The San Diego County office market slowed significantly in the 1st Quarter, posting extremely low

quarterly leasing activity. The result is a suspended market with virtually no change in the overall

vacancy rate (11.78%) and no rent growth (although the weighted average rents increased as a result of

the available space). What leasing activity there was helped to push positive net absorption, however,

with 401,000 SF of space absorbed in 1Q, 2014. San Diego's February unemployment rate of 7.0%

increased from 6.8% in November of last year.

The Golden Triangle submarkets continue to be the most desirable in the County, with robust

leasing activity, strong rental rates and new construction. While vacancy remains high in Downtown

San Diego (16.2%), the submarket will see its first new construction in years with the new Sempra

Energy HQ build-to-suit beginning the construction process (320,000 SF). Central San Diego

submarkets continue to get stronger, with vacancy rates for the area approaching single digits.

Overview

Historical Absorption & Vacancy

Vacancy & Rental Rate Trends

VACANCY 11.8%

+ 0.06% YTD

ABSORPTION

+401,000 SF YTD

RENTS (WEIGHTED)

$2.23 PSF +$0.05 psf

YTD

SAN DIEGO UNEMPLOYMENT

= 7.0%

Sources: NAI San Diego, CoStar, California Employment Development Department. The information in this report is from sources deemed to be reliable, but no warranty is made as to the

accuracy of the data nor its usefulness for any particular purpose.

Direct Sublease Total Vacancy YTD Net Under Quoted

Market Total SF Vacant SF Vacant SF Vacant SF Rate Absorption Constr. Rent

North County 15,244,346 2,050,902 65,057 2,115,959 13.88% 8,103 33,917 $2.15

Golden Triangle 26,995,096 2,818,248 524,590 3,342,838 12.38% 221,361 716,000 $2.75

Central San Diego 24,032,697 2,395,693 110,501 2,506,194 10.43% 127,964 7,800 $1.92

Greater Downtown 20,260,339 2,513,964 107,790 2,621,754 12.94% (32,782) 320,000 $2.16

I-15 Corridor 13,602,370 1,527,093 27,766 1,554,859 11.43% 17,830 0 $2.14

South Bay 4,732,037 595,297 0 595,297 12.58% 24,658 0 $1.98

East County 8,279,263 583,288 8,876 592,164 7.15% 33,818 0 $1.63

Total - San Diego County 113,146,148 12,484,485 844,580 13,329,065 11.78% 400,952 1,077,717 $2.23

Overview

Methodology The data used in the NAI San Diego Office Update is based on office and medical office buildings of all sizes, in all classes (including owner-user buildings) in order to provide the broadest view of the market. We have divided San Diego County into seven Markets for office properties: North County, Golden Triangle, Central San Diego, Greater Downtown, I-15 Corridor, South Bay and East County. Rental rates are based on quoted rents for available space on a monthly, per square foot, full service gross basis. Average rents are weighted based on available square footage. The information contained in this report is sourced from NAI San Diego, CoStar, the California Employment Development Department and other sources deemed to be reliable, but no warranty is made as to the accuracy of the data nor its usefulness for any particular purpose.

Quarterly Leasing Activity San Diego Office

Sources: NAI San Diego, CoStar, California Employment Development Department. The information in this report is from sources deemed to be reliable, but no warranty is made as to the

accuracy of the data nor its usefulness for any particular purpose.

Direct Sublease Total Vacancy YTD Net Under Quoted

Market Total SF Vacant SF Vacant SF Vacant SF Rate Absorption Constr. Rent

Carlsbad 6,677,241 1,067,488 47,052 1,114,540 16.69% (2,452) 0 $2.16

North Beach Cities 3,188,988 193,901 9,398 203,299 6.38% (21,162) 33,917 $2.90

North Central County 326,303 22,213 0 22,213 6.81% 2,699 0 $3.63

Oceanside 1,729,661 218,009 5,591 223,600 12.93% 8,933 0 $1.73

San Marcos 1,617,873 221,478 3,016 224,494 13.88% 21,376 0 $2.12

Vista 1,704,280 327,813 0 327,813 19.23% (1,291) 0 $1.87

Subtotal - North County 15,244,346 2,050,902 65,057 2,115,959 13.88% 8,103 33,917 $2.15

Del Mar/Carmel Valley 4,449,907 585,167 93,279 678,446 15.25% 9,781 0 $3.42

Governor Park 870,138 128,907 0 128,907 14.81% (8,146) 0 $2.21

Sorrento Mesa 9,790,122 816,754 61,234 877,988 8.97% (61,482) 410,000 $2.38

Sorrento Valley 832,445 89,043 32,978 122,021 14.66% (6,715) 0 $2.31

Torrey Pines 2,896,965 239,144 49,347 288,491 9.96% 0 0 $2.72

UTC 8,155,519 959,233 287,752 1,246,985 15.29% 287,923 306,000 $2.75

Subtotal - Golden Triangle 26,995,096 2,818,248 524,590 3,342,838 12.38% 221,361 716,000 $2.75

Kearny Mesa 10,935,835 1,198,844 18,223 1,217,067 11.13% 114,394 0 $1.81

La Jolla 1,952,536 198,726 25,616 224,342 11.49% (12,073) 7,800 $2.89

Mira Mesa/Miramar 1,853,757 297,067 20,622 317,689 17.14% 11,750 0 $1.42

Mission Valley 7,024,492 599,580 46,040 645,620 9.19% 4,788 0 $2.05

PB/Rose Canyon/Morena 1,831,501 95,301 0 95,301 5.20% 8,534 0 $1.83

Uptown East 434,576 6,175 0 6,175 1.42% 571 0 $1.59

Subtotal - Central San Diego 24,032,697 2,395,693 110,501 2,506,194 10.43% 127,964 7,800 $1.92

Coronado 190,580 1,800 0 1,800 0.94% (1,800) 0 $4.00

Downtown 13,029,977 2,022,987 88,227 2,111,214 16.20% 4,059 320,000 $2.19

Old Twn/S Arena/Pt Loma 2,874,258 211,319 9,468 220,787 7.68% (5,150) 0 $1.86

Park East 405,757 4,369 0 4,369 1.08% 2,108 0 $1.65

Uptown West/Park West 3,759,767 273,489 10,095 283,584 7.54% (31,999) 0 $2.13

Subtotal - Greater Downtown 20,260,339 2,513,964 107,790 2,621,754 12.94% (32,782) 320,000 $2.16

Escondido 2,517,054 312,903 19,313 332,216 13.20% (11,587) 0 $1.86

Poway 1,578,828 94,762 1,569 96,331 6.10% 10,680 0 $2.06

Rancho Bernardo 6,752,879 577,822 3,000 580,822 8.60% 14,184 0 $2.34

Scripps Ranch 2,753,609 541,606 3,884 545,490 19.81% 4,553 0 $2.11

Subtotal - I-15 Corridor 13,602,370 1,527,093 27,766 1,554,859 11.43% 17,830 0 $2.14

Chula Vista 3,405,810 392,640 0 392,640 11.53% 24,097 0 $2.05

National City 816,020 166,279 0 166,279 20.38% (94) 0 $1.89

Otay Mesa 306,174 34,558 0 34,558 11.29% 655 0 $1.73

San Ysidro/Imperial Beach 204,033 1,820 0 1,820 0.89% 0 0 $0.00

Subtotal - South Bay 4,732,037 595,297 0 595,297 12.58% 24,658 0 $1.98

College Area 1,388,222 135,261 0 135,261 9.74% 1,740 0 $2.09

El Cajon / La Mesa / Santee 5,628,591 324,128 3,388 327,516 5.82% 33,497 0 $1.59

Mission Gorge 713,314 50,608 5,488 56,096 7.86% 2,163 0 $1.25

Southeast San Diego 549,136 73,291 0 73,291 13.35% (3,582) 0 $1.26

Subtotal - East County 8,279,263 583,288 8,876 592,164 7.15% 33,818 0 $1.63

Total - San Diego County 113,146,148 12,484,485 844,580 13,329,065 11.78% 400,952 1,077,717 $2.23

By the Numbers

Sources: NAI San Diego, CoStar, California Employment Development Department. The information in this report is from sources deemed to be reliable, but no warranty is made as to the

accuracy of the data nor its usefulness for any particular purpose.