The Registry | The Q Fourth Quarter by The Registry

A publication by

october | november | december | 2013

4: 2013

NOW THE HARD PART | PG. 10

PUC aims for ultra-sustainable headquarters

URBAN CANOPY | PG. 20

Bay Area catching up with living roof trend

PLUG AND PLAY | PG. 32

Factory-built homes get environmentally friendly

EXTREME GREEN | PG. 52

San Francisco building code out-greens the state

Tesla motors inc. | PG. 54

Q THE

www.theregistrysf.com

Automaker looks for ways to rev up production

Commercial & Residential Real Estate

THE SUSTAINABILITY ISSUE 2013

sustainability

the new normal

volume 2, number 4

WHATâ&#x20AC;&#x2122;S YOUR Q?

Q RATIO =

Total Market Value of Firm Total Asset Value

LEED. Follow. Or get out of the way. Diligent preconstruction makes green building far more efficient and affordable. Learn what happens when you mix a culture of foresight with leading expertise in sustainable building at www.bcciconst.com/green

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inside 4 | Plan Bay Area

32 | housing

Turning Away jobs

plug & play

Inadequate housing production may cost the Bay Area 280,000 jobs over 30 years.

Working In Spite of Ourselves

More factory-built homes are meeting California’s strict environmental building code.

Housing shortage won’t stunt job growth

42 | smart buildings

10 | San Francisco PUC

these walls can talk

Now the hard part

Utility regulator’s new headquarters was built green, but how green will it run?

16 | Green Infrastructure Beautiful utility

Neighborhood aesthetics get a role in projects that manage rainwater runoﬀ.

20 | green roofs a green roof over your head

The Bay Area catches up with the trend to top oﬀ buildings with vegetation.

What Is a green roof?

Technology allows structures to help the humans that run them.

48 | green buildings old dog, new tricks

Tenants in this 1908 building must take a 21st century approach to sustainability.

54 | Tesla Motors inc. Searching for second gear Maker of electric cars looks for ways to rev up production.

EXTREME GREEN

San Francisco building code out-greens the state

It’s alive!

More than a million plants California Academy of Sciences green roof inspires

At Left: Top to bottom: Hayes Valley in San Francisco; a meeting room at 240 Stockton; fabricated housing by Blu Homes.

on the cover: Plants flourish atop the new office building in downtown Mountain View developed by The Minkoﬀ Group and built by Nibbi Brothers.

Laura Kudritzki, jae henderson, Blue Homes

online The Premier Provider of Bay Area Real Estate News. www.theregistrysf.com events | industry news | market trends | design

LET THE REGISTRY TELL YOUR STORY. Send your news releases to news@theregistrysf.com.

letter from

the PUBLISher

Dear Reader, John McNellis has been writing opinion pieces for our magazine and our Web site for the last few years. In that time, he has written quite candidly about various commercial real estate-related topics. He has questioned the practices of some professionals and complemented others. But in every single one of his articles he has supported his viewpoints with facts and a high level of subject matter expertise. His most recent column focused on a topic very relevant to this issue, the solar installation on one of his buildings in Palo Alto. In the piece titled McNellis Shines Sunlight on Solar (http://tinyurl.com/theregistry-solar), John outlined his actual experience of owning this system: expense, rebate and savings figures. He estimated the actual benefit of his system to be marginal. One could conclude that it was almost not worth the eﬀort or, by extension, that solar systems like his may not be a great solution for some commercial building owners. The reaction to this article was immediate and vociferous. I have personally seen emails sent to John that support his position (even the Urban Land Institute in Washington, D.C., asked to republish his piece), and I have heard and read emails that called for his head. As John and I joked about the Prius Posse coming for him, we both concluded that the message of this article was not about criticism of the solar industry, but about improving such installations. Before this magazine goes to print, we will likely have published a response penned by the company that sold him his solar system, as well as John’s retort. Many things will be clarified, but most importantly a dialogue will commence, conducted by cooler heads, that will attempt to highlight the issue at hand. The thing to remember here is that we are not trying to find a chink in solar’s armor and disprove the benefits of such installations. What is important here is that the solar industry needs to understand the challenges it faces within the commercial real estate industry and improve solar’s economics. Money is the best incentive for a technology to take oﬀ, and in John the solar industry has a real-life example of how a building owner/operator may value the benefits of a solar system. In John’s case, there are certain variables that are part and parcel of his experience, namely energy prices in Palo Alto being some of the lowest in the Bay Area (this may be the only lowest-in-the-Bay-Area claim that Palo Alto can make). But those are issues that providers of solar installations must address at the forefront of the process with potential buyers. Living in the Bay Area, we are perhaps more acutely aware of all things green, and I would like to think that we are early adopters of the technology and the mindset needed to implement it. Put more plainly, my feeling is that we walk our green talk. John certainly has by investing nearly $100,000 in this system alone. However, it is evident that in some cases we can do better. And in this case, we can learn from the experience of one buyer and make solar installations a far better proposition. Vladimir Bosanac Publisher

www.theregistrysf.com

Q THE

Publisher Vladimir Bosanac (415) 738-6434 vb@theregistrysf.com President Heather Bosanac (415) 738-6434 heather@theregistrysf.com ASSOCIATE EDITOR Robert Celaschi EDITORIAL Jon Chown Hayden Dingman Brett Goetschius David Goll Neil Gonzales Rebecca Rosen Lum Sharon Simonson Maria Shao DESIGN Laura Myers Design Photographer Laura Kudritzki Advertising Denise Franklin (408) 366-1984 denise@theregistrysf.com News news@theregistrysf.com Feedback letters@theregistrysf.com Subscriptions subscriptions@theregistrysf.com (415) 738-6434 Ethics Policy The Registry embraces a strict ethics policy for its staﬀ and contributing writers, including columnists and freelance reporters. No person employed by or affiliated with The Registry has accepted or will accept any compensation, monetary or otherwise, in exchange for editorial content. All information that appears in the magazine is selected solely for its informational value to readers. The Registry is a registered trademark of Mighty Dot Media, Inc. ©2013 Mighty Dot Media, Inc. All rights reserved. This publication and/or its contents may not be copied, reproduced or republished in whole or in part without the written consent of Mighty Dot Media, Inc.

plan Bay area

Turning AwayJobs for a Strategy le Sustainab n Regio July 2013

cast of Final Fore sing and Hou on ti la Jobs, Popu

Plan Bay Area calls for more housing development of the type shown here in downtown Berkeley, close to jobs, stores and public transit.

Laura Kudritzki

Rebecca Rosen Lum PLAN BAY AREA, A LAND-USE BLUEPRINT for accomm0dating 2 million new residents and more than a million new jobs by 2040, promises to drastically reduce the greenhouse gases spewed into the air by placing mixed-use, high-density housing and jobs close to public transit. The plan is the Bay Area’s response to the California Sustainable Communities and Climate Protection Act of 2008, which requires its 18 metro areas to cut greenhouse-gas emissions from cars and light trucks by 15 percent over the next 20 years. Leading the project are the governing boards of the Metropolitan Transportation Commission, the regional transportation planning agency; and the Association of Bay Area Governments, the regional land-planner.

scenarios called for 902,000 new housing units and more than 1.4 million new jobs, the final plan seeks only 660,000 homes, and job creation drops to a corresponding 1.12 million. New housing estimates were lowered twice. Johnny Jaramillo, a regional planner at ABAG, said the lowered numbers acknowledge “the high vacancy rate due to the recent recession,” and the ability of the existing housing stock to absorb early demand. A scrappy, contentious, three-year tug-of-war between the major players culminated in the scrappy, contentious, sevenhour meeting of the two agencies on July 19. Plan Bay Area won the blessing of both the MTC and ABAG boards—but not before speakers invoked the names of Karl Marx, the John Birch Society, and the United Nations. Already, the Pacific Legal Foundation has sued. To achieve the targeted reduction in greenhouse gases, the plan “propose[s] a draconian, high-density land-use regime that will require nearly 80 percent of new housing and over 60 percent of new jobs in the Bay Area to be located within just 5 percent of the region’s surface area,” says the complaint, filed in Alameda County on behalf Bay Area Citizens, a nonprofit. The housing projections “are based on a time when we were in the middle of a financial crisis,” said Paul Nieto, a senior vice president with a specialty in infill development for Oakland homebuilder Signature Development Group. “This plan is business as usual for the Bay Area. We import workers and export housing,” said Paul Campos, vice president of government aﬀairs for the Building Industry Association of the Bay Area. “Development will go to the Central Valley and chew up prime agricultural land.” The plan is supposed to signal a sharp turn from that destiny of sprawling suburbs and ever-widening highways. Eighty percent of new housing and 66 percent of jobs will be directed to 191 “priority development areas” along transit networks and traffic

Regional planners: Inadequate housing production will cost Bay Area 280,000 jobs in next 30 years. The financial and economic consequences are high. The plan’s population and job projections become a basis for such outcomes as the distribution of billions of dollars in federal transportation grants. Stephen Levy of Palo Alto’s Center for Continuing Study of the California Economy says unlike other areas of the country and world that must take economic conditions much as they come, “We have our destiny largely in our hands.” Critics complain the plan is “gravely flawed.” The plan itself acknowledges that the region could generate more jobs if cities and counties allowed development of more homes. Home developers say it is out of touch with consumer preferences for detached single-family housing. In a letter to chairs of the MTC and ABAG, Bay Area Council President Jim Wunderman and a broad coalition of business groups called the final plan “an excellent work product.” But they noted with dismay that while the initial planning

Population Distribution by Age and Generation: Bay Area Compared to U.S., 2010

B ay A r e a

U.S.

8 7

PERCENT

6 5 4 3 2 1 0

Under 5 Gen Z

5-9

10-14

15-19

20-24

25-29

echo boom / Gen y

30-34

35-39 Gen x

40-44

45-49

50-54

55-59

60-64

ba by b o o m

Source: U.S. Census, 2010; Joint Center for Housing Studies, 2011; Strategic Economics, 2010.

www.theregistrysf.com

plan Bay area

Plan Bay Area aims for bike-friendly development, such as this scene in San Francisco’s Hayes Valley. At right, Lance Gorée in downtown Berkeley.

courtesy of Rebecca Rosen Lum; Laura Kudritzki

“There will be growing pains, but benefits could be high.” Lance Gorée, program manager, Downtown Berkeley Association corridors selected by local jurisdictions as “walkable” environ- the Urban Land Institute’s 2011 report, “What’s Next? Real Estate ments. Generous transportation grants will go to the cities and in the New Economy.” counties that identify PDAs and cooperate in the scheme. “Increasingly our people come in from outside San Francisco,” said The grant money is to come from billions of dollars raised Marc Cowlin, spokesman for software company MeltwaterGroup, via a cap-and-trade auction system. State law caps emissions of which opened its world headquarters at 225 Bush St. in June. “Anyheat-trapping fossil-fuel pollution from power plants, factories thing that makes living easier and working easier is a good thing.” and oil refineries, with a goal of reducing them to 1990 levels by Plan Bay Area will proceed regardless of the lawsuit, as has 2020. It requires industries to purchase permits to pollute, which a similar plan with a CEQA challenge in San Diego, said Sam can be bought and sold in a carbon market. Tepperman-Gelfant, a senior land use attorney for nonprofit law Regionally, the number of new jobs is projected to rise by a firm Public Advocates Inc., which challenges “systemic causes of third, bringing the total to more than 4.5 million. Alameda, Contra poverty and racial discrimination.” He specializes in “equitable Costa and Solano counties outpace the pack at 36 percent pro- development” for the San Francisco nonprofit. The federal transjected employment growth from 2010 to 2040. Marin lags badly. portation dollars will continue to flow, he said. Familiar demographics and economics drive the plan’s con“This is not the end of suburbia by any means,” said Bena Chang, ception: vibrant growth in the tech sector; director of housing and transportation for the graying of the baby boomer generation— the Silicon Valley Leadership Group, a public those born from 1946 to 1964; and the coming policy business trade organization representof age of Generation Y, largely the babies of ing more than 375 South Bay employers. “But baby boomers. we want to revitalize blighted areas.” These so-called Echo Boomers, unlike the “I think it remains to be seen what impact generation that came before them, would just will be on the ground,” she said. “There is still as soon not drive. In fact, they’d rather text a lot of control at the local level. We have to Too Little New Housing than drive, according to a recent survey by carride herd to make sure the implementation To Cost the Bay Area sharing company Zipcar Inc. Four out of five happens.” The plan is up for review every four Tens of Thousands of Jobs said the high cost of gas, parking and mainteyears. As soon as a year from now, “we’ll be http://tinyurl.com/theregistry-housing nance is a deterrent—a big change from 1985, ramping up” to prepare, Chang said. when people ages 21 to 34 bought nearly 40 Like all change, this one will take some percent of cars. time to get used to, said Lance Gorée, program manager for the The University of Michigan’s Transportation Research Institute Downtown Berkeley Association of businesses. “A new dynamic reported that fewer young people are even bothering to get a will have to be taught and learned,” he said. “I see some encroachdriver’s license. ment issues—residential is coming into commercial zones. You “Young people are moving in increasing numbers to large love residents as a business owner because they become concities with reasonable public transportation, such as New York sumers. But they’ll have opinions about how you do your busiand San Francisco,” researcher Michael Sivak told Traffic Injury ness. Residents will have more say. There will be growing pains, Prevention, adding that the echo boomers are “on the forefront of but benefits could be high.” Chains will produce brands that suit concern” for the environment. mixed-use developments, he said: “Target has already come out “Our employees already are heavy users of public transit and with ‘Urban Target.’ They’ll cater more to residents. You’ll see also bike to work in good numbers,” said Twitter Inc. spokes- more Pottery Barns. woman Karen Wickre in an e-mail message. “And as BART stretches down to San Jose, you’ll see the same Americans are making a beeline back to cities, according to thing in Fremont.”

read more online:

www.theregistrysf.com

Build Greener. Challenge Accepted.

We build to improve lives, and there is nothing more fundamental to this ideal than working for a healthier planet.

Learn more about this LEED Platinum Project at

xlconstruction.com

plan Bay area

Working In Spite of Ourselves Sharon Simonson EVEN WITH ITS HOUSING CONSTRAINTS, the Bay Area is expected to capture a growing share of the nation’s new jobs. The region’s proportion of American employment fell to a 20-year low in 2010, hitting 2.4 percent. By 2040, the Bay Area will claim nearly 2.55 percent of all U.S. jobs, according to an analysis by economist Stephen Levy at Palo Alto’s Center for Continuing Study of the California Economy. In the next 30 years, not quite three-quarters of all new Bay Area jobs are expected to come from business and professional services, the health and education sectors, and leisure and hospitality. The same industries will drive new U.S. employment—but the Bay Area will capture a disproportionate share. Even as the nation sees employment growth of 50 percent within computer services, scientific research and development services, and architecture and engineering services, from 2007 to 2040, the Bay Area’s professional and busi-

The concentration of business, professional and scientific services in the Bay Area will grow.

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ness services jobs base will grow by more than 57 percent to more than 912,000 jobs. Nationally, employment related to education and health services is to rise 66.8 percent by 2040; the Bay Area will see its education and health services sectors grow by nearly 70 percent to 655,000 jobs, the Levy study says. At 20.2 percent job growth from 2010 to 2020, the Bay Area will exceed California by 1 percentage point and the nation by not quite 5 percentage points. At the same time, while about 40 percent of the Bay Area’s existing 2.6 million households are considered very low or low-income now, that proportion will rise to 43 percent even as middle-income households fall by 3 percentage points to 57 percent, according to the Association of Bay Area Governments. In the next 15 years or so, large increases in the young adult population and retiring workers will drive higher housing densities in inner-city development and redevelopment near transit. The young are in search of the hip. The old want convenience. Demand for the region’s huge stock of single-family homes in outlying areas will suﬀer in the face of oversupply. But as the Gen Xers—those aged 30 to 44 now—grow older, and echo boomers (those aged 10 to 29) follow, a resurgence of family formation should reverse the trend with a return to the suburbs from 2025 to 2040.

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san francisco puc

now

the Hard Part Neil Gonzales THE FREE BIWEEKLY PUBLIC TOURS speak to how proud the owner and planners are

of the sparkling, glassy tower that is the new San Francisco Public Utilities Commission headquarters. Overlooking the neoclassical Civic Center, the modern 13-story structure at 525 Golden Gate Ave. is certainly an attraction—far from the drab, utilitarian construction for which government offices are typically known. The spacious, elegant lobby features a trendy café and a digital-arts wall that shows the PUC water-system operations and other educational material through interactive videos. The tours start in this lobby where workers, visitors and schoolchildren on a recent field trip created a scene more reminiscent of a museum than a public administrative building. Catania Galván, coordinator of citizen involvement for the PUC, serves as a tour guide, explaining the building’s deeper allure: the innovative environmental and energy-saving elements from the water-recycling system to the façade-integrated wind turbines and rooftop solar array. “This building will be paid for in about 25 years,” Galvan said. “It is built to last 100.” Indeed, the sustainability goals have been set extremely high for the PUC headquarters, built for $201.6 million (including design and other factors) and finished in June 2012. The building is expected to exceed the recent state requirement for energy efficiency in new office buildings by 55 percent. It is expected to reduce heating, cooling and ventilation costs by 51 percent, will need 45 percent less energy to illuminate the interior compared to typical Class A office buildings and generate up to 7 percent of its own power needs. Over 75 years, the building should save $118 million in energy costs.

The San Francisco PUC promises long life and low cost for its super sustainable $200 million headquarters.

Above & Inset: The San Francisco PUC headquarters in the foreground oﬀers a modern contrast to the neoclassical Civic Center nearby.

courtesy of KMD Architects

right: PUC employees must do their part to see that the LEED Platinum building uses energy efficiently.

courtesy of SFPUC www.theregistrysf.com

www.theregistrysf.com

san francisco puc

Clockwise from top left: A digital wall at the ground level show the PUC water system; a wall of windows floods the entrance with light; wind turbines on the north façade doubles as an art element; Catania Galván, coordinator of citizen involvement for the PUC, also guides tours of the building.

Courtesy of SFPUC; Laura Kudritzki One year after opening, there’s no verdict yet on exactly how the building’s actual performance stacks up against these lofty goals. In July, the building earned Platinum certification from the Leadership in Energy and Environmental Design program, the top rating for environmentally conscious construction from the U.S. Green Building Council. The building garnered a major national award from the American Institute of Architects in April when it was named a Committee on the Environment Top Ten green project for its sustainable design and reduced energy consumption. Any level of LEED certification is worth bragging about, but Platinum “is quite a big leap,” said Lynn N. Simon, senior vice president at Thornton Tomasetti, an international engineering firm that provided sustainability consulting for the project. “It takes a tremendous eﬀort, from the design team to the owner. There’s no wiggle room. You have to do high-level water and energy efficiency, indoor air quality and other issues.”

But neither the LEED measure nor the AIA recognition is based on the building’s actual operation over time, the ultimate measure of success. The wind and solar panel systems weren’t even fully deployed until May 30. The PUC had to first hammer out a connection agreement with Pacific Gas & Electric Co. to operate the wind turbines and solar array on a 24-hour basis, including lots of systems testing. “Once the building is up, the question is: How does it really perform?” said Ralph DiNola, executive director for the New Buildings Institute, a nonprofit in Vancouver, Wash. “It’s important that tenants know what the energy assumptions are and are engaged.” The New Buildings Institute works to improve energy performance of commercial properties. Despite its untested state, the PUC headquarters still impresses DiNola: “Overall, it is an outstanding building,” he said. “There’s a nice integration of renewable technology in a pretty dense area, [and] it serves as a model for the private sector and

demonstrates strategies and technologies [of] a high-performing building.” The initial impetus was to consolidate PUC staﬀ from two leased buildings into one city-owned property. The resulting savings in lease payments coupled with cutting-edge design to reduce utility and operating costs at the new headquarters would mean a 26-year payback. It is only fitting that the PUC embarked on what is now considered one of the greenest buildings in North America: The agency provides potable water to much of the Bay Area, wastewater treatment to San Francisco, and hydroelectric power to municipal departments. Appropriately, the PUC building is one of the first in the nation to treat wastewater within the property. The wastewater-treatment system is based on advanced wetland technology and among the building’s best highlights. Planters inside and outside filter used water through a process similar to that found naturally in a wetland. The system reclaims all of the building’s wastewater to

www.theregistrysf.com

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“Once the building is up, the question is: How does it really perform?” Ralph DiNola, executive director for the New Buildings Institute courtesy of SFPUC

satisfy 100 percent of the demand for the low-flow toilets and urinals. Also, rainwater is harvested and used throughout the building for irrigation. “We use 60 percent less water than the typical office building,” said Brook Mebrahtu, a San Francisco Public Works senior project manager who was part of the PUC construction team. “It’s an incredible feat.” The building also uses less energy to light the interior by harvesting daylight. Shelves bounce the sun’s rays into the interior, while automatic exterior blinds are tied to the trajectory of the sun. Fixed fins on the south façade serve as shelves that bring daylight even further inside. Wind turbines on the north façade and photovoltaic panels on the rooftops should help the building consume 32 percent less energy than similarly sized offices. On the north side, “the building is curved to create a wind tunnel, so it helps power the wind turbines,” Galván said.

Even though energy-saving elements achieve its energy goals. But it could take are already integrated into their workplace, several more months to start gauging exact the more than 900 employees inside still performance. Now that the turbines and need to do their part. “We do encourage solar panels are fully operational, he said, employees to reduce their energy usage” “we need a full year to obtain that [energy] such as keeping the interior shades up information given the sun angle and wind to bring in the natuspeeds at diﬀerent ral light, Mebrahtu times of the year.” said. Workers comCurrently, the pete to use the least PUC is developing energy, pitting each an “integrated buildfloor against the othing management sysers. Many people tem,” sophisticated already take the grand data-collection and Electricians Unveil Cutting-Edge staircase instead of monitoring software Net-Zero Energy Training Center using the destinathat will closely track http://tinyurl.com/theregistry-training tion elevators, which performance of enercarry riders directgy, water, wastewater ly to their floors without stopping. and other systems. It will not be complete The elevators themselves are up to 35 per- for several months, Mebrahtu said. Once cent more efficient than the standard lift. it is ready, the program will create a single With all the sustainability features and platform from which building managers employee participation, Mebrahtu feels can track and tweak operations to maxiconfident that the building eventually will mize efficiency and cut waste.

read more online:

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Green infrastructure

Hayden Dingman

Beautiful Utility

THERE’S A PROBLEM at San Francisco’s Mission and Valencia streets. The V-shaped intersection, lying atop one of the city’s eight watersheds, floods during every rainfall. The rainwater tries but fails to escape down the drains. San Francisco’s combined sewer and storm runoff treatment system fills to capacity. Meanwhile, the other end of the system vomits untreated sewage and rain into the bay with equal zeal, unable to distinguish between the two. Even after storms pass, the backup takes days to resolve. Modern San Francisco inherited this system; most of the infrastructure was set up a century ago. The system is not without benefits—the drinking water is really clean. But there’s a tradeoff. “When we have large storms, our system gets overwhelmed for short periods of time and then goes back to normal,” said Raphael Garcia, a project manager for green infrastructure at the San Francisco Public Utilities Commission. “We’re meeting our regulatory requirements, but what we’re trying to do is be better.” With such an old and extensive patchwork, a drastic overhaul isn’t feasible or necessarily desirable. However, that’s not to say there aren’t ways to progress. San Francisco’s PUC has set aside $400 million for “green infrastructure” and watershed improvement, including an undertaking at the aforementioned Mission and Valencia streets known as the Mission & Valencia Green Gateway. Initially, eight neighborhood projects are slated, from Chinatown, Sunset and the Lower Haight to a one-mile stretch on Cesar Chavez Street from Guerrero Street to nearly Potrero Avenue. They have a tentative total budget of $57 million. Future projects are to proceed after this round is complete. While the projects’ utility is most important, the commission is attempting to layer another benefit on top: creating street scenes and aesthetic values that reflect each neighborhood’s identity. “We know the Mission [District] is very different from, say, the Sunset [District], so there are ways we can design the project that are more ‘the Mission’ or more ‘the Sunset’ and take into consideration different cultures that make up each community,” said Teresa Young, the SFPUC’s communications lead for the green-infrastructure projects.

San Francisco wants to introduce aesthetics and neighborhood branding into projects that manage rainwater runoff.

www.theregistrysf.com

Opposite Page: An artist’s conceptual rendering of the water infrastructure project planned for the intersection of Tiﬀany, Duncan and Valencia. Raphael Garcia and Teresa Young in La Lengua neighborhood of San Francisco.

Rendering courtesy of AECOM

this Page: Near the intersection of Valencia and Mission in La Lengua, street scenes give the visual cues that will be used to create infrastructure and reflect the neighborhood’s aesthetic values.

Laura Kudritzki

www.theregistrysf.com

Green infrastructure

Green infrastructure is a broad term, covering everything from trees to permeable pavement to ‘rain gardens’ that capture and absorb stormwater runoﬀ from streets, roofs and parking lots.

Artist’s concept rendering of the project at the intersection of Mission and Valencia.

Rendering courtesy AECOM Green infrastructure is a broad term, covering everything from trees to permeable pavement to “rain gardens” that capture and absorb stormwater runoﬀ from streets, roofs and parking lots. With these improvements, plants and soil absorb rainwater during storms, diverting some entirely and slowing the flow of the rest to the sewer system while helping to purify all of it. “There are examples of green infrastructure all around the city, but these are going to be some of the first that have very specific performance criteria up front,” said Garcia, who is a project manager for the first phase of green projects. “We’re going to be monitoring them for years afterward.” Plans for the Mission-Valencia project detail a broad, permeably paved plaza with scattered trees and gardens. The goal is to enhance stormwater drainage on Valencia from Cesar Chavez Street south to Mission. There’s plenty of space to widen the sidewalk without worsening traffic, making it a prime community focal point. A second plaza is proposed at Duncan and Valencia streets plus improvements to Duncan itself and the surrounding streets: Tiﬀany, San Jose and 29th.

www.theregistrysf.com

In contrast, Chinatown has no space for a giant plaza, so the team is focused on two of the neighborhood’s historic alleyways instead: Spoﬀord Street and Ross Alley. To better understand each neighborhood, Garcia and Young are hosting regular open-house meetings across the city, inviting the community to comment on everything from the number of trees to the color scheme. “In the past it’s been, ‘We are informing you that we’re going to come and do this.’ Instead we’re inviting the public to come in during the planning process and provide input early, so it helps shape the design,” Young said. “Sometimes people are adamant about not removing parking in certain areas. We can actually make that area permeable and not change the use. When we’re talking about managing storm water, we can do that in a range of ways that can really reflect the needs of the location we’re working in,” Garcia said. For the Valencia-Mission streets project they are planning the first “sparkly permeable paving,” hoping to sync the Green Gateway project with the unique sidewalks Valencia Street is known for. Residents seem excited. During a recent tour of the project area, Cory Obenour,

co-owner of the celebrated Blue Plate restaurant on the corner of Mission and Valencia, approached Garcia and Young about the future Green Gateway. “How are the sparkly sidewalks coming?” he asked, grinning. Obenour attended the latest open house and is looking forward to the change in scenery. “This neighborhood is one turn away from being another great destination like Hayes Valley or 18th and Valencia because all the establishments are here,” he said. “I just feel with a bit of eﬀort it would be great.” The project timelines are longish. The first, at Fell and Oak, won’t finish until 2014, while the Mission and Valencia project won’t start construction until early 2015 and finish until the end of 2016. Still, Garcia and Young are optimistic about the potential, especially provided the community stays engaged. “It’s really the combined eﬀorts of the merchants and residents and these grassroot organizations, as well as the city— that’s how we’re going to get to where we’re trying to get to in the future,” Garcia said. “I don’t think we’re ever going to get to where we’re trying to get to on our own.” Luckily, it looks like they won’t have to.

Wendel Rosen has worked with the real estate industry for more than a century. As real estate evolves, so do we. In 2003, we became the first law firm in the country to be certified as a green business. This unique perspective, along with our historical strengths in all aspects of real estate transactions, development and litigation, make us the go-to law firm for your sustainable real estate projects. From risk allocation in green construction contracts to navigating green leases, ordinances and building requirements, the lawyers at Wendel Rosen can help add some green to your real estate visions.

Green Roofs

A Green Roof

The 13,000-square-foot rooftop garden at 899 West Evelyn in Mountain View has two mature trees, a bocce ball court, a lawn deck and a trellis.

Laura Kudritzki

Over Your Head Maria Shao

IN AN ERA OF HEIGHTENED ENVIRONMENTAL CONSCIOUSNESS,

developers and building owners are looking to green roofs as a way to reduce their environmental imprint and meet rising requirements for low-impact development. Living roofs are being incorporated into structures to cool buildings, limit rainwater runoﬀ and get people outdoors to expose them to natural habitats and sustainable architecture. Other U.S. cities including Washington, D.C., Chicago and New York have installed green roofs at a faster clip than the Bay Area, according to Green Roofs for Healthy Cities Inc., a Toronto nonprofit. But regional examples are proliferating. “Every company is trying to leverage sustainable technology that will reduce their footprint. The green roof is another tool,” said Marlene Barneveld, branch manager in San Carlos for ValleyCrest Landscape Companies. “It’s also the social conscience of companies [and] the PR value of using the latest green technologies.”

The concept dates back to Mesopotamia, Greece, Rome and Persia. In Iceland, sod roofs have long insulated buildings from the cold. Germany is a leader in the technology. In recent years, green roofs have cropped up in the United States. Ford Motor Co.’s River Rouge factory in Dearborn features a living roof. Chicago’s City Hall has one, and the city’s Millennium

The ecology-minded Bay Area is catching up in the green-roof and green-wall movement. Park, atop a garage and train station, serves as one of the world’s largest green roofs. Locally, one of the oldest living roofs, an expanse of prairie vegetation, was installed in 1997 on the former Gap Inc. headquarters in San Bruno, now occupied by Google’s YouTube. San Francisco’s most renowned green roof was installed in 2007 atop the newly

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Green Roofs

“We see it as an amenity that becomes more valuable as cities require you divert rainwater.” Chris Heimburger, vice president of development, Kilroy Realty Corp.

Details on the green roof of 50 U.N. Plaza in San Francisco.

Laura Kudritzki

built California Academy of Sciences in Golden Gate Park. Since then, green roofs have appeared on a San Francisco city government office building and a public library in its Sunset district; at low-income apartment buildings in San Jose and a Berkeley animal shelter; at a family home in Marin County and some private schools. In late August, the U.S. General Services Administration unveiled a 14,000-square-foot green roof at its new regional headquarters at 50 U.N. Plaza in San Francisco. More green roofs are planned for high-profile future construction: the 5.4-acre park atop San Francisco’s Transbay Transit Center that will be ready in 2017; Facebook’s West Campus

headquarters building in Menlo Park where it proposes an eightacre green roof; and the top of the nine-story suite tower at the San Francisco 49ers Levi’s Stadium. “The green roof is a way to make the building more sustainable, whether you’re trying to get a LEED rating, return on investment or be environmentally conscious,” said John Loomis, principal at SWA Group, which did the landscape design of the Academy of Sciences’ living roof. Commercial developers are taking note. Kilroy Realty Corp. plans a six-story LEED Platinum office building at 333 Brannan St. in San Francisco that will have at least a 3,000-square-foot vege-

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Green Roofs

“You can take your lunch and a laptop up to the roof deck, and it is another place to work.” Daniel Minkoff, The Minkoff Group

tated area as part of the 30,000-square-foot roof. Native, droughttolerant plants will live in 12 inches to 15 inches of growing medium. Excess rainwater from the roof will drain into a tank onsite, where it will be treated and pumped back up to flush toilets. The vegetated area will be adjacent to a roof deck, where occupants can enjoy a verdant view. The greenery will add some insulation value to the roof. The green portion will cost $40 to $50 a square foot compared to $10 a foot to $12 a foot for a conventional roof, and it probably won’t mean higher rents. “We see it as an amenity that becomes more valuable as cities require you divert rainwater,” said Chris Heimburger, Kilroy vice president of development. Swinerton Builders is the general contractor at 333 Brannan St. Daniel Minkoff of The Minkoff Group was so convinced that his new 70,000-square-foot downtown Mountain View office building needed a green roof that he returned to the city in 2011 to adjust his 2009 entitlements. After speaking to prospective tenants in downtown Palo Alto and Mountain View, he found that “they wanted to stay in Caltrain-served downtowns, but they needed an outdoor amenity space.” The 13,000-square-foot rooftop garden includes two 15-foot mature trees, a bocce court, lawn, deck and trellis. The additional weight required some special steel support in the building. “You can take your lunch and a laptop up to the roof deck, and it is another place to work while still being able to walk to Caltrain to get home at the end of the day,” he said. Nuance Communications Inc. agreed in April 2012 to lease the building for 12 years, paying net effective rents of $5.20 a square foot, according to Cassidy Turley Commercial Real Estate Services. Nibbi Bros. was the general contractor. The city of San Francisco is stepping up its look at using roof vegetation to better manage storm water. Dense urban areas are full of impervious surfaces so there often are “no other opportunities for dealing with storm water rather than on the roof,” said Mark Palmer, senior green-building coordinator for the Department of the Environment. In 2010, the city put in a 10,000-square-foot green roof on an eight-story city-owned office building at One South Van Ness Ave.

Above, right: Casa Feliz Studios provide 60 aﬀordable, energy-efficient units in downtown San Jose.

courtesy of Casa Feliz

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what is

a green roof? A living roof has a growing medium, filter membrane, drainage layer, waterproofing layer, support panel, insulation, vapor-control layer and structural support. An extensive green roof usually has hardy plants (sedum is often used) that do well in three-to-six inches of growing medium and requires relatively little care. An intensive green roof has growing medium deep enough for trees and is usually a more complex environment that requires additional maintenance.

Among the benefits of green roofs: REDUCING HEAT: Plants absorb heat and provide shade, reducing roof temperatures sharply and cooling building interiors. This can lower air conditioning and energy costs. CAPTURING STORM WATER: Vegetation absorbs and evaporates rain, reducing and slowing water runoff. This relieves stress on sewer systems and limits pollutants that flow into the ecosystem. CLEANSING THE AIR: Plants remove pollutants from the air. ENHANCING HABITAT AND BIODIVERSITY. IMPROVING HEALTH AND AESTHETICS: Greenery that is accessible or viewable can lower human stress, improve productivity and reduce absenteeism. LENGTHENING ROOF LIFE: A green roof can double the life of a roof from 15 years to 30 years.

Green roofs cost significantly more than traditional roofs. They can start at two to three times more than a standard roof—roughly $20 to $30 a square foot—versus $8 to $10 a square foot on a conventional roof, said John Loomis, principal at SWA Group, a landscape architecture firm. Maintenance costs for a green roof can be three to four times more than maintaining the same type of plantings on the ground, said Nada Duna, senior vice president and regional manager at ValleyCrest Landscape Companies. “It does add a lot of intrinsic value to the real estate from a programmatic viewpoint. The buyers we see today are more environmentally conscious. They’ll select an upcharge for these projects,” said Paul Kephardt, president of Rana Creek Inc., a landscape architecture firm in Monterey that has designed numerous living roofs in the Bay Area. “It definitely costs more than a traditional roofing system, but over a longer period of time they will pay off. If you can make them accessible or a visual amenity, they will pay off more quickly,” said Steven Peck, founder and president of Green Roofs for Healthy Cities Inc. Peck brings his 11th Annual CitiesAlive Green Roof and Wall Conference to San Francisco Oct. 23 to Oct. 26. Numerous cities have joined the call for living roofs. Toronto requires the construction of a green roof on 20 percent to 60 percent of available roof space on new commercial, institutional and residential buildings of at least 2,000 square meters (~21,500 square feet). For industrial buildings of at least 2,000 square meters, a green roof is required on 10 percent of available roof space or 2,000 square meters, whichever is less. Chicago offers grants worth 50 percent of the cost of placing a green roof on an existing building in its downtown central loop and awards $5,000 grants for green roofs on residential and small commercial projects. Washington, D.C., provides funding of $5 a square foot for living roofs on residential, commercial and institutional properties. Philadelphia credits 25 percent of green roof costs, up to a $100,000 maximum, against the city’s business income tax. None of the cities and towns in the Bay Area offer such direct support for green roofs, Peck said.

Atop 50 U.N. Plaza (from left) are John Rahim, director of the San Francisco Planning Department; Ruth Cox, GSA Regional Administrator, Pacific Rim Region; Stephen Peck, president of Green Roofs for Healthy Cities; and Juliet Ellis, assistant general manager for External Aﬀairs at SFPUC.

Laura Kudritzki

www.theregistrysf.com

Green Roofs

The roof has sharply reduced the amount of runoff sent into the city’s sewer system. Sensors and emitters placed in the soil measure dryness and trigger watering during the dry months. Rainwater from an upper roof is collected and stored in a 6,500-gallon cistern on the living roof. The stored water has supplied 40 percent to 50 percent of the irrigation water used annually, Palmer estimated. The roof, which is accessible by a freight elevator to maintenance and operations staff, has attracted hawks, owls, dragonflies, ladybugs and grasshoppers. First Community Housing, a San Jose nonprofit that develops affordable housing, has committed to green roofs. Two of its 18 buildings have living roofs and another will have one when construction is complete in November. So will three of the four new buildings it plans to build after that. At downtown San Jose’s Casa Feliz, a LEED Gold building with 60 apartments, five green roofs manage storm water onsite rather than dumping large amounts of runoff into city sewers. The roofs retain 90 percent of rainwater, while the remaining 10 percent drains into a bio-swale, a vegetated soil area in the backyard that filters the water before releasing it into sewers through mid-sized pipes. The green system cost $320,000 to build—less than the $350,000 it would have cost to build a larger piping system to carry a much greater amount of water two blocks directly to the city’s sewers. “I’d rather put the money into our own building than storm piping in the street,” said Jeff Oberdorfer, First Community executive director. At its 100-unit Fourth Street Apartments, also in San Jose, there is a 50,000-square-foot green roof that captures most storm water. Excess water goes into a concrete basin with sediment filters that treat the water before it is sent to the sewer system. “This is basically for low-impact development to maintain the water onsite. Many cities have low-impact development guidelines. You’re going to be required as a developer to do this sooner or later,” said Oberdorfer. Facebook plans an eight-acre green roof on the West Campus headquarters building it proposes to construct in Menlo Park across from its current headquarters. The company hired noted architect Frank Gehry to design a 430,000-square-foot building that can house 2,800 employees in one cavernous room in the 1,565-foot-long structure. The vegetated roof, about 45 feet above grade, will have lawns, meadows, gardens and potentially more than 300 trees. The roof, where soil will be deeper than four feet in some areas, will include paved gathering areas, outdoor dining, a half-mile walking path and space for a special events tent. The building is designed to integrate with the surrounding natural landscape. “The green roof will be both functional continued on page 30

More than

a million

Plants

Maria Shao The field wears a blanket of green. Rustic grasses, flowers, ferns and other plants cover not only flat sections but also several mounds. It is an undulating two-anda-half acre verdant terrain that seems like a landscape from another planet. It’s actually the green roof atop the California Academy of Sciences in Golden Gate Park. This carpet of life—70 species of native Californian plants plus insects and birds—is a symbol of San Francisco and an important exhibit of the science museum. “The mission of the California Academy of Sciences is to explore, explain and sustain life. Having a green roof ties in closely with our mission,” said Ari Harding, director of building systems for the San Francisco museum that includes an aquarium, rainforest and planetarium. “The green roof is one of the icons of sustainability.” Museum architect Renzo Piano envisioned the roof as the result of lifting up a section of Golden Gate Park and sliding a building beneath. The public can view the expanse, with its seven hills blanketed by 70 native California plant species, from a rooftop terrace. continued on page 29

The green roof at the California Academy of Sciences still inspires.

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Green Roofs

Museum architect Renzo Piano envisioned the roof as the result of lifting up a section of Golden Gate Park and sliding a building beneath. continued from page 27 The roof, installed in 2007 when the museum was built, is one of the world’s most complex green roofs and has helped the museum twice earn LEED Platinum ratings. Initially, 1.7 million plants in over 50,000 biodegradable trays made of coconut husk fiber were installed. Nine species, including beach strawberry and self-heal, were planted; dozens more species have been planted since. Surrounding the roof’s perimeter are 60,000 photovoltaic cells that contribute 5 percent or more of the museum’s energy needs and also provide shade. Because of the vegetation, the roof stays an average 40 degrees cooler than a standard roof, helping to keep temperatures inside exhibit halls 10 degrees cooler than with a conventional roof. The sharp slopes of the rooftop hills—up to 60 degrees—and automated skylights strategically placed in the mounds help funnel cool outside air into the central piazza inside, naturally ventilating the surrounding exhibit spaces. The skylights also allow natural light, reducing the museum’s artificial lighting needs. Conversely, hot interior air rises and is released through

the skylights. The exhibit halls do not have conventional air-conditioning, only radiant heating beneath the floors. The living roof also keeps rainwater out of the city’s sewer system. The vegetation absorbs most precipitation, while excess is diverted to a recharge station under the building’s loading dock, then sent to an aquifer under the park to be used to irrigate the park. “One hundred percent of rainwater is either used immediately by plants or is diverted into the aquifer. We get to keep it and use it for irrigation again in a closed loop system,” Harding said. The roof provides a vibrant habitat for dozens of insect and bird species that have been studied by scientists. But because the roof needs to stay green year round, the museum uses about 1.5 million gallons of water a year for irrigation during the dry months, an expense that Harding said is worthwhile: “It’s teaching science and botany. It’s bringing people in the door, so it’s been a good investment,” he said. “The more people see a green roof, the more they’ll be interested in installing green roofs and thinking about sustainable architecture.”

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Green Roofs

“People will be able to get oﬀ city streets, have a place to exercise, have a cup of coﬀee, be outdoors yet be in the heart of San Francisco.” Paul Kephardt, landscape architect, Rana Creek Inc.

Both the public and private sectors have embraced green roofs. From left: The Minkoﬀ Group’s new office development in Mountain View; exterior and rooftop of 50 U.N. Plaza.

Laura Kudritzki

continued from page 27 and aesthetic. We build our campuses so that they promote activity—people sitting outside, eating together, or walking around,” said a company spokesman. Not far away, in Mountain View, Google also planned living roofs at a nine-building campus it wants to construct near its Googleplex headquarters. Construction has been put on hold. At the San Francisco 49ers new Levi’s Stadium set to open in 2014, there will be a green roof atop the suite tower overlooking the field. The 27,000-square-foot roof will feature native vegetation and will serve as a year-round event space that can host 500 people

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to 700 people while offering a view of the surrounding valley. In San Francisco, at the Transbay Transit Center, which is under construction, a 5.4-acre rooftop park will provide gardens, trails, grassy areas, lily ponds and an amphitheater. There will be oaks, redwood trees and diverse vegetation, providing a lush spot in the heart of a dense city. “People will be able to get oﬀ city streets, have a place to exercise, have a cup of coﬀee, be outdoors yet be in the heart of San Francisco,” said landscape architect Paul Kephardt of Rana Creek Inc. in Monterey, who participated in the initial concept design team. “It cleans storm water, freshens air, provides habitat, provides an amenity not otherwise available.”

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housing

This Blu Homes Breezehouse model in Healdsburg represents the new generation of green prefab homes.

courtesy of Blu Homes Inc.

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Plug &Play Jon Chown

AMONG THE stately, traditional homes on Donner Avenue near historic downtown Sonoma rests a far more modern structure: three semi-detached boxes, with slightly pitched roofs, cedar siding and big rectangular windows that start close to the roofline and reach nearly to the ground. It’s loaded with environmentally friendly features, including cabinets made with sustainable woods, double-pane Andersen windows, Energy Star-rated appliances, dual-flush toilets, ecofriendly countertops and even eco-friendly paint. The home needs only some panels for the solar-ready roof to produce enough energy to power itself. The house was built in the new Vallejo factory of Blu Homes Inc. with a steel frame that allows for a patented folding technique. Workers delivered the prefabricated dwelling to the work site in sections and assembled it in days. Blu Homes’ founders, Maura McCarthy and Bill Haney, conceived the idea while at the Rhode Island School of Design. The result is a home so intriguing that people like Bill and Samantha Johnson, who live in Pismo Beach, drove their Toyota Prius nearly 300 miles to see it. “It’s fantastic,” the couple said in unison.

The Bay Area is Blu’s biggest market, so it made good sense to move production from the company’s original Massachusetts factory in late 2011. The 250,000-squarefoot Vallejo site can produce 500 homes a year.

Manufacturers refine the factory-built home to meet California’s stricter building code. It seems to be a good time to set up shop in California. After falling to a production low in 2011, the state’s single-family homebuilders are pushing back into action, led primarily by new production in Santa Clara County. Yet the California housing market of today isn’t simply following the sequence established before the Great Recession. In April 2010, the state adopted the nation’s first green-homebuilding requirements. The new standards went into eﬀect in January 2011, and become more stringent each year. The 2014 standards require 25 percent more efficiency than the 2011 baseline. By 2020, the California Energy Commission wants all new homes in the state built to a zero-energy threshold,

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Blu Homes prices its models from $130,000 to $590,000, not including the cost of land or the foundation.

courtesy of Blu Homes Inc.

meaning every house will produce as much energy as its occupants consume. The leap is tantamount to moving from a Silver level to a Gold level in the Leadership in Energy and Environmental Design program, said Bob Raymer, senior engineer for the California Building Industry Association and an expert on the state building code. “In our analysis, the additional cost [per home] could range from $30,000 to $100,000,” he said. LEED assigns points based on the sustainability of the site, water efficiency, energy use, indoor environmental quality, materials and resources used. Additional credit can be gained through innovation and design. There are 100 possible points. A score of 40 will certify a project as green; 50 points earns a Silver rating, 60 points a Gold, and 80 or more a Platinum rating. It generally takes a zero-energy home to earn Gold. To builders, 2020 is right around the corner, Raymer said. As standards increase, the industry is faced with meeting the requirements and understanding how to market the moreexpensive homes to the public, including the all-important first-time buyer. “Is this something homebuyers are ready to embrace in the next five to six years? Our biggest questions focus on design, cost and marketability. Is it something that 100 percent of homebuyers will want?” Raymer said. Blu’s sales director, Kaitlin Burek, is convinced the buyers who prefer a green home are quickly becoming the majority. “People are thinking about helping the environment, becoming more efficient and saving money,” she said. “More banks are willing to wrap in solar costs to traditional home loans.” While very few first-time homebuyers could aﬀord the $2.25 million Blu Home in Sonoma, other designs are more aﬀordable. The smallest, a 460-square-foot studio apartment, starts at $130,000. A four-bedroom “Sidebreeze” model such as the one in Sonoma costs $590,000. That price doesn’t include land and other costs such as the foundation, which could be as low as $60,000, according to a Blu Homes estimate. Los Angeles’ Connect:Homes, founded in May 2012, also is manufacturing

housing

â&#x20AC;&#x153;Since I joined three years ago, our sales have grown more than 10 times.â&#x20AC;? Kaitlin Burek, sales director for Blu Homes Inc.

Blu Homes uses a proprietary technology that allows the steel frame to be folded and trucked to the building site.

courtesy of Blu Homes Inc.

www.theregistrysf.com

housing

green factory-built houses. Each is shipped 90 percent pre-assembled. Both Blu Homes and Connect homes meet the Silver-level LEED requirements; Blu homes can attain LEED Gold certification with the addition of the solar panels. Where Blu’s homes are box-like, Connect homes are more like a boxcar, 8 feet wide, 40 feet long and 9½ feet high.

The modular shape can be shipped just about anywhere for about $5,000, according to Connect. The base model, a 640-square-foot, one-bedroom, costs $139,000. Installation and site work are an additional $23,000. On the upper end of the range, Connect’s 2,500-square-foot model costs $360,000 plus $88,000 to put it together.

At the end of 2012, Blu Homes celebrated its 100th “project” (each structure is referred to as a project), and by July of this year it had already doubled that mark, Burek said. Blu has built more than 50 of those homes in the Bay Area and more than a dozen more within 150 miles of San Francisco. “Since I joined three years ago, our sales have grown more than 10 times,” Burek said.

Blu Homes’ Glidehouse model has wooden slat panels to block sunlight while doubling as an art feature.

2,292

3,363

2,741

2,797

2,808

3,917

6,700+

courtesy of Blu Homes Inc.

$2,138

Average Monthly Mortgage Payment of June 2013 Buyer (First time over $2,000 since Sept. 2008)

California Single-Family Building Permits (2007–2013, at June)

Bay Area Median Home Price Mid 2007:

Bay Area Median Home Price Mid 2013:

$587,000

$555,000

(most recent high)

(for nine counties)

Source: DataQuik

Source: California Building Industry Association

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housing

Foot traffic Sharon Simonson WHEN ROCKWOOD CAPITAL and Four Corners Properties bought the Water Tower Plaza office and retail building in downtown Campbell, the “walkability” of the neighborhood was cited in the decision to buy. According to Seattle-based Web site and research company Walk Score, downtown Campbell is a “walker’s paradise.”

Cities score by offering ‘car-light’ lifestyles Its 94-point score on a 100-point scale makes it one of the most walkable neighborhoods in Silicon Valley. We in the Bay Area hear a lot about the virtue of urban living, including benefits for the air, natural environment and

public health. The region’s preoccupation has been evident for years. First communities created “greenlines” beyond which development was no longer allowed (San Jose’s was established in 1996), then turned to high-density, infill development—preferably close to transit—to house more people and to get them out of their cars. If walkability is taken as a proxy for urban, Walk Score provides another metric by which to measure our progress toward a “better” (or at least more compact) place to live. San Francisco ranks as the second most-walkable city in the country with an overall walk score of 84.9. (No. 1 New York’s score is 85.3.) Berkeley has a community-wide score of 82; Emeryville an 80. They are the only cities in the Bay Area with overall walkability scores above 70.

A score of 70 is still walkable, said Walk Score co-founder Matt Lerner. Scores from 50 points to 70 signify walkable qualities, but “it would be hard to get by without a car,” he said. San Jose, Santa Clara County’s largest city with close to a million people, has an overall walkability score of 55—eleven points lower than Los Angeles. Los Gatos, Fremont and Foster City have scores of 52. Even Burlingame, with its downtown Burlingame Avenue shopping district and steady foot traffic, achieves only a 68. Campbell as whole, with a score of 66, is only “somewhat walkable.” Walk Score created its algorithm to determine a location’s walkability in conjunction with “leading urban planners and universities.” Their question at its most

Most walkable cities in each of the region’s major counties with 2013 mid-year median home prices MEDIAN PRICE

WALK SCORE

$1.1 million

Downtown

$739,000

Duboce Triangle

$885,000

Telegraph Hill

$742,250

Van Ness/Civic Center

$464,000

Mission District

$770,000

$611,250

$905,000

$787,513

Emeryville

$388,888

Alameda

$622,000

Half Moon Bay

$780,000

Serramonte

$688,000

Burlingame

$1.48 million

San Mateo

$750,000

Daly City

$580,000

Campbell

$750,000

Mountain View

$787,500

Santa Clara

$655,000

$1.77 million

$793,888

SAN FRANCISCO COUNTY Financial District

ALAMEDA COUNTY Albany Rockridge/Oakland Berkeley

courtesy of Rebecca Rosen Lum basic is: “How easy is it to live a ‘car-light’ lifestyle?” Lerner said. The score takes into account attributes such as whether groceries or other necessities can be found within walking distance and if routes from home to destinations are suitable for walking: How long are the blocks? What do the intersections look like? Yet, hope abides. Walk Score produces colored maps to signify walkable and notso walkable areas. Walkable areas are green; unwalkable areas are red. San Jose’s middling score conceals lots of walkable neighborhoods. Downtown San Jose has a walk score of 74. Add Willow Glen, Midtown and the Washington-Guadalupe neighborhoods—three downtown-adjacent suburbs that have added housing and development density in the last decade—and a significant, walkable core is emerging. The same is true on the Peninsula, where the string

of green circles seems destined to expand and join. Rockwood also has acquired office properties in downtown San Jose and Mountain View in the last year or so. In Mountain View, the former Mayfield Mall building is smack dab in the middle of an emerging walkable node where a former low-lying shopping center is undergoing massive redevelopment into a mixed-use, high-density village. It is next to a transit station. Walk Score measurements are updated regularly, Lerner said. Common sense would predict that infill development is at the heart of a region’s growing its walk score. Billions of dollars in new housing, corporate campuses, hotels and offices are under construction in the Bay Area, especially from San Francisco down the Peninsula and into North San Jose. Virtually all of it is infill.

SAN MATEO

SANTA CLARA

Palo Alto Sunnyvale Source: ZipRealty Inc.

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smart buildings

These Walls

â&#x20AC;&#x153;They are engineering smart buildings with automation, which facilitates the creation of smart work environments.â&#x20AC;? Bob Brown, chief executive and co-founder, Fremont-based Teladata LLC

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can talk David Goll

IN AN ERA OF RAPID TECHNOLOGICAL PROGRESS, is there a reason that an office complex or classroom building—both housing lots of smart people—can’t elevate its own IQ? In a smart building, software allows communications among traditionally separate systems running everything from lighting, heating and ventilation to security and telecommunications. The systems’ convergence creates a single intelligent network that allows a building to react dynamically to real-time conditions using input from every source attainable. Moreover, smart buildings are the backbone of smart work environments, something that tenants increasingly want. Energy is typically the largest expense for any U.S. building owner or user, accounting for 30 percent of operating costs in an average commercial building, according to the U.S. Environmental Protection Agency. Overall, commercial and industrial buildings use $200 billion a year nationwide on power, producing nearly half of the nation’s greenhouse-gas emissions. Smart buildings are being credited with reducing energy use by 20 percent to 30 percent as compared to conventionally built and operated structures. “The scope of thrift is limitless once you have all of these systems exchanging data,” said David Wilts, an evangelizer for the get-smart trend and an associate principal for Arup Group Ltd., a multinational engineering, design and consulting firm based in London with San Francisco offices. Among his clients, building owners primarily want the efficiencies, cost savings and value-add aspects of smart buildings, said Bob Brown, chief executive and co-founder of Fremont-based Teladata LLC, a physical infrastructure consultant. Tenants want “smart environments” where employees can work collaboratively on any number of digital devices anywhere in and around their offices. “They are engineering smart buildings with automation, which facilitates the creation of smart work environments,” Brown said. Westfield Group LLC’s network infrastructure manager, Tyler Kelly, said the mall company is automating Westfield Labs at 835 Market St., adjacent to the Westfield San Francisco Centre. “Efficiency and cost savings were the main motivations,” he said. Westfield Labs develops digital innovations to introduce at the company’s more than 100 upscale retail centers worldwide. That includes San Jose’s Valley Fair and Oakridge and 19 more in California. In Los Angeles, Westfield shifted its U.S. headquarters from Wilshire Boulevard to a Century City commercial complex in May. The Australian company upgraded a three-story, 120,000-square-foot space housing 550 employees with an automated system governing lighting, extensive videoconferencing equipment and scheduling of the office’s more than 40 conference rooms, among other activities. Fresenius Medical Care North American, a Waltham, Mass., -based provider of kidney dialysis services and renal care products, opened a 230,000-squarefoot office with sales operations, a call center, manufacturing and research and development at 4040 Nelson Ave. in Concord in late August. It added a 50,000-square foot warehouse.

Buildings get smarter and so do workplaces.

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smart buildings

The company spent more than a year designing a smart and technologically advanced operation to remain competitive for the next decade or more, said Nathan R. Minchey, Fresenius senior manager of global manufacturing operations. After gutting the former Siemens AG manufacturing plant, Fresenius added energy-efficient LED lighting throughout and automated all lighting, cooling and heating controls. Employees can walk into the complex’s myriad conference rooms, pull a cable out of a large meeting table, plug it into a laptop and automatically activate lighting, TV and sound, Minchey said. When unplugged, the TV and audio functions turn oﬀ automatically in one minute, lights in 20 minutes. Fifteen-ton air handlers sense temperature and humidity levels outside the buildings, adjusting air and other conditions inside accordingly. The plant manufactures large hemodialysis and peritoneal dialysis machines that weigh up to 5,000 pounds apiece. Fresenius consolidated more than 500 employees in Concord from Walnut Creek and Pittsburg. The company will receive a return on its investment in the smart-building technology within two-and-a-half years, Minchey said. He declined to say how much Fresenius invested in the renovation and building project. Fresenius is a Teladata client. Not everyone believes smart buildings will usurp “big, dumb buildings” en masse, as some in the industry refer to conventional structures. He has yet to see developers move significantly toward smart buildings though he is cautiously optimistic that will change, said David Kaneda, managing principal of Oakland-based infrastructure design and engineering firm Integral Group Inc. Kaneda’s company, which also has San Jose offices, recently completed work on the new 49,000-square-foot Los Altos headquarters of the David & Lucile Packard Foundation and is currently at work on the 45,000-square-foot headquarters and research facility of the J. Craig Venter Institute now under construction in San Diego. It employs 300 scientists doing human, plant and environmental gene research. Both projects have earned a Platinum designation under the Leadership in Energy and Environmental Design program, the highest available, and are operating at what Kaneda described as a “net-zero” level—in energy use, water use and carbon emissions. They take no energy from the electrical grid, do not deplete water supplies and add no new carbon to the atmosphere. “We are seeing companies beginning to write software that can sit on top of everything and tie all of a building’s systems together,” said Kaneda, an electrical engineer. He cites San Ramon’s Integrated Building Solutions Inc. and Pasadena-based Onuma Inc. “Connecting a building’s mechanical, lighting, heating, cooling and inventory-control systems makes a lot of sense and has tremendous potential. But there is a lot of difficulty in controlling all of this complexity. I have not seen what I would consider a totally successful example yet.” High-tech companies, airports, college and university campuses lead adoption, said Arup engineer Gareth Ashley. “Companies and organizations want a work place where their employees want to spend time. This is an important workplace issue today.” A large, rapt audience of Silicon Valley real estate and technology professionals gathered in July at the Aspiration Dome of Sunnyvale tech company Juniper Networks Inc., to hear Ashley

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smart buildings

and Wilts present smart building case studies. The event, sponsored by the Northern California chapter of CoreNet Global, a corporate real estate trade association, featured examples of smart-building makeovers. “Today, 100 percent of our clients have an interest in this, but whether it works for all of them individually is another question,” Wilts said. “A developer might not be motivated to spend another 1 percent on construction costs if he is only going to flip the building and is only interested in the profit-loss picture instead of value added. But we’re seeing a real change in the industry. You might spend four days of programming time [on building systems] instead of two days on the front end of a project. And then, you recoup your additional up-front costs within the first year.” San Jose software giant Adobe Systems Inc. has reduced electricity use by half, natural gas use by 30 percent, domestic water use by 79 percent and irrigation water use by 71 percent by constantly measuring the performance of its building systems. Using what it calls an “intelligence-building interface system,” Adobe and a consultant developed software that monitors realtime operations of its buildings. The system tracks natural gas use, electricity use by floor, and temperature, comparing expected and past performance. It notifies building operating engineers when energy use varies from normally expected levels. The system doesn’t itself directly reduce energy, but is a tool to uncover inefficiency and waste, said George Denise, Adobe commercial property and facilities manager. Higher education throughout California also is ripe for adoption of smart-building technology after years of reduced state funding for the 112 community colleges, the 23-campus California State University and 10-campus University of California systems, said Tom Armstrong, director of the Foothill-De Anza Community College District’s bond measure construction program: “Everyone is interested. We have 45 buildings at De Anza and 50 at Foothill. We are constantly looking at ways to reduce our operational costs. We must. Property managers for commercial buildings are doing the same thing.” The 64,000-student district opened its first two structures with smart-building elements during the 2012-13 academic year. The $35 million, 67,000-square-foot Media and Learning Center at Cupertino’s De Anza College and 66,000-square-foot, $44 million Physical Sciences and Engineering Center at Foothill College in Los Altos Hills both sport computer-controlled building management systems. The De Anza building alone is projected to save the district $67,000 a year in energy costs, Armstrong said. Among its automated features are photo sensors that dim or shut off artificial lighting during daylight hours, window shades that block out the hot sun on warm days, and a buoyancy-driven ventilation system that relies on the differences in the density of interior and exterior air arising from temperature variations instead of conventional forced-air heating and cooling. “We have reduced staff time devoted to reviewing building operations and maintenance plans,” Armstrong said. “This is new to us, so there is a learning curve. We are conducting a study measuring the buildings’ performance that should be ready by year’s end.”

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Green buildings

new tricks

While 240 Stockton retains elements of 1908, it has been refitted to 21st century sustainability standards.

sherman chu

www.theregistrysf.com

Brett Goetschius SAN FRANCISCO commercial property owner Bently Holdings wants to burnish its brand as landlord of historic, architecturally significant office buildings by requiring all new tenants at 240 Stockton St. to attain Silver level certification for their offices under the Leadership in Energy and Environmental Design program. Bently is setting the pace by attaining LEED for Existing Buildings’ Gold certification for the 1908 period structure and by fitting out its own 7,000-square-foot headquarters office to achieve LEED Platinum. It is the second Bently office building in San Francisco—the first was Bently Reserve at 301 Battery St.—where the landlord has set environmental standards for tenants. The 10-story Stockton Street structure on the east side of Union Square has a Gucci store on the ground floor and a mezzanine level with about 40,000 square feet of commercial office space above. To win over doubters, Bently is oﬀering $20 a square foot for tenant improvements to pay for LEED-related expenses, said Bently property manager Anne Hill. “This is a first for us, and one of the few buildings we are aware of across the country where tenant build-outs are required to be LEED certified,” said Jake Arlein, sustainability consultant and partner at San Francisco’s Environmental Building Strategies. Arlein’s firm led the LEED certification program at 240 Stockton. How enticing the all-LEED requirements prove to occupiers is being revealed now. “It’s a slow process for tenants to see the

only one office metro market nationwide—Houston—showed more than 20 percent of its office building square footage as green; two years later, 10 of the 15 U.S. metros had more than 20 percent of their office stock labeled as green. Nearly 40 percent of the buildings in the Denver metro were considered green in 2009. A third of the office buildings in the San Francisco, Houston and Minneapolis-St. Paul metros were green by 2009; not quite a third were in Seattle. The market also is clearly alive to the nuances in value associated with a building’s lesser or greater “greenness:” “Among green buildings, increased energy efficiency is fully capitalized into rents and asset values,” the study found. “… [T]he size of the Energy Star premium is aﬀected by both the vintage of the label and the contractual arrangements for payment of the utility bill made by tenants and building owners,” it says. A building with both ratings fares the best. The findings have implications for the stock of lesser quality buildings as well, the study concludes. Sustainability was certainly a factor in the decision of the latest tenant to take new space at 240 Stockton: Heath-Newton LLP, a law firm specializing in family and marriage practice, recently agreed to lease the 4,000-square-foot ninth floor. Doing a LEED build-out was a natural next step for Heath-Newton, an existing tenant on the third floor. The firm became part of San Francisco’s Green Business program earlier this year and sees the greening of its offices as aligned with its corporate values and focus on family, lesbian, gay, bisexual and transgender law. With an 85 percent leased building owned by a family foundation that places environmental sustainability at the core of its value system, Hill said she has the luxury of waiting for the right tenants. The same policy at Bently Reserve has rendered “a really high-quality, focused building,” she said. “We have tenants coming to us with ideas about being more proactive in composting, tenants that present diﬀerent behaviors that help the building run more efficiently.” Yet, a green label isn’t enough to entice tenants. “I wish it were true, but it’s not,” said Benjamin Osgood, senior vice president in commercial leasing at Dunhill Partners West, and the chair of the San Francisco branch of the U.S. Green Building Council. “The top attractions for tech tenants are a building’s cool factor and access to public transportation. There’s very little demand for LEED space from tech clients.” Smart landlords seeking to attract tech tenants are building out tenant spaces to green standards “because green is cool,” Osgood said. “But I do not think a LEED certification is enough to attract a tech tenant on its own.” LEED also is not as consistently synonymous with sustainability as its promoters probably would like. A recent article by Sam Roudman in “The New Republic” noted the three-year old Bank of America Tower in New York, the first-ever LEED Platinum skyscraper, had been identified as Manhattan’s “biggest energy hog” in a citywide energy audit published last year. The audit found that the building used two times the energy per square foot as the Empire State Building, a building that is not LEED certified and is just 20 years younger than 240 Stockton.

San Francisco’s Bently Holdings, landlord of historic office properties, requires tenants to be certifiably green value in choosing a green building and doing a LEED build-out, but that’s changing,” Hill said. “The number of tenants who seek green buildings is still small but growing. We see it becoming the norm over time.” Evidence mounts that green buildings—those that are LEED or Energy-Star certified—carry a detectable market premium that is expressed in better rents and sales prices. Buildings lost value overall in the downdraft of the recession—San Francisco’s commercial rents dropped 30 percent and New York City’s went from $65 a foot to $42. But green buildings’ values dropped less, according to a study published in March in The Review of Economics and Statistics, a publication of Harvard College and the Massachusetts Institute of Technology. Scientists from the University of California, Berkeley, and the Netherlands’ Maastricht University, including Berkeley’s John M. Quigley, looked at the U.S. office building stock in the country’s 15 largest markets from 2007 to 2009. Rents in properties with LEED or Energy Star ratings averaged 3 percent higher than comparable unrated properties, and properties with LEED scores of 60 (the minimum threshold for a Gold certification) or better achieved rent premiums of 20 percent more. Upon sale, LEED and Energy Star-rated buildings garnered 13 percent higher prices, on average, than similar unrated properties, the study found. The stock of green buildings in the 15 largest U.S. metros by office square footage also skyrocketed in the two years. In 2007,

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Green buildings

ABove: From left: Jake Arlein, partner at Environmental Building Strategies (EBS); Anne Hill, Bently property manager; and Trevor Trauz, Bently chief engineer standing in Bently Holding’s new headquarters space within 240 Stockton.

Property Owners Grow Green LEED- and Energy Star-Certified Office Buildings in 15 Largest U.S. Office Markets (measured by % of total square footage) New York-Northern N.J.-Long Island Los Angeles-Long Beach-Santa Ana Washington-Arlington-Alexandria Chicago-Naperville-Joliet Dallas-FW-Arlington Boston-Cambridge-Quincy SF-Oakland-Fremont Atlanta-Sandy Springs-Marietta

2007 2.6 %

2009 10.1 %

16.2

25.5

9.6

23.0

8.5

25.0

10.0

20.5

7.0

16.0

18.0

35.0

8.1

29.7

Houston-Sugar Land-Baytown

22.0

35.5

Minn.-St. Paul-Bloomington

15.9

32.1

Seattle-Tacoma-Bellevue

13.3

28.8

Phoenix-Mesa-Scottsdale

8.1

14.4

Denver-Aurora-Broomfield

19.3

36.9

San Diego-Carlsbad-San Marcos

9.1

16.6

San Jose-Sunnyvale-Santa Clara

5.4

11.5

SOURCE: “The Economics of Green Building,” The Review of Economics and Statistics, March 2013

read more online:

Kilroy Wants San Francisco’s First Net-Zero Office Building

Laura Kudtrizki

At left: 240 Stockton, owned by Bently Holdings.

Matt Powers San Francisco has adopted similar audit and benchmarking provisions as New York for its office buildings, and the city and state are implementing disclosure requirements. Even the Maastricht-Berkeley study found that green ratings don’t necessarily mean low energy use: only a 0.26 correlation (1.00 being a direct relationship) between LEED scores and energy use per square foot was found among the buildings in the study. A 2009 study for the National Research Council Canada found some 18 percent to 30 percent (depending on the energy measurement used) of LEED buildings used more energy than their unrated counterparts, leading the researchers to conclude that “the measured energy performance of LEED buildings had little correlation with the certification level for the buildings.’’ The LEED program used at 240 Stockton, the Existing Building Operations and Maintenance, or EBOM, diﬀers from the more widely known program for new buildings that has been the focus of much of the criticism, EBS’ Arlein said. “EBOM is an ongoing process. You get initial certification, but that’s not where it stops, which is unique for the LEED-rating system.” “During the performance period you have to continually track all the changes put in place, and you have to re-certify the building every five years. That is really where the value of the EBOM process comes into play. You don’t just make changes and forget about it,” he said. The city of San Francisco also recognizes the unique stature of a LEED EBOM certification in its ordinances. Bently expects to implement the LEED tenant build-out requirements in its other commercial properties in San Francisco and the greater Bay Area, including Belvedere Place, a 100,000-square-foot office property in Mill Valley, and Bently Reserve, where two tenants remain grandfathered in non-LEED spaces. The company eventually wants to roll out the tenant-certification requirements to its properties in Southern California, France, Argentina, South Korea and Singapore.

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Green buildings

extreme

Green

“I would like nothing more than to see all tenants pay their own energy bills.” Benjamin Osgood, senior vice president, leasing, Dunhill Partners West; chair, San Francisco branch, U.S. Green Building Council

Sharon Simonson SAN FRANCISCO HAS AN ELABORATE GREEN SCHEME for its office stock, addressing not only new construction and major renovation but also operations. Its building code is more stringent than CalGreen, the state code, said Barry Hooper of the Green Building Program in the San Francisco Department of the Environment. CalGreen, which went into eﬀect in 2011, set the bar higher than ever nationwide for buildings to use less energy and water, and produce less waste. Now San Francisco is phasing in requirements adopted in 2011 that are related to tracking commercial properties’ daily operations. Owners of buildings larger than 10,000 square feet must conduct an energy audit every five years and must benchmark their energy use annually, reporting consumption per square foot and greenhouse gas emissions. The audit is supposed to help owners identify financially plausible new measures that could save energy. Buildings that maintain an Energy Star rating or the LEED rating for Existing Buildings: Operations & Maintenance, which requires recertification every five years, don’t have to do an additional audit. Under the benchmarking plan, the ordinance requires the city to publish each building’s energy-use intensity, which can be compared across properties. The work also prepares landlords to comply with California’s Assembly Bill 1103, which has been delayed but is ultimately expected to require that owners disclose energy use to prospective buyers, lenders and lessees, Hooper said. The energy-use data will be an important tool for property buyers to assess their total costs of ownership, but it won’t have much of an impact on tenants because few tenants pay their own energy costs, said Benjamin Osgood, senior vice president in commercial leasing at Dunhill Partners West and the chair of the San Francisco branch of the U.S. Green Building Council. That would take sub-metering and direct billing of energy to tenants—something San Francisco considered but ultimately chose not to include in its green-building codes. “I would like nothing more than to see all tenants pay their own energy bills,” said Osgood, as he looked out his office window at 101 California St., its 48 stories lit like a Christmas tree at 6:15 p.m. on an early fall Thursday before a long holiday weekend. “I’ve been shouting it from the rooftops to anyone who’ll listen.” Osgood’s frustrations should abate with time. It is common understanding today that buildings— commercial and residential—use and waste lots of energy. Global governments and their preoccupation with climate change and energy use plus available technology for improvement make structures continued, obvious conservation targets.

The data will help property buyers assess their total costs of ownership, but won’t have much of an impact on tenants because few pay their own energy costs.

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Sustainability Coblentz is proud to work with our clients to achieve their sustainability goals. Our experienced attorneys advise clients on a variety of issues, including green building, renewable energy development, CEQA compliance, project finance, tax credits, and policy formation and advocacy.

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tesla Motors Inc.

Searching for Second Gear Hayden Dingman AT FULL CAPACITY, premium electric carmaker Tesla Motors Inc. could manufacture 500,000 cars a year at the former New United Motor Manufacturing Inc. plant in Fremont. But how long it may take Tesla to reach that threshold—if ever—is far from obvious. When NUMMI occupied the Silicon Valley factory, it produced 24,000 cars a month. Tesla plans to deliver 21,000 automobiles this year. Next year, it expects to double its output, selling globally. The Fremont plant is Tesla’s sole manufacturing location though it has a new assembly operation in The Netherlands. Poor consumer demand is not behind production limits today. “I am trying to figure out how to make more cars,” Tesla co-founder, chief executive and product architect Elon Musk told analysts midyear. “The thing that prevents us from doing that is supplier parts.” On April 1, 2010, NUMMI joined the ranks of America’s manufacturing departed. Workers finished one final red Toyota Corolla before closing the plant for good. Four thousand seven hundred NUMMI jobs disappeared. But that 4,700 was a fraction of the total jobs aﬀected. Auto plants and similarly sized manufacturing operations traditionally rely on a vast network of external suppliers. In the wake of the NUMMI closure, everyone from injection molders to precision machinists were endangered—an estimated 20,000 Bay Area jobs. Yet, mere months later and seemingly against all odds, the former NUMMI plant reopened: Tesla, the company most visibly attempting to kill the internal-combustion vehicle, was buying it for a seeming pittance. Building a new auto plant these days can cost $1 billion or more. Tesla bought the NUMMI plant for a scant $42 million.

Automaker looks for ways to rev up production

Tesla uses only about a quarter of the 5 million-square-foot plant. www.theregistrysf.com

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Tesla Dashboard (As of June 2013)

Incorporated: July 2003 Initial public offering of common stock: May 2013 Second-quarter production: 5,150 Model S cars Cash balance midyear: $750 million Global retail locations: 41 U.S. retail locations: 30 Global service locations: 47 Revenues 1H 2013: $967 million Net loss 1H 2013: ($19.3 million) Tesla Model S cars on the road: 13,000

Courtesy of Tesla Motors

www.theregistrysf.com

tesla Motors Inc.

“I am trying to figure out how to make more cars.” Elon Musk, Tesla Motors Inc., co-founder and product architect Even with retrofitting, equipment purchases and the recent $18.5 million purchase of an additional 31 acres just south of the factory, it’s unlikely the company has invested anywhere near the $1 billion mark. Of course, the ultimate cost remains unknown. Tesla agreed to accept long-term liability for known environmental contamination, including groundwater pollution, at NUMMI. The company has set aside $5.3 million toward that end, but says it is “reasonably possible” that estimate could “change materially.” Tesla was an early adopter of a trend to bring manufacturing back to the United States. For years, outsourcing to countries with less-expensive labor was considered a logical step for corporations—especially technology companies—looking to improve their bottom lines. This wisdom has come under increasing suspicion, especially as U.S. domestic energy costs have fallen. A study earlier this year by business advisory firm AlixPartners LLP estimated the cost of production in China and the United States would reach parity by 2015. Well-seasoned commercial property landlord and developer Trammell Crow Co. said recently that it intended to build new manufacturing assembly buildings in Silicon Valley in anticipation of increased demand. Transport costs have become a greater consideration, and there seems a rising acceptance that short-term profits gained by outsourcing can get lost in certain intangibles including slowed innovation, less productivity and large divisions within company cultures. “The location of the manufacturing plant close to [the Palo Alto] headquarters allows more face-to-face interaction among employees from diﬀerent departments, which helps problem solving,” said Andrea James, a senior research analyst at Dougherty & Co. who follows Tesla. Design engineers are always on hand at the Fremont plant, getting instant feedback on manufacturing processes. Musk’s desk is right next to the production line. Tesla uses only about a quarter of the 5 millionsquare-foot plant. Yet, a full 3,000 people work there in two separate shifts—not so far oﬀ the NUMMI employee counts. Supplier issues caused Tesla to miss its 2012 build projection too, so it’s no wonder that the company is trying to produce everything it can in-house. “We’re convinced by integrating a lot of the manufacturing processes here, we save a lot of money with logistics,” Tesla’s head of manufacturing, Gilbert Passin, said in an interview with Bloomberg. Of the former NUMMI suppliers, many companies just disappeared, almost overnight. Some—like Plastikon Industries Inc., an injection-molding company based in Hayward—managed to adapt and survive the changeover, but they are rare exceptions. Tesla has repeatedly said it works with “over 200 suppliers,” but

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tesla Motors Inc.

It’s the lack of supplier parts, not a lack of demand, that has kept Tesla production stuck in low gear. that’s still a fraction of the thousand that NUMMI used. The suppliers that Tesla does employ are pretty far-flung, from Michigan to Germany. Production problems are only part of the long-term challenge. The company must build sales, service and refueling networks in order to compete. Under questioning from Dougherty’s James on the most recent conference call, Musk said he remained confident that the company would one day produce a “high-volume aﬀordable car” that would sell for around $35,000 and achieve a range of about 200 miles between re-fueling. But, he noted, production at that threshold brings another significant challenge: to produce anywhere on the order of 500,000 cars a year, battery production volumes have to increase substantially.

“When you do the math, saying, ‘How many batteries do you need? What is the cell-fabrication capability, the raw materials or the elements?’ It is really quite a large number in order to ultimately feed a factory that is producing 500,000 vehicles a year. We start exceeding the entire laptop industry by a decent margin,” Musk said. New factories to produce the batteries would need to be built, and the science surrounding the raw materials improved. “I see a fairly clear path to that vehicle,” Musk said, though he gave no timeline or other detail. As far as American manufacturing goes, is Tesla a sign of things to come? “It’s a lot of particulars that mean it makes sense for Tesla, but I don’t think it’s a trend for manufacturing in general,” said Ana Orozco, a senior economist for IHS Global Insight.

California’s credits for zero-emission vehicles are a boon for Tesla but wouldn’t benefit most companies. High wages are a particular issue. “Very high-tech, high-skilled manufacturing has some advantage in the Bay Area, but other than that, because of the high cost, there’s no competitive advantage,” she said. Even then, manufacturing automation has replaced American workers in droves even as American output has soared. That trend shows absolutely no signs of abating: Speaking to Wired magazine, Tesla manufacturing honcho Passin said, “We want to push the boundary of what can be done by robots versus humans … [I]t’s a constant evolution. This Tesla factory is the future of the U.S.A. and the world. We are building the future here.” “The potential is very significant,” Musk told analysts. “But I don’t want to overpromise.”

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