2009 | REAL ESTATE FORECAST

SAN FRANCISCO
BAY AREA

Office

Industrial

Retail

Investment
SAN FRANCISCO BAY AREA

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Year-end 2008 numbers include estimates for the fourth quarter that were derived in November. Final published numbers may vary slightly. Totals may not add precisely
due to rounding.

© 2008 Grubb & Ellis

To Grubb & Ellis Clients and Colleagues:
As we end 2008, it is becoming extremely clear that we are in the midst of what could be a
lengthy and prolonged recession. Actually, our outlook for the commercial real estate industry
changed dramatically during the third quarter of 2008 as the credit market unrest that first
gripped the national economy in August 2007 escalated into a full-blown global financial crisis.

Although it is difficult to predict just how long and severe the current downturn will be, we
believe that we have not seen the end of weakening consumer and business confidence,
slowing manufacturing activity, and rising unemployment that is currently plaguing our
economy. These are all factors that impact every aspect of the commercial real estate industry.

Within the commercial real estate market, the investment sector was the first to feel the effects
of the credit crisis, and as a result property sales were down by two-thirds during the first three
quarters of 2008 as compared with the same period in 2007. As I write this, access to capital
remains extremely limited, and the leasing market is starting to more severely feel the effects
of the economic uncertainty. Needless to say, this is probably the most challenging market we
have experienced since the early 1990s. I can say that it is certainly the most challenging time
I’ve seen in my 30 years in the real estate industry.

At this point we believe it most likely will be late 2010 before we begin to see a meaningful
recovery throughout the commercial real estate industry. However, there are some bright
spots. Low oil prices and interest rates will allow some commercial real estate sectors to
recover quicker than others. And if you are a tenant with a requirement or an investor with
cash, 2009 will offer considerable opportunity.

At Grubb & Ellis Company, we believe that within a challenging market there are opportunities.
Our goal, as always, is to help our clients take advantage of them. We look forward to
discussing the specifics of our 2009 Forecast with you, and to helping you meet your real estate
goals now and into the future.

Sincerely,

Gary H. Hunt
Interim Chief Executive Officer
Grubb & Ellis Company

Table of Contents
Grubb & Ellis goes above and beyond in-depth local market research and analysis. As our clients’ Office 2
needs have evolved from bricks and mortar requirements to encompass complex global real estate Industrial 4
Retail 6
issues, our industry subject matter experts contribute focused, specialized expertise to the process.
Investment 7
This added layer of analysis gives clients a more complete picture of the environment in which they Company Profile 9
operate and helps us leverage our market data to help owners, users and investors construct smart, Grubb & Ellis Research 11
innovative solutions to today’s real estate needs. Office Directory 12
Contributors and Sources 13

© 2008 Grubb & Ellis San Francisco Bay Area l 1

SAN FRANCISCO BAY AREA
Office

Weakening tenant demand will result in a softer office market in 2009. Sublease space and vacancy rates
are predicted to rise while absorption and rental rates will decline. Market fundamentals will deteriorate,
albeit less dramatically than they did during the dot-com bust.

Vacancy Rates Market Overview Although the unique industry base inherent
Year-End Challenging economic conditions will trans- to the Bay Area will prevent market funda-
30%
late into a difficult year for owners of mentals from deteriorating to the degree
20% commercial real estate in the Bay Area. other major markets will, the ailing economy
Oakland and San Mateo were the first will result in a slowdown in real estate trans-
10%
markets to show signs of deterioration, actions. Tenants will take longer to evaluate
0%
posting negative net absorption for 2008. lease opportunities in the face of uncertain
00 02 04 06 08P 09F
■ Oakland/ ■ San Francisco ■ San Jose/ ■ San Francisco/ The stronger markets of San Jose and San revenue projections. Financing challenges
Eastbay Silicon Mid-Peninsula
Valley
Francisco finished 2008 with positive will hinder demand as well. As demand
Source: Grubb & Ellis
absorption, but are forecasted to record slows and sublease space increases, down-
negative net absorption in 2009. The slow- ward pressure on rents will escalate. Average
Historical Absorption
Year-End (in Thousand SF) down in consumer spending and Class A asking rents declined in all Bay Area
5,000 deteriorating job market, coupled with the office markets during 2008 and steeper
evaporation of business loans is sure to reductions are anticipated. Rents are
0
negatively impact businesses throughout projected to decline by 12 percent for the
-5,000 the Bay Area in 2009. entire Bay Area in 2009. Landlords will
aggressively seek tenants by offering
-10,000
00 02 04 06 08P 09F
In addition to the reduction in loan dollars
concessions such as free rent.
■ Oakland/ ■ San Francisco ■ San Jose/ ■ San Francisco/ available from struggling financial institu-
Eastbay Silicon Mid-Peninsula
Source: Grubb & Ellis Valley tions, an impending slowdown of venture Confidence among developers has dissi-
capital investment will also adversely affect pated and several speculative office
Asking Rental Rates tenant demand, particularly in the Silicon buildings have been scrapped. Construction
Year-End ($/SF/Yr. Full Service) Valley. During 2009, venture capital invest- activity, which was modest to begin with
ment levels will be driven significantly by the due to geographical land constraints, will
$80
cleantech sector, which according to the decline to minimal levels in 2009. Market
$40 National Venture Capital Association, “will fundamentals will weaken as bankruptcies,
continue to grow despite economic woes mergers and tenant contractions transpire.
$0 and could become the top investment Vacancy in the Bay Area office markets is
00 02 04 06 08P 09F
■ Oakland/ ■ San Francisco ■ San Jose/ ■ San Francisco/ sector for the venture capital industry by projected to rise throughout 2009. Although
Eastbay Silicon Mid-Peninsula
Source: Grubb & Ellis Valley 2012.” Already the high-tech capital of the Bay Area commercial real estate is in for a
world, the Bay Area will benefit in the long rough ride in 2009, the anticipated down-
run as the global hub of the emerging clean- turn is predicted to be less severe than the
tech and biotech industries. Revitalization of one brought on by the dot-com collapse. A
San Francisco’s Mission Bay neighborhood bottom in sales pricing and rents is antici-
has been led by the development of pated to be reached in late 2009, paving the
biotechnology friendly office buildings in way for a comeback as capital access returns
which UCSF, Phizer, FibroGen and Merck- and economic recovery ensues.
owned Sirna Therapeutics have committed
to space.

2 l San Francisco Bay Area © 2008 Grubb & Ellis

San Francisco
Confidence in San Francisco’s office market
has deteriorated in the face of a global
economic downturn. From a leasing perspec-
tive, the effects of the recession will
materialize in increased sublease space, rising
vacancy to continue to rise as 1.5 million
square feet slated for completion in 2009
comes online. As the national government’s
$740 billion bailout plan helps to free up
capital, tenants that have been sitting on the
sidelines will be able to benefit from quality
them to shop the market for the best deals
and landlords to court tenants with more
concessions as well as continuing to offer
short-term deal options.
San Francisco/Mid-Peninsula

vacancy, lower tenant demand, deterioration
in rental rates and emptying of the develop-
ment pipeline. Capital access challenges are
expected to hinder business operations and
office expansions substantially. Available
sublease space, which increased in 2008, will
flood the market in 2009 forcing landlords to
lower rental rates on competitive space.
Although a downturn is expected, market
fundamentals in San Francisco are predicted
to hold up better than in other major markets
due to the city’s unique tenant base and
construction limitations.
San Jose/Silicon Valley
Silicon Valley’s office market responded to
the economic challenges of 2008 with an
increase in vacancy of approximately 50
basis points per quarter, a shift from the
downward trend that began the first quarter
of 2006. Going forward we anticipate
space at lower asking rates as landlords add
more incentives to fill vacancies. Despite the
negativity surrounding the economy, Silicon
Valley has a silver lining when compared to
the rest of the nation.
Oakland/East Bay
The mortgage meltdown coupled with the
credit crisis weighed down the East Bay
office market throughout 2008. Many
companies remained very
regarding their real estate commitments
and adopted a wait-and-see attitude which
translated into four consecutive quarters of
increased vacancy and a softening of overall
rents. As the national economic challenges
spill over into 2009, look for sublease space
to rise, asking rental rate erosion and
vacancy to continue its climb upward. As
tenants jump into the driver’s seat, watch for
2008 was the first year since 2003 to show a
real pullback in the San Francisco/Mid-
Peninsula office market. While 2007 was a
time for landlords to test tenants’ tolerance
for escalating rents, 2008 and 2009 will bring
more opportunities and variety to the
market. With a limited number of financial
tenants, and high-tech employment contin-
uing to serve as the anchor for a large
portion of demand, the Peninsula office
cautious market will likely rebound ahead of the rest
of the Bay Area.
With only one major construction project
scheduled to complete in 2008, and a nearly
empty pipeline, the San Francisco/Mid-
Peninsula is positioned well to weather the
current economic downturn. Expect rents to
soften and vacancy to increase, however we
should not see as deep a decline as in the
previous down cycle.

Key Leasing Transactions

2008
Lessee Lessor Property Submarket Size (SF)
Robert Half Sunset Land Company 2613 Camino Ramon San Ramon 236,000
Google Inc Prime Property Fund 345 Spear St South Financial 195,654
California State Automobile Association Equity Office Properties Trust 3055 Oak Rd (Station Landing) Contra Costa Centre 166,204
PG&E Nearon Enterprises 3401 Crow Canyon Rd San Ramon 140,000
SF Public Utilities Commission Metcalf Family Trust 1155 Market St Civic Center 140,000
Pfizer Inc Alexandria Real Estate 455 Mission Bay Blvd Mission Bay 105,000
Trend Micro Blue Coat Systems 10201 N De Anza Blvd Cupertino 104,990
Gunderson, Dettmer, Stough Starwood Capital 1200 Seaport Blvd Redwood City 98,022
Rearden Commerce Inc Harvest Properties 1001-1051 E Hillsdale Blvd Foster City 91,363
Motorola Ariba 809 11th Ave Sunnyvale 91,000
Lab 126 Prometheus 20450 Stevens Creek Blvd Cupertino 70,000
Sony Ericsson LBA Realty 100 Redwood Shores Pkwy Redwood City 62,721

© 2008 Grubb & Ellis San Francisco Bay Area l 3

SAN FRANCISCO BAY AREA
Industrial

Despite the challenges currently facing the economy, the Bay Area industrial market is
poised to remain healthy throughout 2009. The market will experience demand but deal
velocity will be slower than it has been over that past two years.

Vacancy Rates Market Overview a market driver in both the East Bay and
All Product Types, Year-End Despite the negative national economic Silicon Valley markets. This is in comparison
landscape, two major drivers helped main- to the Peninsula where sublease space hit
20%
tain positive industrial momentum the market due to rising travel time and the
throughout 2008: clean technology activity increased cost of fuel. Grubb & Ellis expect
10%
and the decreasing dollar, which increased warehouse vacancy on the Peninsula to
0%
exports. This was in contrast to the office and increase over the next couple of years while
00 02 04 06 08P 09F
■ Oakland/ ■ San Jose/ retail sectors, which experienced increased the East Bay and Silicon Valley markets
Eastbay Silicon Valley
vacancy in the latter half of the year due to remain steady.
Source: Grubb & Ellis
frozen credit markets, negative GDP and
Moving forward into 2009 Grubb & Ellis
reductions in workforce.
Historical Absorption anticipates asking rents will remain steady in
All Product Types, Year-End (in Thousand SF)
Clean technology company activity in Silicon the East Bay and slightly decrease in Silicon
10,000 Valley and the East Bay not only maintained Valley and Peninsula as landlords hold off on
positive market momentum but also helped raising rates until the market regains its
-10,000 to reduce any large general industrial and balance. Tenants will remain cautious about
R&D/flex blocks of space that had been sitting making moves until the government’s
-30,000 vacant or given back to the market. efforts begin freeing up credit, reassuring
00 02 04 06 08P 09F
■ Oakland/Eastbay ■ San Jose/Silicon Valley Approximately two-thirds of the leases them that it is time to come off the sidelines
Source: Grubb & Ellis completed in Silicon Valley in the third and move forward with expansion plans.
quarter, over 750,000 square feet of gross While there is still considerable uncertainty
Warehouse Asking Rental Rates absorption, were done by clean technology in the market, space options in the Bay Area
Year-End ($/SF/Yr. Triple Net) tenants. Furthermore, two of the biggest markets are extremely tight and landlords
$12
deals inked in 2008 in the East Bay market are advised to work with tenants that have
$8 were done by clean technology tenants. upcoming lease expirations during these
turbulent times.
$4 A weakening dollar that buoyed exports
overseas coupled with a desirable Bay Area Limited industrial base inventory along with
$0
00 02 04 06 08P 09F location resulted in positive momentum in almost no new construction coming online
■ Oakland/ ■ San Jose/
Eastbay Silicon Valley warehouse/distribution space. A constrained means there is little to compete with existing
Source: Grubb & Ellis
product type, warehouse proved to be inventory. No new construction is expected in
the Silicon Valley or the East Bay in 2009 and
Key Leasing Transactions
2008 the Peninsula expects to see 78,000 square
Lessee Lessor Property Submarket Size (SF) feet. Going forward we anticipate a new
Fed Ex LBA Realty 8333 Central Avenue Newark 320,875
economic playing field, new interest in
Coaster Prologis 6753 Mowry Avenue Newark 268,538
Super Micro Pinole Point 48350 Fremont Blvd Fremont 246,450 sustaining U.S. jobs versus offshoring work, as
BioRad Laboratories Sares Regis Group 2100-2900 Atlas Rd Richmond 116,500
well as continued technology innovation and
Optisolar PNK, LLC 31164-31172 Huntwood Ave Hayward 60,000
environmental initiatives will help the Bay
Area weather through the storm.

4 l San Francisco Bay Area © 2008 Grubb & Ellis

San Jose/Silicon Valley
The Silicon Valley industrial market remained
healthy throughout 2008 despite national
economic challenges. Not since the last
recession in 2001, which hit the technology
sector hard and ultimately affected the
R&D/flex product type, has industrial seen an
increase in vacancy. In this economic down-
turn, real estate-related industries and the
office sector were affected, while technology
companies kept market fundamentals
strong in industrial.
Clean technology tenants actively leased
space though at 2008 signing average lease
terms of 52 months. This could mean that in
the next three to four years as leases expire
and these growing companies seek to
expand, landlords offering large blocks of
space can benefit from the opportunity. But,
they but will need to offer bigger tenant
improvement packages to accommodate
clean tech’s requirement of heavy power and
large lab space. This trend coupled with no
new developments projected to complete in
the near future will offer nothing to compete
with the already limited available inventory.
While this is positive for the industrial sector,
it is unlikely that it will totally escape the
downturn in the national and global
economies. While industrial demand is often
said to be a lagging economic indicator, into
2009 we expect to see slight vacancy
increases and rental rates decreases
although not to the degree experienced in
other commercial real estate sectors.
© 2008 Grubb & Ellis
Oakland/East Bay
Despite the national economic turmoil experi-
enced this year, the East Bay continued to post
positive market performance. This marks the
fourth consecutive year of positive net
absorption in the East Bay. Although the trans-
action volume was not as high as the previous
years, it did help to push vacancy down 40
basis points to 3.5 percent. The primary driver
for this positive net absorption was ware-
house space, which accounted for well over
50 percent of the positive net absorption in
the market. Despite the fact that rental rates
were escalating through the entire market in
2007, rents remained relatively flat in 2008.
The construction pipeline, which has been
empty for three consecutive years, will remain
empty in 2009 as land continues to be scarce.
Watch for steady transactions and flat rental
rates to continue throughout 2009.
The market will experience demand but deal
velocity will be slower than it has been over
the past two years. As we advance through
next year look for industrial investors to
gravitate toward markets with consistent
market performance, such as the East Bay, and
avoid more volatile markets thus eliminating
unnecessary risk. Although the space options
in the East Bay market are extremely tight,
landlords would be advised to work with their
tenants that have upcoming lease expirations
during these turbulent times. The Port of
Oakland along with the Oakland Airport
continue to identify this market as one of the
key global pathways, setting the East Bay
apart as one of the most sought after
industrial markets in the country.
San Francisco Bay Area l 5
SAN FRANCISCO BAY AREA
Retail

Brace for a rough retail year in 2009 throughout the Bay Area - consumer confidence
that is in the dumps as well as diminished consumer demand and the credit crisis coupled with a challenged
housing market will put pressure on tenants as well as landlords.

Median Household Income The wave of growth that Bay Area retail has With stringent lending requirements and a
2008 (in Thousands) been enjoying over the past few years came weakened dollar, retail is in store for a rough

U.S. Average
crashing down in 2008. The mortgage melt- road ahead. As a result of these turbulent
down coupled with the financial crisis that times some retailers have already filed for
San Francisco/
Oakland/ the nation is wrestling with has stifled bankruptcy protection. Examples include
East Bay
San Jose/
consumer demand and confidence. Circuit City, Mervyn’s and Sharper Image.
Silicon Valley
Consumers have clamped down on While other companies, such as the Gap
$0 $40 $80
spending in reaction to tightening credit, have announced plans to significantly

Source: Claritas
mounting layoffs and stock market losses. reduce the number of stores nationally.
Backing this up is the International Council This will put additional pressure on
of Shopping Centers Chain Stores report landlords who are already feeling the
Typical Rent
In-line Shop Space, 2008 ($/SF/Yr. Triple Net) noting the weakest retail comparable-store pain in the market.
sales performance in more than 35 years.
U.S. Average The Bay Area retail market will remain
Additionally the Conference Board
San Francisco challenged throughout 2009. Watch for
Consumer Confidence Index plummeted to
Oakland retail consolidation to continue. Rents will
its lowest level in the 40-year history of the
San Jose/ continue to decline as vacancies climb
Silicon Valley survey. Another market indicator to watch is
upward. Landlords will give more
$0 $40 $80 Mortgage Equity Withdrawals (MEW), which
concessions to tenants either in the form of
measures the availability of home equity
Source: Grubb & Ellis higher tenant improvement allowances or
through borrowing and when plotted
free rent. As people still need essentials,
against retail expenditures, it is evident these
Retail Square Feet Per Capita neighborhood centers with grocery
activities are in lockstep with one another.
2008 and drug stores should fare best during this
Harder to attain credit and reduced net
U.S. Average time. Neighborhood shopping centers
equity values have translated into less
San Francisco located near high-income areas are also
availability of MEW credit and a reduction in
expected to weather the storm in 2009.
Oakland retail sales. The more discretionary in nature
All signs point to another rough year for
San Jose/ the items seem to be, the less people will
Silicon Valley retail, but these vacancies will provide better
40 44 48 spend on them in times of stress and
real estate opportunities and less
especially in periods where one has
Source: Grubb & Ellis, CoStar, Claritas competition for some retailers.
difficulties extracting their home equity.
The difficult mortgage environment and the
Tenants Expanding or Downsizing substantial reduction in home values
2009
Expanding or New to Market Downsizing combined to greatly curtail borrowing and
Cellular & Accessory Stores Auto Dealerships as a result, discretionary spending.
Casual Dining Restaurants Department Stores
Health & Personal Care High End Restaurant
Wholesale Clubs Home Furnishings
Building Materials, Garden & Supply Clothing & Accessory Stores

6 l San Francisco Bay Area © 2008 Grubb & Ellis

SAN FRANCISCO BAY AREA
Investment

The credit crunch effectively ended an incredible five-year run in pricing and activity.
With capital availability likely to remain limited in 2009, look for heavily leveraged investors
to unload properties to cash rich buyers at reduced prices.

Average Capitalization Rates Market Overview property sectors. Fallout from home foreclo-
Closed Sales (2008) Upheaval in the financial markets has sures in the Bay Area should remain
8% greatly disrupted commercial real estate relatively restrained compared to some
6% investment throughout the Bay Area, overbuilt Southern California markets.
4% creating a bleak outlook for 2009. The credit
Perspective buyers can be assured that
2% crisis put an end to the record pace of deal
investing in Bay Area real estate represents a
0%
velocity achieved in 2007. Investment
Office Industrial Retail Apartment Hotel tremendous long-term opportunity. San
transactions totaling approximately $5
Francisco is considered the West Coast’s
billion closed in 2008, an 82 percent decline
Source: Real Capital Analytics
premier office market and one of the most
in dollar volume from 2007. Marketed
dynamic real estate investment markets in
investment opportunities are scarce
Property Sales Volume the world. Technology companies continue
(in Billions) heading into 2009 as uncertainty with
$40,000 to drive demand in San Jose where employ-
regards to pricing runs wild. Lack of credit
ment and income growth are robust.
$30,000 availability in the foreseeable future will
Oakland/East Bay remains a vital Bay Area hub
$20,000 result in a significant slowing of capital into
housing the fourth largest port in the nation.
real estate, keeping the flow of new acqui-
$10,000 Beyond local economic strength, investment
sitions minimal throughout 2009.
$0 properties are situated to benefit from the
02 04 06 08P 09F Leveraged buyers are expected to re-
■ Office ■ Industrial ■ Retail ■ Apartment ■ Hotel Bay Area’s standing as a coastal global
emerge in 2010 when capital access
Source: Real Capital Analytics pathway. Large familiar markets like San
improves. Even cash-rich public pensions
Francisco are favored in the typical flight-to-
will have limited capacity for new invest-
Sales by Property Type ments in 2009 as plunging stock and bond
quality that occurs during a downturn.
2008
values have significantly reduced their An upheaval among highly leveraged
asset bases. Across the board, companies investors will create opportunities moving
Apartment 21.3% ■
Hotel 0.4% ■ have geared up for recession by reserving forward. Cash investors will be afforded open-
Industrial 8.9% ■
Office 57.7% ■
cash. This new focus on solvency and cash ings to purchase distressed properties at
Retail 11.7% ■ management will hinder acquisition market lows. Ultimately prices are expected
activity for many investment companies in to decline 20 to 30 percent from the highs
the near term. achieved in 2007. Investors willing and able to
Source: Real Capital Analytics
take a risk by acquiring property at reduced
While financial crisis grips the nation and
prices in 2009 will likely position themselves
negatively affects real estate investment
to benefit greatly when recovery ensues.
nationwide, the strength of the local
economy should help Bay Area properties
withstand a difficult period. The region’s
uniquely diversified economy is predicted to
outperform the national average, helping all

© 2008 Grubb & Ellis San Francisco Bay Area l 7

SAN FRANCISCO BAY AREA
Investment
continued

San Francisco
The Urban Land Institute ranks San Francisco
as the premier city for development and the
second-best city for commercial investment
in its Emerging Trends in Real Estate 2009
report, noting, “The City by the Bay never
strays far from the top of the survey,
featuring a Pacific gateway with barriers to
entry and quality of life, comparing favorably
to any other 24-hour market.” While property
values did fall in 2008, the ultimate decline is
not expected to be as dramatic as it was
during the 2000-2001 tech bust. Values are
predicted to find a bottom approximately 20
to 30 percent below highs reached in 2007.
Land constraints create a barrier to new
San Jose/Silicon Valley
Overall commercial property sales in 2008
continued to fall with transaction volume
through August off 75 percent compared to
the same period in 2007. Towards the end of
2008, buyers and sellers hadn’t yet settled on
a new price level and the gap between
offers and actual pricing remained wide. Into
2009, the investment market should begin
to see slight improvement as the govern-
ment helps to free up capital and property
values should decrease allowing opportu-
nity for buyers with cash on hand to pick up
quality space. Owners should continue to
hold onto investments in 2009.
investment levels enjoyed just last year.
Looking toward 2009, values will continue to
adjust downward as a result of the credit
debacle; cap rates will continue to climb by
at least 25 to 50 basis points creating the
opportunity for better returns and the ability
to acquire properties at below current
replacement costs. Both regional and institu-
tional investors that have been sitting on the
sidelines in the latter half of 2008 and begin-
ning of 2009 will take the lead in those
opportunities. Back are the days of lower
loan-to-value ratios, higher debt coverage
ratios and stronger tenant evaluation.
San Francisco/Mid-Peninsula

construction; helping maintain the value of Oakland/East Bay The San Francisco/Mid-Peninsula investment
existing investment quality properties. What a difference a year makes with 2008 market has been hit significantly by a much
investment transaction volumes down tighter credit market and an economic
significantly compared to the robust decline. Only a handful of properties traded
hands in 2008, and with rents on the decline
Key Investment Transactions buyers and sellers alike will likely adopt a
2008
Property Property Price wait-and-see stance. Watch for the gap
Buyer Type Name City Size (SF) (millions) between asking and offering prices to close
CIM Group Office CIM Group Portfolio Oakland 1,739,125 $412.5
LaSalle Bank JV Retail Bay Street Emeryville Emeryville 383,055 $234.0 in 2009 and for cap rates to shift upward.
Harvest Properties JV INVESCO Office Parkside Towers Foster City 398,000 $179.8
Legacy Partners Office Ygnacio Center Walnut Creek 499,231 $174.3 Considering the ongoing turbulence among
CBRE Investors Office 500 Terry Francois San Francisco 291,000 $149.0
U.S. capital markets, it is anticipated that
Thor Equities Office Phelan Bldg San Francisco 267,446 $130.0
PNC Realty Investors Office 199 Freemont St San Francisco 396,200 $127.4 property values and velocity will fall in the
VNO Patson Van Ness Holdings Office CSAA Portfolio San Francisco 597,574 $118.5
near-term future. As capital access returns
United Dominion Realty Trust Apartment Edgewater Luxury Apts San Francisco 157,135 $115.0
Shorenstein Properties and the economy begins a slow recovery
JV SKS Development Industrial Oyster Point Bus Park South San Francisco 404,215 $84.0
Angelo Gordon cycle, the Mid-Peninsula investment market
JV Centrum Properties Industrial SFO Logistics Center South San Francisco 568,823 $80.0 will be well positioned for a comeback.
LBA Realty Office 4900 Johnson Dr Pleasanton 288,000 $66.5
Eden Township
Healthcare District Office Dublin Gateway Medical Center Dublin 115,000 $60.0
Prado Group JV Felson Cos Apartment Nob Hill Tower San Francisco 108,000 $37.2
Nearon Enterprises General Industrial Sycamore Drive Milpitas 197,604 $22.0
Sares-Regis Group Warehouse 48350 Fremont Blvd Fremont 246,500 $21.0
Intuitive Surgical R&D/Flex 950 Kifer Rd Sunnyvale 163,286 $16.5
Nearon Enterprises Warehouse 940 Remillard Ct San Jose 166,600 $16.0

8 l San Francisco Bay Area © 2008 Grubb & Ellis

COMPANY PROFILE
Grubb & Ellis is a real estate services and investment firm committed to
identifying and creating business and investment opportunities through
real estate, uniquely tailored to our clients’ individual needs.
Grubb & Ellis is one of the largest and most
respected commercial real estate services
and investment companies. With more than
130 owned and affiliate offices worldwide,
Grubb & Ellis offers property owners, corpo-
rate occupants and investors comprehensive
integrated real estate solutions, including
transaction, management, consulting and
investment services supported by propri-
etary market research and extensive local
market expertise. Grubb & Ellis and its
subsidiaries are leading sponsors of real
estate investment programs that provide
individuals and institutions the opportunity
to invest in a broad range of real estate
investment vehicles, including tax-deferred
1031 tenant-in-common exchanges, public
non-traded real estate investment trusts and
real estate investment funds.
Research plays an integral role in our busi-
ness, and our professionals have earned a
reputation for providing informed solutions
that combine local market knowledge with
detailed analysis. Strong knowledge about
general economic issues and global trends –
combined with specialized expertise for
property types such as office, industrial, retail,
land, medical office, multifamily and hospi-
tality – provides our clients the information
they need to achieve their corporate and
investment goals.
© 2008 Grubb & Ellis
Grubb & Ellis has the people, platform and Structured Around the Needs of Our Clients
best-in-class processes to deliver superior Our unique, comprehensive platform includes
service whether a client needs help with a transaction services, management services,
single investment property or multiple corporate services and a wide range of
global facilities. Our consistent performance investment programs.
grounded in keen market insight plays a role
Transaction Services
in our success and is recognized by our
Grubb & Ellis has one of the largest and most
clients. For example, in 2008, Grubb & Ellis
experienced real estate brokerage sales
was honored with Microsoft Corporation’s
forces in the country. Our teams of specialists
Environmental Award for our successful
cover all aspects of commercial real estate
efforts to reduce the company’s impact on
and work closely with owners, occupants
the environment. This commitment to
and investors to assess the ways in which real
continuous improvement and the develop-
estate issues relate to – and contribute to –
ment of programs and initiatives designed to
an organization's strategic business objec-
meet a client’s individual needs are the
tives. Last year, Grubb & Ellis and its affiliates
driving forces behind our more than 50 years
completed 16,250 transactions valued at
of service excellence.
more than $22 billion.
Seamless Integration of Real Estate
Transaction services include:
Products and Services
Grubb & Ellis is a unique company that • Agency leasing
brings together traditional transaction and
• Tenant representation
management real estate services with inno-
• Consulting services
vative investment programs offered through
Grubb & Ellis Realty Investors. Our brokerage • Valuation consulting
network offers insight into the pool of assets • Retail services
nationwide, maximizing investment oppor- • Institutional investment services
tunities for program investors. In turn, the
• Private capital investment services
property and asset management services of
• Site selection
the company seek to drive value to each
property, capitalizing on opportunities from
acquisition to disposition – whether it be for
our own portfolio or on behalf of our clients.
San Francisco Bay Area l 9
 COMPANY PROFILE
continued
Microsoft’s Environmental Award in 2008
Global Client Services
As one of the nation’s largest full-service
commercial real estate firms, Grubb & Ellis
delivers integrated property, facility and asset
management services focused on cost-effi-
cient operations, tenant retention and
increasing property values to a host of corpo-
rate and institutional clients. The company
and its affiliates manage a diverse portfolio
totaling more than 275 million square feet of
space. This portfolio includes headquarters,
facilities and Class A office space for major
corporations, as well as industrial, manufac-
turing and warehouse facilities, data centers,
retail properties, medical buildings and
multifamily assets for real estate occupants
and investors. Additionally, Grubb & Ellis
provides consulting services that help clients
better understand their real estate portfolio,
the current operating environment, and
future opportunities that exist through smart,
strategic planning.
Management services include:
• Property management
• Facility management
• Asset management
• Business and fulfillment services
• Consulting services
• Project/construction management
• Engineering services
10 l San Francisco Bay Area
Grubb & Ellis was the recipient of
Corporate services include:
• Consulting services
• Real property and lease administration
• Retail services
• Strategic planning
• Tenant representation
• Valuation services
• Site selection
• Project management
• Portfolio rationalization
• Disposition services
Investment Programs
Grubb & Ellis is one of the nation’s leading
sponsors of innovative commercial real
estate investment programs. Grubb & Ellis
Realty Investors, the company’s real estate
investment and asset management
subsidiary, structures, acquires, manages and
disposes of real estate for its clients. Through
Private Client Accounts, the firm offers high
net worth investors a comprehensive
program to build or expand their commercial
real estate portfolio to meet their investment
objectives. In total, Grubb & Ellis Realty
Investors oversees a portfolio of assets valued
in excess of $6.5 billion located throughout
more than 30 states, and has completed
acquisition and disposition volume totaling
more than $11 billion on behalf of program
investors since its founding in 1998.
Investment programs include:
• 1031 tenant-in-common exchanges
• Public non-traded real estate
investment trusts (REITs)
• Limited liability companies
• Wealth management
• Institutional investments
• Mutual funds
• Securities separate accounts and funds
This is neither an offer to sell nor a solicitation of an offer
to buy any security. Such an offer may be made only by
means of an offering document. Investors should read
the offering materials and review the risks associated
with any offering prior to making an investment and
should be able to afford the loss of their entire invest-
ment. Securities offered through Grubb & Ellis Securities,
Inc. member FINRA/SIPC.
Our Commitment
A strong, integrated delivery platform
combined with the expertise of our profes-
sionals offers our clients a partnership unlike
any other in the industry. We bring strategic
thinking and exceptional service to each and
every engagement. We deliver perspective,
insight and innovation to help our clients
achieve their desired outcomes. And we
execute effectively and efficiently, enabling
us to form long-lasting collaborative relation-
ships with property owners, investors and
corporate users of real estate.
To locate a Grubb & Ellis office near you,
please visit www.grubb-ellis.com/offices.
© 2008 Grubb & Ellis
GRUBB & ELLIS RESEARCH
Grubb & Ellis is one of the most widely quoted sources when
it comes to real estate market trends and their implications.
For more than 50 years, Grubb & Ellis has
made real estate market research a corner-
stone of its business. The company has built
a reputation for consistently delivering some
of the highest quality research reports in the
industry and regularly provides expert
commentary on the forces shaping the
commercial real estate landscape. As the
issues facing real estate owners, corporate
users and investors grow increasingly
complex, sound research and analysis
become even more vital, and our research is
a tool our professionals rely on to help their
clients solve real estate issues, uncover
opportunities and achieve larger organiza-
tional objectives.
Grubb & Ellis research reports span from
coast to coast and around the globe. We
cover big-picture economic trends as well as
specific drivers of local market demand for
space. We provide standard real estate statis-
tics and also respond to significant
developments, such as the credit crisis of
2008. Our research is used by our clients, the
media and the industry at large to help
explain current conditions and predict what
the future has in store.
Grubb & Ellis leverages four integrated
components to create our unique and
comprehensive insights:
• Our professional research managers and
their staff, whose critical function it is to
build the base of market intelligence in
each office and provide published reports
and custom analyses to our clients. Grubb
& Ellis pioneered the concept of hiring
© 2008 Grubb & Ellis
professional research managers to direct
the company’s research function, which is
widely viewed as having the most accu-
rate grass-roots level data in the industry.
Incoming research analysts and brokers
are trained to understand the nuances of
the real estate cycle, inflection points in
the cycle, leading indicators, and the
actions and advice that are appropriate for
each phase of the cycle.
• Our systems used to compile, maintain,
analyze and disseminate our research.
Grubb & Ellis was a pioneer in the field of
computerized market research and
analysis and continues to make invest-
ments to improve and enhance the
information available. Most of the
company’s offices have been tracking
data for more than two decades. In addi-
tion to subscribing to the top property
databases in the industry, Grubb & Ellis has
built a proprietary, centralized Web-resi-
dent data warehouse to track its
property-specific data, including property
details, images, available space, leasing
and sales comparables, and tenant infor-
mation, all in an easy-to-use format. This
sophisticated system is based on a
rigorous set of research standards
designed to ensure that data are consis-
tent across markets.
• Our reports and publications through
which we translate our extensive data-
bases into analysis, insights and
actionable recommendations for our
clients. In addition to our annual national
and local forecast reports, Grubb & Ellis
produces quarterly Market Trends reports
that analyze local and national market
conditions throughout North America by
product type, a Weekly Market Insight
electronic communication on a timely
economic or real estate-related topic,
quarterly capital markets reports and
white papers on issues that are important
to our clients.
• Our real estate professionals, whose famil-
iarity with the people and the property in
their submarkets yields a daily, in-the-
trenches grasp of changing market
conditions. The creation of market intelli-
gence is a team effort, with knowledge
flowing constantly between our research
teams, sales professionals and investment
specialists. This knowledge is integrated
with our professionals’ insight and experi-
ence, forming a solid foundation from
which to advise clients, and giving Grubb
& Ellis and its clients a competitive edge.
Among our clients, we have seen an
increased demand for more accurate data
and sharper analysis fueled by increased
market transparency and a strong need for
accountability. Real estate investors as well
as corporations in all sectors of the economy
are closely examining their real estate strate-
gies and searching for timely and smart
market research that will help guide and
support their decisions. Providing this infor-
mation is one of the things Grubb & Ellis
does best.
To keep abreast of research disseminated
by Grubb & Ellis, please visit
www.grubb-ellis.com/research.
San Francisco Bay Area l 11
OFFICE DIRECTORY

Corporate San Jose Indiana Nebraska Oklahoma Washington

Headquarters 408.452.5900 Indianapolis Lincoln Oklahoma City Seattle
Santa Ana San Luis Obispo Harding Dahm & Pacific Realty Levy Beffort 206.388.3000
California Central Coast Company 402.467.1234 405.840.1500
714.667.8252 Commercial 317.844.2700 Wisconsin
Omaha Oregon Appleton
805.541.5000 Mishawaka/South Bend
Alabama Pacific Realty
Santa Barbara Cressy & Everett Portland Pfefferle
Mobile 402.345.5866
Peebles & Cameron, LLC 805.564.3366 574.271.4060 503.241.1155 920.968.4700
251.438.4312 Nevada Green Bay
Temecula Iowa Pennsylvania
WestMar Las Vegas Pfefferle
Arizona Des Moines Las Vegas Commercial King of Prussia
951.491.6300 920.884.5000
Phoenix Mid-America Commercial Brokerage, LLC 610.337.1010
BRE Commercial, LLC Visalia 515.222.0605 Madison
Pearson Commercial 702.733.7500 Philadelphia
602.954.9000 Oakbrook Corporation
559.732.7300 Kansas Reno 215.561.8300
Tucson Lawrence NCG 608.238.2600
520.321.3330 Walnut Creek Pittsburgh
925.939.3500 The Winbury Group 775.332.2800 412.281.0100 Milwaukee
Arkansas 785.865.5100 New Hampshire Apex Commercial
Bentonville Colorado South Carolina 262.784.7500
Wichita Bedford
Solomon Partners Colorado Springs Martens Commercial Charleston
479.271.6118 Quantum Commercial Coldstream Real Estate Waupaca
Group, LLC Barkley Fraser
Group Advisors, Inc. Pfefferle
North Little Rock 316.262.0000 603.623.0100 843.725.7200
Solomon Partners 719.590.1717 715.258.8000
Denver Maryland Portsmouth Columbia
501.975.0547 Wausau
303.572.7700 Baltimore Coldstream Real Estate Wilson Kibler
California Pfefferle
410.625.4200 Advisors, Inc. 803.779.8600
Anaheim Connecticut 715.355.6060
Bethesda 603.433.7100 Greenville
714.939.6000 Stamford Wyoming
203.406.9899 301.530.8200 New Jersey The Furman Co.
Bakersfield Cheyenne
ASU & Associates Massachusetts Edison 864.242.5151
Delaware Wyoming Commercial
661.862.5454 Wilmington Boston 732.225.0433 Myrtle Beach
617.772.7200 Wilson Kibler 307.432.4070
Carlsbad 302.888.4500 Fairfield
BRE Commercial Michigan 973.486.2500 843.946.7100 Canada
760.431.4200 District of Columbia
Detroit Marlton Tennessee Avison Young
El Cajon Washington, D.C.
202.312.5400 248.350.9500 856.334.2100 Chattanooga Calgary
BRE Commercial 403.262.3082
619.462.3100 Florida Grand Haven New Mexico Hudson
Paramount Commerce Albuquerque 423.698.8660 Edmonton
Fresno Boca Raton
616.296.0604 New Mexico 780.428.7850
Pearson Commercial 561.995.5150 Memphis
559.432.6200 Fort Myers Grand Rapids 505.883.7676 Memphis, LLC Halifax, Nova Scotia
LA Downtown 1st Commercial Paramount Commerce Las Cruces 901.761.1717 902.442.4050
213.596.2222 239.210.7600 616.774.3500 New Mexico Nashville Mississauga
LA East (San Gabriel) Jacksonville Holland 505.523.6000
Centennial, Inc. 905.712.2100
562.364.2000 Phoenix Realty Group Focus Properties Santa Fe
616.394.4500 615.320.7500 Montreal
LA North 904.399.5222 New Mexico
(Sherman Oaks) Kalamazoo 505.989.3900 Texas 514.940.5330
Melbourne
818.332.2000 Commercial Florida Paramount Commerce Austin Ottawa
269.978.0245 New York
LA South Bay 321.984.1957 512.349.1000 613.567.2680
New York (Midtown)
(Torrance) Miami Minnesota Corpus Christi Quebec City
310.491.2000 212.759.9700
305.982.4100 Minneapolis Coastal Bend 418.694.3330
LA West Wappinger Falls
Orlando Northco Real Estate 361.994.0649 Regina
310.477.3800 Services Facility Resource Group
Commercial Florida 306.359.9799
Newport Beach 407.423.1200 952.820.1600 845.296.3200 Dallas
949.608.2000 North Carolina 972.450.3300 Toronto
Tampa Mississippi
Ontario Commercial Florida Chapel Hill El Paso 416.955.0000
909.605.1100 Gulfport Best/White LLC
813.639.1111 Sawyer Commercial Thomas Linderman Vancouver
Pleasanton 228.863.0232 Graham 915.772.9082 604.687.7331
Georgia
925.218.3388 919.968.4017 Houston Winnipeg
Atlanta Missouri
Redwood City 770.552.2400 Raleigh 713.626.8888 204.947.2242
Chesterfield Thomas Linderman
650.596.2460 Hawaii Mission/McAllen
Gundaker Commercial Graham Mexico
Riverside Honolulu 636.728.5100 Select Regional
951.530.1700 919.785.3434 Ciudad Juarez
CBI, Inc. Kansas City Solutions
Roseville North Dakota Best/White de Mexico
808.942.7100 The Winbury Group 956.630.4300
916.770.8900 011.52.656.629.1111
Idaho 816.531.5303 Fargo San Antonio
Sacramento Marc C. Johnson & Monterrey
Boise St. Louis (Clayton) 210.828.5050
916.418.6000 Campbell, LLC Select Regional
Idaho Commercial Gundaker Commercial Virginia
San Diego Downtown 314.719.2000 701.281.5200 Solutions
Group
BRE Commercial 208.287.9500 Charlottesville 877.445.4070
619.515.0017 Montana Ohio
Real Estate III Reynosa
San Diego (Otay Mesa) Illinois Bozeman Cincinnati
West Shell Commercial Commercial Select Regional
BRE Commercial Chicago Montana 434.817.1240
312.698.6700 Commercial, LLP 513.721.4200 Solutions
619.661.0657
406.587.8700 Cleveland Richmond 899.929.3830
San Diego UTC Columbia
BRE Commercial Gundaker Commercial 216.861.3040 Harrison & Bates San Luis Potosi
Kalispell
858.546.5400 618.281.8800 Montana Columbus 804.788.1000 Select Regional
San Francisco Rosemont (O’Hare) Commercial, LLP Adena Realty Advisors Tysons Corner Solutions
415.433.1050 847.390.8040t 406.755.8485 614.436.9800 703.448.2000 444.811.1771
12 l San Francisco Bay Area © 2008 Grubb & Ellis
CONTRIBUTORS AND SOURCES

Grubb & Ellis research teams across the U.S. work together to ensure our clients
have the most up-to-date market knowledge.

Contributors
San Francisco
Erin Proto, Assistant Vice President Client Services Manager – Bay Area
Jesse Gundersheim, Senior Research Analyst
Asa Flynn, Research Analyst

San Jose
Dina Simoni, Research Services Manager

Walnut Creek
Erin Proto, Assistant Vice President Client Services Manager – Bay Area
Katie Burton, Senior Database Coordinator

Redwood City
Asa Flynn, Research Analyst

Sources
IREN, Real Capital Analytics, State of California, Claritas, CoStar Group, Crittenden, The
Conference Board, Urban Land Institute, PricewaterhouseCoopers, U.S. Census Bureau,
National Venture Capital Association, International Council of Shopping Centers, U.S.
Department of Commerce, Mercury News, San Francisco Business Times, San Jose Business Journal

© 2008 Grubb & Ellis San Francisco Bay Area l 13

Grubb & Ellis offers its clients an integrated platform
of real estate services and investment programs.
We strive to meet the evolving needs and investment
objectives of corporate owners and occupants as
well as institutional and private investors.

Transaction Services
• Agency leasing
• Tenant representation
• Consulting services
• Valuation consulting
• Retail services
• Institutional investment services
• Private capital investment services
• Site selection

Management Services
• Property management
• Facility management
• Asset management
• Business and fulfillment services
• Consulting services
• Project/construction management
• Engineering services

Corporate Services
• Consulting services
• Real property and lease administration
• Retail services
• Strategic planning
• Tenant representation
• Valuation services
• Site selection
• Project management
• Portfolio rationalization
• Disposition services

Investment Programs
• 1031 tenant-in-common exchanges
• Public non-traded real estate
investment trusts (REITs)
• Limited liability companies
• Wealth management
• Institutional investments
• Mutual funds
• Securities separate accounts and funds

The direct or indirect purchase of real property involves significant

risks. Investors should consult their own tax advisors and legal
counsel. Always remember that each property is unique and past
performance is no guarantee of future results. WWW.GRUBB-ELLIS.COM