now, and maybe every hour and every second soon with all that we are getting in the way of business news. i would also like to welcome a year quan -- mayor quan and mayor lee and thank them for participating in the premiere real-estate event in the area. happy valentine's day, everyone. i like to wish my lovely daughter and my lovely wife, who are here with me today, a happy valentine's day. [applause] and thank you all for climbing out of your tents and sleeping bags to occupy the oakland convention center here this morning at such an early hour. it has been a tough year for the cities of oakland and san francisco. both have been handed some very large lemons to deal with. but before we get a feeling too sorry for ourselves, let's look at someone who has also been dealt a few lemons -- president obama. he has been dealing with record unemployment, the bankruptcy of

general motors, osama bin laden, two wars to clean up. but somehow, in spite of all his problems, he is turning lemons into lemonade. lower unemployment, a new gm, no more osama bin laden, and an imminent end to two very pesky wars, which when complete, will have earned him his nobel peace prize. [applause] so let's start by reviewing the real estate metrics for oakland and san francisco from the past 12 months. vacancies were split in 2011 with san francisco dropping to 12.1%, and the oakland cbd moving up to 16%. in 2012, demand for high-tech space in south of market will lower vacancies to single digits and will migrate into north of market commodity space such as the linkedin lease just completed at one montgomery.

office rents were also split with rates dropping to $28 in oakland and rising to over $40 per square foot in san francisco. rents in san francisco will rise to the $60 or $70 per square foot levels, and it will trigger new office construction for the first time in over four years. oakland, are you listening? investment sales volume in the bay area continue to grow in all product types and rose to over $12 billion in 2011, an increase of 57% from the previous year. projections show an increase of 100% for 2012. the top office leases during the past 12 months in san francisco and oakland -- these experienced office -- rising office activity with many tenants rushing to lock in long-term rental rates prior to the big increases expected in 2012 and 2013.

salesforce continues to be the market maker with a 400,000 square foot lease signed this past january. let's go back to this linen truck -- lenin -- lemon truck and turning lemons into lemonade. san francisco had a few limits handed to it this past year, but in spite of that, the city continues to show us it knows how to make lemonade -- san francisco had a few lemons. an example -- the america's cup. the events for this well- publicized multimillion-dollar america's cup will be held on san francisco bay starting this summer with the grand finale scheduled for september of next year. the port of san francisco is widely using the america's cup as a catalyst for revitalization of its peers -- piers pierre --

its piers. the $4 billion transbay terminal project is under way with new construction coming under the ground in months. mayor lee, if you think san francisco had lemons this past year, you should talk to mayor quan. here is a lemon. here is another. he is it -- here is an even bigger lemon. it is time to start thinking about making some lemonade. no, required here. here is a more limited with the soon-to-be completed new east span of the bay bridge, which lights up every morning, which i saw this morning as i drove over. also, to the "new york times, oakland making it to the no. 5 on the "new york times" top 45 places to go in 2012 list.

[applause] open's revival of its uptown district by restoring the historic box theater and the magnificent paramount theater for future and current generations. adding thousands of residential units to the urban marketplace with the housing plan and revitalize nightlife with sophisticated clubs and restaurants. and kaiser permanente at a close to 600 beds to the much-needed stock of medical facilities in oakland. let's also talk about a few trends occurring in the marketplace. rolling office space is where office rent is being measured in price per gallon compared price per foot. over 6000 employees per day or 1.5 million people per year are being shuttled in wifi-enabled rolling offices. this trend will continue in a

big way. also, old vacant buildings are taking a new life as tenants and owners occupied newly clad and newly refurbished offices, such as a river bed and the university of the pacific's school of dentistry. another trend -- here is a new leader had warehouse located two blocks from san francisco's brewery at 16th and wisconsin. the graffiti artist who did this is now a facebook millionaire. thanks to bad boy billionaire is mark zuckerberg and sean parker who recently parted here recentlysnoop dogg -- party -- partied here with snoop dogg. the neighborhood is full of adventurous young techies

putting up games at zynga headquarters or mobile apps. another trend we are seeing is the technology side we all know and read about, but what you see here are nine buildings in san francisco as an example of over 3.5 million square feet. these were nine predominantly empty buildings, all of which now are committed by new technology tenants, all within the last 12 months. here are five entitled office projects, representing 1.5 million square feet. with increasing rents, many of these will break ground in 2012 but will not be delivered to the market until late 2014 or 2015. so as san francisco waits for this new office space to believe its pending overcrowding, the growing firms we read about every day will have no where to call home. oakland, it is time to get ready for the next generation of

occupiers -- the office- occupying, rent-paying occupiers. [applause] so throw out the welcome mat and dust off home plate because there is sure to be some big pop flies coming your way. thank you, mayor quan and mayor lee, and do not forget to bring some ice. thank you. [applause] >> thank you, dan. we know oakland is home to some great technology companies like pandora, so the table is set with the excitement happening in oakland as well. now, they look at the financial outlook. we are delighted to have the senior vice president and director of fixed income investments for citi national. he is in charge of the

investment advisory group and has been with the bank since 2003. they provide custom portfolio management and expertise in investment to individuals, firms, and municipalities. he's been managing investment portfolios for more than 30 years, focusing on mutual funds in particular of high net worth individuals, and the authors the bank's weekly economic reports and commentary. please welcome paul single. [applause] >> good morning, all. it is a great turnout did. it is great to see you all. it is an honor to be here with both of you. i would like to spend a little time here today talking about what is going on in the global economy, what are some investment opportunities, and some of the risks out there for a lot of people in terms of how they are looking at their investment portfolio. quickly, the united states economy is gaining momentum. it is on a nice, a ford

trajectory. last quarter put the gdp number was the strongest of the last year, and it looks like that will continue to do better going forward. a couple of other things that are of concern i will go through quickly. the next one is that the austerity plan is going on in europe will probably cause a recession if europe is not already in a recession. china needs to avoid a hard landing, and i will talk about those topics in a little more detail. the next board is the politicians in washington really need to expend the stimulus plan they have in front of them in terms of extending unemployment benefits and the tax cuts. the u.s. economy is doing better, but it still needs the stimulus to keep going. finally, the unemployment rate is still uncomfortably high. it has come down to 8.3%, down from the 10% level. in california, it is 11.1%, down from the recent high of 12.5%, but it needs to do better. our outlook on the economy is that it is sunny with partly

cloudy, but the united states is probably the most important part of this outlook. it is doing well. the chart here showing gdp growth -- this is a measurement of the economic output in the united states, the broadest measure we have. if you follow the red line, you can see that the year-over-year change is starting to trend upward. green columns represent the quarterly change. blue columns represent the market expectations of the future. all this makes it easier for comparison, but you can see we are continuing to move somewhere between 2% and 2.5% growth. a, an analogy would be like a car in second gear trying to get in the third. we will get to our destination, but it will take a little bit slower. this is not uncommon. the credit crisis started just five years ago. last week was the anniversary. hsbc had to announce that they had to restate previous year's earnings because of losses in

subprime loans. no one knew what a subprime loan was. everyone now has opinions on it, but that is the start of it. the recession we had was extremely severe, and it was a financial recession, and it takes a long time to recover out of them, but we are on the right trajectory, and that is the important thing in terms of the outlook for this economy. inflation -- this chart is the consumer price index, the broadest measure of inflation, and it goes back to 1975. many of you in you may remember the very high levels of inflation we had then. now, it is down around 2%. this is a level that is acceptable for the federal reserve bank, and it allows them to use their tools to try to stimulate the economy because they do not have to use those tools to try to fight inflation, but this is the concern -- housing. i love the start because it puts in perspective how bad the

housing market was affected in this economy. the overall economy is the green line, and it measures the change in the drop of the economy from the recent peak. it dropped about 6%. now, look at the red line. that is the housing market. you can see how badly that was impacted, and it has not recovered yet. the economy has recovered. we are at a point of economic growth higher than we were before the recession started, but in housing, that is not the case. and housing employs a lot of people, and that is part of why this recovery has been so slow. china -- this is a big deal. if you take a look at the global economy, the g-20, the eminent group of finance ministers, the united states is number one. we are the largest economy in the world. china is now number two. china in a few years will be number one. united states is richer on a per

capita basis by a magnitude of about tenfold, but china will have more economic output than the united states. it is a force that has to be reckoned with. they got this way because they have had very good growth for a number of years, but it is growing a little bit too strong. there are some small bubbles popping up in different parts of their economy, and they are trying to slow down the economy. slowing down an economy -- every government can do that. the hard part is controlling that downward trajectory. in most cases, countries that tried to slow down their economy -- they go into a crash, they go into a recession, but china is different. the best way i have to describe china's economy, to steal a line from yogi berra is one-half market economy and three- quarters centralize control economy. they are big enough. they are powerful enough that they can probably pull this off. we will have to see how it

happens, but that is an important thing for the world economy. europe, on the other hand, is another story. if you believe in the mayan calendar that the world will end in 2012, europe might be the reason for it. it has an awful lot of problems going on. you read about the sovereign debt crisis in the news. that is one problem. that is probably the least problem that they have. the second problem they have is most of the banks are undercapitalized. they need to increase their capital and as a result, they cannot make the loans needed to expand the economy, and that is a big concern, and banks are bigger in europe than in the united states, much more prominent in terms of driving the economy. the third most important part is the fact that they are really going into a recession, and it will not be as big a recession is what occurred in 2008 and 2009, but it will be more important in terms of downward movement because they are in a much worse position.

germany is doing very well with an unemployment rate of 5%. the lowest it has had since unification, but other countries -- spain, their unemployment rate is at 23%. that is what the united states was like back during the great depression. as a result, where they are in terms of outlook is europe has an awful lot of problems to work out. and germany is not necessarily the savior. look at this chart here and focus on the blue. this is an example of how exports affect any economy. in the united states, we export goods to europe, but it accounts for just 1.4% of our gdp. it is a small portion. china, it is about 5%. germany is 21%. germany needs the rest of europe to perform well and get out of this recession so that they continue to expand as an economy.

germany has a chance of going into recession, and it may very well happen. on a more upbeat, california. california is doing quite well. i like the start because it shows how california is doing relative to the united states and relative to texas. we kept hearing how great an economy texas had. but you can see we are on a much faster pace than the united states and about the same pace that taxes is at. -- texas is that. but they do quite well for the fact that their largest employer is the federal government. in a recession, the federal government does not lay off people. the second largest employee -- employer is the state of texas. they do not let up people. all the support organizations that work with those people to knock have the financial

situation than we did in california or the rest of the united states were corporations were laid off people. but one of the most attractive things about taxes is that realistic is very cheap. austin, texas, is the most expensive metropolitan area. you want to know what the median price of a house is there? want to guess? $194,000. and i'm rounding up. it is very cheap. as a result, a lot of employers that need low-cost workers are moving to texas. that is one thing they are benefiting from. you can see on this list here, this is the 12 top changes in payrolls state-by-state. california is no. 7, and right above it is taxes at no. 6. but look at all the states above us -- texas, wyoming, utah, north dakota. what did they have in common? 200 years ago, it was swampland

and dinosaurs died there. it is either oil or gas. california is in a much better position. we have a far more diversified economy. agriculture, manufacturing. information technology is extremely strong. we have large ports that export to asia, the growing area of the world. most importantly, california has a highly educated work force. if you are looking for a job going forward, you want to have high education. that is what will be needed. let's quickly go over some investment ideas. here is a view of the stock market during the last year. we started the year at 1257, ended the year at 1257. they call it the roller-coaster year. start in one place, come back to the same place, but there were some thrills on the up and down. in terms of relative investment performances, you can see when we look at different markets around the world, the united

states was able to squeak out a small increase, and that is because of the dividends on the stock market. what we are calling ourselves is the nicest looking house in a not so great neighborhood. but consider where we were two or three years ago. the analogy was not with housing. it was much more like we were the nicest looking horse at the glue factory. we have really improved an awful lot. that is the the my want to drive home -- the economy is on a nice upward trajectory. last year, the surprising part is that bonds were one of the great performing sectors of the market. last year at this time, interest rates were at record low levels. who thought they would fall even more? well, they did. treasury bonds fell the most, but the bonds were most people invest their portfolio still had solid returns. which of these choices do you think have the best performance over the last 20 years? stocks, bonds, oil, gold?

personal residences, or real estate investment trust? you can see thatreit's had the best performance of all. wealth created in holmes is used by most americans for their retirement. they buy a house, raise a family. family moves out, they downsize the gains they receive from the house or planned into retirement. i did not work out to be nearly as good as many other investments, especially when you take into account inflation. you can see that the gain is very small. what if we add in what people do with transactions for their own personal accounts in terms of purchases for mutual funds? you can see that the return is not nearly as high as what one probably needs to retire. that is an important point i want to make. when you are looking at your investment portfolio, you need

to think about other alternative investments. you need to look at something else going forward. of course, this is what happened in history. what is going on in future is something different. you do not use the rear view mirror for your driving, but you need to look at the for alternative investment to increase your wealth. in terms of the bond market, we can expect interest rates to continue to move down. treasuries will be viewed as a safe haven, so those rates will stay quite low. inflation is under control. and you need to look at certain corporate bonds, high-yield and municipal bonds. this is why high-yield as attractive. agree line shows the yield above the basket of treasuries. you can see it is about the average level it has been since the late 1990's, but look at the red line -- the default level is near the lowest levels. on a risk/reward basis, owning high-yield funds are an attractive place to be. equities is something we're very excited out. we have been excited for two or three months. january has been off to a good start, but the profits many

people have made in bonds are starting to move to stocks. let me show you the charts. in terms of metrics used to determine whether stocks are cheap or expensive, this is probably the most popular one in terms of the forward p/e ratio, and you can see it is below the long-term average. many stocks are relatively cheap. this looks at the earnings yield and compares it to treasuries. it is at record highs going back 50 years. some people like to compare it against corporates -- record high for the last 30 years. this is my favorite one of all -- the yield you would receive on a stock relative to a 10-year note on almost at the s&p 500, the dividend yield on the stock is much higher. think about it -- over 10 years, the bonds will mature, no capital appreciation. over 10 years, you will probably find some capital appreciation in that stock. just to end with a couple of

conclusions here, that we continue to expect market volatility, but it probably will not be as severe as last year. that there are opportunities in the bond market, and you still need an allocation to bonds, but you need a portion of your portfolio safe. it will probably be a very good year for equities in the united states, not so much in europe. the important thing with your portfolio is that you need to stay diversified. thank you very much and good luck. [applause] ." >> 90. now, we will invite our mayors to the stage to tell us about their priorities, all looks, and priorities for the city. jim gardner will moderate a discussion. he has a number of questions. i remind you, if you have questions, hold your cards up. we will gather them. think of the now, and we will get them up to jim.

each mayor will speak for a few moments, and then jim will lead the discussion. since oakland is the host city, mayor quan is gracious enough to allow mayor lee to go first. please welcome gregory adams, president of tiger foundation -- kaiser foundation health plan, a highly respected leader in health care. greg adams. [applause] >> thank you, mary. just a few modifications to your statistics. kaiser permanente in northern california actually has 65,000 employees, 21 medical centers, and we actually have about $700 million a year in our community benefit programs. also, i just wanted to note that one of the eliminates -- eliminate -- the lemonades in

open was the new kaiser permanente part, and if you have not had an opportunity to see it, you really should. kaiser permanente is pleased to be partnering with the san francisco business times, the host of this very important discussion. the issues we face as business leaders and members of the community provide us with a unique opportunity in the coming years and many real challenges. it is vitally important that we stay connected and informed so that we may continue to build a vibrant bay area economy. as one of the region's largest employers and the largest integrated delivery system in the country, our reason for being is simply to improve health. we exist to provide high- quality, affordable health care services and to improve the

health of our members and the communities we serve. in fact, we are proud to provide care and coverage to many of you in this room. i know that as business leaders, you are probably all concerned about the affordability and quality of health care as you assess and seek to understand the impact of health-care reform. be assured that kaiser permanente is committed to quality and affordability and that it is at the center of our mission as an organization. in addition to staying true to our mission and core values, we remain committed to working with all of you to create a robust local economy and thriving communities. the most visible demonstration of this commitment is the three new medical centers that we have under construction in oakland,

san leandro and red with city. these symbolize our significant investment in the health of this region. now, it is my honor to introduce a man i believe shares our commitment to a strong, healthy future, san francisco mayor, ed lee. [applause] he was sworn in on january 8 of this year as the 43rd mayor of the city and county of san francisco. lee is the first asian-american mayor in san francisco's history. prior to his election, while serving as interim mayor, he championed balancing the budget, keep sanford cisco safe, solid, and successful by reforming city pensions, focusing on economic

development, job creation, and public safety as his top priorities. they year lee -- mayor lee has worked hard to keep the economy and economic recovery on track, to create jobs for residents, and everything to support a thriving economic climate. during this term, he has said that he will keep his focus on economic development and job creation, taking responsibility for building san francisco's future and making city government more responsive, efficient, and accountable through innovation and technology. .wr? in 1989 as an investigator for the city's first whistle-blower ordinance. he also served as executive director of the human rights commission, director of city purchasing, director of the department of public works,