cup experience. one s f is mobilizing san francisco's corporation and is citizens behind the many many community and legacy benefits of the america's cup and there are many. cruise ship terminal infrastructure projects and so when you become a one s f partner you will drive that local effort and help provide the funding support and there are so many exciting ways you can become aligned with the cup this exciting year and so one s f of the america's cup organizing committee and really the mayor will say more about that and robert half international i have to thank them for helping me find my great business manager this year just on the side and i wanted to thank randal my second who's regent vice president of mice executive international and they help us with our staff and talent and that has a lot to do with this today and so thank

you for profile staffing service scefers through finances, and legal technology and staffings and we u.s.a. them all the time for our creative as well and webcore builder and is what aren't they building and we want to thank peterson and shelly doury who's one of the senior executive's in the web cor community and they built the beautiful oakland cathedral and acacademy of science and certainly at work on mass coney center expansion the early work on the warriors a marine eye and so many iconic projects in both northeastern and fortunately and southern california and wells fargo such an integral institution and part of of the

fabric of our society and vaginal foalgee president the bay area region together encompassing this whole wide region for wells far going and we are soon going to hear from tim quinn written economist from wells far go and going to get some insight from him and a major focus and this says so much about the strength of our economy and the economy is small business lending and really promising news and 2012 wells far go expended scene billion dollars in that now loan commitments to small businesses across the united states over 30% in 2011 and that is great news so thank you wells fargo and many thanks to our partners in associations who always help us in promote things event it takes a villages to market deimagine. >> joseph markenson, md: and new

president and c o oavment bob electric sway and president and c o e dennis callahan and executive director dave metcalf, e c a karen inc.,el and inner city advisers jose conia and typely going to have to forgive me if i miss some of you and so you can send me another or someone else will help me when they get up here and so welcome to the public officials in the room. supervisor carmen chu and scott wiener and supervisor eight district san francisco monique myoand executive director port of the san francisco and general forerodney phoning, president of s f planning commission and, from the city of oakland. deana santana city mr., fred blab below assistant city

administrator robert bert bra burn director on the board and councilmember knoll gallow district five. city attorney, barbara parker, debra ally smith director port of oakland so we have our two port directors in the room which, is wonderful and if i miss someone please forgive me or come up and harass me about it latter. we had a. q. year at the business times, i'll say in 2012 and everything is up, print six declaration, web audience one .2 million page views a month and growing advertising is up and so far so good in 2013. we made our first month, all right so that is always a good way to start the year, so. i hope you subscribe. i hope you also receive all of the digital information the expanding array of information we send out in that way if you don't subscribe today, you can save a little money if you see our

circulation folks just for thank you going for being ore we will give you a book of list and you have access to the premium content resemble and follow up to drop your business card on the business times table you can draw for a 200 doctor gift certificate and feel free to tweet any information from this morning event and it's hash tag s f o mayors and it's up on the screen. so back to the program we really do love these two cities, each of them in their own unique way and the surgery because they are sirengee synergy and the way that they impact each other and the two mayors where long time friends and know they are competitive but they are very good freeness and so we have asked each mayor to send his or mer vision for their

city and is there are priorities and challengeses and what are they doing to improve the climate for business and how are they working to bring list business to the cities or prevent them from leavings and encourage future development and how do they week together so before we get to the mayors, we are going to get some expert insight on the economy, the first look at the real estate outlook and then a general economic for cast and the financial market and we will get a look at what is in store for 2013 and once we have heard from the opening sparkes we will get into our conversation with the mayors and then end at ten and so lets get started and let begin the program with a look at the real estate outlook with our long time partner dave crest man who's executive managing director at cornish and carey commercial new mark night frank and dan has been actively

engaged in as a brother in the sales and leasing of commercial real estate in san francisco for 30 years and he knows every single building i swear i walked the streights with him on sunday and whoever was in it or owned it. and more recently he managed retail giant mazecies.com and among many many transaction in the pass year please welcome dan crest man: (applause) . >> thank you mary and thank you to the san francisco business times for continuing to cover our industry i would say better than any other publication until the bay area. mayor khan, welcome to san francisco and welcome mayor lee. thank you again for participating in our annual for cast breakfast and happy valentines day everyone and i would like to wish my wife and daughter a happy value teen's

day as well who are here with me as well. now my career i wanted to start tout by saying my career has been spent tracking the traditional fire-based economy of finances, insurance and real estate. and, monitoring it's effect on the occupancies and values of commercial real estate. as we repeatedly seen, major job cuts and permanent down sizing are continuing in cities across the country. the fire-based economy we have known over our lifetime is rapidly shrinkings and trans forming good a new ice based economy one of innovation, culture - and education. innovation along with it's partner collaboration are being reflected in the explosive growth of the tech sector for each i couldn't engineer hired by pandora or twitter a

multiplier effect occurs with job openings create for eliminate oh, mow drivers bare resist at a asks and yoga instructor and is personal finances gore g u r u's and so as we have seen as multimillion dollar facilities being created on both sith of the bay and parts of the rising sports culture tour which we have an abundance of in pot of our cities education is being manifested by the strong and growing influence of our public and private universities in tandem with our expanding healthcare sector. in oakland in 2013, oakland will have three major projects under way for over $2.2 billion surpassing san franciscotion current healthcare construction.

we will get this keep it moving here ... it's a little the technology that we are talking about ... there we go. okay. office space previously used by the shining fire sector is now being converted into more efficient and open collaborative space forts ice users. here, we see pack bell's 680 folsome going from 300 square feet per employee in 195 to one 30 per employee in 2013 for macies.com and now moving on to the market stats and in 2012. office vaguey was were split with the o oakland v v b moving up to 17.5%

in 2013. continued command for high-tech space in fraction will push vacancies to lower single digit while oakland will benefit from nonprofit and rent sensitive tenants migrating across the bay. increasing 30% to $52 and 75 cents while oakland rents remain livable flat at $31 and i didn't cents look for increase in both markets in 2013 and this is a that is right that i constructed between year ago and it continues to hold true today. san francisco rents have been running in tandem with the ice based economy for some time and as you can see our current tragedy geek free doesn't reflects the.com era we saw 20 year ago. sealings force was the mark maker in 2012 with one .3 million square feet of new

leases signed. ask.com and pandora continues to set the stage for innovative tenants span expanding in oakland. office sales in the bay area courts of record recovered substantially with over $6 billion of transaction in downtown san francisco and 10010 merchandise sale least back of it's san francisco 5012 head quarters san francisco projects represent or 200 million square feet. in pre-leased to single user ice tenants while 2,222nd and five thrive mission are scheduled to break ground later this year with escalating represents triggering new office instruction construction in san francisco oakland's turn to build is around the corner now fraction's mid market is part of the city's most significant public transit corridor in 5012 the building at the edgy

intersection of sixth and market and also hometo mayor lee's election head quarters was leased by benchmark capital from the not to edgy sand hill road in pal low alto we have seen mid market morph from michael douglas and carl mailed den chasing bad guys to twitters 2012 move into 10th and market and now, onto doll bee sounds one million dollars acquisition of ninth and mark along with squared 250,000 square foot least at 11th and market new apartment construction continues as well this crescent heights high rise at the tenth and market and one money hundred van s into 400 apartments with unlimited views. now while san francisco has long 'em braced it's history igpublic transit

the city is moving swiftly from analogue to dig at that time the one .6 billion central subway is transforming land use along the fourth street corridor with the proposedded corridor moon plan setting the stage for the neck decade and looking further into the future the cal train yards at fourth and town send also known as the north end of silicon valley may under go under ground rails and mixed use towers up to 400 feet in height similar to broad gate station in london. now, here are the names of the inshat vattive tech firms recognized around the globe and head quartered in san francisco christen and brix retail and software in the cloud to digital media and online lodging governor pairy would

give his it's to have any one of these to move to texas and but don't count on it behind these are other tech firms and spin offs from bred says source such as twitter and paypal, online directorsy and is on demand transportation all head quartered right here in san francisco looks like a tech bubble you might say, well no doubt there will be failures in the future but new opportunities will easily be backfilled by the dna of innovation now etched in san francisco's economy these firms and more, will provide access to a mobile mercantile network of over 5 billion consumers in a few short years and the magnitude of the upcoming change to the bay area will be stung. we are still in spring training. once again, thank you mayor khan and mayor lee and we that i thank you for

continuing to promote the company that is make it fun to live and work in our respective cities. thank you. (applause) thank you dan those are some great visuals. let's see, i got a couple of more names so, to acknowledge for being here oakland city attorney barbara jordan oakland city counsel. pat concern ham. oakland port commissioner instead of butt inner and bryan parker and deputymary sandra sum sum. so, that was wrong sorry. mayor khan, you are going to have do me better on that. so, now, for a look at the

economy and financial markets broadly and also, drilling down into the region we are delighted to have tim quinn lynn an economist with wells fargo securities to she had light on what the future hold tim quinn lynn provides analysis on financial markets macro economic developments in the mainly economies in the world he writes for wells fargo monthly economic reports these are great report if you get them by-the-way, and provides regular updates on industrial production, business spendings and manufacturings and tim has flown across the country to be be us and so we are so delighted and so please welcome from wells far go tim quinn lynn economist: . >> thank you very much for having me here today. i have got about ten minutes to spend with you and in that time, what i would like to do is sort-of

describe some of the big challenges that you the united states economy faces right now and then kind-of lay out wells fargo baseline forecast for where he where where we see thing headed for the overall united states economy and at the end of high presentation i brought as me some terrific slides on the local regional market specific to real estate but only a great fool would use those after the presentation by dan that we just witnessed and so i'll probably concentrate more on the united states stuff and not impasse pipe hive and so we begin here with this graph the federal budget surplot plus or deficit. obviously it's been some time since we have run anything like a significant budget surplus we went into the recession carrying a farrell substantial deficit and obviously that really ballooned and got much much worse and what we are facing now are really the

biggest bulletin deficits that the united states economy has faced since the second world war we are moving in the right direction it's getling smogger and it's still a farrell daunting challenge and this is what was westbound bend the whole fiscal cliff last year and we ended up with an 11th hour deal to avoid the worst of the fiscal live kcliff and i'm not going to read all of the stuff on this slide but basically what we got was tax increases that effect the working poor primarily and the very affluent and not really not much of an impact on the middle class and you can may be have your own political opinions about that but the spending cuts didn't really take much effect at all. the spending cuts are now poised to go into effect march 1st and to make thing more interesting we run back into the ceiling debt much later and that rolls

up into the fiscal cliff 2.0 in how the government tempts to deal with it. so you may ask yourself we have a portion of the tax increases went through and who knows exactly what congress is going to but it's probably a pretty good guess that we get to the very last minute right before the march 1st effective gate date for the spending cuts and then we get some other short-term extension to add to this made for tv drama that they seem so fond of lately and you wonder where does it get us long term and how are we able to close the gap here the congressional budget office has looked at what they consider to be the most likely outcome of the ongoing negotiations which, is a marshal implementation of these spending cuts and what you see here are two lines. the top line is out lace as a percentage of gdp or government spending as a

percentage of gdp and starting today and going out through the end of 2022 and this is a forecast for the next nine years and going below that is rather a new as a% of gdp and what you take way here is what are we dealing with this budget deficit problem for some time if there is a good side to that, if you can continue to grow an economy, even with a budget deficit, what you are looking at here is gdp but not the way that you are used to looking at it more often than that phot what we talk about d g t we focused on the economy quarter growth range and whether it grew during the quarter this teems you in terms of a absolutely level base basis and reason i'm showing it this way is because for all four quarters of last year the overall economy was better than the it was before the

prerecession high water mark and we have turn the quarter into a new expansion and if it didn't feel that way it that is to do with this the none farm payroll and each bar here represents a single month's change in the total number of people who have a job and you add up all of knows jobs that was loss during the recession it's 8.8 million people and we have only created five and-a-half million total job and that leaves us with a deficit of three or so million jobs and we are cranking out more in terms of goods and services but we are doing it with 3 million fewer people in the workforce and is to some extent that is why it may not feel like a new cycle or why if you try to tell somebody we are no longer in recovery but in a new cycle expansion they want throw a pie in your face because it doesn't feel like that to them. so where are we headed from here this is gdp the way that you are used to seeing it and the in the fourth quarter

for when which we have data up here the government contracted at a one .0 analyzed rate. and didn't tdon't worry that we are slipping down into contraction that is the best looking contract actual growth that you will see it's slower government spentings and is a slower pace of inventory building and when you look at real drivers of economic growth we are doing a lot better than whereas quarter would indicate and if you look at the forecast here we are looking for two% gdp growth in the next years and so how do we get there and what are the various drivers of that and the first case is that residential construct construction is going to help and that is what got us into this mess so it may seem counterintuitive this is the most macro measure i can use to show the residential activity across the country and obviously this fell off the cliff during

the recession and has not meaning fully retraced ground during that time period what might be useful is to think about if this is the demand for new homes what is the real -- i'm sorry the supply of new homes what is the demand for it how many new homes do we really need and nor to get a sense for that i look at this data series from the united states census bureau and this is house of information and if you are young couple getting a first house or an individual who's you know, living in school and getling their first detriment ask a forms the horizontal line going through there is the average from 1961 to 2,000 and leaves out the last deck a i did ask so it says how many newer homes do we really need here and it's one and a quarter million and so may be between one and a quart million and one and-a-half million is where we aught to be

and so now i'm going to backup and go to the previous slide and if this was penciled in here it would be a horizontal line through this graph and we would find that we were building way too much at the height of the bubble and so where are we going from here we are going back to one and a quarter or one and-a-half million or so overt course of next five years and considering we have been at 600,000 or so, if we go to one .2 million that is a double in the pace of reconstruction activity the and twice as many framers roofers and home inspector and is then that has a booying fantastic on the overall economy having said that i'm not living with my head in the sand here i recognize that a lot of markets are still suffering a little bit and this graph show you's you the change of value in home price from their local market peak to where they are at present the case sowler

composite and san francisco is halfway through the pack there down to about 33% and so whole values are still off from where they were before but if you look at where we are from the low point until where we are today, san francisco is looking a little bit better and oakland is not a member city and they randomly take 20 cities that are plead broadly representative of the housing market and san francisco is the second line on here and posted as one of the naysest paces of recovery and so we get some help from residential construction and we also get help from securelier spending this is what i'm showing here and this is the debt service ratio and it's an interesting concept if says if you add up my mortgage payment and car payment and any other kind of consumer debt that i carey and how much of that is a% of personal disposable income and where we are at relative total whereas 30 years that service ratio is about as low

as it's been during anytime at that period and is there any reason that the fed tries to lower interest raid and rate and drive the cost of housing and if you look at the graph on the left hand side the blue portion is the household real estate value and not surprisingly it's down and hasn't really come back much in the last couple of ears and the rusty color on top is the financial assets and we have retraced a lot of the lost rounds in the recession people's 401 k's have come back and so in 2013, we are probably back to pre-recession level of household wealth respondent right-hand side there, you see the retail fails and personal number are hanging in there and that aught to support a halfway decedent

growth in consumer spending and that is what this is showing here may be two% growth in securelier spendings and so you get some help from construction sector and consumer spend something and what about businesses what role do they play in this, gdp growth in the future to the expend it has and this is a look at cash on hand and the point point is that businesses are swim swimming in cash but not spending it. and this is a look at business spendings and what you find is that in the early part of this recovery when consumers were you know, hiding under their beds and you know worried about the recession it was businesses that were really spending rather aggressively they had just laid off 8 million people and looking for ways to become more productive through the implementation of the better use of it can technology and capital investment and this period right after the recession, businesses were spending a lot and sort-of loss a lot of mommentum here

and not completely convinced that they have lots the way and they are not going into hiding either. this line the biggest take away looking at this graph may be legible from where you are sittings and i'll try do what i can to call out the lints that most people care about g d p is two% it's a little weaker than that in the opt year because you get a slower start because of the tax that weighs on consumer spending in the first couple of quarters inflation is more or less in line with the fed's target rate of roughly two% and i i think we do a farrell decedent job with our forecast and you can tabling me into talking about upside or down side risk here with you there is one line federal funds target rate and i feel confidant about our forecast for that line because the federal reserve is