SAN DIEGO OVERVIEW TRENDS, IMPACT PROJECTS & THE FUTURE OF THE BUILT ENVIRONMENT

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1 SAN DIEGO OVERVIEW TRENDS, IMPACT PROJECTS & THE FUTURE OF THE BUILT ENVIRONMENT UDI VICTORIA Thursday, September 27, 2018

2 BRIEF INTRO ECONOMIC DRIVERS MEGATRENDS OUR CURRENT SITUATION IMPACT PROJECTS TAKEAWAYS/Q&A

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4 BRIEF INTRO ECONOMIC DRIVERS MEGATRENDS OUR CURRENT SITUATION IMPACT PROJECTS TAKEAWAYS/Q&A

5 OFFICE DEVELOPMENT SLOW TO RESPOND

6 OFFICE DEVELOPMENT SLOW TO RESPOND

7 OFFICE DEVELOPMENT SLOW TO RESPOND

8 OFFICE DEVELOPMENT SLOW TO RESPOND

9 BRIEF INTRO ECONOMIC DRIVERS MEGATRENDS OUR CURRENT SITUATION IMPACT PROJECTS TAKEAWAYS/Q&A

10 Megatrends Global Economy Emerging Innovative Sectors War on Talent Workspace Retail / Industrial

11 GLOBALIZATION SLIDE CBRE

12 KEY SAN DIEGO EXPORT INDUSTRIES Communications Equipment Engine and Power Equipment Pharmaceuticals Medical Devices Research and Development Services CBRE

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14 Megatrends Global Economy Emerging Innovative Sectors

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17 Source: Pitchbook

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20 GENOMICS FOUR TRENDS ARE CONVERGING Reduced Sequencing Costs Computational Power Machine Learning Value-Based Care CBRE

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26 Megatrends Global Economy Emerging Innovative Sectors War on Talent

27 THE BIGGEST DRIVER CBRE

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31 H-1B VISAS bioinformatics scientist capable of applying advanced mathematical analysis to the human genome. CBRE

32 >4,000 STEM Workers

33 Megatrends Global Economy Emerging Innovative Sectors War on Talent Workspace

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36 Megatrends Global Economy Emerging Innovative Sectors War on Talent Workspace Retail / Industrial

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38 DEPARTMENT RETAIL WOES CBRE

39 EXPERIENTIAL RETAIL CBRE

40 ON-DEMAND RETAIL CBRE

41 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q E-COMMERCE SALES ZOOMING AHEAD E-commerce Sales ($M) 100,000 % of Retail Sales ,000 80,000 70,000 60, , ,000 30,000 20,000 10, Source: U.S. Department of Commerce, E-commerce Sales (L) % of Retail Sales (R) CBRE

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45 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q E-COMMERCE SALES ZOOMING AHEAD E-commerce Sales ($M) 100,000 % of Retail Sales ,000 80,000 70,000 60, , ,000 30,000 20,000 10, Source: U.S. Department of Commerce, E-commerce Sales (L) % of Retail Sales (R) CBRE

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48 BRIEF INTRO ECONOMIC DRIVERS MEGATRENDS OUR CURRENT SITUATION IMPACT PROJECTS TAKEAWAYS/Q&A

49 SENTIMENT? or FUNDAMENTALS?

50 THE BIG PICTURE Market Soaring Office Industrial Retail Multi-Family Q $2.95 $1.01 $2.39 $1,678 Asking Rate Peak $2.95 (Q2 18) $1.04 (Q1 18) $2.39 (Q2 18) $1,678 (Q2 18) Trough $2.11 (Q3 10) $0.72 (Q2 12) $1.72 (Q2 13) $1,191 (Q1 10) Q % 4.1% 4.7% 3.9% Vacancy Rate Peak 19.2% (Q3 09) 11.4% (Q1 10) 8.2% (Q3 11) 5.3% (Q3 10) Trough 10.6% (Q2 18) 3.8% (Q4 17) 4.5% (Q4 17) 3.8% (Q2 17) U/C Q K 3.6M 443K 9,314 (Units)

51 1Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2018 Millions OFFICE DEVELOPMENT SLOW TO RESPOND M K % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% U/C SQ. FT. RECESSIONS U/C SHARE OF RBA

52 OFFICE DEVELOPMENT SLOW TO RESPOND 14,000,000 Total Office Sq. Ft. Delivered by Business Cycle Office Sq. Ft. Delivered in Current Cycle 12,000,000 10,000,000 8,000,000 7,804,641 10,371,453 BTS 724,394 27% 6,000,000 4,000,000 2,699,890 Spec 1,975,496 73% 2,000, s Cycle 2000s Cycle This Cycle Total Delivered

53 LABOR FORCE TIGHTENING 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

54 SLOWING JOB GROWTH ON THE HORIZON Jobs Added 80,000 60,000 40,000 20, ,000-40,000-60,000-80, , % 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% -----FORECAST-----

55 THE BIG PICTURE Market Soaring Office Industrial Retail Multi-Family Q $2.95 $1.01 $2.39 $1,678 Asking Rate Peak $2.95 (Q2 18) $1.04 (Q1 18) $2.39 (Q2 18) $1,678 (Q2 18) Trough $2.11 (Q3 10) $0.72 (Q2 12) $1.72 (Q2 13) $1,191 (Q1 10) Q % 4.1% 4.7% 3.9% Vacancy Rate Peak 19.2% (Q3 09) 11.4% (Q1 10) 8.2% (Q3 11) 5.3% (Q3 10) Trough 10.6% (Q2 18) 3.8% (Q4 17) 4.5% (Q4 17) 3.8% (Q2 17) U/C Q K 3.6M 443K 9,314 (Units)

56 SAN DIEGO HOUSING AFFORDABILITY AND PRICES Housing Affordability Index 50% 45% % 35% 30% 25% 20% 23% 15% 10% 5% 0%

57 ATTRACTIVE FOR TALENT Local Advantages A RECENT SURVEY FOUND THAT SAN DIEGO WAS THE MOST CITED POTENTIAL LOCATION OF INTEREST FOR AMERICANS

58 BRIEF INTRO ECONOMIC DRIVERS MEGATRENDS OUR CURRENT SITUATION IMPACT PROJECTS TAKEAWAYS/Q&A

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66 Completed

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74 SAN DIEGO BAY CBRE

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79 Urban versus Suburban CBRE

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81 $6.4 billion in 63 projects u/c, planned or in review 24,744 units currently with 8,106 underway CBRE

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88 VOTE FOR or CBRE

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90 Union-Tribune

91 Town & Country Union-Tribune CBRE

92 Hines Town & Country Union-Tribune CBRE

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97 BRIEF INTRO ECONOMIC DRIVERS MEGATRENDS OUR CURRENT SITUATION IMPACT PROJECTS TAKEAWAYS/Q&A

98 KEY TAKEAWAYS San Diego is uniquely positioned in cutting edge innovations in the life sciences and information/communication arenas. Market is ripe for development, but office builders remain tentative in this landscape. Mulit-family developers are capitalizing on attraction to San Diego and an evolving urban desirability. Technology, global forces, a war for talent, and evolving space requirements will effect all markets, but San Diego especially. The major projects that will shape San Diego s built environment for the next years are happening right now. CBRE

99 MICHAEL COMBS Research Manager CBRE Research : michael.combs@cbre.com THANK YOU