7,212,705 429,416 6.0% 2 38,342 13 353,334
736 7,195,702 487,036 6.8% 2 9,821 12 337,616
734 7,185,881 386,742 5.4% 1 4,460 10 232,429
733 7,181,421 395,774 5.5% 00 6 213,749
733 7,181,421 356,900 5.0% 1 3,000 5 177,523
735 7,232,052 430,585 6.0% 4 154,372 2 132,202
731 7,077,680 342,119 4.8% 1 19,000 5 157,372
730 7,058,680 357,609 5.1% 00 6 176,372
Source: CoStar Property®
©2007 COSTAR GROUP, INC. THE COSTAR OFFICE REPORT 29
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