1. Orange County Office Market Review – Year End 2014
Presented by Erik Koentje

2. Year End 2014 Orange County Office Stats
• Existing Properties: 6,085 (first net increase since 2009)
• Under Construction: 6
• Spaces for Lease: 5,378
• Existing RBA: 153,439,656SF (Class A = 29%, B = 56% C = 15%)
• Vacant Space: 16,155,215 SF
• Vacancy Rate: 10.2%
• 2014 Net Absorption: 2,955,272SF
• Average Asking Rent: $2.04 Full Service Gross
(arrows show comparison to Year End 2013)

3. 2014 Started Slow, Finished With Strong Demand

4. Rents Growing At Fastest Pace Since 2006
Vacancy Rate Almost in Single Digits

5. 2015 and 2016 Will Have Even Stronger Rent Growth

6. New Construction Still Slow, But Likely To Change In ’16

7. What Was Completed in 2014?
520 Newport Center
326,065SF
271,957SF Available
10550 Talbert Ave
469,000SF
100% Leased by Hyundai
650 Newport Center
380,000SF
100% Leased By PIMCO
19510 Jamboree Rd
108,696SF
100% Leased by Google

8. What’s Under Construction?
6940 Beach Blvd – The Source Tower
50,000SF - Delivering October 2015
100% of Office Space is Available
4450 MacArthur Blvd
21,311SF – Delivering February 2015
50% Preleased
13833 Beach Blvd
16,000 SF - Delivering January 2015
100% Preleased
200 Spectrum Center
425,044SF - Delivering March 2016
100% Available

9. Half Of All Spaces Taking Over 10 Months To Lease

10. 125,000 Jobs Added So Far, Mostly In Office-Using Jobs

11. 2014 Office Sales Activity
• 328 office buildings sold
• 141 were owner/user
• 27 class A properties sold
• 209 class B properties sold
• 92 class C properties sold
• 70 were condo sales
• Nearly $1.75 Billion in Value*
*includes estimated allocations for multi-market portfolios
(arrows show comparison to 2013)

12. Largest Orange County Office Deals Of 2014
275 Valencia Ave, Brea
Sold 12/3/14 for $110,000,000 ($172.55/SF)
Cap Rate 5.43% - 100% leased to Bank of America
Buyer: Greenlaw Partners/Cerberus Capital
Seller: Lexington Realty Trust
17901 Von Karman Ave, Irvine
Sold 10/24/14 for $94,250,000 ($345.38/SF)
Cap Rate: 4.2% - 85.5% leased at time of sale
Buyer: John Hancock Life Insurance Co
Seller: LBA Realty
18301 Von Karman Ave, Irvine
Sold 1/16/14 for $67,905,600 ($300/SF)
Cap Rate: 4% - 77% leased at time of sale
Buyer: Greenlaw Partners / CIGNA
Seller: Partnership including Greenlaw,
Westbrook Partners, and Walton Street Capital
Griffin Towers – 5 & 6 Hutton Center, Santa Ana
Sold 3/14/14 for $129,000,000 ($232.99/SF)
Cap Rate: Not Reported – 88% leased at sale
Buyer: Equity Office
Seller: Angelo, Gordan & Co / Lincoln Property Co

13. Pricing Is Struggling to Recover So Far

14. Cap Rates Are Back Down to 2007 Levels

15. Sales Volume Getting Back To High Levels

16. Half of All Sales Taking 6 Months Or Less From When
They Are First Listed

17. Insights And Key Take-Aways
 Vacancy compression may slow as some announced layoffs occur and
construction ramps up, but will not be enough to dampen recovery
 Rent growth is will accelerate in 2015 and 2016
 Rent and NOI growth expected to be in upper tier of US markets for
next few years
 Great point in the cycle to invest in Orange County, with better returns
than most markets through 2018
 Core assets are already overpriced but value-add strategies and
investments outside of the Airport Area can pay off
 Airport Area and South County will return to pre-recession rent levels in
2018 and 2019
 Supply growth will really kick-in in 2016, with new supply potentially
outweighing demand by end of 2017

18. Upcoming Presentations
Industrial: Thursday 1/29
Retail: Thursday 2/5