Presented toThe Board of Directors

Jan. 21, 20174:00 PM

2017 Santa Clara County Construction Forecast

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1. National Construction Statistics2. California Construction Numbers3. Santa Clara County Data4. Construction Employment History

Table of Contents

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Annual Rate of Construction Spending US (Billions)1

Public ($) Private ($) Total ($)2005 256.3 904.3 1160.6

2006 280.9 896.8 1177.7

2007 297.8 842.4 1140.2

2008 319.6 737.1 1053.7

2009 309.6 593.0 902.5

2010 301.0 486.9 787.9

2011 286.6 529.7 816.4

2012 270.1 614.9 885.0

2013 266.5 663.9 908.4

2014 283.5 698.6 982.1

2015 294.3 828.2 1122.5

2016 289.2 892.8 1182.0

1Numbers come from December Annual Construction Report for the US Census Bureau, except for 2016 numbers which came from the November Report.

United States Construction Starts ($ Billions)

(McGraw Hill)

In billons 2015Actual

2016Estimate

2017Forecast

% change 15-16 % change 16-17

Total Construction 667,660 676,400 712,925 +1.3% +5.4%

Residential 270,155 290,275 313,700 +7.4% +8.1%

Single Family 186,202 203,500 227,125 +9.3% +11.6%

Multifamily 83,953 86,775 86,575 +3.4% -0.2%

Nonresidential 217,280 224,025 241,725 +3.1% +7.9%

Nonbuildings 180,225 162,100 157,500 -10.1% -2.8%

4ENR Magazine, November 21, 2016, p 29

FMI Construction Put In Place Forecast 2017 ($ Billions)

In billons 2015Actual

2016Estimate

2017Forecast

% change 15-16 % change 16-17

Total Construction 1,108,718 1,162,903 1,208,553 +4.9% +3.9%

Total Residential 440,255 463,908 480,700 +5.4% +3.6%

Total Nonresidential

444,616 467,993 488,508 +5.3% +4.4%

Non-buildings 223,847 231,001 239,345 +3.2% +3.6%

5ENR Magazine, November 21, 2016, p 29

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Dodge Construction National Growth Forecast

Annual % Change for $Volume of Construction Starts

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

+12.0 +10.0 +6.0 +5.0 +2.0 +5.0 +12.0 +13.0 +3.0 -7.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-13.0 -24.0 +2.0 +1.0 +12.0 +11.0 +10.0 +11.0 +1.0 +5.0

ENR Magazine, November 21, 2016, p 28

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Dodge ConstructionUS Outlook-2017

• Total Construction up 5% in dollars to $713 Billion• Multi Family Housing flat in dollars & down 2 % in units• Single Family Housing up 12% in dollars & 9% in units• Commercial Buildings up 6% in dollars• Public Works up 6% after down 3% in 2016.• Electric Utilities down 29% in dollars• Institutional Buildings up 10% in dollars• Manufacturing Plant Construction up 6% in dollarsData is based on Construction Starts

Dodge and Data Analytics, Press Release October 20, 2016

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Pattern of US Construction Starts 2016 (in billions $)

Dodge 2017 Construction Outlook

2011 2012 2013 2014 2015 2016 2017

Total Construction

441.5 492.9 547.3 601.0 667.7 676.4 712.9

Single FamHousing

97.3 125.8 159.2 163.8 186.2 203.5 227.1

Multi FamHousing

29.7 40.8 51.7 68.9 84.0 86.8 86.6

Commer. Build

48.4 55.3 67.7 83.1 88.0 98.9 105.1

Instit. Build 100.3 91.8 92.1 104.4 105.2 108.1 118.5Manuf.Build 17.3 13.1 19.4 35.6 24.1 17.0 18.1Pub. Works 106.9 112.3 127.3 121.3 123.7 120.1 127.5

Elec. Utilities 41.5 53.8 29.9 23.9 56.6 42.0 30.0

Construction Dive, November 18, 2016

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California Building Permits 2016 through November

New Commercial New Industrial Alters/Additions

$8,281,974,773 $951,161,663 $11,340,707,470

New Other Total Non Residential Total All Construction(including Res)

$4,131,979,316 $24,705,823,222 $52,647,019,622

Information from the California Building Industry Foundation. 2016 data is through November 2016

Single Family Valuation New Multi Family Valuation

Residential Alterations &Additions

$13,944,479,982 $7,804,166,316 $6,192,550,102

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City Construction Cost Index for Q3 2016

New York CitySan Francisco

San JoseOaklandChicago

PhiladelphiaBoston

SacramentoLos Angeles

National Average

0 50 100 150 200 250 300

279266.6

255.9255.1

248.8238.4237.7235.1235

207.3

JLL Construction Outlook, Q3 2016 p. 12

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National Development Profile

West Midwest Northeast South Nat. Average

49.0 52.8 44.9 55.2 49.7

The further the index is from 50, the larger the number of firms reporting the changeIndex <50- Architectural Firms are reporting decrease in billingsIndex=50 –Architectural Firms are reporting no change in billingsIndex>50- Firms are reporting an increase in billings

JLL Construction Outlook, Q3 2016 p. 15

West Midwest Northeast South

Q3 2015 7.78 6.48 8.54 10.29

Q3 2016 6.66 8.33 7.6 10.7

Construction Backlog Indicator (in months)

ABC Press Release, P. 2, 12/13/2016

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California Housing Starts-2004-2016

New Housing Units0

50000

100000

150000

200000

250000212960

208972

164280

113034

64962

3642144762

4734359225

8547285844

98233106939

2004 2005 2006 2007 2008 2009 20102011 2012 2013 2014 2015 2016

Information from the California Building Industry Foundation. 2016 data is through November 2016

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California New Housing Starts Forecast (thousands)

Housing Starts0

50

100

150

200

91.4 96.9

128.2144.1 152.9 159

2015 2016 2017 2018 2019 20201Eberhard School of Business, Metro Forecast, September 2016

San Jose, Sunnyvale, Santa Clara Construction Starts

In millions ($) 2012Actual

2013Actual

2014Actual

2015Actual

2016 Forecast

Total Construction 4,153 4,302 5,734 3,197 3,502

Residential 1,047 1,154 1,085 1,390 1,489

Non Residential 1,603 1,603 4,240 1,206 1,423

Comm/Manuf 475 737 3,723 854 1,003

Office/Bank 284 347 3,078 324 448

Institutional 1,128 1,427 517 353 421

Nonbuildings 1,503 983 410 600 590

14ENR Magazine, November 28/December 5, 2016, p CA4

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San Jose, Santa Clara, Sunnyvale Construction Starts 2011-1016

Total Construction0

1000200030004000500060007000

2377

4153 4213

5734

3197 3502

Total Construction, in Millions

201120122013201420152016

Engineering News Record San Jose Reports-2011-2016

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Santa Clara County Residential Permits

Year 2006 2007 2008 2009 2010

Buildings 2,260 2,060 1,067 643 851

Units 6,075 4,123 3,462 1,054 4,011

Con.Cost($) 1,221,896,290 988.906,795 649,043,037 305,153,891 715,846,355

Year 2011 2012 2013 2014 2015 2016 1

Buildings 1,028 1,554 1,994 1,860 1,852 1,523

Units 3,064 5,479 7,621 9,424 5,570 4,420

Con.Cost($) 700,203,207 1,045,660,437 1,613,258,474 1,766,267,674 1,322,181,022 989,154,040

1Census Bureau Statistics, through October 2016

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Santa Clara County Real Estate Trends-Retail

• Dvlpmnt. will complete 740,000 sq. ft in 2016• Main St. Cupertino and Stanford Shopping Center highlight 2016 Deliveries• The uptick in metro vacancy will trigger a slowdown in the pace of average

asking rent, which will go up 4.1% .

San Jose Metro Area NumbersTotal Buildings 1,748 Inventory 37,427,034 sq.

ft.Vacancy 5.6% Ave. Ask Rent $29.48

A combination of Cushman & Wakefield and Marcus & Millichap San Jose Metro Area Retail Research Report 3rd Quarter 2016

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Santa Clara County Real Estate Trends-Commercial

• 3.1 million sq. ft. will be completed in 2016.• 3.9 million sq. ft completed in 2015• Asking rents will rise to $44.08 per sq. ft• Vacancy down to 10.6% in 2015• Apple’s new HQ will be completed in 2017- 2.8 million sq.ft.

Marcus & Millichap San Jose Metro Area Commercial Research Report 2nd Quarter 2016

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Santa Clara County Real Estate Trends-Apartments

• 5,900 units are being finished in 2016.• Vacancy at 3.7%• Effect rents will climb 3.5% to $2560 per month.

In Santa Clara CountyTotal Properties 1,617 Total Units 162,242Under Constr. 7,368 Ave. Vacancy 4.6%Ave. Rent $2619

A combination of Cushman & Wakefield and Marcus & Millichap San Jose Metro Area Apartment Research Report 3rd Quarter 2016

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Santa Clara County-ConstructionEmployment Statistics by Month-

Jan.07-Nov.16

Peak Employment- September 2000, 52,200 November 2016 Employment 49,000

0

10000

20000

30000

40000

50000

60000Employment

(Highest employment since Sept. 2007)

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Santa Clara County Construction Employment-Annual Average

In Thousands

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160.05.0

10.015.020.025.030.035.040.045.050.0

44.441.6 43.0 44.5 46.8 47.2

44.2

34.4 32.2 31.434.7

37.5 39.243.2

46.8

Bureau of Labor Statistics-San Jose, Santa Clara, Sunnyvale Statistical Area

November 2016 is 49,000- Highest since September 2007 Peak Employment is September 2000-52,200

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Estimated California Construction Unemployment Rates %

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160.0

5.0

10.0

15.0

20.0

25.0

30.0

7.25.2

6.9 7.8

16.9

24.2

25.2

17.4

13.8

9.1 8.56.5 5.7

ABC Economic Report 2017

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Bay Area Forecast-Unemployment (%)

Metro Area 2015 2016 2017 2018 2019

San Francisco 3.5 3.2 3.1 3.0 3.1

San Jose 4.3 3.9 3.7 3.4 3.3

Oakland 4.9 4.4 4.5 4.6 4.8

California 6.2 5.5 5.6 5.6 5.8

Eberhardt School of Business, September 2016, Metro Forecast

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Other Trends

•Construction Wages 1 March 2008-$24.20 Today-$29.28 23.9% Higher•About 35,000 new Construction jobs are anticipated in each of the next 3 years, just below a 4% annual growth rate. Despite this expected growth, there will still be few Construction jobs in 2020 than before the recession.2

•3 Million Sq. Ft. of office space is to be completed in 2017 in San Francisco, the highest level in decades. Its twice the amount of space finished in 2016. Its 40% leased.•189,100 multifamily rental units finished in 4Q 2015 and 3Q 2016 in US, 84% in luxury category.4

•CalTrans has reported a $59 billion backlog of projects and an annual shortfall of $5.7 billion per year in its highway maintenance program. California cities and counties report a $7.8 billion annual shortfall in $ needed to fix local streets. A quarter of local streets can slip into failed condition by 2024 if current trends continue.5

1 JLL Construction Outlook, Q3 2016, p.142 Eberhardt School of Business, Fall 20163 JLL Construction Outlook, Q3 20164 Luxury Apt. Boom Set to Fizzle in 2017, Wall St. Journal, 1/3/20175 Rock Paper Scissors Blog, Granite Rock, January 2017