Lynn Reaser, Ph.D. Chief Economist, Point Loma Nazarene University A Look at the Economy in San Diego IFMA San Diego January 13, 2010

U.S Outlook 2

Real GDP Growth Forecast in 2010 Percent change, Q4/Q4

“V”-shaped Recovery GDP, billions of chained 2005 dollars

Weaker-than-normal Rebound Real GDP, % change Trough to 6 qtrs later

6 Job Growth to Slowly Resume Change in nonfarm employment, in thousands

Jobless Rate to Edge Lower by Year-end 2010 Percent Actual

Profits to Rebound After-tax profits, percent annual changes

Inflation Subdued Consumer prices, percent change, Q4/Q4

Interest Rates to Slowly Rise Quarter-end, percent 10-year Treasury note

U.S. Forecast Summary Recession over Financial markets settle “V” shaped recovery, but less robust than normal Moderate inflation Gradual rise in interest rates

ME WORRY?

Debt Shifts to the Public Sector Q3 2009, % change from prior quarter, annualized 13

California’s Prospects 14

15 California Bottoming Out with Nation Nonfarm employment, percent change over prior years US

16 California Outperforms in Goods, Underperforms in Services and Government Jobs Percent change, Nov 2009 over prior year U.S. Goods Private Services Gov’t

17

California’s Problems Dysfunctional government Fiscal pressures Infrastructure and schools Regulatory burden Expensive housing Water usage 18

California’s Strengths Entrepreneurial talent Technology frontrunner Environmental leader International edge Draw of our climate 19

20 San Diego

21 San Diego’s Jobs Decline Widespread Percent change December 2009 over prior year Total

22 San Diego’s Jobless Rate Rises Monthly, percent

23 Home Sales and Prices Recover Percent change, November 2009 over prior year Prices Sales

24 San Diego Home Price Trend Converges to the Nation’s S&P/Case Shiller Home Price Index, Jan. 2000=100 San Diego U. S.

San Diego Housing Permits to Rise 25 Thousands of units

Commercial Real Estate Distress across the board Gap closing between lease and sublease rents Market trough end of 2010 Owners better capitalized than in early 1990s 26

27 Positive Forces Housing market improves International trade Technology Alternative energy Naval construction Tourism Health care and biotech Risks/Constraints Rising commercial real estate vacancies Credit still tight Fiscal problems for state and local governments Outlook for San Diego

San Diego Jobs to Return 28

Implications for Facilities Managers 29

30 Fastest Salary Growth Expected in 2010

Takeaways for Property Managers Keep your tenants happy Earn a raise in 2010 Take care of your employees Re-examine your personal finances Character counts