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C O L L I E R S I N T E R N A T I O N A L O A K L A N D O F F I C E B R O K E R S A N D S T A F F 1999 HARRISON ST., SUITE 1750 OAKLAND CA 94612 Colliers International is committed to providing consistently superior commercial real estate services, wherever and whenever needed. We believe local market knowledge augmented by a global network of service providers enables us to excel in our individual markets and disciplines. We are pleased to introduce you to our quarterly market overview which covers market highlights throughout the I-880 and I-80 corridor. The report is organized by submarket and product type and provides comprehensive market statistics. We have also included market highlights and industry projections. We hope you find this report useful and look forward to continued success in serving your commercial real estate needs. Thank you for helping us grow. We need you and appreciate your business. BRANCH MANAGER Kenneth W. Meyersieck (510) 433-5802 kmeyersieck@colliersparrish.com OFFICE Aileen Dolby (510) 433-5815 adolby@colliersparrish.com Kenneth W. Meyersieck (510) 433-5802 kmeyersieck@colliersparrish.com Al Musante (510) 433-5817 amusante@colliersparrish.com Anthony Stratton (510) 433-5818 astratton@colliersparrish.com INVESTMENT Gregory L. Hugo (510) 433-5804 ghugo@colliersparrish.com Louis J. Scarpa (510) 433-5812 lscarpa@colliersparrish.com J. Michael Speers, CCIM (510) 433-5803 jmspeers@colliersparrish.com Doug Miller Marketing Manager (510) 433-5844 dmiller@colliersparrish.com Chris Trapani Director of Client Services (510) 433-5836 ctrapani@colliersparrish.com ADMINISTRATIVE Patrice Page, Administrative Asst. (510) 433-5816 ppage@colliersparrish.com Patricia Folks, Receptionist (510) 986-6770 pfolks@colliersparrish.com GRAPHIC DESIGN Damian Diaz (510) 433-5819 ddiaz@colliersparrish.com INDUSTRIAL James B. Bohar (510) 433-5814 jbohar@colliersparrish.com Gary M. Breen, SIOR (510) 433-5828 gbreen@colliersparrish.com Norman J. Eggen, SIOR (925) 283-2221 - remote office neggen@colliersparrish.com David Henderson (510) 433-5823 dhenderson@colliersparrish.com Richard P. Keely (510) 433-5806 rkeely@colliersparrish.com Greig F. Lagomarsino, SIOR (510) 433-5809 glago@colliersparrish.com James E. Morris (510) 433-5811 jmorris@colliersparrish.com Casey Ricksen (510) 433-5805 cricksen@colliersparrish.com Tim W. Rolston (510) 433-5813 trolston@colliersparrish.com Todd O. Severson, SIOR (510) 433-5810 tseverson@colliersparrish.com Lane B. Stephens (510) 433-5824 lstephens@colliersparrish.com RESEARCH Jim Scotland, Research Mgr. (510) 433-5837 jscotland@colliersparrish.com Glenda Cheng (510) 433-5835 gcheng@colliersparrish.com 1

O F F I C E M ention Class A speculative development in the Oakland Metropolitan market and people used to just snicker not anymore. Wareham Development is nearing completion on this area s first Class A office building in over ten years, and it is fully leased! That s right, Wareham hit a home run with its ±250,000 square foot EmeryStation development. And guess where the major tenants are coming from? You know it - San Francisco s NorthPoint Communications and UCSF/Gallo crossed the Bay and will occupy ±72,500 square feet and ±75,000 square feet respectively. Wareham s success may influence other developers to break ground on a speculative basis, but no one has committed yet. Spieker Properties has entered the City approval process for a fourth Class A office tower at its Watergate Complex in Emeryville. Meanwhile, Shorenstein is trying to secure an anchor tenant at its planned Class A City Center office tower. Soaring rents and low vacancy in San Francisco continue to drive companies to the East Bay where they can pay nearly half as much rent for comparable Class A office space. NorthPoint and UCSF/Gallo are only the most recent examples. The 1st Quarter of 1999 saw Providian Financial, Chevy s, Consensus Health and Big Online all cross the Bay to the Oakland Metropolitan market. It s not just Class A tenants that are moving either. NorthPoint Communications took an additional ±30,000 square feet of former Chiron space at a flex project on Hollis Street. Also, San Francisco s Level III Communications is rumored to be close to a deal on the entire 120,000 square foot Berkeley Land conversion project in Emeryville. In a recent ranking of the "Best Places To Do Business," Forbes Magazine named the Oakland/East Bay area as number five out of 162 regions in the United States beating out tech centers like San Jose, Denver and San Diego. In fact, ".com" and telecommunications companies are driving activity throughout this office market. Recent deals include REEL.com, "Ask Jeeves," TruePet.com and HealthCentral.com as well as Hitachi, the Hypermedia Group, Realtime Solutions and Intertek Testing. 101 Rafael 1 EMERYVILLE 80 OAKLAND San Francisco 280 Richmond 101 ALAMEDA San Mateo 80 Redwood City BERKELEY 92 D O W N T O W N 880 101 Palo 780 24 Martinez Pittsburg 680 A Concord San Leandro Walnut Creek Danville Dublin 580 Hayward 680 Union City 84 Fremont Newark 880 680 Pleasa Milpitas O A K L A N D The East Bay gives these companies access to many of the same benefits as San Francisco s famed Multimedia Gulch but at a significant discount. Emeryville and Berkeley are converting nearly their entire industrial base to make room for high-tech companies. Developers report strong pre-leasing activity at all of Emeryville s soon to be delivered office/flex conversions. Dennis Wong s project at the former Courtaulds Facility in West Berkeley pre-leased ±45,000 square feet to Discovery Channel Toys (Nature Company). The completion and occupancy of these projects in the coming months should dispel any fears of overbuilding in the rapidly growing office/flex segment. For the remainder of 1999, we expect the trend of declining vacancy rates and rising rents to continue. Although we hesitate to predict it, we will not be surprised if we see you at the groundbreaking of a Class A speculative development by year-end. 2

O A K L A N D O F F I C E The addition of sublease space to available supply offset an active leasing market during the first half of 1999. Class A net absorption for the period totaled 63,451 square feet. The relocation of Providian Financial and California Bank and Trust from San Francisco made up most of this activity. Internal tenant growth also helped absorption as several local companies completed relocations or expansions during the first half of 1999. Class A overall vacancy dipped slightly from the end of 1998 and currently stands at 11.8%. Factoring out sublease space yields a 9.3% direct vacancy rate. The City Center submarket continues to tighten as tenants absorb the last remaining blocks of space vacated by the City of Oakland. This submarket now boasts a vacancy rate of 4.9%, with the largest contiguous space consisting of only 14,000 square feet. The migration of San Francisco tenants to Downtown Oakland may slow down due to the lack of supply in the market. Despite only a modest decrease in vacancy rates, rents rose at an accelerated pace as landlord optimism continued to gain momentum. Asking rents currently range between $2.00 and $2.50 per square foot per month (psf/mo) full service; however, the weighted average rent for transactions completed in the first two quarters was $2.27 per square foot per month. This far outstrips the same period in 1998 when rents on completed transactions averaged only $1.88 psf/mo. This equates to a stunning 2 increase in rental rates in a 12 month period. We expect this trend to continue provided overall economic conditions in the Bay Area remain strong. PROVIDIAN FINANCIAL WILL OCCUPY 146,000 SQUARE FEET AT 1333 BROADWAY O AKLAND CBD CLASS A OFFICE SPACE 1 $2.40 1 $2.30 $2.20 $2.10 $2.00 $1.90 O AKLAND CBD CLASS B/C OFFICE SPACE The Class B/C markets in Downtown Oakland are also benefiting from a healthy economy. Consistent with the overall market, vacancy rates have improved and rents continue to rise. Overall vacancy for this market segment currently stands at 10.6% with rents ranging between $1.35 and $1.95 psf/mo. Sales activity in the B/C market picked up steam. The focus of sales shifted from the Lake Merritt submarket down to the City Hall vicinity. Two historic buildings changed hands, the four-story Oakland Title Building at 401 15th Street and the 14-story Cathedral Building at 1601 Broadway. The sale of the 10- Story 1700 Broadway building rounded out the deals in the City Center submarket for the first half of 1999. With sales prices between $30.00 and $60.00 dollars per square foot, these buyers should realize considerable upside on their investment. Continued low vacancy in the Class A market could significantly enhance the value of these second-tier buildings. 1 $1.70 $1.65 $1.60 $1.55 $1.50 $1.45 $1.40 $1.35 Asking Full Service Rent Space Type Inventory Overall Available Space Full Service Rental Range Average Full Service Rent Class A Office 6,301,271 743,550 11.8% $2.00 - $2.50 $2.25 Class B/C Office 5,153,347 546,255 10.6% $1.35 - $1.95 $1.65 Totals 11,454,618 1,289,805 11.3% $1.35 - $2.50 $1.98 3

B E R K E L E Y O F F I C E DOWNTOWN BERKELEY The Downtown Berkeley market added a newly renovated office building to its inventory this quarter. The 28,500 square foot rehab project at 2100 Shattuck helped push overall vacancy up to 6.2%. Asking rents also edged higher, closing the quarter at $2.20 per square foot per month (psf/mo) full service. Even with this new addition and some sizable sublease spaces, this market remains tight. Landlords definitely have the upper hand and are seeing their property values soar as investor interest in this market grows. The physical and political limits on future office development in this market make it highly attractive from an income standpoint. In recent activity, offices have sold at low cap rates and high per square foot numbers as investors grow bullish on rising rental rates. Expect to see Downtown Berkeley absorb much of the new space that has come to market. By year-end, vacancy should drop back below, and possibly lower. Asking rental rates should continue climb. DEVELOPERS COMPLETED THE RENOVATION WORK ON 2100 SHATTUCK, ADDING 28,500 SQUARE FEET OF NEW SPACE TO THE DOWNTOWN BERKELEY INVENTORY. 2031 2ND STREET, A 9,808 SQUARE FOOT WAREHOUSE ON A 16,800 SQUARE FEET LOT, SOLD FOR $650,000 - $66.27 PSF. 800 BANCROFT, A 29,954 SQUARE FOOT LOT WITH A TEAR DOWN BUILDING SOLD, FOR $1,250,000 THAT CALCULATES TO $41.73 PSF. 1200 5TH STREET, AN 11,400 SQUARE FOOT BUILDING ON A 7,000 SQUARE FOOT LOT SOLD FOR $912,000 - $80.00 PSF. D OWNTOWN BERKELEY OFFICE SPACE $2.25 WEST BERKELEY West Berkeley property values continue to soar. The wave of conversions to both retail and office/flex have changed this market into a major focal point for development activity. However, few properties of any kind are still available for sale in West Berkeley. Recent zoning has compounded the shortage of buildings available for conversion. It limits the percentage of space that can be upgraded from warehouse/industrial space to R&D/office space. As a result, industrial and warehouse buildings with even minimal improvements are rising in value selling for between $60.00 and $90.00 per square foot (psf). At 1200 5th Street, an 11,400 square foot building on a 7,000 square foot lot sold for $912,000 - $80.00 psf. The concrete tilt-up building had 4,400 square feet of office and another 4,000 of production area. At 2031 2nd Street a 9,808 square foot warehouse sold for $650,000 - $66.27 psf. This building had no office improvements but sat on a 16,800 square foot lot. Lastly, at 800 Bancroft, a 29,954 square foot lot with a tear down building sold for $1,250,000 that calculates to $41.73 psf on land. This last sale testifies to the enormous confidence investors have in this transforming market. 1 1 1 W EST BERKELEY OFFICE SPACE $2.20 $2.15 $2.10 $2.05 $2.00 $1.95 $1.90 $1.85 $1.80 $1.75 $1.90 $1.85 $1.80 $1.75 $1.70 $1.65 $1.60 $1.55 Asking Full Service Rent Space Type Inventory Overall Available Space Full Service Rental Range Average Full Service Rent Berkeley Downtown 1,394,566 86,297 6.2% $1.75 - $2.50 $2.20 West Berkeley 1,038,825 82,634 $1.55 - $2.40 $1.80 Totals 2,433,391 168,931 6.9% $1.55 - $2.50 $2.03 4

E M E R Y V I L L E O F F I C E Emeryville exploded with leasing activity during the first half of 1999. Wareham Development has fully leased its soon to be completed EmeryStation project. Wareham designed this speculative Class A office with high-tech tenants in mind. Their strategy paid off. Major tenants in the new building include "Ask Jeeves", an Internet search firm; Northpoint Communications, a provider of DSL telecommunication data lines; and UCSF/Gallo, a research lab user. "Ask Jeeves" will move from Berkeley into ±40,000 square feet, while UCSF/Gallo and Northpoint Communications, both from San Francisco, took ±75,000 and ±72,500 square feet respectively. This strong preleasing activity will nullify any impact the addition of Wareham s ±250,000 square foot project might have had on Emeryville s meager 2.8% Class A vacancy rate. With this low vacancy, the Class A market appears ready for Spieker Properties fourth building at the Watergate Towers project. Demand continues to outpace supply, and much of the new office/flex inventory is already taken. Spieker is currently seeking the necessary City approvals to begin work on the projected ±300,000 square foot building. Wareham Properties may also pursue further development at its EmeryStation project. Neither of these potential additions could be deliverable for at least 18 months. This will allow plenty of time for Emeryville to absorb the balance of its new flex inventory. WAREHAM DEVELOPMENT HAS FULLY LEASED ITS SPECULATIVE CLASS A EMERYSTATION PROJECT. E MERYVILLE CLASS A OFFICE SPACE 1 $2.45 $2.40 $2.35 $2.30 $2.25 $2.20 $2.15 Emeryville s rapidly growing Office/Flex market is now eager to add the new EmeryTech and Westvaco facilities to the inventory next quarter. Earlier fears that these additions might send the Emeryville Class B/Flex vacancy rate into double digits now appear unfounded. Westvaco experienced strong pre-leasing activity and is already at 60% occupancy. REEL.com, an Emeryville tenant, is relocating to ±20,000 square feet in the soon to be completed EmeryTech project. This project, located at 1400 65th Street, also benefited from strong pre-leasing and is almost 50% occupied. Although construction has not begun on the Berkeley Land office/flex conversion yet, rumor has it that Level III Communications has already laid claim to the entire ±120,000 square feet project at 5000 Hollis Street. In other activity, Northpoint Communications took Chiron s ±30,000 square foot sublease space at 6121 Hollis Street, in addition to its 72,500 square feet at the new EmeryStation building. This flurry of activity dropped the Class B/Flex vacancy rate back down to 2.3% and removed any anxiety about overbuilding in the Emeryville market. E MERYVILLE CLASS B OFFICE/FLEX SPACE $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 Asking Full Service Rent Space Type Inventory Overall Available Space Full Service Rental Range Average Full Service Rent Class A 1,308,595 36,716 2.8% $1.95 - $2.45 $2.40 Class B & Flex 1,091,480 25,393 2.3% $1.60 - $2.35 $2.05 Totals 2,400,075 62,109 2.6% $1.60 - $2.45 $2.24 5

A L A M E D A O F F I C E Alameda has joined the other Oakland metro office submarkets in a robust recovery. Landlords are enjoying appreciating property values and a favorable sales environment. Tenants, on the other hand, will continue to find opportunities in Alameda, but they will be forced to choose from a smaller pool of available space and will face increasing rents. In essence, tenants will get less for more, one of the drawbacks of a booming economy and a thriving real estate market. The Marina Village project itself currently stands at nearly 9 occupancy (factoring out sublease space). The greater Marina Village area vacancy rate dipped from 11.6% last quarter to its current 10.3%. After deducting sublease space, which accounts for ±57,000 of Marina Village s ±155,000 available square feet, the vacancy drops to 6.5%. Legacy Partners Alameda Center project recently reached full occupancy. In yet another San Francisco relocation, Intertek Testing leased 7,435 square feet (at $1.30 net), the last space in the 153,000 square foot project. Legacy is now marketing the fully-leased complex for sale at approximately $143.00 per square foot. Marina Village presents an excellent investment opportunity. It boasts a strong high-tech and biotech tenant base and access to the East Bay s highly-trained labor pool. The quiet suburban feel also helps it stand out from other submarkets in the Oakland metropolitan area. Harbor Bay s overall vacancy fell from 18.9% to 16.1% during the 2nd Quarter. As in Marina Village, sublease space makes up a large portion of this vacancy rate. Factoring out subleases yields a direct vacancy rate of 9.7%. Harbor Bay witnessed steady activity during the quarter. Hitachi will relocate from South San Francisco into 15,667 square feet at Alexandria s 1201 Harbor Bay Parkway building. Absolute Quality, an Oakland tenant, took 9,600 square feet at 1320 Harbor Bay Parkway. Harbor Bay continues to offer investors a wide variety of building and land acquisition opportunities. A trade buyer recently purchased the three building, ±70,000 square foot Technology Center complex at 1255-1275 Harbor Bay Parkway for approximately $114.00 per square foot. Legacy Partners is marketing its six-building, 439,000 square foot Harbor Bay portfolio at around $110.00 per square foot and is entertaining a variety of offers. Legacy should have the portfolio sold before year-end. Pivotal is still marketing 18 acres in Harbor Bay at approximately $9.00 per square foot net of assessments. The site would make an ideal office campus for a large user. LEGACY PARTNERS 10-BUILDING, 592,000 SQUARE FEET ALAMEDA PORTFOLIO IS FOR SALE AT $70 MILLION. DISCOUNTING SUBLEASE SPACE, ALAMEDA S DIRECT VACANCY RATE DROPPED TO IN THE 2ND QUARTER. INTERTEK TESTING LEASED 7,435 SQUARE FEET AT THE LAST SPACE IN THE 153,000 SQUARE FOOT LEGACY ALAMEDA CENTER. HITACHI LEASED 15,667 SQUARE FEET AT ALEXANDRIA S 1201 HARBOR BAY PARKWAY BUILDING. A TRADE BUYER PURCHASED THE THREE BUILDING 70,000 SQUARE FOOT TECHNOLOGY CENTER COMPLEX AT 1255-1275 HARBOR BAY PARKWAY. 2 2 1 A L A M E D A O F F I C E S P A C E Asking Full Service Rent $1.90 $1.85 $1.80 $1.75 $1.70 $1.65 $1.60 $1.55 $1.50 Space Type Inventory Overall Available Space Full Service Rental Range Average Full Service Rent Marina Village 1,513,596 155,224 10.3% $1.70 - $2.05 $1.90 Harbor Bay 1,084,930 175,195 16.1% $1.60 - $1.60 $1.60 Totals 2,598,526 330,419 12.7% $1.60 - $2.05 $1.77 6

I N D U S T R I A L The East Bay industrial markets recorded solid leasing and sales activity during the first half of 1999. However, the lack of new warehouse and light industrial product continued to limit activity and kept levels below last year s. Developers are responding to this need with several planned projects that should boost activity next year, but the next few quarters will witness few construction completions. Overall vacancy in the I-80/I-880 Corridor held steady at a low 5.4%, and rents currently average $0.46 per square foot per month (psf/mo) for all space types. WAREHOUSE/DISTRIBUTION Several large warehouse spaces came back on the market during the 2nd Quarter, nudging vacancy up to 5.4%. These additions will offer tenants only minor and temporary relief from tight market conditions. Single digit vacancy rates remain the norm from Oakland through Union City. With only limited construction currently underway, large distribution users will continue to pay a premium for quality warehouse space. Livermore used to provide users with some relief, but rental rates in the Tri-Valley now match or exceed rates in the I-880 Corridor. Rising land costs and restrictive zoning are limiting warehouse/distribution development throughout the East Bay. Overall asking rents on distribution space held steady at $0.40 psf/mo for the first half of 1999. Expect to see rents move higher towards the end of the year, as steady demand continues to outstrip the diminishing supply of new space. LIGHT INDUSTRIAL The overall vacancy rate for the light industrial sector dropped slightly from in the 1st Quarter to its current 4.7%. Average asking rental rates actually fell slightly to $0.46 psf/mo as much of the quality space disappeared from the market. Light industrial users face an ongoing scenario of rising rents and limited space choices. Rising demand from relocating San Francisco and Peninsula tenants is placing further pressure on this tight market segment. Meanwhile conversion projects continue to target the higher-rent R&D/Flex users removing still more industrial inventory from the market. We expect users to quickly absorb the limited construction that will be delivered in the next months. Developers have plans in place for additional light industrial construction, but these projects will not be deliverable until Spring of 2000. Expect to see this market segment remain tight for the balance of the year. 101 Rafael 1 San Francisco 280 101 San Mateo 80 Redwood City O A K L A N D 80 RICHMOND Berkeley OAKLAND 92 880 Martinez 680 Palo Alto Mt. 237 280 View Sunnyvale Pittsburg Ant Walnut Creek SAN LEANDRO Danville 680 Dublin 580 HAYWARD UNION CITY 101 24 84 Fremont Newark 880 680 Pleasant Milpitas I N D U S T R I A L R&D/Flex The R&D/Flex market remained quiet during the first half of 1999. Overall vacancy for this sector closed the 2nd Quarter at 11.5%, down a bit from last quarter s 12.6%. Asking rental rates climbed to $0.85 psf/mo. In Richmond, Catellus Development Corporation signed the first lease at its Regatta Business Park. Vicor, a Richmond software firm, leased 15,500 square feet in the 42,500 square foot building. Catellus is also rumored to have leases under negotiation on several other spaces in the speculative project. Hayward s R&D/Flex vacancy rate remained in double digits for the fourth straight quarter. Still, developers remain bullish on this region in spite of this minor slowdown. Simeon Commercial Development has broken ground on Phase II at the Mt. Eden Business Park two buildings totaling 87,000 square feet. Britannia Development will deliver an additional 30,000 square feet in the next months. This regions excellent location, highly-trained workforce and lower operating costs continue to make R&D development a highly attractive investment. 7

R I C H M O N D I N D U S T R I A L Developer and user interest in the Richmond submarket is continuing to rise. Industrial users in Berkeley, Emeryville and Marin County are facing shrinking available inventories, soaring rental rates and continued conversions of industrial buildings to higher-end uses. These factors have prompted more developers and users to consider Richmond as a viable alternative. Activity remained relatively slow for Richmond s existing space, much of which is functionally obsolete. But activity may soon take off as developers begin to build quality new industrial space. PINOLE POINT BUSINESS PARK WILL BREAK GROUND ON A SPECULATIVE ±144,000 SQUARE FOOT, DISTRIBUTION BUILD- ING THIS SUMMER. CATELLUS DEVELOPMENT CORPORATION LEASED 15,500 SQUARE FEET AT ITS REGATTA BUSINESS PARK TO VICOR. TWO BUILD-TO-SUIT PROJECTS TOTALING ±110,000 SQUARE FEET WILL START CONSTRUCTION ALONG THE RICHMOND PARKWAY THIS SUMMER. R ICHMOND INDUSTRIAL SPACE $0.36 Leading the charge, Pinole Point Business Park has nearly completed the first of their planned buildings. Alan Ritchey s 200,000 square foot build-to-suit facility will be ready for occupancy by early Summer 1999. Pinole Point Properties also plans to break ground on a speculative 144,000 square foot cross-dock distribution building by mid-summer. This building should be completed near year-end. Pinole Point Properties is currently exploring other build-to-suit proposals with a variety of potential tenants. $0.35 $0.34 $0.33 $0.32 $0.31 $0.30 $0.29 Activity picked up at Catellus Development Corporation s speculative Regatta Business Park. Catellus recently leased 15,500 square feet at the 42,500 square foot building to Vicor, a Richmond-based software company. They also have deals pending for the remainder of that building. There still aren t any signed leases for the 88,900 square foot building, but Catellus is negotiating with several prospective tenants. Smaller users have shown great interest in Koll Development Company s newly completed buildings at the North Shore Business Park in Hercules. Both the 26,000 and 16,000 square foot facilities have seen strong activity recently. The third building, 49,000 square feet, was close to closing but reportedly fell out of escrow. The abundance of inexpensive land along the Richmond Parkway and its convenient proximity to the I-580 and I-80 Corridors make this area ideal for investors and local companies. Panattoni Development Company is rumored to be in escrow on 2 parcels of land totaling ±45 acres. The 2 parcels include Don Stull s ±24 acres on Collins Avenue and Freethy Industrial Park with ±20 acres of buildable land on the west side of the Parkway. A couple of local companies also have plans to expand near the Parkway. Richmond Wholesale Meat Company is currently in a joint venture with Don Jones to begin construction on a ±66,000 square foot build-to-suit project on 5.5 acres near the Richmond Parkway. The highly specialized building will consist mostly of freezer space, with a 42 feet clear height ceiling for racks and storage. Steve Oliver also proposes to begin construction on a 41,000 square foot manufacturing build-to-suit facility on Goodrick Avenue. R ICHMOND WAREHOUSE SPACE 1 $0.36 1 $0.34 $0.32 $0.30 $0.28 $0.26 R ICHMOND R&D/FLEX SPACE 2 $1.24 $1.22 2 $1.20 1 $1.18 $1.16 $1.14 $1.12 $1.10 Asking NNN Rent Space Type Inventory Overall Available Space NNN Rental Range Average NNN Rent Warehouse 3,790,000 470,470 12.4% $.25 - $.38 $.33 Industrial 4,900,000 178,430 3.6% $.25 - $.55 $.35 R&D/Flex 1,606,400 218,979 13.6% $.80 - $1.55 $1.20 Totals 10,296,400 867,879 8.4% $.25 - $1.55 $.55 8

O A K L A N D I N D U S T R I A L Demand for available industrial space continues to outstrip the available supply throughout the Oakland Industrial submarket. The single digit vacancy rates that have characterized this market for the last 12 months remain firmly entrenched. Large blocks of modern high-cube warehouse space are virtually non-existent. Currently, the overall vacancy rate for the Oakland Industrial market stands at 3.7%. Further market tightening is expected as development struggles to catch up with the increased demand for quality industrial space. Catellus Development Corporation s Enterprise Airport Center clearly illustrates the increased demand for quality industrial space in the North 880 corridor. Due in large part to the foresight of Don Little, Catellus has established the Enterprise Airport Center as one of the premier industrial developments completed in the Oakland area during the past decade. Catellus recent 48,360 square foot lease with Santa Fe Collections, brought Building One to full occupancy. Meanwhile, Catellus successfully repositioned a portion of this portfolio by selling Building Two to Tension Envelope for $5.6 Million ($55.47 per square foot). Tension Envelope will initially occupy approximately 80,000 square feet of warehouse and benefit from a preexisting lease for the balance of the facility. Catellus also recently completed a 147,500 square foot lease with the U.S. Postal Service for the majority of Phase II of the Enterprise Airport Center. Currently, Catellus has approximately 74,000 square feet remaining for future development. The apparent selection of Opus West Corporation as the master developer for the redevelopment of the Oakland Army Base should help alleviate pent-up demand for modern high-cube warehouse space. In all likelihood, however, this project will take a minimum of twelve months to implement. A reuse plan for the base calls for a diverse blend of light industry, environmental services, research and development, retail, bioscience and technology, corporate offices and job training and placement. TENSION ENVELOPE PURCHASED THE 100,954 SQUARE FOOT BUILDING TWO AT CATELLUS DEVELOPMENT CORPORATION S ENTERPRISE AIRPORT CENTER LOCATED AT 550 85TH AVENUE. SANTA FE COLLECTIONS LEASED 48,360 SQUARE FEET IN BUILDING ONE OF CATELLUS DEVELOPMENT CORPORATION S ENTERPRISE AIRPORT CENTER. THE CITY OF OAKLAND APPEARS TO HAVE SELECTED OPUS WEST CORPORATION AS THE MASTER DEVELOPER FOR OAKLAND ARMY BASE REDEVELOPMENT PROJECT. THE GAP LEASED 43,670 SQUARE FEET FOR THE DEVELOPMENT OF A NEW CONCEPT STORE AT 7900 EDGEWATER DRIVE. O AKLAND INDUSTRIAL SPACE O AKLAND WAREHOUSE SPACE $0.40 $0.35 $0.30 $0.25 $0.40 The Port of Oakland will be selling off 73.3 acres as part of its Hegenberger Gateway Development project. The parcels include 34.4 acres of land slated for industrial or higher use development. As with the Oakland Army Base though, most of the development at this site will not be deliverable for at least one year. This project should fuel further growth in the Oakland Airport area and facilitate the continued expansion of both the Oakland International Airport and the Port of Oakland. Provided the Oakland City Planning Department and the development community can address the lack of quality industrial space, Oakland is well positioned to capitalize on the industrial users being forced to relocate from South San Francisco and the Peninsula. Asking NNN Rent $0.38 $0.36 $0.34 $0.32 $0.30 Space Type Inventory Overall Available Space NNN Rental Range Average NNN Rent Warehouse 10,791,000 481,260 4.5% $.30 - $.45 $.38 Industrial 21,909,000 725,502 3.3% $.30 - $.50 $.37 Totals 32,700,000 1,206,762 3.7% $.30 - $.50 $.37 9

SAN LEANDRO INDUSTRIAL MARKET San Leandro s vacancy hit its lowest mark in over a decade. Overall vacancy rates fell to 3.9%, down from 5.9% at the start of the year. This tight market has prompted many tenants to renew their existing leases at market rents or leave San Leandro and try their luck elsewhere. Neighboring cities such as Oakland and Hayward offer little relief from rising rents. Some large users are being forced to consider moving out to the Central Valley. The cost of doing business is considerably lower in the Central Valley; however, much of San Leandro s manufacturing base needs to be near rail and port access. They also face higher moving costs due to their heavy equipment requirements. In development activity, Gahrahmat Development has begun construction on a new ±140,800 square foot warehouse. This speculative project at 13951 Washington Avenue should be complete by year-end. The Hohner family has begun to fill their large parcel at the end of Davis Street, and is rumored to be near a decision on a development plan. Golden Grain is remodeling and adding on to its existing plant at 139th Avenue. Golden Grain joins the long list of food producers expanding in this market. Coca Cola, Ghirardelli and Gallo Salame have all grown their San Leandro operations in the last two years. Leasing activity has slowed, and rental rates leveled off somewhat as much of the quality space disappeared from the market. The influx of tenants from other Bay Area cities has increased the competition for the few remaining available spaces. Landlords are seizing this opportunity to boost rents and/or upgrade their tenant base where possible. Many tenants are experiencing serious sticker shock, realizing upwards of a 3 rental increase from their existing lease rates. Over the balance of the year, leasing activity should remain constant with rental rates expected to rise between to. GAHRAHMAT DEVELOPMENT HAS BEGUN CONSTRUCTION ON A NEW ±140,800 SQUARE FOOT WAREHOUSE AT 13951 WASHINGTON AVENUE. THE HOHNER LAND PARCEL ON DAVIS STREET IS IN CON- TRACT WITH A DEVELOPER WHO PLANS TO BUILD MEDIUM- SIZED LIGHT-INDUSTRIAL BUILDINGS AT THE SITE. GOLDEN GRAIN COMPLETED A RENOVATION AND ADDITION TO ITS PLANT AT 139TH AVENUE IN EAST SAN LEANDRO, JOINING A LONG LIST OF FOOD PRODUCERS WHO HAVE EXPANDED THEIR FACILITIES IN THE LAST YEAR. JUST DESSERTS HAS ENTERED NEGOTIATIONS ON 70,000 SQUARE FEET AT THE KELLOGG FACILITY. THEY HOPE TO MAKE USE OF THE EXISTING FOOD PROCESSING EQUIPMENT AND OTHER AMENITIES. S AN LEANDRO INDUSTRIAL SPACE S AN LEANDRO WAREHOUSE SPACE $0.44 $0.42 $0.40 $0.38 $0.36 $0.34 $0.32 $0.30 $0.28 $0.42 San Leandro should experience a strong and stable industrial real estate market for the balance of 1999 and into 2000. The city s large manufacturing base is less vulnerable to the erratic swings of the high-tech industry that impact many other East Bay markets. More manufacturing firms will be moving over from San Francisco and the Peninsula, building on San Leandro s already solid tenant base. Much of the older industrial inventory across the bay is being converted or demolished to make room for higher-end office and flex space. San Leandro and Oakland are natural relocation choices for these companies. This trend will bring these markets into the new millennium in their best shape ever. Asking NNN Rent $0.40 $0.38 $0.36 $0.34 $0.32 Space Type Inventory Overall Available Space NNN Rental Range Average NNN Rent Warehouse 14,215,660 375,610 2.6% $.38 - $.43 $.40 Industrial 12,109,443 659,768 5.4% $.35 - $.45 $.42 R&D/Flex 798,200 26,173 3.3% $.63 - $.73 $.70 Totals 27,123,303 1,061,551 3.9% $.35 - $.73 $42 10

H A Y W A R D I N D U S T R I A L Tight market conditions throughout the Bay Area continue to benefit the centrally located Hayward market. Leasing heated up in the 2nd Quarter after a sluggish 1st Quarter. Companies relocating from the Peninsula and San Leandro/Oakland markets made up much of the activity. Lack of available space in those markets is forcing more companies into Hayward. AMB AQUIRES THE 354,000 SF LIGHT INDUSTRIAL MULTI- TENANT DIABLO INDUSTRIAL PARK FROM DIVCO WEST E.F.L. TRANSPORTATION LEASES A 61,306 SF WAREHOUSE BUILDING FROM SIMEON COMMERCIAL PROPERTIES/GUARDIAN LIFE INSURANCE H AYWARD INDUSTRIAL SPACE The warehouse sector remained strong, with several leases signed in the quarter. The overall vacancy increased slightly to 7.1%, up from due to some large sublease space coming to market. Publishers Group West is relocating to Reno, vacating its 210,000 square feet in the Winton Industrial Park. Yes Entertainment and Thacker Container have both put separate 89,000 square foot sublease spaces back on the market at the 1001 Whipple project. Rents, however, continued to hold firm with average asking rates increasing to $.42 per square foot per month (psf/mo) NNN. Opus Development closed on probably the last remaining site approved for warehouse development in North Hayward, with plans for a 214,000 square foot high-end warehouse building. $0.56 $0.54 $0.52 $0.50 $0.48 $0.46 $0.44 $0.42 The industrial sector remained tight with a low vacancy rate. The number of available spaces for 5,000 20,000 square foot users is still very limited resulting in increased lease renewals. Mt. Eden Business Park s remaining 80,000 square feet is the only available new space on the market. Simeon is marketing the building at $.75 psf/mo NNN including $10.00 in Tenant Improvements. Lastly, Goldsmith & Mancini began construction on two buildings totaling 86,000 square feet which should be shell complete by the 4th Quarter. In the R&D sector, the activity level has picked up, and several deals are working. Mt. Eden Business Park has broken ground on Phase II comprised of two single-story R&D buildings totaling 87,000 square feet. They are also negotiating on a hotel deal for the project. Britannia Development is shell complete on its final 30,000 square foot building. These new R&D projects are offered at $1.20-$1.30 psf/mo NNN including $20-$25 in tenant improvements. 1 1 H AYWARD WAREHOUSE SPACE H AYWARD R&D/FLEX SPACE $0.44 $0.42 $0.40 $0.38 $0.36 $0.34 $0.90 The investment community continues to express interest in this critical industrial market. In a recent deal, AMB purchased Divco s 354,000 square foot Diablo Industrial Park. Divco is also marketing the 214,000 square foot Delta Court project. AEW is offering the 800,000 square foot Winton Industrial Park for sale. This strategically located park should close by the end of July. Finally, Simeon Commercial Properties is reported to be in negotiations with Duc Housing, controllers of the Oliver Trust site. Simeon hopes to develop both commercial and housing on this last large development site in Hayward. Asking NNN Rent $0.86 $0.82 $0.78 $0.74 $0.70 Space Type Inventory Overall Available Space NNN Rental Range Average NNN Rent Warehouse 20,848,325 1,479,270 7.1% $.30 - $.48 $.42 Industrial 16,312,981 813,243 $.48 - $.62 $.54 R&D/Flex 4,438,551 538,290 12.1% $.60 - $1.20 $.75 Totals 41,599,857 2,830,803 6.8% $.30 - $1.20 $.52 11

U N I O N C I T Y I N D U S T R I A L The migration of companies from the Silicon Valley and West Bay continues to keep demand strong in the Union City industrial submarket. This trend, combined with limited supply, dropped the overall vacancy rate to 4.7% during the 2nd Quarter. Vacancy rates for the highly competitive warehouse/distribution sector fell to an even lower 3.6%. Thanks to tight market conditions, owners are getting above asking prices on many available spaces. The high cost to relocate is also forcing existing tenants to renew their leases at market rents. Most large quality spaces are leasing shortly after they become available. Panattoni Development Company s project on Transit Avenue is nearly shell complete. Available for occupancy early in the 3rd Quarter, this project should help ease the demand for space. Panattoni has already sold the northern half of the middle building to Mobilex of Redwood City. Another deal is pending on the southern building. This strong activity testifies to the high demand for new product within this submarket. The development community is poised to feed this demand with extensive new construction. Several planned projects are set to break ground in the next six months. Legacy Partners is moving forward with its 330,000 square foot Crossroads Technology Park. Legacy will build this light industrial/r&d park at the former Campbell Chain site, with construction slated to begin late in the third quarter. Koll Development Company s planned Willowbrook Business Center will bring an additional 405,000 square feet of warehouse and light industrial/manufacturing space to the market. This project, scheduled for completion early next year, will be located at the former Young s Market Company site on Whipple Road. Koll will construct four buildings ranging in size from 30,000 to 90,000 square feet on the rear 12.61 acre parcel. Young s Market Company s existing 185,500 square foot building at 1600 Whipple Road is currently available for lease or sale. Situated on 8.83 acres of land, this site provides an excellent opportunity for a large user. Lastly, Catellus Development Corporation still has land in the Decoto Industrial Park that can accommodate up to 340,000 square feet. WASTE MANAGEMENT SOLD 33333 WESTERN AVENUE TO L.N. DEVELOPMENT FOR $3,010,000. THE PROPERTY INCLUD- ED A 70,000 SQUARE FOOT WAREHOUSE FACILITY ON 6.5 ACRES. FARMHOUSE FOODS SOLD THEIR 53,000 SQUARE FOOT FACILI- TY ON ATLANTIC AVENUE TO CALASINO FOR $2,650,000. FAIR LIGHT SUBLEASED THE FORMER BANTA SPACE OF 72,000 SQUARE FEET IN LEGACY/PFG S LINCOLN ALVARADO BUSINESS PARK FOR THREE YEARS AT $.40 NNN. LOCAL POST FURNITURE DISTRIBUTION CORPORATION LEASED 40,200 SQUARE FEET OF WAREHOUSE/DISTRIBUTION SPACE FROM USUA AMANAM ON 7TH STREET IN A FIVE YEAR LEASE TRANSACTION. CROWN CORK & SEAL S 125,200 SQUARE FOOT MANUFAC- TURING FACILITY ON CENTRAL AVENUE IS RUMORED TO BE IN ESCROW WITH A SOUTH BAY USER. 9.0% U NION CITY INDUSTRIAL SPACE U NION CITY WAREHOUSE SPACE $0.70 $0.65 $0.60 $0.55 $0.50 $0.45 $0.40 $0.45 $0.43 $0.41 As the influx of new inventory eases market tightness, the second half of 1999 should see leasing and sales activity surge. Some large availabilities and several new projects will finally provide relief to the long pent-up demand in this vital industrial submarket. $0.39 $0.37 $0.35 Asking NNN Rent Space Type Inventory Overall Available Space NNN Rental Range Average NNN Rent Warehouse 6,520,200 237,904 3.6% $.38 - $.46 $.43 Industrial 7,738,695 365,635 4.7% $.62 - $.72 $.67 R&D/Flex 840,472 104,497 12.4% $.80 - $.90 $.83 Totals 15,099,367 708,036 4.7% $.38 - $.90 $.61 12