The document provides an overview and forecast of the 2010 California commercial real estate market. It summarizes that the US and California economies will see weak growth tied to stimulus spending through mid-2010, with a slow job recovery. The California housing market hit bottom in early 2009 and inventory is decreasing, but affordability remains high. The commercial real estate sectors of industrial, retail, office, and multifamily will see rising vacancies through 2010-2011 before starting to recover, with multifamily recovering earliest. Financing remains difficult due to the moribund commercial mortgage backed securities market. The overall forecast is for a slow economic and commercial real estate recovery in California starting in 2010.

1. 2010 California Commercial Real Estate Market ForecastOctober 7, 2009 Robert A. Kleinhenz, Ph.D.Deputy Chief EconomistCalifornia Association of REALTORS®

3. California Housing Market

4. Commercial Markets

5. Industrial

6. Retail

7. Office

8. Multifamily

10. US and California Economic Conditions

11. QUARTERLY PERCENT CHANGE, ANNUAL RATE Gross Domestic Product 2009 Q2: -0.74% SOURCE: US Dept of Commerce, Bureau of Economic Analysis

12. QUARTERLY PERCENT CHANGE Personal Consumption 2009 Q2: -0.87% SOURCE: US Dept of Commerce, Bureau of Economic Analysis

13. INDEX, 100=1985 Consumer Confidence Index August 2009: 54.5 September 2009: 53.1

14. PERCENT CHANGE FROM A YEAR AGO Retail Sales July 2009, Down 9.5% YTY; 2009 August Down 6.0% YTY

15. PERCENT CHANGE FROM A YEAR AGO Industrial Production August 2009: Down 10.3% YTY SOURCE: Federal Reserve Board

16. SA, PERCENT OF CAPACITY Capacity Utilization Rate July 2009: 68.5%

17. Unemployment Rate California vs. United States SOURCE: CA Employment Development Division

18. Employment Growth, California vs. U.S. YEAR TO YEAR % CHANGE SOURCE: CA Employment Development Division

19. Employment by Sector YTY % Changes in California 2008-2010 % Change SOURCE: CA EDD, LAEDC

20. Nonfarm Employment By Region SOURCE: CA Employment Development Division

21. Consumer Price Index July 2009: All Items -1.89% YTY; Core 1.56% YTY PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984

22. DJI Monthly Avg. Dow Jones Stock Price and Consumer Confidence 30 Industrial Index vs. Consumer Confidence Index 1987-2009 Cons. Conf.

23. SOURCE: US Dept of Commerce, Bureau of Economic Analysis Components of GDP Percent Change from Quarter Earlier

24. Gross Domestic Product 2008: +0.44%; 2009 Q2: -0.74% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $ ANNUAL QTRLY

26. Growth tied to stimulus spending Q3-09 thru Q2-10

27. Weak job picture, u-rate stabilizes by mid-2010

28. Inflation a concern but in check

29. 2009 Stimulus intended to prime the pump, but will another be needed?

31. Sales of Existing Detached Homes and Pacific West Consumer Confidence California, August 2009 Sales: 526,970 Units, Up 38.2% YTD, Up 9.0% YTY INDEX UNITS SOURCE: California Association of REALTORS®; The Conference Board *Sales are seasonally adjusted and annualized

32. Median Price of Existing Detached Homes California, August 2009: $292,960, Down 16.9% YTY SOURCE: California Association of REALTORS®

33. Sales By Price RangeOctober 2004-Present SOURCE: Mortgage Bankers Association, C.A.R.

34. Peak vs Current Price - August 2009

35. Distressed Sales to Total Sales Ratio (Aug 2009)

36. Unsold Inventory Index California, August 2009: 4.3 Months MONTHS SOURCE: California Association of REALTORS®

37. Unsold Inventory By Price Range California - Existing Homes August 2009 vs. August 2008 SOURCE: California Association of REALTORS®

38. Proportion of First-Time HomebuyersCalifornia Q. Was the buyer a first-time buyer?

39. First-time Buyer Housing Affordability Index California Vs. U.S. 2000-2009 % OF HOUSEHOLDS THAT CAN BUY SOURCE: California Association of REALTORS®

40. Median Price to Median HH Income Ratio California Average Over Years Shown: 6:1 Ratio SOURCE: California Association of REALTORS®

41. Asking Rents for Class A&B Apartments California, 2009 Q2: $1,382, Down 4.5% YTY Asking Rents SOURCE: California Association of REALTORS®; REALFACTS

42. NODs & Trustees Deeds Filed in California 2005 - 2009 No. of Defaults or TDs Source: DataQuick Information Systems

43. Mortgage Rates SOURCE: Federal Home Loan Mortgage Corporation

44. California Foreclosure Activity September 18, 2008: Paulson asks For TARP Funds September 2008: Senate Bill 1137 Takes Effect Government Intervention March 4, 2009: HAMP February 20, 2009: CA Foreclosure Prevention Act February 11 2009: Frank’s Moratorium Request SOURCE: ForeclosureRadar.com

45. CA Mortgage Foreclosure & Delinquency Rates California: Q2-2009, NSA Delinquencies: Long Run Average: 4.1% Foreclosure Rate: Long Run Average: 1.0% SOURCE: Mortgage Bankers Association

46. California Subprime & Alt A Loans As of May 2009 SOURCE: FirstAmerican CoreLogic, LoanPerformance Data, U.S. Census Bureau, and Federal Reserve Bank of New York, compiled by C.A.R.

50. Commercial Sector

52. Retail

53. Office

56. Transportation & Logistics

58. SA, PERCENT OF CAPACITY Capacity Utilization Rate July 2009: 68.51%

59. Employment by Sector YTY % Changes in California 2008-2010 % Change SOURCE: CA EDD, LAEDC

60. Vacancy Rates for Industrial Segment SOURCE: NAR Forecast

61. Vacancy Rates for Industrial Segment SOURCE: NAR Forecast

62. Vacancy Rates for Industrial Segment SOURCE: NAR Forecast

63. Year-to-Year % Change in Lease Rates SOURCE: NAR Industrial Forecast

64. Year-to-Year % Change in Lease Rates SOURCE: NAR Industrial Forecast

65. Year-to-Year % Change in Lease Rates SOURCE: NAR Industrial Forecast

66. Retail Space

68. Growth in economy & jobs

69. Consumer expenditures

71. PERCENT CHANGE FROM A YEAR AGO Retail Sales July 2009, Down 9.5% YTY; 2009 August Down 6.0% YTY

72. Employment by Sector YTY % Changes in California 2008-2010 % Change SOURCE: CA EDD, LAEDC

73. Vacancy Rates for Retail Segment SOURCE: NAR Forecast

74. Vacancy Rates for Retail Segment SOURCE: NAR Forecast

75. Vacancy Rates for Retail Segment SOURCE: NAR Forecast

76. Year-to-Year % Change in Lease Rates SOURCE: NAR Retail Forecast

77. Year-to-Year % Change in Lease Rates SOURCE: NAR Retail Forecast

78. Year-to-Year % Change in Lease Rates SOURCE: NAR Retail Forecast

79. Office Space

81. Business Services

82. Government

84. Vacancy Rates for Office Segment SOURCE: NAR Forecast

85. Vacancy Rates for Office Segment SOURCE: NAR Forecast

86. Vacancy Rates for Office Segment SOURCE: NAR Forecast

87. Year-to-Year % Change in Lease Rates SOURCE: NAR Office Forecast

88. Year-to-Year % Change in Lease Rates SOURCE: NAR Office Forecast

89. Year-to-Year % Change in Lease Rates SOURCE: NAR Office Forecast

90. Multi-Family

92. Renter share in California larger than US

93. Undersupply of units

95. Population Percent Changes California (1971 - 2008) SOURCE: U.S. Census Bureau; California Department of Finance; California Association of REALTORS®

96. Sources of Population Growth California (1981-2008) THOUSANDS SOURCE: CA Dept. of Finance

97. New Housing Permits California, August 2009: 2,911 Units, Down 48.8% YTD SOURCE: Construction Industry Research Board

98. Vacancy Rates for Multifamily Segment SOURCE: NAR Forecast

99. Vacancy Rates for Multifamily Segment SOURCE: NAR Forecast

100. Vacancy Rates for Multifamily Segment SOURCE: NAR Forecast

101. Year-to-Year % Change in Lease Rates SOURCE: NAR Multifamily Forecast

102. Year-to-Year % Change in Lease Rates SOURCE: NAR Multifamily Forecast

103. Year-to-Year % Change in Lease Rates SOURCE: NAR Multifamily Forecast

105. Moribund secondary markets for CMBS make financing scarce and difficult

107. Community banks

109. Trickle of new CMBS issuances (I’m not dead yet!)

111. U.S. Economy Forecast Date: October 2009 SOURCE: California Association of REALTORS®

112. California Economy Forecast Date: October 2009 SOURCE: California Association of REALTORS®

113. California Housing Market Outlook Forecast Date: October 2009 Source: CALIFORNIA ASSOCIATION OF REALTORS® SOURCE: California Association of REALTORS®

115. Better in LA and San Francisco than elsewhere in US

117. Orange, San Francisco, San Jose, Los Angeles, and Ventura better than US

119. Weak markets because of job losses in bus svcs/fin svcs

121. Favorable demographics in Southern Cal

123. www.car.org  Economics  Speeches Speeches & Presentations The End - - Thank You