Bay Area Corporate Housing Market Trends 2005-2006

The year 2005 revealed a major shift in the market place. Bay Area renters are beginning to
see rental prices rise as bargaining power swiftly diminishes. An improving job market has
boosted demand for Bay Area apartments since the dot-com blowout. In the past year, Bay
Area employers have gained 26,600 jobs (source: Employment Development Departments
monthly survey). Corporate profits have rebounded and the surge in the local economy is
poised to persist. Regional employment gains are strong and widespread; analysts believe the
job market will grow through 2006.

Strong economic growth in the Bay Area has created high demand for housing needs in
already densely populated areas of the Bay Area and the South Bay. Occupancy in the Bay
Area is expected to reach 96.4% in March 2006. San Francisco’s occupancy is anticipated to
reach 97.1% in Q106, exceeding Oakland’s forecast occupancy of 96% and San Jose’s
anticipated occupancy of 95.9%.

Occupancy rates caused an upward shift in rental rates. Mortgage interest rates have slowly began to steady themselves, and with such high ‘for sale” price points, most Bay Area residents can’t afford to buy. Rental apartments are the only choice for many. Developers and property management companies know they can increase rental fees with longer mandatory leases because the supply of apartments is growing at a slower rate than the number of home buyers in the Bay Area.