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EXHIBIT 3
<br />Valbridyge Public Pay Parking Lot
<br />a`a4 PROPERTY ADVISORS MARKET ANALYSIS
<br />dramatically with currently 2,430,157 square feet under construction countywide. Rental rates have
<br />steadily increased since the low in 2011 for Orange County and owners in most areas are decreasing
<br />concessions and raising rates in response to the higher demand. Rates have increased to $2.31 per
<br />square feet for 3rd quarter 2016, which is the highest since 2008.
<br />ORANGE COUNTY TOTAL OFFICE MARKET OVERVIEW
<br />The subject property is considered part of the Central County sub -market, which comprises the
<br />second largest inventory of office space in the county, but has the lowest rental rates. This market
<br />contains the 2nd weakest absorption rate for the county so far this year with only 7,891 new space
<br />under construction. The Central County area presently has a vacancy of 11.0%, which is above the
<br />county overall. Co -Star indicates a present average rental rate of $1.89 per square foot on a full
<br />service gross basis for the Central County area. The rental rates are the lowest in the county and the
<br />vacancy rate is the highest in the county. This is largely due to the central area being one of the
<br />oldest in the county and with some of the lowest economic demographics in county. However, there
<br />are pockets of the area that are in redevelopment mode and or are located in niche markets.
<br />Market Conditions
<br />The improvement in the Orange County office market has continued a positive trend which began
<br />near the end of 2010. Vacancy is down significantly from previous highs during the recession. Land
<br />values have been rising due to the lack of available land in the area and demand for office property
<br />remains strong. This lack of availability also plays a role in the low levels of new construction. Most
<br />property owners are not advertising free rent concessions or tenant improvements, but will negotiate
<br />some incentives on longer term leases. Terms normally range from three to five years on single
<br />tenant buildings and 12 to 36 months for multi -tenant buildings.
<br />Conclusion
<br />Orange County and Southern California are emerging from a prolonged recession. Vacancy levels are
<br />down significantly and new construction remains limited as compared to pre -recession levels.
<br />However, the pace of the recovery has been modest and, in particular, there remain concerns relating
<br />to the potential of rising interest rates. As a result, public spending patterns are somewhat erratic,
<br />however, area office real estate markets have seen rental rates consistently raise each year. The
<br />subject property is a part of an office market that has historically experienced average demand and
<br />should compare favorably to markets in Orange and Los Angeles Counties.
<br />@2015 VALBRIDGE PROPERTY ADVISORS I Penner and Associates, Inc. Page 22
<br />SA4-54
<br />Sub -Market
<br />Airport Area
<br />Central County
<br />North County
<br />South County
<br />West County
<br /># Bldgs.
<br />1,289
<br />1,489
<br />1,152
<br />1,365
<br />771
<br />Building NRA
<br />52,649,958
<br />33,066,606
<br />21,062,174
<br />32,605,815
<br />14,654,545
<br />Vacancy
<br />SF
<br />4,839,131
<br />3,648,965
<br />1,791,099
<br />2,442,677
<br />1,063,905
<br />Vacancy
<br />Rate
<br />9.2%
<br />11.0%
<br />8.5%
<br />7.5°%
<br />7.3%
<br />SF Net
<br />Absorption
<br />188,953
<br />63,904
<br />259,086
<br />705,963
<br />124,794
<br />SF Under
<br />Construction
<br />613,970
<br />7,891
<br />0
<br />1,763,796
<br />44,500
<br />Ave. Asking
<br />Lease Rate
<br />$2.69
<br />$1.89
<br />$2.00
<br />$2.50
<br />$2.03
<br />Orange County Total:
<br />6,066
<br />154,039,098
<br />13,785,777
<br />8.9%
<br />1,342,700
<br />2,430,157
<br />$231
<br />Source: Costar 3rd Quarter 2016
<br />The subject property is considered part of the Central County sub -market, which comprises the
<br />second largest inventory of office space in the county, but has the lowest rental rates. This market
<br />contains the 2nd weakest absorption rate for the county so far this year with only 7,891 new space
<br />under construction. The Central County area presently has a vacancy of 11.0%, which is above the
<br />county overall. Co -Star indicates a present average rental rate of $1.89 per square foot on a full
<br />service gross basis for the Central County area. The rental rates are the lowest in the county and the
<br />vacancy rate is the highest in the county. This is largely due to the central area being one of the
<br />oldest in the county and with some of the lowest economic demographics in county. However, there
<br />are pockets of the area that are in redevelopment mode and or are located in niche markets.
<br />Market Conditions
<br />The improvement in the Orange County office market has continued a positive trend which began
<br />near the end of 2010. Vacancy is down significantly from previous highs during the recession. Land
<br />values have been rising due to the lack of available land in the area and demand for office property
<br />remains strong. This lack of availability also plays a role in the low levels of new construction. Most
<br />property owners are not advertising free rent concessions or tenant improvements, but will negotiate
<br />some incentives on longer term leases. Terms normally range from three to five years on single
<br />tenant buildings and 12 to 36 months for multi -tenant buildings.
<br />Conclusion
<br />Orange County and Southern California are emerging from a prolonged recession. Vacancy levels are
<br />down significantly and new construction remains limited as compared to pre -recession levels.
<br />However, the pace of the recovery has been modest and, in particular, there remain concerns relating
<br />to the potential of rising interest rates. As a result, public spending patterns are somewhat erratic,
<br />however, area office real estate markets have seen rental rates consistently raise each year. The
<br />subject property is a part of an office market that has historically experienced average demand and
<br />should compare favorably to markets in Orange and Los Angeles Counties.
<br />@2015 VALBRIDGE PROPERTY ADVISORS I Penner and Associates, Inc. Page 22
<br />SA4-54
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