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Mr. John J. Jermanis City of San Leandro May 31,2000 Page 6 SEDWAY GROUP Real Estate and Urban Economics to benefit the most from the ferry include residential, office and restaurant. The potential for retail related to the ferry terminal is likely limited to commuter-serving kiosks. MARKET CONDITIONS The following sections provide brief overview of five distinct market sectors: hotel, restaurant, boutique/specialty retail, office, and residential. Hotel Annual data on hotel performance shows that average occupancy rates at OaklandlEast Bay hotels (which includes all of Alameda and Contra Costa counties) increased from 71.8 percent in 1995 to 76.9 percent in 1997. Due to the addition of numerous rooms since 1997, occupancy levels have since dropped sharply to an average of 70.7 percent in 1999. Meanwhile, inflation adjusted average daily room rates in the OaklandlEast Bay region have risen from $86.35 in 1995 to $104.77 in 1999, an increase of over 20 percent in five years. Within the overall OaklandlEast Bay hotel market, the primary hotel market area pertaining to the Marina is defined as the area surrounding the Oakland International Airport, including Hegenberger Road, the Oakland Coliseum Complex, Alameda's corporate parks, and the San Leandro industrial parks. While the main sources of hotel room demand consist of corporate travel, groups and airline crews (57, 20 and 13 percent, respectively), a sizable portion of demand in the past few years actually represents turnaway business from San Francisco and Santa Clara County. Including the Marina Inn, there are 12 hotels with over 1,830 rooms within the primary market area, as detailed in Exhibit 1. Most of these hotels (8) are limited service products ranging from 61 to 152 rooms and room rates from $65 to $179 per night. There are three full-service hotels with 189 to 362 rooms, all of which are located on Hegenberger Road. None are newer than 14 years old and room rates range from $95 to $219 per night. There is one extended-stay product, StudioPlus, with 88 rooms, that opened in August 1999 in Alameda. Room rates are $99 per night. A secondary market area has been defmed due to the waterfront character of the Marina. In addition to travelers who might stay in the Marina area due to its proximity to the airport, there is a group of travelers who prefer a waterfront location. This market area is defined as the East Bay shoreline running from Berkeley to San Leandro, including Jack London Square and the Oakland Estuary shoreline. There are six hotels in this secondary market, including the Marina Inn, with a total of 1,187 rooms, as detailed in Exhibit 2. The newest product in this market area is the Executive Inn Embarcadero Cove, built in 1991. Room rates range from $65 to $350 per night. As a result of strong economic conditions in the East Bay and a shortage of hotel rooms in San Francisco, there has been a significant increase in hotel rooms in the East Bay in the past two years. Over 260 rooms were added within the Marina's primary market area during this period, a 17 percent increase in supply. The development trend continues as there are several hotels that are either under construction or in the planning stage throughout the Oakland metropolitan area (defined for the purposes of this report as the inner East Bay area stretching from Hayward to Emeryville), as detailed in Exhibit 3. Currently 925 hotel rooms are under construction in five projects and another 485 rooms in three projects are in the planning stage. In addition, five projects in the preliminary proposal phase could total an additional 800 to 1,000 rooms. In all, at least 2,200 rooms are in the supply pipeline,