Pleasanton continues to show signs of a robust economy. Companies are constructing new buildings, and new and existing businesses are making tenant improvements. Similarly, a number of residential projects are approved and underway. All of this illustrates the value of having a Pleasanton location. Based on building permits in 2018 alone, the valuation of development projects in the city was more than $267 million.

Of course, economic vitality is not only measured in building activity. Sales tax revenues are at pre-recession levels, hotel transient occupancy tax revenues reached a high-water mark at over $6.4 million, and many of our companies are reporting their own positive results. The number of jobs is now more than 62,000 across all employers in the city and the revenues from more than 9,700 business licenses - based on gross receipts - were at their highest at $4.3 million for the fiscal year. These numbers, according to Niche.com, support Pleasanton's ranking as the sixth best city in California.

In Pleasanton, our economic development activity offers tangible evidence of financial achievement and a strong local economy. In his recent State of the City address, Pleasanton Mayor Jerry Thorne noted: "I'm pleased to report that our economy is strong, and we are able to celebrate all of our accomplishments as we look forward to more. Seventy-two percent of our revenue comes from property and sales taxes; last year, due to a steady increase in property values, and additional residential and commercial developments, the City saw over $65 million in revenues from property taxes - that's $26 million more than we realized during the lowest point of the recession in 2011 and 2012."

Commercial Activity

The story of Pleasanton as an excellent location for business is well supported by data: Pleasanton's economic health is strong as the city's commercial office vacancy rate has remained at less than 10% - closing at 9.8% at the end of 2018. Pleasanton's narrative continues to be one of robust activity as new business tenants and expanding firms move into available commercial space throughout the city. Pleasanton's amenities include high-quality office and flex space that are affordable relative to other Bay Area markets. Combined with ample parking, freeway and BART access, and proximity to strong housing and labor pools, the city's commercial space has encouraged tenant relocation from the inner East Bay, San Francisco and Silicon Valley to Pleasanton. Tenant demand has been driven largely by a few industry sectors that are well represented in Pleasanton's commercial community: Healthcare & Medical Devices, Business Services, Technology, and Legal, Finance & Insurance.

Much of this movement is in Hacienda, where recent leasing activity serves to offer additional depth and breadth across 650 companies with approximately 18,000 employees. New tenants to the Tri-Valley such as Barrick Gold of North America and Quotient Technology joined the mix, while existing firms such as Dimension Data, Safari Kid, and the Roman Catholic Diocese of Oakland facilitated relocation and expansion as they grow to meet increasing demand.

As well, there was notable office sales activity in Hacienda, reflecting the solid investment value of Pleasanton commercial real estate. Crosspoint Chinese Church of Silicon Valley purchased a flex building for its permanent location. The former Alameda County Courthouse on Stoneridge Drive sold to a new owner which will offer this two-story office building as a new opportunity for users in the market. And Saratoga Center sold to new investors its two-building project in which personalized cancer treatment developer Gritstone Oncology opened its state-of-the-art bio-manufacturing facility in 42,620 square feet of R&D space.

Pleasanton's technology sector sustained its strength, as smaller tenants took advantage of the healthy economic climate to expand their presence in the city and on the national scene. Two leading examples: after getting its start at the i-GATE innovation hub, startup AEye has moved into commercial space in Pleasanton and raised more than $59 million in investment financing for its computer-vision technology for autonomous vehicles. In addition, Pleasanton-based startup Safe Traces, which develops edible bar codes for food safety, has already secured $18 million in funding. These were joined by supply chain software developer OpenText; Workday services partner DayNine Consulting; and recruiting firm Deploy HR's which all secured leases. At the same time, Pleasanton's larger technology companies continued to demonstrate their successful growth trajectories. As two illustrations: Ellie Mae, the leading cloud-based platform provider for the mortgage finance industry, just announced that it has entered into an agreement to be acquired by leading private equity investment firm Thoma Bravo in an all-cash transaction that values Ellie Mae at approximately $3.7 billion; and Veeva Systems has been capturing substantial portions of its total market such that shares have nearly quintupled since February 2016.

Pleasanton's life sciences sector continued in growth mode as several new companies joined established performers to bring life-changing products to the market. Hacienda-based Roche Molecular Systems' new 70,700 square foot administration building brings its campus to 384,000 square feet as it develops and manufactures a wide array of innovative medical diagnostic equipment and tests. TriReme Medical renewed the lease for its flex space in which it produces medical devices dedicated to developing, manufacturing and distributing advanced therapeutic solutions for the treatment of complex vascular disease, while urological solutions developer and manufacturer NeoTract is expanding its footprint with its lease of more than 75,000 square feet of flex space. As well, Gatan inked its renewal flex space for the manufacturing of instrumentation and software used to enhance and extend the operation and performance of electron microscopes, while Natus Medical leased space to continue its work on the diagnosis, monitoring, and treatment of impairments and disorders affecting newborns' brains, nerves, muscles, balance, mobility and hearing. And a host of small companies can make a big impact: Spirosure, a manufacturer of breath analysis devices for respiratory disease, expanded; while three other firms committed to space: analytical instrument manufacturer Purigen Biosystems; medical aesthetic devices manufacturer Solta Medical; and Providence Medical Technology. This pattern in which new companies start up in a small space and then find suitable square footage to expand and remain in Pleasanton is a defining marker of finding success in Pleasanton's business environment.

An excellent illustration of this pattern is the progression of financial software-as-a-service leader Workday during its tenure in Pleasanton. The company has continued to expand rapidly over the past several years, and is now nearing completion of its 410,000 square foot, 5-story building next to the West Dublin/Pleasanton BART station and its connection to the 5-building Stoneridge Corporate Plaza purchased in 2013. Through an excellent design that incorporates pedestrian and site improvements, an entryway to the BART station and a police substation in the parking garage, along with traffic circulation improvements to accommodate employment growth, this collection of buildings and related amenities will be fully integrated to create the company's headquarters campus.

And Workday's investment has served to spur redevelopment more broadly around the Stoneridge Shopping Center. In 2017, investors purchased the adjacent Sheraton hotel and are currently renovating the property under the AC Marriott flag to leverage the travel activity created by Workday's training programs. As of late 2018, Pleasanton-based biologics firm 10X Genomics (which is also an excellent illustration of the 'start, expand and grow' pattern) signed a lease to occupy the building that was earlier vacated by Workday, as 10X deepens its commitment to remaining in Pleasanton and further underscores Pleasanton's attraction of life sciences companies. As well, Simon Property Group, owner of Stoneridge Shopping Center, has purchased two of the mall's anchor properties - the 177,930 square foot Sears and the 172,000 square foot Macy's men's and children's stores - and has submitted an application to renovate and reposition the center to better compete in today's retail market. Additionally, the owner of the adjacent Pleasanton Plaza shopping center has been exploring how to redevelop that site to best complement and benefit from the recent improvements in the area.

The Johnson Drive Economic Development Zone program continues to look toward completion. Following the unsuccessful ballot measure that would have limited the size of individual building footprints within the zone, City staff moved forward with preparing the proposed zoning changes to include warehouse retail and other large format retailers along with hotels/lodging properties, finalizing required environmental documentation, and developing a JDEDZ transportation fee to recoup costs for transportation infrastructure from future development within the zone. In late 2017, a lawsuit was filed challenging the California Environmental Quality Act (CEQA) document that was certified for the project. The City Council - in agreement with Costco - subsequently voted to rescind its JDEDZ approval to prepare the requested additional analysis and review, which is expected to be recirculated for public comment in the coming months, and then reconsidered by the Planning Commission and City Council this summer.

Retail Activity

Citywide retail space vacancy remains low at less than 10%. This is on par with the overall US retail vacancy rate of 10.2% at the end of 2018, and importantly allows some room for new additions to meet the community's ongoing interest in new retail establishments.

Neighborhood shopping centers within the city are benefitting from investment by property owners; one notable example is the facade renovation program at Rose Pavilion by property owner Brixmor to build on the momentum generated by the relocation of Trader Joe's to the center along with several new tenants including Total Wine & More, Pet Supplies Plus and Burgerim. In east Pleasanton, the mixed-use Vintage project added 345 apartments to the city, along with 39,000 square feet of on-site retail offering a CVS, Starbucks, Orange Theory Fitness and independent craft beer purveyor Bottle Taps. The new Pacific Pearl community shopping center at Stoneridge Drive and El Charro Road is now almost fully occupied; anchored by a 99 Ranch Market and complemented by 20-30 restaurants, retail, and service businesses, Pacific Pearl is strategically positioned to attract local and regional shoppers given the adjacent commercial development.

The current retail vacancy rate in downtown Pleasanton is also steadily less than 10% with a few Main Street locations currently transitioning between tenants. Despite the increase in online shopping, downtown Pleasanton retailers are uniquely positioned to provide personalized service and experiences to keep patrons shopping at local brick-and-mortar shops, and the City and Pleasanton Downtown Association work collaboratively to support their efforts and attract patrons to downtown. Two long-awaited projects came forward: with the new building complete, SideTrack Grill + Bar has joined the downtown scene on West Angela Street, and with construction on the new building at 725 Main Street complete the owner is actively soliciting for restaurant and retail tenants. The Clubhouse and Lily's Spirited Dining have brought new energy to the Pleasanton Hotel at the north end of downtown. At the same time, other property owners focused on repositioning and redeveloping their existing tenant spaces, setting the stage for Wild One California Mexican Grill, Uptown Burger and SaltCraft to open last year and for Zachary's Chicago Pizza, Ramen 101 and Patio cafe to open this year. New retail shops such as men's furnishings purveyor Baqchi, Change of Heart consignment shop, and ceramics studio Color Me Mine also expanded the tenant mix.

Construction activity at Pleasanton's auto dealerships continues. At Pleasanton Auto Mall, Mini and BMW are benefitting from their recent upgrades, while construction on a new 83,000 square foot Lexus showroom and service facility is almost complete. On the Staples Ranch site, Chrysler Jeep Dodge and CarMax dealerships are now fully operational and contributing to the City's revenues. City staff continues efforts to attract additional auto dealerships to the remaining auto mall-zoned portion of the property (approximately 15 acres).

Offering additional corroboration of the city's successful commercial climate, Pleasanton-based investment management firm Mirador Capital Partners offered a broader perspective on commercial success. In 2016, the company launched the Mirador Tri- Valley Index (MTVX), a composite index comprised of the publicly traded companies located within the immediate Tri-Valley, to help to demonstrate the value of the region's companies. The Mirador View report shows the index would have annualized total returns of 26% over the last five years as compared to 12% for the equally weighted S&P 500 (data through March 2018); over the last ten years, the index would have returned an annualized 23% as compared to 9% for the S&P 500.

Another measurement by which Pleasanton companies demonstrate significance in our market is capital investment: notably, from mid-2017 through third-quarter 2018, Pleasanton companies received more than $234 million. Leading examples include Fulcrum Bioenergy for its process to make low-carbon, low-cost transportation fuels from household garbage; Bolt Therapeutics for using technology from Stanford University to develop complete cures in numerous cancer models; Unchained Labs for its manufacturing of life sciences tools; ThinkHR for its technology and knowledge applications that deliver human resources solutions; and 10X Genomics for its DNA sequencing technology and tools. In fact, 10X Genomics was named the fastest growing private company in the Bay Area, with a 2-year growth rate of 2,044%, from 2016 to 2018. Notably, such capital investment across early, mid and late-stage companies - particularly in the life sciences sector - additionally affirms the aforementioned pattern that companies can start, grow and stay in Pleasanton.

Residential Activity

From residents who have seen the city grow over many years and want to age in place, to the next generation workforce as they start on their careers, to the families whose children are still in school, we want Pleasanton to be a city which all can call home. To achieve this, having a sufficient supply of housing across a range of types and prices is essential.

Well on its way toward completion is the long-planned redevelopment of Pleasanton Gardens and Kottinger Place senior housing units into a new 185-unit Kottinger Gardens. This project is the outcome of a years-long community task force that sought to address the tremendous need for affordable housing among the growing population of seniors. Phase I was completed in 2017, and residents have moved into the 131 rental apartments; phase 2 will add an additional 54 apartment homes and is currently under contraction, with completion anticipated for later in 2019. Approved in 2016, the Meritage residential development project on the lrby Ranch properties along Stanley Boulevard near downtown Pleasanton is currently under construction.

In addition to amenities such as extending Nevada Street to First Street for better circulation, improving the trail along the Arroyo Del Valle, connecting infrastructure to better serve nearby residents, and preserving the Zia house, the project also allocates 1.64 acres for Sunflower Hill to create a 31-unit community to provide housing for special needs adults complemented by 87-market rate homes. Not only do projects such as these provide updated housing but they demonstrate the community's commitment to support first-time home buyers and some of our most vulnerable residents.

Several infill developments are also underway across the city; these will add a small number of residential units that are designed to fit into the context of the surrounding area. In downtown, such projects are underway on St. John Street, Spring Street and Peters Avenue, all bringing opportunity for new residents to live in downtown. And Ponderosa Homes is now delivering infill developments on Rose Avenue near the Alameda County Fairgrounds, and in the Valley Trails neighborhood, after completing the final phase of its Ironwood development on Busch Road in East Pleasanton.

As a way to broadly inform residents and businesses of all the development activity in Pleasanton, the city's Community Development Department produces a bi-monthly newsletter that provides project location and status along with contact information for all significant projects across the city. The newsletter update is available on the Community Development Department page on the city's website at www.cityofpleasantonca.gov/gov/depts/cd/ .

Economic Vitality Committee Initiatives

Contributing to our city's economic success, the Economic Development Strategic Plan was developed through the work of the Economic Vitality Committee (EVC) and adopted by Pleasanton City Council in 2013. This plan guides the city's efforts in maintaining a business-friendly environment to attract and retain companies.

A key action identified in the plan is to solicit feedback from businesses in Pleasanton, with a particular interest in learning where improvements might be recommended. To date, two business needs surveys have been conducted, first in 2012 and again in 2015. Results of this research indicate businesses in Pleasanton are generally very to extremely happy with their location. In both surveys, 91% of the participating companies found the community an excellent or good place to do business citing the city's positive environment, convenient and central location in the region, and friendly people including customers. And more than nine in ten businesses anticipated they will still be in Pleasanton two years from now. The EVC will be conducting the next survey later this year to solicit current insights.

The EVC will also be working with City staff on two initiatives recommended for the City Council's 2019-2020 Work Plan. One is to identity opportunities to provide additional support for doing business in Pleasanton; the other is to expand and grow the City's life sciences sectors. With the Council's approval, programs will be developed and shared with the city's businesses.

Through efforts such as these, the EVC continues to monitor trends and identify issues in Pleasanton's commercial community to sustain a strong and diverse economic base.

Addressing the Future

As the City of Planned Progress, looking ahead and planning for the future is an integral part of our culture. Managing resources that ensure long-term sustainability for the community is of critical importance to our businesses, and several such efforts were addressed or achieved in the past year.

The City continues to put considerable effort on finding solutions to help address some of our transportation and traffic issues. As one example, through our regional efforts the 1-580 express lanes opened last year and a recent review indicates that travel time has improved considerably along the 11-mile stretch. The City is also actively involved in the Valley Link Rail partnership to extend the BART system beyond Livermore to the San Joaquin Valley, and in bringing to completion the widening of State Route 84 from I-580 in Livermore to I-680 in Sunol.

The city also takes a comprehensive approach to circulation within its own limits. While the spotlight is intensely focused on traffic circulation for automobiles, the city's Pedestrian and Bicycle Master Plan is an important part of the equation so that residents and workers alike can travel efficiently. The goal of the 2018-adopted plan is to create an interconnected safe and comfortable network suitable for all ages and abilities that provides benefits to the entire community.

In 2016, a Civic Center/Library Master Plan Task Force met to create a plan for the future of the city's civic center, library and police station, so that the needs of current and future residents can be addressed in a center reflective of Pleasanton's progressive and robust community spirit. That project laid the groundwork for an initiative that will shape the future of downtown: an update to the Downtown Specific Plan. Since mid-2017, the Downtown Specific Plan Update Task Force has been soliciting community input and working to address the ideas and issues that will create a long-term roadmap for the development of downtown. A draft Downtown Specific Plan and accompanying environmental report are now available for public review on the PtownDtown.org website. Anyone interested can access the materials and information that has been shared throughout the process, offer their opinion and perspective, and sign up to receive ongoing updates.

Pleasanton's economy and business environment is healthy and growing. Located at the crossroads of Interstates 580 and 680, we are home to both start-ups and Fortune 500 companies. We have all the attributes for business success thanks to a highly educated and skilled labor pool, proximity to major markets, access to BART, excellent schools, a thriving arts community, a charming historic downtown, an engaged community of citizens and business leaders, and a progressive outlook that listens and responds to the needs of our corporate community.

So when our community is acknowledged for being an excellent place - such as being included among the 2018 Best Small Cities in California by personal finance network WalletHub.com - we know it's the result of all of these efforts. Thanks to valuable partnerships between the City of Pleasanton and such organizations and individuals as the Chamber of Commerce, members of the Economic Vitality Committee, Hacienda Owners Association and the Pleasanton Downtown Association, Pleasanton continues to be the right address for business.