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John Husing, Ph.D. Economics & Politics, Inc. & Chief Economist, IEEP

Inland Empire Economy. John Husing, Ph.D. Economics & Politics, Inc. & Chief Economist, IEEP. Three Step Growth Process Based On Interaction Of:. Population Preferences Dirt Prices. Why Southern California Population Grows. People Prefer To Live Near The Coast.

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John Husing, Ph.D. Economics & Politics, Inc. & Chief Economist, IEEP

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  1. Inland Empire Economy John Husing, Ph.D. Economics & Politics, Inc. & Chief Economist, IEEP

  2. Three Step Growth ProcessBased On Interaction Of: • Population • Preferences • Dirt • Prices

  3. Why Southern California Population Grows

  4. People Prefer To Live Near The Coast

  5. As a homeowner, would you prefer to move closer to work if it involved a townhouse or condo?(I-15 & Sr-91 Commuters, 2008) 87.5% No Answer stable over 5 years As a renter, would you prefer to move closer to work if it involved a townhouse or condo?(I-15 & Sr-91 Commuters, 2008) 72.3% No

  6. Lack of Land or Inadequate Zoning Drives Up Coastal Prices Forcing Home Buyers & Renters to Move Inland Exhibit 20.-Home Prices, So. California Markets Median Priced New & Existing Home, 2nd Quarter 2013 $610,000 Advantage Median All Home Price San Bernardino County Price $454,000 $247,000 $428,000 $371,000 $191,000 $165,000 $263,000 $239,000 $215,000 $189,000 $24,000 San Bernardino Co. Riverside Co. Los Angeles Co. San Diego Co. Orange Co. Source: Dataquick

  7. BUILD FREEWAYS & THEY’LL COME Don’t Build Them & They’ll Come Anyway! I-210 Delayed For 1980-2007 Years San Bernardino County went 900,000 to 2,000,000 people

  8. Stage #1: Rapid Population Growth • People forced to move inland for affordable homes • Population Serving Jobs Only • High Desert & I-215 South are current examples

  9. Commuting

  10. Business Prefers The Coastal Counties

  11. Not Enough Land … Industrial Prices Much Lower In Outlying Areas Exhibit 13.-Industrial Space Costs Differences Southern California, Sub-Markets, March 2013 Price Per Sq. Ft. 156.6% Price with 20% Cubic Factor Difference . $0.78 107.2% % Difference $0.63 $0.56 84.2% $0.48 $0.38 $0.33 $0.30 $0.26 Inland Empire Los Angeles Co. Orange Co. San Diego (non-R&D) nnn=net of taxes, insurance, common area fees Source: CB Richard Ellis

  12. Blue Collar Jobs Important To Outlying Areas 37.9%

  13. Outlying Workers Will Work For Less Not To Commute Exhibit 82.-Median Wage & Salary Percent Difference Inland Empire vs. Coastal Counties, 2010 459 Common Occupations, Under $70,000 Weight Median Pay Percent IE Pay Is Lower $35,173 $34,656 $34,089 $33,240 5.81% 4.26% 2.55% 0.0% Inland Empire San Diego Los Angeles Orange Note: Occupations in common weighted by Inland Empire Jobs Source: CA Employment Development Department, Occupational Wage Survey, Economics & Politics, Inc. calculations

  14. Stage 2: Rapid Industrial Growth

  15. Jobs:Housing Balance lmproves IE Western Edge is today’s best example

  16. Step #3 Higher-End Migration Upscale Housing

  17. Skilled Workers Migrate InlandFor Better Homes

  18. Condo Living Becomes More Prevalent

  19. Higher-End Workers Added

  20. Outlying Workers Will Work For Less Not To Commute Exhibit 98.-Median Wage & Salary Percent Difference Inland Empire vs. Coastal Counties, 2010 138 Common Occupations, $70,000 & Up Weight Median Pay Percent IE Pay Is Lower $94,806 $94,768 $93,489 $86,806 9.17% 9.22% 7.70% 0.0% Inland Empire San Diego Los Angeles Orange Note: Occupations in common weighted by Inland Empire Jobs Source: CA Employment Development Department, Occupational Wage Survey, Economics & Politics, Inc. calculations

  21. Stage 3.- High-End Companies Ultimately Follow Workers

  22. Jobs:Housing Balance Achieved Southern California Avg. 1.20 Jobs per Occupied Dwelling

  23. Secondary Tier Economic Development … Increase The Economic Base! Primary Tier

  24. Current Economic Status & Issues

  25. After Losing 8.74 Million Jobs …U.S. Job Creation Is Crawling Back Without Loss of -682,000 Government Jobs 7,495,000 Growth or 85.8%

  26. 26th Largest U.S. State by Population

  27. Ethnic Composition

  28. Relatively Young Population

  29. Share Stopped EducationHigh School or Less BA or Higher Bay Area: 42% Inland Empire: 18% Lake Elsinore: 16% 37.9%

  30. Why Not High End Jobs? Labor Force Education Dictates Type of Growth Possible

  31. Stagnant Incomes for 23 Years Lake Elsinore $61,250 +7% -8%

  32. Job Growth vs. Other CA Areas

  33. Continuous Job Growth For Decades,But . . . Exhibit 3.-Wage & Salary Job Change Inland Empire, Annual Average, 1984-2013 61,533 59,275 56,467 49,850 46,008 44,692 41,025 41,483 40,692 40,567 38,325 37,642 36,775 35,467 36,533 33,292 30,050 28,925 23,083 23,025 16,917 9,758 6,342 4,575 4,633 2,508 (17,325) (46,208) -146,400 -11.4% (84,892) Sources: CA Employment Development Department, Economics & Politics, Inc. 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e

  34. Unemployment Falling, But High

  35. Worst U.S. Metropolitan Area Unemployment Rates

  36. Share of Underwater Homes Plunging

  37. Poverty Lake Elsinore 14.5%

  38. Water Issue Delta Smelt 20 Years Water Supply To Build Santa Ana Sucker Replacement Water Cost: $1,862,000,000 If Water Can’t Be Found … Can’t Build Large Projects

  39. CA’s Regulatory Environment CEO’s: California is the Worst State for Business

  40. Status of Sectors Capable of Driving Recovery

  41. Logistics Flow of Goods

  42. Truck To Inland Empire

  43. Sophisticated Warehousing Operations

  44. Port Container Volumes

  45. Fulfillment Centers(John & Dan) Sales Tax Revenue to Cities (1,000,000 SF) ($5 million per year under assumption 50% of Sales Out of California)

  46. 17 Firms Looking For Space (John & Fran) 1,500,000 1,000,000 1,000,000 800,000 to 1,000,000 700,000 to 1,000,000 500,000 to 800,000 700,000 to 900,000 850,000 700,000 700,000 700,000 to 800,000 600,000 600,000 to 700,000 500,000 450,000 300,000 to 400,000 350,000 SizeJobs E-Commerce: 6,150,000 to 6,450,000 SF 5,467 to 5,733 Jobs Conventional: 5,800,000 to 6,800,000 SF 1,850 to 2,092 Jobs Total Potential: 11,950,000 to 13,250,000 SF 7,282 to 7,826 Jobs Average Square Feet Per Job Combined = 1,641 to 1,693 Source: Jones LaSalle

  47. Industrial Vacancy Rate Recovering Everywhere! 2005/2006 2009Q3 2013Q2 Inland Empire 2.7% 12.8% 5.8% San Diego 7.0% 12.0% 9.9% Orange Co. 5.4% 6.5% 3.2% L.A. Co. 2.1% 3.2% 2.0% IE Gross Absorption Back at 12.5million Sq. Ft. But Still Under Its Long Term Average

  48. Inland Empire Logistics Jobs 28% of All Inland Jobs … Jan-July 2012-2013

  49. Health Care

  50. Health Care Jobs: Continuous Growth 700 500 900

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