Survey Reveals Los Angeles and San Diego Commercial Real Estate Markets Are Moving Past the Credit Crisis

LOS ANGELES, June 10, 2008 - Some office space markets in California are holding their own, according to the latest Allen Matkins / UCLA Commercial Real Estate Survey. The survey, conducted for the third time over the past two years, polled panelists in Los Angeles, San Diego, and Orange County, and for the first time, San Francisco. Results of the survey reveal that in Los Angeles and San Diego, there was a sense that while credit conditions were going to remain tight for the near term, the credit crunch was starting to lessen. In Orange County and San Francisco, the panels believed the opposite it true.

“The Allen Matkins / UCLA Forecast Survey looks forward to market conditions in 2011 and asks the regional panels for their views of changes in supply and market conditions. What is interesting about this survey is that by looking beyond the near term it picks up the impact of today’s economic conditions on longer run market conditions,” said Jerry Nickelsburg, economist, UCLA Anderson Forecast and author of the survey results summary. “In the case of San Francisco there appears to be a difference of opinion between the panel’s view and the economic fundamentals from our forecasting models. As this unfolds, some interesting investment opportunities could develop.”

Los Angeles

The panel does not believe the Los Angeles market will tighten between today and 2011. The survey results imply an average vacancy rate in Los Angeles at levels lower than experienced in the last 20 years, and rental rates consistent with a stable future evolution of market fundamentals. Today’s market represents a healthy office space market and with new supply expected to come on the market over the next three years at a rate just about equal to the expected increase in demand - the market will remain healthy.

San Diego

The panel was pessimistic last December about San Diego’s office market. In the latest survey, composite index, rental rate index, and vacancy rate index are higher. The panel sees the market tightening out to 2011 with both occupancy rates and rental rates higher. “We see the turnaround as a result of the growth in office using employment,” said Nickelsburg. “Although San Diego did not make much progress in the first quarter of 2008 in terms of overall job growth, outside of finance, office space using employment grew in the first quarter 2008 from the first quarter 2007 by 1.5%.”

Orange County

The survey finds that developers are pessimistic about this market and shows downward pressure on the price of land for office space development signifying a weak market. With higher financing costs and slack demand this is a market where investors will have to choose their projects carefully.

San Francisco

For the first time, the San Francisco office market has been added to the survey. The panel’s analysis of the current San Francisco market is similar to the Orange County market except that land costs are seen to be a more significant factor in the supply equation. The panel forecast that occupancy rates would go up at the same time as real rental rates are going down. This is characteristic of a market which is weak. But office using employment has been increasing in recent years and real rental rates and occupancy rates are finally going up again “What is interesting here is that the recovery from 2001 downturn, if it continues apace, could result in a shortage of office space by 2011 – the opposite result of the panel’s assessment – as a consequence of the pessimism of investors and financiers,” said Nickelsburg.

The Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey and Index Research Project polled a panel of California real estate professionals in the office space and investment market, and asked a series of questions on various aspects of the commercial real estate market. It was initiated by Allen Matkins in 2006, furtherance of their interest in improving the quality of current information and forecasts of commercial real estate. Future surveys will focus on other real estate markets and will feature additional cities.

Results of the Allen Matkins/UCLA Anderson Forecast California Commercial Real Estate Survey will be discussed at the UCLA Anderson Forecast Conference on June 18, 2008 at UCLA. More information can be found at www.uclaforecast.com.

About Allen Matkins

Allen Matkins, founded in 1977, is a California-based law firm with approximately 220 attorneys in four major metropolitan areas of California: Los Angeles, Orange County, San Francisco and San Diego. The firm's core specialties include real estate, real estate and commercial finance, bankruptcy and creditors' rights, construction, land use, natural resources, environmental, corporate and securities, intellectual property, joint ventures, taxation, employment and labor law, and dispute resolution and litigation in all these matters. For more than 30 years, Allen Matkins has helped clients turn opportunity and challenge into success by providing practical advice, innovative solutions and valuable business opportunities. When clients' challenges require experienced trial counsel, Allen Matkins has a proven track record of successful litigation before juries, judges and arbitrators.

Allen Matkins is located on the web at www.allenmatkins.com.

About UCLA Anderson Forecast

UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state’s rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://uclaforecast.com.

About UCLA Anderson School of Management

UCLA Anderson School of Management, established in 1935, is regarded among the very best business schools in the world. UCLA Anderson faculty are ranked #1 in "intellectual capital" by BusinessWeek and are renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides management education to more than 1,600 students enrolled in MBA, Executive MBA, Fully-Employed MBA and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.