Research & Forecast Report STOCKTON SAN JOAQUIN COUNTY OFFICE Q1 2016 Vacancy Increased Slightly During the First Quarter > Vacancy rates have been steadily declining since the fourth quarter of 2011. > Stockton is leading San Joaquin County absorption for Class A space. > Off market sale of 121-129 Guild Avenue closed during the first quarter. Vacancy rates in the Central Valley s San Joaquin County office market increased in the first quarter of 2016 by 80 basis points to 11.5 percent. Vacancy rates have been steadily declining since the fourth quarter of 2011 when vacancy reached 20.1 percent and the average asking lease rates were $1.44 per square foot per month. Positive absorption of 8,194 square feet was recorded for Class A office product during the quarter with average asking lease rates lowering slightly to $1.45 per square foot per month. Absorption for Class B office space was negative for the quarter totaling 29,038 square feet, increasing the vacancy for that product class to 9.5 percent while average asking lease rates remained at $1.14 per square foot per month. Class C office product vacancy remained relatively unchanged, increasing by 30 basis points to 7.8 percent for the quarter. Absorption for the class was negative 3,197 square feet, while average asking lease rates increased to $1.07 per square foot per month. Construction at the newly developed Stockton courthouse has continued into 2016 with a fourth quarter 2016 occupancy expected. Market Indicators San Joaquin County 10-Year Nominal Consumer Unemployment Rate Interest Rate Confidence 8.8% 9.61% 1.78 96.2 Market Trends Relative to prior period Q1 2016 Q2 2016* Vacancy Net Absorption Construction Lease Rates Cap Rates Land Prices *Projected Historical Vacancy and Average Asking Rates San Joaquin County Overall 20% $1.50 15% $1.40 10% $1.30 5% $1.20 Summary Statistics Q1 2016 San Joaquin County Office Market Previous Quarter Current Quarter Vacancy Rate 10.7% 11.5% Overall Asking Rate* $1.27 $1.28 Class A Asking Rate* $1.47 $1.45 Class B Asking Rate* $1.14 $1.14 Class C Asking Rate* $0.91 $1.07 Net Absorption 46,512 (24,041) *Asking rates are reported on a full service monthly basis 0% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 Vacancy Rate Asking Lease Rate (FSG) Vacancy rates in the Central Valley s San Joaquin County office market increased in the first quarter of 2016 by 80 basis points to 11.5 percent. $1.10 Economic Indicators California Unemployment Rate 5.8% 5.4% San Joaquin County 8.8% 8.8% Data Source: www.labormarketinfo.edd.ca.gov
Stockton The Stockton submarket experienced a good amount of activity during the first quarter, however the vacancy rate increased just slightly by 50 basis points to 13.0 percent. Stockton Collegiate took down approximately 44,500 square feet at 400 East Main Street in Stockton leading absorption for Class A space to close the quarter at positive 13,948 square feet. The submarket recorded negative net absorption for Class B product of 32,630 square feet, while Class C product absorption totaled positive 16,649 square feet. The average overall asking lease rate for all product types in the submarket decreased slightly to $1.28 per square foot per month. off-market sale of the unoccupied 121-129 Guild Avenue, a 73,954 square foot two-building office sale, to Cepheid. The average asking lease rates closed the quarter at $1.29 per square foot per month. Manteca The Manteca submarket experienced a slight uptick in vacancy, increasing 60 basis points to 4.7 percent. Currently, only Class A and B available office space exists in the submarket. The net absorption for the first quarter in the submarket was negative 2,671 square feet while the average asking lease rate for the two available product types equaled $1.54 per square foot per month. Vacancy rates have been steadily declining since the fourth quarter of 2011 when vacancy reached 20.1 percent and the average asking lease rates were $1.44 per square foot per month. Lathrop The Lathrop submarket statistics remained unchanged with no activity at either of the two available office buildings, leaving the vacancy rate for the submarket at 32.7 percent. The average asking lease rate remained at $0.80 per square foot per month. Currently, no Class C office space is available in the Lathrop submarket. Lodi The vacancy rate for the Lodi submarket increased to 4.4 percent with 23,783 square feet of Class B and C product becoming available during the quarter. Net absorption for the submarket during the first quarter totaled negative 22,066 square feet. The largest sale in the county took place in Lodi during the first quarter with the Tracy Vacancy remained low in the submarket, decreasing by 80 basis points to 3.1 percent. Net absorption was a positive 4,529 square feet, attributed to the leasing of Class B space. The average asking lease rates for Tracy office product increased to $1.80 per square foot per month. Outlook In conclusion, Class A availability in Northern California s Central Valley market continues to tighten, and rental rates are rising as a direct result. Owner/users continue to emerge into the market searching for opportunities to purchase as rental rates rise. Class B properties should expect to see more activity through 2016 as the Class A market continues to tighten. 2 San Joaquin County Research & Forecast Report Q1 2016 Office Colliers International
Significant Lease & Sale Activity 99 Cepheid 121-129 N. Guild Avenue, Lodi February 2016 73,954 Class B Office Sale 5 LODI 12 88 The Management Association, Inc. 2155 W. March Lane, Stockton 1,528 Class B Office Lease STOCKTON 4 Azam Investments LLC 2111-2119 W. March Lane, Stockton 26,614 Class B Office Sale Hancock Family Trust 3215 N. California Street, Stockton 5,669 Class C Office Sale LATHROP MANTECA 120 Stockton Collegiate 400 E. Main Street, Stockton 44,492 Class A Office Lease 205 RIPON 580 TRACY 5 99 Lodi Association of Realtors 3439 Brookside Road, Stockton 1,432 Class A Office Lease = LEASE = SALE Tim Delaney Insurance Services, Inc. 3244 Brookside Road, Stockton 1,533 Class B Office Lease 3 San Joaquin County Research & Forecast Report Q1 2016 Office Colliers International
Market Comparisons San Joaquin County OFFICE MARKET CLASS BLDGS TOTAL INVENTORY DIRECT DIRECT SUBLEASE SUBLEASE TOTAL QUARTER PRIOR QUARTER OCCUPIED SPACE NET ABSORPTION QTR NET ABSORPTION YTD COMPLETIONS QTR UNDER CONSTRUCTION WEIGHTED AVG ASKING FSG LATHROP A 3 72,208 24,000 33.2% - - 24,000 33.2% 33.2% 48,208 - - - - $0.80 B 2 137,288 49,711 36.2% - - 49,711 36.2% 36.2% 87,577 - - - - - C 2 16,084-0.0% - - - 0.0% 0.0% 16,084 - - - - - Total 7 225,580 73,711 32.7% - - 73,711 32.7% 32.7% 151,869 - - - - $0.80 LODI A 15 381,874 17,641 4.6% - - 17,641 4.6% 5.1% 364,233 1,717 1,717 - - $1.27 B 33 433,310 6,558 1.5% - - 6,558 1.5% 0.0% 426,752 (6,558) (6,558) - - $1.25 C 13 138,261 17,738 12.8% - - 17,738 12.8% 0.4% 120,523 (17,225) (17,225) - - $1.32 Total 61 953,445 41,937 4.4% - - 41,937 4.4% 2.1% 911,508 (22,066) (22,066) - - $1.29 MANTECA A 10 108,636 16,711 15.4% - - 16,711 15.4% 10.2% 91,925 (5,671) (5,671) - - $1.65 B 21 187,543 4,094 2.2% - - 4,094 2.2% 3.8% 183,449 3,000 3,000 - - $1.09 C 16 150,289-0.0% - - - 0.0% 0.0% 150,289 - - - - - Total 47 446,468 20,805 4.7% - - 20,805 4.7% 4.1% 425,663 (2,671) (2,671) - - $1.54 RIPON A 5 49,411 8,300 16.8% - - 8,300 16.8% 13.2% 41,111 (1,800) (1,800) - - $1.45 B 3 16,980-0.0% - - - 0.0% 0.0% 16,980 - - - - - C 1 5,052 - - - - - - 0.0% 5,052 - - - - - Total 9 71,443 8,300 11.6% - - 8,300 11.6% 9.1% 63,143 (1,800) (1,800) - - $1.45 STOCKTON A 51 1,958,648 372,749 19.0% - - 372,749 19.0% 18.1% 1,585,899 13,948 13,948-306,000 $1.47 B 178 3,353,825 346,473 10.3% - - 346,473 10.3% 9.4% 3,007,352 (32,630) (32,630) - - $1.14 C 51 715,720 67,196 9.4% - - 67,196 9.4% 11.7% 648,524 16,649 16,649 - - $1.00 Total 280 6,028,193 786,418 13.0% - - 786,418 13.0% 12.5% 5,241,775 (2,033) (2,033) - 306,000 $1.28 TRACY A 12 260,188 12,573 4.8% - - 12,573 4.8% 4.8% 247,615-0 - - $1.97 B 16 164,366-0.0% - - - 0.0% 4.4% 164,366 7,150 7,150 - - - C 15 112,527 3,821 3.4% - - 3,821 3.4% 1.1% 108,706 (2,621) (2,621) - - $1.25 Total 43 537,081 16,394 3.1% - - 16,394 3.1% 3.9% 520,687 4,529 4,529 - - $1.80 MARKET TOTAL A 96 2,830,965 451,974 16.0% - - 451,974 16.0% 15.0% 2,378,991 8,194 8,194-306,000 $1.45 B 253 4,293,312 406,836 9.5% - - 406,836 9.5% 8.8% 3,886,476 (29,038) (29,038) - - $1.14 C 98 1,137,933 88,755 7.8% - - 88,755 7.8% 7.5% 1,049,178 (3,197) (3,197) - - $1.07 Total 447 8,262,210 947,555 11.5% - - 947,555 11.5% 10.7% 7,314,645 (24,041) (24,041) - 306,000 $1.28 QUARTERLY COMPARISON AND TOTALS Q1-16 447 8,262,210 947,565 11.5% - 0.0% 947,565 11.5% 10.7% 7,314,645 (24,041) (24,041) - 306,000 $1.28 Q4-15 443 8,221,819 883,133 10.7% - 0.0% 883,133 10.7% 11.3% 7,338,686 46,512 276,641-306,000 $1.27 Q3-15 443 8,221,819 929,645 11.3% - 0.0% 929,645 11.3% 12.2% 7,292,174 76,242 230,129-306,000 $1.27 Q2-15 443 8,221,819 1,005,887 12.2% - 0.0% 1,005,887 12.2% 12.4% 7,215,932 9,730 153,887-306,000 $1.25 Q1-15 443 8,221,819 1,015,617 12.4% - 0.0% 1,015,617 12.4% 14.1% 7,206,202 144,157 144,157-306,000 $1.28 4 San Joaquin County Research & Forecast Report Q1 2016 Office Colliers International
554 offices in 66 countries on 6 continents United States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112 $2.5 billion in annual revenue COLLIERS INTERNATIONAL STOCKTON 3439 Brookside Road, Suite 108 Stockton, CA 95219 USA +1 209 475 5100 MANAGING DIRECTOR Michael Goldstein, SIOR Executive Managing Director CA License No. 01319234 +1 209 475 5106 michael.goldstein@colliers.com RESEARCHER Kyle Mecker Research Analyst +1 209 475 5110 kyle.mecker@colliers.com CONTRIBUTING AUTHORS Ben Rishwain Associate Vice President Erica Frey Associate 2.0 billion square feet under management 16,000 professionals and staff About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,000 professionals operating from 554 offices in 66 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. colliers.com Copyright 2016 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.