November/December 2014 • $5
Multifamily Boom... Meeting the Challenge This is NOT Your Father’s Office
Acoustics: Tenants Face New Challenges
Buildings Must Be Healthier Says Physician
Designing Healthier Hospitals
Features Good Homes Matter to California’s Future Prosperity A recent college grad — unemployed — is living on a friend’s couch with no hope of being able to afford his own home in the foreseeable future. A woman who works a full shift is living on the edge of town in her car—with her kid. An aging couple tries to survive in a crime-ridden public housing ghetto. Roommates sleep in shifts because housing is unaffordable in cities like San Francisco and Los Angeles. How successful can these people be in life when they don’t even have a decent home? What kind of civilization can we build with so many people without adequate housing? Home Matters.® That’s, in fact, the name of an organization begun in 2013 to address the nation’s growing housing crisis, one felt most acutely in “the Golden State.” In a recent Home Matterssponsored program held at the American Institute of Architects’ San Francisco headquarters, Home Matters CEO David Brown declared that “Our housing crisis is an every person issue.” He meant that everyone is touched by our shortage of adequate housing. Will the talented workers that California companies and organizations want to attract to continue building our great innovative economy come here if they have to surrender half their paychecks for adequate housing— if they can even find it within 50 miles of work? Can we get people to clean and guard our buildings, serve us in restaurants and drive cabs if they have to live six to a one-bedroom apartment in a neighborhood where they hear gunfire pops every night and women can’t safely walk the streets? What is Home Matters trying to accomplish? Its stated purpose is “to make home a reality for all. Home Matters is a national movement designed to ensure that every American lives in a safe, nurturing environment with access to education, healthcare, public spaces and community services. It shines a much-needed spotlight on the larger power of home: supporting people’s identities, protecting and nurturing families, providing essential links to communities, and serving as the base for a stronger America. “The traditional American Dream has lost its relevancy. Today, the pursuit of the American Dream is broader than ever and reflects new and changing American values. Having a physical shelter does not mean that its residents feel safe, that their children get a solid education, that the economy is improving or that individuals and families have the support necessary to thrive. People need more from home. “We need to redefine home and create the New American Dream. We need to change the way people think about where they live. Home is not just about the four walls around us, it’s about the environment that affects the choices we make in life and who we become.” Sound like worthy goals? Check our the Home Matters website at: www.HomeMattersAmerica.com As our package of articles in this issue on the multifamily housing boom will show, complexes and towers are rising all over California, but they fall far short of the need. Only a coordinated effort involving all private and public parties will solve the state’s housing crisis. Henry Eason, Editor (henry@easoncom.com)
If Buildings Could Vote
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5
Better Healthcare Design
Multifamily Boom
10
NOT Your Father’s Office
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20
Report from Greenbuild
Association News
22
Photo credits: cover - center photo – office of Delve Interiors courtesy of Allsteel , ©Neil Boyd. Photo above courtesy of Staples.
California Buildings News Team Ellen Eason, Publisher ellen@easoncom.com Henry Eason, Editor henry@easoncom.com Contributing Editors Zachary Brown, CBRE Bob Eaton, Eaton Hotel Investments Jessica Handy, CodeGreen Solutions David Hysinger, San Francisco State University College of Business Rich Lerner, Construction Consultant Katherine A. Mattes, Real Estate Consultant Larry Morgan, Facilities, SAP Carlos Santamaria, CEES-Advisors
Advertising Information Ellen Eason, ellen@easoncom.com 415.596.9466 © Copyright 2014 Eason Communications LLC PO Box 225234 San Francisco, CA 94122-5234 • 415.242.5244
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5 California Buildings News • November/December 2014
If Buildings Could Vote...
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nly about 42% of the registered voters in California went to the polls in November, and none of them were buildings. In spite of this record-breaking low turnout, real estate fared quite well. It seems that the voters found a comfortable place in the middle between the interests of homeowners and business. And when business does well, real estate does well. All of the business organizations that I polled sent out notices after the election, bragging that their choices on candidates and ballot measures were consistent with the election results. This was true in both the San Francisco area and in Greater Los Angeles. In San Francisco, the results were spot on with the SF Moderates Voter Guide, as well as the endorsements from the SFDCCC, Chamber of Commerce, BOMA, The Alliance for Jobs and Sustainable Growth and SF.Citi, the local tech advocacy group. In spite of its strong progressive leanings, San Franciscans approved an increase in minimum wages, but stopped a sugar tax and a hefty real estate transfer tax. The transfer tax, in particular, intended to stop speculative flipping of residential properties and would have been unintentionally punitive to many property owners. Even though this was directed at residential property, any tax like this could lead to something similar on commercial property. So a sigh of relief there, for now. Other measures that passed in San Francisco were Prop A, which will create a replacement general obligation bond to produce funds to make capital repairs and improvements needed for its transportation infrastructure, and Prop B, which increases funding for transportation each year based on population growth. As transportation is a critical issue for downtown real estate, hopefully this will help to discourage those rooting for congestion pricing. The minimum wage increase in San Francisco is the beginning of a movement that should spread throughout the state. The timing of its impact on commercial buildings will depend on whether building services are provided by union workers or not. Those with non-union workers will see the increase first, and there is likely to be an increase in union wages later on as a result. There will also be pressure on small business tenants, who are likely to increase wages for their lowest paid workers. As a result, our tenants will be hit twice—once at the building level and once at their own
By Kathy Mattes payroll level. I predict that only the strong will survive. At the state level, Props 1 (ensuring a reliable water supply) and 2 (creating a rainy day fund) were vitally important to business. Certainly, ensuring an adequate and consistent water supply is a big issue throughout the state. BOMA Greater LA reported that this was their most important issue. The impact of the current drought will hit the Central Valley the hardest, but that will quickly spread to all major metropolitan areas, like San Francisco/Oakland and Los Angeles to San Diego. Buildings should expect water prices to continue to skyrocket. BOMA Greater LA is a member of JobsPAC (LA Chamber of Commerce) which has won bipartisan approval for its efforts to support pro-business candidates running in open legislative seats. JobsPAC reported that “Candidates from both parties who support job creation through private sector economic growth were generally elected by solid margins.” The 2014 legislative elections were important to the business community because of the change to the state’s term-limit law, which now allows a member to serve 12 years in one house. To that end, 75% of the California Assembly seats are now occupied by either freshman or sophomore members who are eligible to serve until the middle part of the next decade. There are now six members— four Democrats and two Republicans— eligible to serve all 12 years in the Senate. It is my personal hope that as we achieve more balance between the two sides there will be a greater effort to work in a bi-partisan manner. It is interesting to note the political interests of BOMA GLA appear to be mostly Republican, with an attempt to include moderate pro-business Democrats. The political interests of BOMA San Francisco appear to be Democratic, but are actually moderate (at least by San Francisco standards), and the opponents are the Progressives. Both organizations are working hard to protect the interests of commercial property owners in their own backyard as well as at the State level through BOMA California. Bipartisanship may be the ultimate solution to making sure our state stays on track.
Mattes is a Real Estate Consultant in San Francisco (www.kathymattes.com).
6 California Buildings News • November/December 2014
Better Design Can Improve Health Outcomes AIA SF Conference Told Architects Can Play Major Role In Disease Prevention BY DESIGNING MORE WALKABLE AND BIKE-FRIENDLY LOCALITIES, creating more day-lit medical facilities, using data to improve hospital logistics and better distributing health services, architects and planners can produce healthier communities. These are some of the takeaways from FutureCare 2014, a conference the American Institute of Architects San Francisco held in November. As healthcare evolves — driven by technology, an aging population and new government mandates — architects said they must rethink how healthcare is provided. A number of speakers suggested that healthcare delivery be administered in a more distributed fashion, and less from large hospital “citadels.” They recommended more neighborhood clinics, greater use of technology to connect healthcare professionals with patients more efficiently and wellness initiatives. “The healthcare profession continues to be in turmoil,” said John Kouletsis, vice president, facilities planning, at Kaiser Permanente and immediate past president of the AIA San Francisco Board of Directors. “How do we build healthier cities?” he asked, posing a question that many speakers would answer in a variety of ways during the day-long conference at UCSF Mission Bay, co-sponsored by AIA Los Angeles. Keynote speaker, UCLA environmental health chair Richard Jackson, said, “What you build shapes behavior.” The physician said infrastructure design helped increase U.S. life expectancy by 30 years in the 20th century by building highways and creating suburbs that gave people alternatives to densely populated big city-tenement neighborhoods that fostered disease spread. And yet the unintended consequence of the decades-long move to outlying areas created new healthcare problems: harmful auto exhaust emissions from massive commutes and epidemic obesity among people who rarely walk. UCLA 16th Street Outpatient and Oncology Center, designed by Michael W. Folonis Architects, uses ample daylighting. Top photo: outdoor waiting room. Photo: Undine Pröhl , Undine Pröhl Photography. Lower photo: third floor bridge connecting clinics. Photo: Tom Bonner, Tom Bonner Photography.
7 California Buildings News • November/December 2014
“No drug works as well as walking,” said Jackson. “And anything you build that makes it hard for people to walk will harm their health.” He cited one recent study that revealed 52% of Americans get almost no physical activity. Architect Michael Willis of MWA Architects summed it up: “Suburbs make you fat…and well-designed cities can make you fit.”
Healthier Medical Facilities Possible Architects have learned there are numerous ways healthcare can be “designed” to make people heal faster in hospitals and clinics. Willis said by reducing energy costs, medical facilities will have more resources. One byproduct of less spending on energy is daylighting. “It has a proven positive effect on recovering patients,” he said. He also noted that more hygienic products and materials are available, some reducing bacteria, others producing better air circulation and healthier lighting. Jackson, a physician, told the assembled architects, “Sustainability is in the DNA of all designers now, but health isn’t there yet.” From urban to facility design, he urged the architects and city planners to “create places that are irresistible to walk.” “Nearly half of all young people,” he reported, “say they want to live where they don’t have to drive.” Santa Monica architect Michael Folonis of Michael W. Folonis Architects designed an oncology center for the UCLA Health System that creates a seamless connection between indoors and outdoors and further integrates patients with nature by extensively using bamboo and natural light throughout the interiors. The facility also makes outdoor environments available to patients, featuring droughtresistant gardens. “Facilities can be scary” to patients, said Folonis, but pleasant environments will benefit patients’ attitudes. “Technology has an impact on the spaces we design,” said architect Chris Raker of Raker Architects. He said waiting rooms, exam rooms and operating rooms all have special processes and requirements that should be better understood by architects. He admonished his colleagues to keep open minds in rethinking how such areas are designed. Other speakers said more patient-doctor interactions via email and other online communications reduce the need for building more facilities. Los Angeles Healthcare Strategist Frances Ridlehoover of Jensen + Partners said there is a major change away from profit-driven medicine and toward value medicine. “There is a shift (in providing medical care) from ‘billing as much as I can because I need margins’ to (produc-ing) value.” Many medical facilities are “not looking to take on a lot of debt” to build big new facilities, but instead are focusing more on using existing resources more efficiently. Medical delivery can be significantly improved said researcher Chris Arkenburg with Orange Silicon Valley by using technology to track the movements of healthcare professionals, then using that data to better design the way building interiors flow. That will require a major change from old computer legacy systems and toward information sharing methods that more efficiently utilize data now stored in isolated silos. The result, he said, can be “webs of wellness.” ■
Above and left photos: Scenes from Alameda Health System’s Hayward Wellness Center, a 23,000 square-foot medical clinic designed by MWA Architects. Photos: David Wakely.
Top photo: front façade of the UCLA 16th Street Outpatient Surgery and Oncology Center. Photo: Tom Bonner, Tom Bonner Photography. Lower photo: landscaping at the center. Photo: Undine Pröhl, Undine Pröhl Photography.
8 California Buildings News • November/December 2014
Solutions for Quiet Workplaces
S
hould workplaces be quiet or noisy? It’s actually existing spaces to create a more comfortable and productive a question that acoustics consultants debate, with workplace,” says David Sholkovitz, director of marketing at some saying that Millennials, for instance, enjoy Cambridge Sound Management. office buzz and others maintaining that noise inter“A stretch fabric system, like our SoftWalls upholstered feres with concentration and productivity. If sound masking wall system, meets acoustic and aesthetic needs with a wall is your goal, there are many or ceiling application,” says new product and design Michael Balestreri, who is Modern wall systems can solutions that can help you GM Softwalls for D. Zelinsky, significantly mute annoying sounds achieve a work environment an FDT company. “Our that permits people to better and improve workers’ concentration. SoftWalls upholstered wall focus on tasks. system can accommodate “Modern offices have a many types of fabrics; howvariety of acoustical challenges: balancing the imperative ever, fabric selection can play a role in sound absorption. for increased collaboration and density with the desire The core material of the system provides the bulk of the for privacy absorption or and focus; reflection as achieving required, and green building the fabric is requirements the finish for but designing the system. for speech The more privacy; and open weave also creating the fabric is, spaces for crethe better the ative people to acoustical spend time and absorption of also get things the core matedone (e.g., rial behind. game rooms Some fabrics next to conferwill add up ence rooms),” to 0.05 to the says Ethan NRC (noise Salter, princireduction pal consultant coefficient) at Charles rating. A fabric M. Salter with too open Associates in a weave may Sound masking systems can tone down excessive noise in modern offices with open designs. San Francisco. require a liner (Photo courtesy of Cambridge Sound Management.) “The good news to prevent readis that product manufacturers are working with architects through of the acoustical core material and track system. and consultants to improve the situation and help occupants A medium weight polyester panel fabric is typically the achieve their acoustical objectives.” best choice for a combination of aesthetics and NRC Wall systems are crucial in toning down excessive noise. performance.” Sound masking is a viable solution. “In an era of sleek open “Good acoustics is a key contributor to interior office design and collaborative workspaces, direct-field quality— along with lighting, thermal conditions, ergosound masking is a cost-effective tool to protect employee nomics, and air quality. A superior workplace which takes speech privacy and reduce office noise distractions. Directacoustic performance into account can increase productivifield sound masking systems can be easily retrofitted into ty by reducing distractions, increasing privacy, and upping
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SoftWalls Systems Enhance Buildings’ Comfort and Efficiency
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rom waterproofing to acoustical ceiling and wall systems to painting and faux finishes, F.D. Thomas offers extensive solutions for the building and design community. With the recent acquisition of D. Zelinsky & Sons, F.D. Thomas expanded its product and service offerings to include SoftWallsTM upholstered wall and ceiling systems. The SoftWalls Acoustical & Tackable Fabric Panel systems come in a wide array of materials and finish fabrics—from polyester to fine silk. They absorb or reflect sound to resolve acoustical problems effectively. (See photo lower right for project example.) D. Zelinsky & Sons is the exclusive Northern California distributor of the SoftWalls product line. The acquisition also expands the company’s commercial painting capabilities and experience. D. Zelinsky & Sons has painted and decorated major projects in the Bay Area and the nation for over a century, including the Library of Congress, the BART System, San Francisco City Hall, the De Young Museum and the St. Francis Hotel. Its scope of work includes general painting, as well as fine faux wood grains and marbleizing, and complements the work of F.D. Thomas, whose recent painting projects include many modern office interiors (see photo top right). “Buildings professionals can turn to us for solutions that enhance both TIs and new projects,” says Dan Thomas, founder of F.D. Thomas. “Acquiring D. Zelinsky & Sons allows us to build on our strengths as a commercial painting and coating contractor. We look forward to partnering on innovative projects in the new year.”
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comfort for employees and clients,” says GIK Associates Marketing Director Shelly Williams. “The simplest way to control noise is to use good absorptive materials. In open and closed areas, the most effective use of absorption is the ceiling plane, not only because this is the largest surface area available and is close to all of the users; but also because this surface, if left untreated, is a key reflector of voice sounds in an open space. To avoid echoes, wall absorbers covering at least one wall, but preferably two adjacent walls, will improve speech clarity and reduce low-frequency disturbance. ■ Good acoustics is a key contributor to interior quality. (VersionOne offices. Photo courtesy of GIK Acoustics.)
Multifamily Focus
10 California Buildings News • November/December 2014
California’s Multifamily Boom Impressive...But Not Enough to End Housing Crisis
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ew apartment towers, complexes and condo facilities are rising or sprawling all over California. And even vintage office buildings and warehouses are being
nicely repurposed as rental dwellings in a mad rush to provide enough housing for the red-hot economy along California’s populous coast. Annual new unit completions in metro areas are soaring, according to MPF Research: 7,564 in Los Angeles, 7,483 in the Bay Area, 1,882 in San Diego and 1,832 in Orange County, with rents averaging $1,716, $2,198, $1,498 and $1,663, respectively, in those metro areas. Tens of thousands more units have been permitted throughout the state, and even more permits than that are being sought. Recently, investors in the gigantic Parkmerced redevelopment project in San Francisco were recently cleared legally to build 5,679 rental units alongside the existing 3,221 apartments on the 152-acre site near San Francisco State University.
11 California Buildings News • November/December 2014
Still Not Enough New Apartments And yet new job creation in those respective metro areas climbed over the past year to more than 89,000 in LA, 80,000 in the Bay Area, 29,000 in San Diego and 22,000 in Orange County—far in excess of needed multifamily housing availability and pressuring the single-family housing market as well, inflating prices to historic highs. In fact, all areas had greater than 96% multifamily occupancy rates. Recently— at ground zero, housing-short San Francisco — a multifamily developer received 2,595 applications for 18 apartment vacancies, according to the San Francisco Chronicle. The flurry of construction throughout the state will fall far short of what is needed, say industry leaders and government officials. And powerful demographic, sociological and economic forces conspire to retard efforts to provide enough reasonably priced housing for everyone but the affluent. Because of California’s housing crisis, the state’s economic growth is imperiled as needed workers increasingly turn down jobs here, and California companies
plan expansion beyond the state. Red-faced politicians, business and building-trade leaders are scrambling to break various logjams that impede new housing growth. By comparison with California, housing permits issued in regions competing for job-creating enterprises (such as Texas, North Carolina, Washington State) far exceed those of the Bay Area and are on par with permits granted in more populous Southern California. At what point, some wonder, will California’s appealing climate, great lifestyle and desirable jobs fail to attract workers who also want adequate housing that doesn’t burn a hole in their paychecks? (See sidebar: What Can Be Done to Alleviate Housing Shortage on page 26.) Bridge Housing executive Lyn Hikida says, “While employment rates are high, wages are not keeping pace with skyrocketing rents, particularly in major California markets such as the San Francisco Bay Area, Los Angeles, San Diego and Sacramento. The cost of producing affordable housing is impacted by a variety of factors, including rising construction costs, high land values, diminishing subsidies (for example, the loss of redevelopment dollars), and an increasingly complex regulatory environment; these are among the challenges to creating affordable housing.” (Continued on page 28)
Opposite page: AVA Little Tokyo in downtown Los Angeles. Photo courtesy of TCA Architects. This page: top left and lower left – exterior and rooftop of 8th & Hope Apartments in downtown Los Angeles. Photos courtesy of Wood Partners. Above: Ironhorse at Central Station, a 99-unit affordable property for families in Oakland. Photo by Brian Rose, courtesy of BRIDGE Housing.
12 California Buildings News • November/December 2014
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Multifamily Focus
13 California Buildings News • November/December 2014
New Living Preferences Drive Apartment Features Q&A with Mary Gwyn, CPM, Chief Innovator, Apartment Dynamics In what way is the burgeoning multifamily boom a reflection of new living preferences for young and old? GenX and GenY renters don’t want to be tied to a mortgage, like their parents, especially after seeing friends and family face foreclosures. They also want the perceived flexibility that comes with a lease. They will live in a smaller space in exchange for lifestyle benefits, such as living in urban areas, close to restaurants, recreation and transportation. Multifamily communities often offer clubhouses, social events, pet parks and other places to gather without going far—like social interaction on the renter’s individual terms. Multifamily is also well-suited for older generations, like the baby boomers, whose hips, knees and joints don’t feel as good as they used to. Generally speaking, apartments are built to a higher standard of accessibility, and even if not, landlords will help with reasonable modifications to make apartment homes more accessible. Having neighbors close by, living in a location at which you don’t have to drive to survive, having secured access buildings, these are a response to the needs of the aging boomers. What are examples of apartment living innovations? In part, it’s not about the innovations, it’s the conveniences. For example, the typical apartment community receives around 100 packages per week for residents, a number which can double during the holidays. What would residents do if property managers didn’t receive those packages for them? Renters also count on managers to perform routine and urgent repairs when needed inside apartment homes. Residents don’t have to take time off work to wait around for a repairman or pay extra for the repairs. That said, multifamily developers are maximizing the use of common areas, making them an extension of the apartment home’s living space, creating seating areas, hotspots, fire pits, pet walking spots. Amenities are more creative, such as a community that has a private bowling alley in the building, another with a rooftop pool and bar, still others with outdoor movie theaters, virtual golf, fitness and spa facilities that are right on site, personal trainers, Zumba and kick-boxing. Inside apartment homes, renters are getting more customization, design and functionality. Being environmentally green is now expected, and at no additional rent. Innovations start at the front door, with “smart locks,” that vary from fingerprint access to being controlled by a smart phone app. Want your air conditioning turned down before you get home? There’s an app for that! It’s become easy to automate apartment homes so lights, temperature, alarm systems and more can be remotely adjusted. Apartments might have USB charging outlets, to iPod docks that tie to built-in speakers, to bath fans that are motion-sensitive and come on automatically when you enter the bathroom. Multifamily developers are varying design, too. Within a few city blocks you can find apartment homes with countertop surfaces out of quartz, granite, concrete, and new designs of Formica. Flooring finishes vary, with hardwoods, bamboo, ceramic tile, carpet and vinyl plank. Landlords differentiate to compete, and renters reap the benefit of greater choices. How do you think apartment living is shaping the way people will “dwell” in the future? Apartment living is on the rise, with over a third of the U.S. population renting. Apartment dwellers live in close contiguity and share walls. Property managers will have to work closely with residents, implementing policies that help neighbors “play well together.” Hopefully the result will be a return to greater civility. It should also push developers to be more proactive, spending money on features such as improved sound attenuation, designs that prohibit smells from traveling between units, and a greater focus on the impact of people living in close quarters.
Gwyn advises apartment owners on marketing, occupancy and income improvement. Visit www.AptDynamics.com.
Multifamily Focus
14 California Buildings News • November/December 2014
Micro Dwellings: Answer to California’s Housing Crisis?
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ome people are finding it increasingly desirable square foot or rent per square foot is a little higher.” to live in smaller apartments or condos— even “Personally I love micro units since they keep housing if those homes are no more than 250 square feet. cost down, and generally provide nice well-located units,” Developing more micro dwellings, say some, Miller continues. “The funny thing is what we Americans is the ultimate call micro units is solution to housing typical of the housing tenants who want size most Chinese, to live without Japanese and all of roommates but Eastern Europeans can’t afford soarhave lived in for ing housing costs, many years. Only like the average since the turn of the $3,000-plus rent millennium are we for one-bedroom starting to see larger apartments in San units than 650 square Francisco. feet in Eastern Europe “Micro apartand China. If only ments are one way Americans could to lower the cost of visit a family of three entry-level housing generations living in urban areas,” comfortably in 450 says developer square feet in Russia Patrick Kennedy, or China would they principal of even think about the Panoramic Interests micro units as not so in Berkeley. “They micro for much of the obviously are not world. It is all relative “A hundred years ago millions of Americans lived in rooming for everyone—but to how we live and, as houses, residential hotels, and efficiency apartments. Micro they serve as a you know, the average valuable resource dwellings are merely a 21st Century variation of the theme .” new square foot home for single students, here is about 2,600 in — Patrick Kennedy workers, and resithe U.S. Upper income dents who don’t own a car, don’t own lots of stuff, and want families here want a bathroom for each person and one for to be close to all the opportunities and attractions that cities guests. An Eastern European would not understand that have to offer. level of consumption any more than we can understand liv“A hundred years ago millions of Americans lived in ing in less space with less possessions.” rooming houses, residential hotels, and efficiency apartProblems with Micro Dwellings ments. Micro dwellings are merely a 21st Century variation NIMBYs can mount resistance to developing micro of the theme—and desperately needed in cities like San dwellings in their neighborhoods, because they see them Francisco. They represent a choice. And nothing more. No increasing population density. And micro units are certainly one has to live in a small place — but many chose to.” not for everyone. University of San Diego Real Estate Professor Norm “In places like California we find so many communities Miller agrees, saying, “What is great about micro units is resist any units equal to or less than the one typical in their you can put them in urban locations where young people neighborhood, so NIMBYsm runs rampant along the coast want to live, usually pre-children or post-children people, and in places like San Jose, La Jolla, Del Mar. etc., all the and still make them affordable, even though the price per
15 California Buildings News • November/December 2014
way up the coast,” adds Miller. “Critics always cite traffic concerns. Nonsense, if placed in urban areas near jobs and retail.” “Micro units, often 250 square feet-to-350 square feet, are being built in both LA and San Francisco, and delivered with success in San Francisco,” says Greg D. Campbell, senior managing director of TruAmerica Multifamily in Newport Beach. “The small units make it difficult for traditional apartment renters to entertain, and the lack of space can only be tolerated so long. However, smaller conventional units, 450 square feet-to-700 square feet, do work for many of the traditional renters who can live with a few square feet less, provided that there are common area amenities on site of close by.” Many urban planners counter the NIMBY objections to population density (auto traffic, etc.) by observing that denser apartment complexes that are built near mass transit and workplaces do not create unpleasant congestion. A recent Urban Land Institute study says, “The evidence from the market indicates that smaller units tend to outperform conventional units; they tend to have higher occupancy and achieve significant rent premiums. Still unclear is whether this performance is driven by the relatively limited supply of these smaller units on the market, or whether a sizable, and perhaps untapped, segment of renters is willing to make the tradeoff and pay considerably more per square foot rent in exchange for highly desirable locations, better community amenities, the ability to forgo a roommate — or perhaps some combination of these factors. The consumer research indicates that, from the renter’s perspective, the micro-unit strategy that offers a lower monthly rent ‘sticker price’ compared with conventional units is a compelling proposition. But it is also clear from the research that micro units are not for everyone and that micro units may not be the solution for every location.” “Living ‘alone’ has become a luxury lifestyle in many California cities,” says Teresa Ruiz, one of the editors of the ULI study and an architect who works on multifamily projects for SB Architects. “Micro units, with their lower monthly rent, can be a cost-effective alternative to living with roommates. When creatively designed and well managed they can provide affordable urban personal sanctuaries with decreased commute times and more amenities than suburban and exurban housing options.” ■ Micro apartment interiors at Panoramic Interests’ 38 Harriet Street, a 23-unit LEED Platinum building in the heart of the SoMa area of San Francisco. Opposite page: living room. This page: top photo - bedroom. Lower photo: dining room. Photos courtesy of Panoramic Interests. Photographer: Keith Baker.
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Multifamily Focus
California Buildings News • November/December 2014
Multifamily Investors Continue Building Pace in California By David Hysinger Investors will continue to invest in the multifamily sector in California because population and job growth make the state one of the strongest multifamily markets in the country. This optimistic report came out of the Marcus & Millichap/IPA Bay Area Multifamily Forum: San Francisco & Beyond Conference, held last November in Redwood City. Experts from a variety of commercial real estate sectors considered how to address what will happen when the population aged 20-34 increases by 1.6 million over the next few years in California, with 67% of them expected to be renters. The gap between availability and need is enormous. There were about 8,200 new apartment units built in 2013 in the Bay Area, and the economy added more than 90,000 new jobs. Sooner or later, the law of averages will catch up, and most of these people will need to move out of their existing abodes (as roommates or people who have returned to their parents’ homes) and get their own apartments. Single-family homes will probably still be too costly to buy for most of them. Will there be enough supply? When developers say “yes,” it has historically led to over-building. Are we in a bubble? Marcus & Millichap’s George Marcus said, “Industry must follow intellect. The brains want to be in a nice climate. So the companies will stay with them. It will be about where smart people want to live. Quality of life matters.” That means companies that want to hire the best and the brightest will have to locate their businesses in places like California, where the quality of life is highest. This is consistent with Marcus & Millichap’s investor survey from Q3 2014, which showed seven out of ten investors holding apartments in their portfolio expect those holdings to increase in value over the next 12 months. While rising interest rates continue to be investors’ biggest worry, more conventional concerns, such as increased vacancy rates, do not seem to afflict California as much as other areas of the country. Vacancy rates are still healthy, staying below 5%, which many consider natural. (Continued on page 26)
Industry Profiles
17 California Buildings News • November/December 2014
Q&A with Elizabeth Bunker Griggs Principal, Windsor Management LLC and IREM San Francisco President, 2015 What are your goals for the San Francisco Bay Area chapter of the Institute for Real Estate Management when you become its new president? For 2015, my main goal is to get the word out regarding the informative and innovative programs that IREM SF provides for our members and the greater commercial real estate community. Programs and topics we have scheduled for next year include technology and new applications for the industry, legal issues, career development, and Ebola and other communicable diseases in the workforce. Your company manages smaller commercial buildings. In what way does that pose different challenges from what large-building managers face? All buildings have MEP systems that require routine maintenance and repair. I find these systems as big a challenge for smaller buildings as without full-time engineers onsite, the scheduling and responsiveness of services that may be required can be difficult (particularly with emergency situations). Smaller buildings without onsite management need a bit more “handholding,” as frequent meetings with vendors for necessary building services require the presence of our staff. Relationships with the vendors and the assessment of getting the correct vendor for the asset are critically (Continued on page 30)
San Diego’s Valuable Property Can Stimulate the Local Economy Q&A with Cybele L. Thompson, Director, Real Estate Assets, City of San Diego You’re taking the helm of the City of San Diego’s Real Estate Assets Department at a time when it has been criticized for lacking a comprehensive strategic plan. If you agree that it hasn’t been well managed, then what are the outlines of your new strategy? While I had heard this criticism prior to starting my service with the city, I have already realized that our real challenge is addressing this perception of mismanagement that persists despite the reality that San Diego’s real estate assets have actually been managed in an extremely efficient and profitable manner. Our strategy has been, and continues to be, to acquire and manage real estate for the highest public use and benefit, generate revenue through leasing and sales of surplus assets and maximize the overall financial return of the City’s real estate portfolio. You have 25 years of private-sector leadership experience in commercial real estate. What business practices do you see are needed to better manage the government program you now head? Some business practices from the private sector which translate well into the public sector include the concepts of long-term ground lease analysis and percentage rents for uses which will benefit the community in the long run (meaning 50 years or more) as well as provide a high financial return to the city and be relevant that far into the future. In addition, the basics of responsiveness and customer service, which are indispensable in the private sector, apply just as much to the public sector, because we are managing the taxpayers’ assets and responding to the needs of our citizens. It must be tough to get the best leasing terms for city land, while at the same time using city assets to stimulate local economic growth. Your perspective? Actually, one of our easiest jobs has been to obtain the highest and best leasing terms for the city’s assets, because we own so many unique, prime pieces of property which are irreplaceable in locations such as Mission Bay Park and Torrey Pines. Some of the considerations in selecting a lessee for City land include how they will contribute to the local economy via job growth, improving the tax base, and increasing surrounding property values. The City has a large portfolio of open space, park land and mitigation land that will never be available for sale or lease.
18 California Buildings News • November/December 2014
This is Not Your Father’s Office
I
mposing dark-wood furniture, coveted corner offices, plush carpets and neutral walls…in the mid-to late20th Century, these were the furnishings found in a typical office. And the technology of the day— telephones and typewriters—kept most employees bound to their desks. Fast-forward to today, when California companies are collaborating with design professionals to create spaces that fit the way we work now. In the best-designed offices, form doesn’t just follow function— it enhances function and even suits a variety of functions. Contemporary workplaces often evoke a sense of fun
and play with bright interiors and whimsical furniture like beanbag chairs and hammocks, not to mention games like ping pong tables, dartboards and foosball. Many workplaces feature gardens or patios that allow an escape to nature. “California is definitely on the cutting edge of things and is leading the charge for less personal space and more collaborative space. This generation doesn’t want the corner office. They’d rather be bumping elbows with the rest of the staff, setting themselves up for casual collaborations. We stress that offices should have a great break area where you can have all-hands meetings or a chance encounter— that’s where great ideas sometimes come from,” says Doug Mehl, partner with San Francisco-based Fennie + Mehl Architects.
Flexible Spaces and Generational Differences However, as the workplace evolves to meet new work styles and preferences, design and buildings professionals are sometimes challenged to meet the needs of a multigenerational workforce. “Older generations work differently than younger generations,” says John Michael, vice president and general manager, furniture, of Business Interiors by Staples. “Millennials are used to highly collaborative environments with many distractions and have a work anywhere, anytime mentality, while older generations tend to prefer a quieter space to focus and get their work done. Creating a flexible workplace can provide environments that accommodate the needs of different generations. Offering quieter spaces, as well as more collaborate, open rooms, will allow different members of your workforce to work the way they want to.” There is a need for more “we space,” notes A.J. Paron-Wildes, regional architectural and design manager for Allsteel, which creates office furniture that addresses and solves workplace problems. “People are looking for more choices to have during the different kinds of work they do throughout the day—from collaborative, to touch down, to focus work. A good work environment has a combination of all of those spaces and environments that can morph into different space types.”
Cool Offices Help Recruit Top Talent In addition to making employees more productive, a cool office can help recruit, excite and inspire employees. “Competition for tech talent in San Francisco and Silicon Valley is so fierce that great office design and amenities can provide a tipping point for candidates,” says Jenna Ruth with Fennie + Mehl Architects. “Cool offices are the price of entry for recruitment. But cool isn’t enough. The design should help move the company’s
19 California Buildings News • November/December 2014
mission forward. A recruit should walk in the door and know exactly who this company is. Is this a good fit for me?” “An office should reflect the basic character of the people who work there and the culture of a company. If it’s dull, the candidate is going to see the company as soulless, dumb and dimwitted. We always strive for a space that’s stimulating and forward thinking, reflecting the best characteristics of the culture,” says Mehl.
Tech-Free Zones Although technology is everywhere in today’s office, experts point out that people need places to retreat from technology. Office designs should be configured to provide spaces that are technology-free, says Paron-Wildes. “We are creating spaces called Library Rooms where it’s basically a large room that people can work ‘alone together’ and no talking or phones allowed. Or it can just be a room with a view for people to meditate.” Michael notes that the pendulum swings between the desire for closed and open offices, but that interiors can be flexible. “Office interiors need to look toward finding a balance between open and closed layouts, because it’s clear that neither layout works for everyone. It’s also ideal to include power sources in all areas of the office, so workers can easily transition to different areas based on their needs.”
Focus on Nature and Sustainability Bringing access to nature is another hallmark of wellplanned 21st Century workplaces, from patios to rooftop gardens. Sustainable and vintage materials are also valued in design, with a creative mix of old and new. Tech company Citrix Systems “has designed environments that allow people to work and play from anywhere with Wi-Fi available throughout the campus,” notes Ted Lawson, Senior Director, Americas Real Estate & Facilities. Its Santa Clara facility has a patio with a ‘waterfall’ and conversation areas. “We believe that work is no longer a place — it’s something you do anywhere inspiration strikes.” “A lot of our clients are moving into old existing buildings,” says Ruth. “They like the original characteristics and infrastructure of the building and want to celebrate it, rather than cover it up. At GitHub, for example, the design honors the rich history of the brick and timber building through the use of five vintage shipping containers that were deconstructed, rebuilt, and refinished as a reference to the train that rolled in and out of the ground floor when the building was a fruit warehouse in the early 1900s.” ■
Opposite page: Top photo – Box headquarters. Photo courtesy of Fennie + Mehl Architects. Photography: Chad Ziemendorf. Lower photo – GitHub office. Photo courtesy of Fennie + Mehl Architects. Photography: Eva Kolenko.
This page: Top photo - Modern office. Photo courtesy of Staples. Center photo - GitHub office. Photo courtesy of Fennie + Mehl Architects. Photography: Eva Kolenko. Lower photo - Citrix patio. Photo courtesy of Citrix. Photography: Kent Goetz.
20 California Buildings News • November/December 2014
Definition of “Sustainability” Keeps Growing Report from Greenbuild 2014
By Zachary Brown
From October 22 to 24, nearly 20,000 Green Building aficionados descended upon New Orleans for the annual USGBC Greenbuild Conference. This makes my fourth consecutive Greenbuild and perhaps the most eye-opening yet. Even though the conference is a USBGC event and focuses on the LEED third-party rating system, any professional with a stake in the built environment will find something that speaks directly to their respective industry niche. From the perspective of a real estate owner or manager with a portfolio of existing buildings, one can’t help but feel that the conference favors new construction and development; the trade floor is almost exclusively occupied by a who’swho of construction materials and product marque brands. However, the true value of Greenbuild for a building owner/manager is in attending the numerous educational sessions that address existing buildings. This year, the most obvious trend was the move to expand the very definition of “sustainability” to include other niche areas such as occupant health, productivity and satisfaction. Many hours of educational sessions were expended on attempting to attribute a causation to the (albeit strong) correlation between Green Buildings and higher worker productivity. Further, the concept of a “healthy” building continues to be shoehorned into sustainability, and even intangible qualities such as occupant satisfaction are quickly becoming appropriated by the USGBC and LEED rating systems. (If I had a nickel for every time I overheard the term “biophilia” walking through the expo
hall, I would have had enough money to throw my own posh VIP Greenbuild after-party). All cynicism aside, what became obvious to me this year in New Orleans is that sustainability is no longer a buzzword and will soon become business as usual for the modern facility manager. Further, as the workforce absorbs more and more millennials—a generation defined as connected, tech-savvy and socially/environmentally minded—real estate must continue to evolve to incorporate this increasingly broad field of sustainability in order to deliver a cutting-edge space to prospective and existing tenants. Another prevalent topic was the ever-changing LEED Existing Building Operations and Maintenance (EBOM) rating system. The still-current v2009 version of EBOM hit the sweet spot for our industry – stringent, but not prohibitive. The new v4 rating system has already had a long history of controversy (which I need not retread here), so there were numerous sessions focused on selling the yet-tobe embraced v4 certification pathway. Adding another layer of frustration was that following Greenbuild, the USGBC announced that the mandatory deadline to register under v4 has been extended 16 months to October 31, 2016. Adding possibly even more confusion was the introduction of the LEED Dynamic Plaque as an alternative to recertification at last year’s Greenbuild. This year, in New Orleans, the Dynamic Plaque was a hot topic. And I must say, the elegant, yet minimal display of the Dynamic Plaque garnered a lot of “oohs” and “ahs;” however, building owners now have LEED v2009, v4, traditional recertification, and the Dynamic Plaque as possible avenues towards third-party recognition for a sustainable existing building. It’s without a doubt a transitional period for the USGBC as they strive to push the EBOM standard forward while maintaining the large market adoption that they cultivated through the popular v2009 standard. By the end of a long week of exploring the French Quarter followed by bleary-eyed morning educational sessions, I came to appreciate the ever-broadening scope of the sustainable building movement. See you next year in Washington DC! Read more about Greenbuild 2014 here: http://www.usgbc.org/articles/greenbuild-2014-deliversstrong-event-new-orleans
Brown is sustainability manager with CBRE Asset Services Group in San Francisco.
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Association News
Buildings People Donate During Holiday Season The International Facility Management Association of San Diego is urging members to get involved for the 18th consecutive year in its toy drive to help make a lot of dreams come true for children this holiday season. Last year IFMA provided more than 9,300 toys, 8,400 bags of groceries and 195,000 articles of clothing and shoes to brighten the lives of many kids. And the San Diego Building Owners & Managers Association (BOMA) is spreading cheer BOMA San Francisco member Derek Schulze, BOMA Member Services this holiday season with its 21st annual “Give Director Tory Brubaker, SF Firefighter Toy Chairperson Sally Casazza and From Your Heart” toy drive. The drive benefits Jill Nicole Peeler, SF Firefighters Toy Program Event Coordinator. Promises2Kids, a nonprofit organization that has organization encourages help from all San Diegans. This is a worked to create a brighter future for foster children for community-wide effort with corporate leaders volunteering more than 33 years in San Diego county. hundreds of hours to brighten the holidays for underserved BOMA delivered more than 300 decorated donation bins children of San Diego. Promises2Kids creates a brighter to over 150 major business and office buildings throughfuture for foster children in San Diego County. From the out San Diego County. San Diegans are invited to drop off moment they come into foster care and through to adultnew and unwrapped gifts to the bins from November 20 to hood, Promises2Kids provides the hope, support, and opporDecember 15. The bins will then be collected and delivered tunities these special individuals need to change their lives to Promises2Kids sorting facility where the gifts will be allofor the better…now and for years to come. For information, cated to foster children. Promises2Kids’ wish list and addicall (858)-278-4400 or visit www.Promises2kids.org. tional details are available at www.bomasd.org. BOMA San Francisco Member Services Director Tory “Every holiday season, BOMA looks forward to giving Brubaker says that BOMA will once again assist local efforts back to the community and witnessing the joy that this drive to collect and deliver a mountain of toys. “BOMA SF has brings into the lives of hundreds of children,” said BOMA been partnering with SFFD Toy Program for 27 years. The President Kristin Howell. “For over two decades now, this Toy Program distributes over 200,000 toys each year and drive has brought together dozens of volunteers annually serves more than 40,000 families annually. Our members’ to brighten the season for the foster youth of San Diego by participation is integral to the success of this program. Our decorating and distributing hundreds of collection bins and associate members can assist in this effort by providing encouraging tenants in office buildings to donate toys. It’s trucks and volunteer drivers to drop off barrels and pickup truly magical.” BOMA’s goal this year is to collect 15,000 barrels and toys during the collection period,” says Brubaker. gift items and gift cards. In order to make this possible, the
CoreNet Northern California Rated Best in North America This has been a fantastic year for buildings association chapters in California, with many winning national distinctions. Now, add to that CoreNet’s Northern California chapter, just named “Chapter of the Year” at the CoreNet Global North American Summit Awards in Washington, D.C. It took the honor in the large chapter competition. Chapter President Michael Casolo and Past President Bill Roberts accepted the award with many other NorCal board members and chapter members on hand to celebrate. Chapters are evaluated based upon their success in four key areas: membership, value proposition, programming and alignment with CoreNet Global’s strategic plan. In addition to demonstrating Chapter excellence in each these areas throughout the year, the chapter had to create a compelling submission to showcase its work. This year’s submission featured an interactive website called ENGAGE, featuring rich content and video presentations displaying the chapter’s work in each of the required areas.
23 California Buildings News • November/December 2014
California Wags the U.S. Dog in Demanding Sustainable Cleaning Products, Services Building products providers serving California often complain that they must alter what they sell according to state and local regulations if they want access to America’s richest market. And yet, some of those interviewed at the annual ISSA/INTERCLEAN North America conference in Orlando say once they’ve “greened” their products to pass muster in California, they then have products they can offer to other states and areas with sustainable agendas. ISSA is a global cleaning association with more than 6,400 distributor, manufacturer, building service contractor, in-house service provider and manufacturer representative companies. “It’s hard to do business with California, but it does make your products better in the long run,” a pressure-washing maker’s rep told California Buildings News in one of many interviews conducted on the expo floor. “We have to produce a specific engine for California,” said a generator manufacturer. “California is a different world.” A chemical manufacturer at the show said, “The California issue is that the standards are constantly changing. We all look at the Left Coast and make jokes.” But he added that the state’s strict requirements push the industry to make
cleaner products for all their customers, since it is costly to produce one batch for California and lesser batches for other states. “California makes us jump through hoops, which is good.” Yet another manufacturer said, “California starts and other states eventually follow suit. It definitely has the most stringent and controlled VOC (volatile organic compound) regulations. We try to do a 50-state compliance when we reformulate.”
California Firm Wins ISSA’s Best Customer Service Award In other news at the ISSA/INTERCLEAN conference, Newbury Park, CA’s STEP1 Software Solutions was one of 10 companies chosen from 685 exhibiting firms in Orlando to win a “Best Customer Service Award,” as voted by members of the 7,000-plus worldwide cleaning association in November. STEP1 Software Solutions provides Windows-based (Microsoft SQL) distribution software for janitorial, sanitary, industrial paper, packaging supply and safety supply companies.
Association News (Continued on page 24)
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24 California Buildings News • November/December 2014
Association News (Continued from page 23)
SPUR Opens Oakland Office
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Oakland, one of California’s most challenged urban centers, will soon get some powerful help in its efforts to achieve its goals of urban redevelopment. The San Francisco Planning and Urban Research organization, long a force in responsible development in San Francisco and recently in Silicon Valley, has opened an office in Oakland and pledges to use its clout to help that city fight crime, create more inclusive neighborhoods and improve street traffic. SPUR draws support from real estate developers, architects, builders, public officials, the academic community and many others involved in urban affairs. Robert Ogilvie was tapped to run SPUR’s Oakland operation. He has worked extensively in community development and planning around the country to help create healthier, sustainable and prosperous communities. Prior to joining SPUR he was vice president for strategic engagement at ChangeLab Solutions. He served as a faculty member in the Department of City and Regional Planning at the University of California at Berkeley, as a consultant to city and county governments, nonprofit organizations, and neighborhood activists, and as director of volunteers at the Partnership for the Homeless in New York City. Newly elected Oakland Mayor Libby Schaaf, seen by many as having a strong urban reform agenda, was present at SPUR’s annual meeting in November to thank the organization for its decision to focus on Oakland’s issues. SPUR promotes good planning and good government in the San Francisco Bay Area. A member-supported nonprofit organization, it brings people together from across the political spectrum to develop solutions to the big problems area cities face.
25 California Buildings News • November/December 2014
Who Are California’s Best Buildings People? Tell Us Your Favorites ✔ Property Manager
✔ Facility Manager
✔ Buildings Product Supplier
✔ Buildings Services Provider
✔ Building Engineer
✔ General Contractor
✔ Architect
Any California Buildings News reader can nominate the best buildings people in California (and state the reasons for your choices) by emailing your nominations to henry@easoncom.com by January 20. You are welcome to nominate one in each category. We will announce the winners in the January/February 2015 issue of California Buildings News.
26
Multifamily Focus
California Buildings News • November/December 2014
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Multifamily Investors (Continued from page 16) The highest occupancy levels, not surprisingly perhaps, are in the Bay Area. Therefore, investors should expect “positive run” for several more years in the multifamily sector in California. For investors, this will mean increased demand for rental units, which makes the outlook for the multifamily sector very bright indeed. Hysinger is an attorney and lecturer in finance at San Francisco State University, where he teaches commercial real estate and land use development.
How Can Multifamily Designers and Developers Alleviate the Housing Shortage? In many of the core California urban neighborhoods, organized NIMBYs increasingly turn out in force and intimidate public officials charged with permitting new developments. A recent California Housing and Community Department study detailed yet other trends that contribute to the state’s continuing housing crisis: ✔ Affordability worsens, particularly impacting lower income renters, as falling incomes lag behind spiking rents, and homeowners continue to face tight lending standards that impede access to housing financing. ✔ Housing supply shortage in growth areas persists, as new construction is sluggish, and as significant shift from ownership units to rentals continues to occur. ✔ Innovative partnering to preserve the affordable housing stock is critical, as tens of thousands of affordable rental units are at-risk of converting to market rates within five years, squeezing out vulnerable renters. ✔ Aging baby boomers and young millennials are drivers of housing demand over the next decade, with a preference and/or need for a variety of housing types, tenure and locations. ✔ Delayed effects of the housing bust become more evident, as more households face difficulties to rent or take jobs due to credit issues, or inadequate access to education, jobs, health services, and economic opportunity. The State of Housing report concluded,“The housing sector, private or with/without state intervention, cannot be successful alone. An integrated approach to housing policy and investment by engaging cross-sector partners, such as transportation, health, education, and economic development, will be necessary to move the needle of the housing opportunities coupled with access to economic opportunity, health and education, particularly for vulnerable populations. This is only a first step in building wholesome strong and resilient communities throughout California.”
27 California Buildings News • November/December 2014
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Multifamily Focus
28 California Buildings News • November/December 2014
Multifamily Boom (Continued from page 11)
Promising Solutions on the Horizon But in areas that allow responsible development and want to promote better housing options for their citizens, innovative multifamily solutions promise to be an exciting way to alleviate the state’s housing shortage. Never an easy place to permit construction, San Francisco has redoubled its efforts under the leadership of Mayor Ed Lee—though gains have not been enough. Lee’s administration is fighting an uphill battle to stimulate creation of 30,000 new units by 2020. Los Angeles is pressing ahead with many innovative solutions. Redevelopment of downtown Los Angeles, Oakland and other metro areas are models for the rest of the state to emulate—much as have been the recent creation of the entire new multifamilycentric neighborhoods of South of Market and Mission Bay in San Francisco. Los Angeles’ Downtown Center Business Improvement District has done much to spur new multifamily housing in a region of LA once consigned to aging commercial neighborhoods. President Carol Schatz says, “Projects that were stalled in the last recession are back online and building faster and taller than ever. There is a national trend of families choosing to move into the city, closer to work. Downtown LA is experiencing high demand, with occupancy rates in the high 90’s. Downtown LA is a vibrant 24/7 destination with rich cultural attractions, award-winning restaurants and entertainment venues. The real questions is: why wouldn’t you want to live in the center of it all?” Outdoor area of AVA Little Tokyo in downtown Los Angeles. Photo courtesy of TCA Architects.
Multifamily Permitting of Top CA Metro Areas MSA Name Los Angeles San Jose San Diego Santa Ana Santa Monica San Francisco Riverside Oakland Oxnard Sacramento
Change 9/13 vs. 9/14 43.1% 47.8% 67.7% -12.7% -12.97% -1.8% .5% -5.7% 167.8% -54.1%
Source: U.S. Bureau of the Census, U.S. Bureau of Labor Statistics
Rendering of Celadon at 9th and Broadway, a 250-unit property under construction in downtown San Diego. Courtesy of BRIDGE Housing.
29 California Buildings News • November/December 2014
Young people and empty-nest Boomers alike are flocking to exciting urban cores in cities across the state—and dwelling almost entirely in multifamily settings, in new structures and often retrofitted warehouses, factories, office buildings, in-fill buildings on the sites of old parking lots and even—in San Francisco—where former medical facilities used to operate. AvalonBay Communities is a major player in providing quality housing solutions in California. In the last five years it has added significantly to its existing stock in California with completion of 3,500 units and another 2,700 units under construction or in lease-up stages. “We believe that we are in the ‘middle innings’ of this real estate cycle and fully expect to develop and build approximately 1,000 to 1,500 units per year for the foreseeable future,” says Executive Vice President Steve Wilson. “We find the gateway coastal cities in California to be very attractive for a number of reasons that resonate with our target renter. These include quality of life, climate, demographic tailwinds, the energy and buzz within Silicon Valley, the vibrancy in San Francisco and the ‘coolness’ of Southern California. Our branding strategy has been very well received in these areas and has allowed us to pursue opportunities,” says Wilson. A combination of entrepreneurial commitment, government incentives and public support can breech the housing gap, but not without considerable effort by all government and business sectors. ■
Additional articles on the multifamily housing issue in this issue: ▲ Good Homes Matter to California’s Prosperity (Page 2) ▲ New Preferences Drive Apartment Innovations (Page 13) ▲ Micro Dwellings: Answer to CA Housing Crisis (Page 14) ▲ Multifamily Investors Keep Betting on California (Page 16)
Pool at 8th & Hope Apartments in downtown Los Angeles. Photo courtesy of Wood Partners.
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30 California Buildings News • November/December 2014
Griggs (Continued from page 17) important. For example, my company manages various types of commercial properties and depending on if we need improvements in a medical office, retail or warehouse space, we select our vendors and subs accordingly. With central business districts in the Bay Area reaching capacity, are you seeing more firms moving into suburban office buildings? Depending on the market we are definitely seeing a decrease in vacancies. I do foresee this trend continuing as rents in CBD areas are continuing to increase as space becomes even more limited in those markets. What’s the future of the small-property market? I believe the small property market is strong and will continue to be so. Smaller portfolios require as much attention, if not more, than larger ones as we work with owners to educate and inform our owners on a frequent
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basis. At Windsor, we believe we have a nice niche for those owners who desire hands-on, quality management at reasonable prices. You have served as chair of IREM’s education committee. Are there educational opportunities for young people to enter the CRE field without having to go to college? There are various opportunities available for people entering the work force. Some of these require a college degree while others do not. IREM educates with management specific programs for our members. A CPM designation does not require a four-year college degree, but it is an extensive and demanding educational process that requires learning, testing, practical experience and passing these exams for all designees to receive the CPM or ARM.
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Major New Focus on Industrial Properties The Buildings Owners and Managers Association of Oakland/East Bay is focusing educational efforts on the area’s burgeoning industrial sector.
Q&A with Tim Ballas, Vice President, Asset Management, Orchard Commercial, Inc. What are industrial market drivers in the East Bay? The use of Industrial real estate is changing in order to accommodate how products are being distributed and purchased by U.S. consumers. Aging inventory is being re-purposed, more space is being allocated for e-commerce. Clear heights, trailer and employee parking needs as well as proximity to shipping lines are all prominent drivers in the sector. In addition, the specific type of tenants noted above are choosing industrial buildings with greater regularity from which to operate. The reasons include lower cost, better utility and flexibility of the space for multi-purpose staging (i.e. office, R&D, assembly, lab, manufacturing, storage etc.) Technology companies and firms engaged in the “internet of things” are also increasingly using industrial buildings to penetrate and gain Industrial property. Photo courtesy of Orchard Commercial, Inc. market share. In addition, with a growing population of local consumers who utilize e-commerce, these firms are finding “speed to consumer” more achievable with their base of operations located along the East Bay industrial corridor which serves retail distribution. What unique challenges do managers of industrial face? The primary challenges that managers face relate to the sense of urgency their tenants are feeling as they seek to capitalize on opportunities to increase market share. The buildings they occupy must serve and support their needs and when it falls short, the property manager is the first to hear about it. In addition, as specific tenant uses are ever-changing, the building infrastructure must properly support their needs. Sprinkler, ventilation, structural, environmental, roofing, MEP and parking areas must all work well to support the logistical process for each occupant, while co-existing in harmony with each other in a multi-tenant property.