Asset Services Insights - Fall 2016 (External)

BAY AREA SNAPSHOT Northern California’s Bay Area encompasses the cities and metropolitan areas of San Francisco, Silicon Valley/San Jose, and Oakland, along with smaller urban and rural areas. It’s home to some of the world’s finest wine country, waterfront towns, and dramatic beaches, as well as world- leading innovation and industry. Drive the Bay Area loop and you’ll experience lively cities, Napa and Sonoma, the techy zeitgeist of Silicon Valley, some of the best restaurants in the country, towering redwoods, rugged coastal hills, lush agricultural regions, and inland waterways. Well-known professional sports teams entertain Bay Area residents including the San Francisco Giants and the Oakland A’s (baseball), the Golden State Warriors and the Sacramento Kings (basketball), the San Jose Sharks (ice hockey), and the San Francisco 49ers and Oakland Raiders (football). Approximately 8.7 million people call the nine-county region home, an increase of 6.6% since 2010. The Bay Area is the second-largest region by population in California, after the Greater Los Angeles area. It is expected to remain one of the fastest-growing regions in the U.S. over the next decade, thanks to the plethora of jobs as well as the abundant natural attractions and the benefits of urban living. BAY AREA ECONOMY magnet for professionals, with strong employment growth over the last 26 quarters. In recent months, Bay Area job growth has begun to flatten, but this is following several years of staggering employment gains, and this metric remains at historical highs. With a total labor force surpassing 4.1 million, the Bay Area employs more than 3.9 million of its residents; its unemployment rate in 2Q 2016 matched last year’s rate of 4.2%. The national average is 4.9%. Many companies continue to expand business across the region. Professional and business services employ the most people in the Bay Area, followed by educational and health services, government jobs, leisure and hospitality, retail trade, and computer AND EMPLOYMENT The San Francisco Bay Area is a

HOMELESSNESS: The Bay Area, and San Francisco in particular, has a homeless epidemic with no clear-cut solution, although multiple public and private resources have been trying to find one for decades. This is a subject of discussion for everyone in the Bay Area, from executives in board rooms to tech workers to tourists.

and electronics manufacturing. New opportunities in the tech field include robotics, virtual reality, and driverless cars. “Research and development as well as life sciences are critical to the Bay Area economy, and require specific real estate expertise, which Cushman & Wakefield provides,” said Sandra. The Bay Area real estate market, fueled by new development and innovative tenant build-outs, requires specific real estate professionals who truly understand asset management and the tools it takes to underwrite new projects as well as operate buildings with critical infrastructures and complicated tenant use. ECONOMIC CHALLENGES Even with all of the Bay Area’s assets, it’s important to note that three primary issues will impact future growth if not proactively addressed. COST OF LIVING/HOUSING: A fast- growing population, regulatory issues, scarcity and cost of land, and high construction costs add up to a shortage of housing. A pipeline of 23,000 multi- family housing units are now under construction, with another 81,000 proposed, but the new supply will still not meet anticipated demand. MASS TRANSIT WOES: The area’s highways are at overcapacity. People rely on buses, subways, ferries, or the light rail system to get around—as well as planes, bikes, cars, and carpooling— however, the area’s rail and bus options are not completely integrated, and are overwhelmed. Expansions and a high- speed light rail are proposed, but are yet to become reality.

ECONOMIC DIVERSITY

23% PROFESSIONAL AND BUSINESS SERVICES

20% EDUCATION AND HEALTH SERVICES

15% LEISURE AND HOSPITALITY

16% GOVERNMENT

7%

12% RETAIL TRADE

7%

OTHER

COMPUTER AND ELECTRONICS MANUFACTURING

OTHER: construction; financial activities; information; wholesale trade, other services; transportation, wholesale, and utilities; durable and nondurable goods; mining and logging.

EDUCATION Most people are familiar with Stanford, University of California-Berkeley, University of California-San Francisco, Santa Clara, and University of California- Davis, but there nearly 100 other options for students. The Bay Area offers private and public institutions, research universities, and liberal arts colleges. Schools work hard to compete for the brightest high school students—and keeping them in-state later creates a brainy workforce for area companies. According to the 2015 census, 42.4% of Bay Area residents have Bachelor’s or graduate degrees. In San Francisco, 53% hold Bachelor’s or graduate degrees. With more than 7,000 college-degree- holders per square mile, San Francisco has the densest clusters of educated workers in the entire U.S. Note: Any local will tell you that “The Big Game”—a battle between UC- Berkley’s Golden Bear mascot and the “tree” from the “Farm” at Stanford creates a fierce rivalry.

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