the registry november 2011 issue
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The Registry November 2011 IssueTRANSCRIPT
Dear Reader,In your hands you hold the last issue of The Registry.
This is not just the last issue of 2011, it is also the final print publication of our inaugural monthly magazine. Yet, it is also the foundation of our future work, includ-ing the next iteration of our company’s print product, The Q.
For the last six months, our organization has spent many hours discussing the transition into what we call internally the post-print news and media world. That world does not exclude print; it just doesn’t rely on ink and paper as an exclusive medium of news and indus-try perspective. Over the last five years, as we’ve nur-tured The Registry into the Bay Area real estate news company it is today, we have seen the engagement of our audience transform and attention shift to include multiple touch points, devices and media. It was not a fad, it was a transformational shift brought on by the advent of personal computing and devices that are connected at all times in any place. We understood that our survival depended on our ability to adapt to the new environment.
In January, we will launch the first manifestation of our adaptation: a new print publication called The Q. This new journal will remain loyal to our goal of pro-ducing world-class analysis of the real estate industry for the region, and it will offer the superior visual and tactile quality that our readers have come to know. It will also be different; we will publish it quarterly and focus on a core subset of topics that, from our observa-tion, both matter to the industry and lend themselves particularly well to this medium. Those topics include our regional economic outlook through the eyes of in-dustry movers, the state of interior and architectural design in the workplace and beyond, a focus on all as-pects of commercial property and finally sustainability.
The Q is a double entendre. One meaning, perhaps the obvious one, is related to the quarterly frequency of its publication. The second one refers to the Q ratio, also known as Tobin’s Q ratio, which is a mathemati-cal formula for evaluating the relationship between the value of the firm and the size of its assets. We are after all a business media company, and the financial aspect of this meaning speaks to our foundation as a business
journal. We found these two meanings to be symbolic of our mission to provide economic and business analysis in an engaging format that our readers appreciate.
A counterpart to our print revamp is the upgrade of our Web page. Over the last three-and-a-half years, we have steadily increased our breaking-news cover-age, and the market has responded. Our Web audi-ence has recorded exemplary growth, and in our Web offerings, we have come to see nearly unbounded opportunity—unbounded in the sense that the Web gives us a practically unlimited canvas on which to present our findings, through words, photos, graphs and other visual displays. But also unbounded in the sense that we are not limited to the regional distribution of our print product.
Indeed, our Web site already has helped us to gain national prominence and international notice. Money managers, institutions, private individuals, public companies—firms from all over the country and world—invest in Bay Area real estate. We draw readers online from across Southern California and the nation, including New York, Chicago, Dallas and other major metropolitan regions. Our broad coverage of this economically intertwined and interdependent region is granting readers insight into its inner work-ings and exposing the players and industries who make our geography so compelling.
At the same time, the Internet provides us at The Registry with an immediate, intimate and unprec-edented understanding of our readers and the kinds of stories that they want to read. You can mail a magazine and hope that people read it, pass it on to their col-leagues and in some rare cases even provide feedback. The Web, on the other hand, tells you exactly who is reading, what is read, when, how long and how many times. We study and comprehend that feedback as-siduously because we believe it is a crucial component of our news production.
Surprisingly, or maybe not, technology has not di-minished the importance of personal relationships in this industry. Our events have been popular and suc-cessful because one-on-one communication afforded by an intimate physical setting matter. Nothing can be a substitute for the interaction one gets when in the company of others. This is also why we will enhance our events over the next year and continue with our successful formula of providing unbiased content aligned with the most important and contemporary topics in the industry.
So, ladies and gentlemen of the real estate industry and beyond, I thank you for your interest in our work to date. We are very excited about the transformation of our organization. Our hope is that through all the changes we are steadfast in our effort to provide the most valuable and informative industry coverage that will enhance your knowledge and understanding of Bay Area real estate.
We look forward to your continued support, and we hope to hear feedback from you on all our efforts.
Sincerely,Vladimir Bosanac
Letter from the Publisher
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Editorial Board
Board members of The Registry serve without expectation of recompense or reward. They advise the magazine’s executive team on matters of relevance to the region’s commercial and residential real estate community. The board’s makeup reflects the wide readership of the magazine including attorneys, architects, interior designers, residential and commercial real estate brokers, investors, lenders, general contractors and subcontractors, engineers and other professionals.
Marc CunninghamPresidentAllWest
Bruce DorfmanPrincipal
Thompson | DorfmanPartners, LLC
Daniel Huntsman,LEED AP
President & Founding PrincipalHuntsman
Architectural Group
Jesshill E. Love IIIPartner
Ropers, Majeski,Kohn & Bentley
Daniel MyersPartner, Real Estate Practice
Group LeaderWendel, Rosen,
Black & Dean LLP
Jeanne MyersonPresident &
Chief Executive OfficerThe Swig Company
Anton QiuPrincipal
TRI Commercial
Phil Williams, P.E.,LEED AP
Vice PresidentWebcor Builders
Paul ZegerPrincipal, President & CEO
Pacific MarketingAssociates
Michael W. FieldDirector,
Commercial Real EstateThe Sobrato Organization
Norman C. Hulberg,MAI
PresidentHulberg & Associates, Inc.
Jody QuintonRegional Manager
DPR Construction, Inc.
Jeffrey A. WeidellExecutive Vice President
NorthMarq Capital
Tim TostaPartner
Luce Forward
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Erik W. DoyleExecutive Managing Director
Newmark Knight Frank Cornish & Carey Commercial
Geoffrey C. EtnireCo-Chair,
Real Estate GroupHoge, Fenton, Jones & Appel, Inc.
THERegistryP.O. Box 1184
San Mateo, CA 94403 415.738.6434
Mission StatementThe registry is a real estate journalthat aspires to fulfill the need ofbay Area professionals for accurate,unbiased and timely news, analysisand information.
Publishervladimir bosanac
PresidentHeather bosanac
Editor-in-ChiefSharon Simonson
DesignJelena KrzanickiJanet raugust
Photographerchad Ziemendorf
Writersbrad berton, douglas caldwell,
michele chandler, robert celaschi, maria Shao, Sharon Simonson,
Contributorsmatt Francois, Peter Ingersoll, Scott Kinder,
rob La eace, Janna Luce, John mcnellis, Anna Shimko, craig Zodikoff
Advertisingdenise Franklin408.366.1984
Ethics PolicyThe 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 hasaccepted or will accept any compensation, monetary or otherwise, in exchange for edito-rial content. All information that appears in the magazine is selected solely for its informationalvalue to readers.
The registry is a registered trademark of mighty dot media, Inc.
©2011 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.
Coblentz, Patch, Duffy & Bass is proud to haveone of the most highly regarded real estate andland use practices in California. Because ourclients demand more than just development,Coblentz provides a highly developed real estateand land use practice.
c o b l e n t z l a w . c o m P r a c t i c e . Pe r f e c t e d .
HIGHLY DEVELOPED
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Contributors
Rob La eace
Go Figure, pg. 32
Responding to emergencies as a firefighter in a variety of uncertain situations and diverse neighborhoods taught Rob La Eace a lot about how people should be treated, not only during a crisis, but also every day. Today, these same skills are an asset to those who work with this San Francisco native in his career as a broker associate with Paragon Real Estate Group. The tools he puts to work as a firefighter are what makes the difference to the clients La Eace works with as an agent. While it may help that La Eace is the type of guy with a warm smile and a friendly attitude, his professionalism, organization and drive to succeed are what make him stand out in his career. Working in his sixth year in the industry, La Eace is in touch with his clients’ needs and with the city—putting a local’s perspective to work.
John mcnellisA Sod Roof Too Far, pg. 28
John McNellis is a Palo Alto-based retail developer and investor. Since its inception nearly 30 years ago, McNellis Partners has developed more than 50 projects in Northern California, primarily shopping centers ranging from 30,000 square feet to 200,000 square feet. McNellis serves on the national board of trustees for the Urban Land Institute and is a ULI governor. He is a member of the International Council of Shopping Centers and serves on the Policy Advisory Board for the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. He also serves on the national board of directors for Outward Bound USA and the board of Rebuilding Together Peninsula, a volunteer partnership to rehabilitate homes and community facilities. He is a former board member of Lambda Alpha International (Golden Gate Chapter), an honorary society for the discussion of land-use and economics. On occasion, he lectures for the ULI, the ICSC and Stanford University’s schools of business and law.
Peter Ingersoll
Baby, Please Come Home, pg. 18
Peter Ingersoll is chief executive of East Bay investment advisory Safe Harbour Equity Inc. and a serial entrepreneur. He has an economics degree from the University of Pennsylvania Wharton School and several advanced degrees from the School of Hard Knocks earned while working in the construction, development, site acquisition, private banking & trust, investment banking, securities and, most recently, the Northern California commercial real estate industries.
Matt Francois
Making CEQA Work, pg. 30
Matt Francois, a partner with Sedgwick LLP, specializes in all aspects of land use and environmental law, representing both public agencies and private landowners and developers in the land use administrative approval process, advising on compliance with the California Environmental Quality Act and litigating land use and CEQA matters.
Anna ShimkoMaking CEQA Work, pg. 30
Anna Shimko is chair of the Real Estate and Land Use Practice Group at Sedgwick LLP, where she focuses on all areas of land use and environmental law, representing both public agencies and private landowners and developers in administrative and court proceedings. She has particular expertise in compliance with the California Environmental Quality Act.
Scott KinderLandlords Beware, pg. 22
Scott Kinder is a principal and co-founder of CresaPartners in San Jose, specializing in corporate services in the high technology and new technology sectors. A licensed real estate agent in the State of California, Kinder has 30 years of commercial real estate experience in corporate and tenant representation, including sales and lease negotiations for major site acquisitions, ground-up corporate build-to-suits, financial analysis, transaction and lease management, dispositions, consulting and strategic planning. Kinder is a member of the Association of Silicon Valley Brokers and serves on CresaPartners’ Technology Committee.CresaPartners is a corporate real estate advisory that exclusively represents tenants. It specializes in the delivery of integrated real estate services, including transaction management, project management, relocation planning and management, strategic planning, workforce and location planning,
subleases and dispositions, lease administration, capital markets, sustainability, supply chain and facilities consulting. Cresa has more than 55 North American offices and more than 250 offices worldwide.
Janna LuceLandlords Beware, pg. 22
Janna Luce, a senior vice president in CresaPartners’ San Francisco office, has 14 years of experience exclusively representing corporate clients and buyers on a local and national basis. Her clients include VMware Inc., AARP, Prudential Insurance Co., Wachovia Securities, OpenTV, MyPoints.com, ValueClick Inc. and NetZero Inc. Prior to joining CresaPartners, Luce was a principal with Prudential CRES Commercial Real Estate, where she specialized in office transactions for corporate and nonprofit tenants throughout the Bay Area. A licensed real estate broker by the State of California, Luce also is a member of the State Bar of California. sity’s schools of business and law.
Craig ZodikoffLandlords Beware, pg. 22
Craig Zodikoff, managing principal of CresaPartners’ San Francisco office, has 17 years of experience in corporate real estate portfolio management, financial analysis, mergers and acquisitions, build-to-suits, site selection, labor analysis, state and municipal tax and non-tax incentives, and dispositions. Zodikoff’s clients span the financial services, legal services, life sciences, technology, nonprofit, consumer products and manufacturing sectors. He has completed more than 200 transactions ranging from 1,200 square feet to 1.3 million square feet and has managed individual accounts in excess of 12 million square feet. He began his career as an attorney, specializing in corporate law, bankruptcy and commercial real estate. n
Media PartnersThe Registry would like to acknowledge its partnerships with the following organizations:
www.norcal-ai.org
Google Amasses a Kingdom in Mountain ViewGoogle Inc. has acquired The Landmark at Shoreline for $100 million from Broadreach Capital Partners, the Palo Alto real estate investment company founded in 2002 by former executives with Spieker Properties Inc.
The 240,000 square-foot office campus on 18 acres in the city of Mountain View is adjacent to Google’s headquarters at 1600 Amphitheatre Parkway and fronts U.S. 101.
The transaction marks the latest property acquisition by Google in the North Bayshore area. The company has been on a property acquisition and leasing spree as its head-count has grown. It owns many of the buildings in the North Bayshore neighborhood. It also is building a new headquarters on 18 acres there that it is leasing from the city of Mountain View.
Google is working with the city on the update of the city’s general plan, Mountain View 2030, the master development blueprint for the next two decades. Google has sought to reshape the largely industrial enclave at Shoreline into a community with as many as 1,500 homes and apartments, commercial development and offices. It is developing its headquarters to an environmental standard that exceeds the highest level of LEED.
San Jose Looks to Reposition ItselfA San Jose task force of 35 members that has spent the last four years contemplating the future of its community has ambitious plans: 470,000 new jobs over the next three decades, doubling the employment base to 840,000.
San Jose City Hall has been whacked by the recession as much as any local government, and the city’s proposed general land plan, in which these jobs goals are embodied, is making every attempt to reverse the tide. Housing units are slotted to increase by less than half.
San Jose has resisted for more than a decade its reputation and the fiscal reality of being the bedroom community to many locales farther north, notably Palo Alto and Santa Clara. Instead it wants to be a jobs center where the number of jobs well exceeds the number of employed residents. “We are the only big city in the United States over 500,000 people that exports workers,” says Senior Planner Andrew Crabtree. “Most cities have three jobs per employed resident.”
The proposed general plan, Envision San Jose 2040, is expected to go to the San Jose City Council on Nov. 1. It has already been approved by the city’s planning commission. It is the city’s first comprehensive land-use update in 30 years, Crabtree said.
The plan proposes to change the landscape of San Jose by focusing housing and other development at existing commercial nodes and near stations for the Caltrain, BART, light rail and bus rapid transit systems. There will be practically no single-family development. Rather, all new housing will be almost entirely in mixed-use, high-density formats, and there will be an emphasis on redeveloping underused commercial properties.
It total, the plan contemplates some 80 of these “urban villages,” which are both concentrated nodes and spread along transit corridors. In general, devel-opment is focused downtown and in the neighborhoods immediately adjacent to downtown; in North San Jose, where 32,640 new homes are anticipated; at existing and planned BART, Caltrain and light rail stations, and a handful of other neighborhoods where detailed planning work has already occurred.
Large Apartment Complex Breaks Ground in The Mission Avant Housing LLC, a joint venture between AGI Capital, TMG Partners and CalPERS, broke ground on a six-story, 202-unit apartment development at 1880 Mission St. in
San Francisco’s Mission District.
The $60 million development will be the largest Class A market-rate institutional apartment building in the area. The Mission is one of the oldest neighborhoods in the city. Leasing will begin next summer.
“1880 Mission is symbolic of The Mission’s new draw for capital investment,” Eric Tao, development principal at Avant, said in a prepared statement.
The first developments were large affordable housing projects or smaller projects, Tao said. Nothing institutional in size—larger than 150 units—for market-rate housing has been attempted in the area. Avant purchased the property for redevelopment in Nov. 2010.
The 230,000-square-foot mixed-use project will have a mix of studios, one-, two- and three-bedroom homes and penthouse lofts. It also has 7,500 square feet of street-level retail and 155 below-ground parking spaces.
The design will incorporate salvaged brick and timber from the original 105-year-old building on the site. A business center will look more like the shared open creative space now popular among professionals and entrepreneurs. Many bike-centric designs are built into the project, including extensive bike parking and a workbench and tools to fix and maintain a bike. Twenty percent of the units are to be below market rate, available to those earning 55 percent of median income.
SoMa Blaze Keeps BurningSan Francisco’s Swift Realty Partners acquired 140 Second St. in the city’s SoMa district, paying $12 million, or about $315 a square foot, for the historic brick-and-timber building.
The six-story, 38,000 square-foot property is adjacent to the future Transbay Transit Center, which will include a 5.4-acre park and transportation connections to BART, Caltrain,
SamTrans and multiple other bus and rail systems. It is also five blocks south of the Montgomery Street BART station.
The red-brick building is but the latest SoMa property to trade. In the third quarter alone at least seven other SoMa buildings sold to buyers including Manulife Financial Corp., Kilroy Realty Corp., Beacon Capital Partners, Cornerstone RE Advisors and Hudson Pacific Properties Inc.
As The Registry went to press, Iowa-based insurer Aegon Americas announced that it was putting a 55,000 square-foot SoMa building up for sale. Seth Siegel, an executive director for Cushman & Wakefield, said the company expected to garner a sales price in the $400-a-square-foot range. Siegel and two other Cushman executives are managing the listing.
Downtown San Jose Gets Good NewsEnterprise hardware and software maker Oracle Corp. pulled building permits from the city of San Jose to complete tenant improvements on three floors at 488 Almaden Blvd., an 18-story glass high-rise that Oracle acquired when it bought BEA Systems Inc. in 2008.
The permit, which was approved by the city on Sept. 14, indicates that Oracle intends to occupy all or parts of the third,
eighth and ninth stories of the tower totaling 65,000 square feet, said Chu Chang, the chief building official for the city. An Oracle spokeswoman did not return a telephone call or email seeking comment.
San Jose Mayor Chuck Reed said he is delighted that Oracle has decided to occupy a portion of the building, an invitation he had extended to Oracle President and Chief Financial Officer Safra Catz after Oracle first acquired the building. At that time, Catz did not indicate an interest, the mayor said.
“They have a lot of people who work way up on the Peninsula who live in San Jose, so it is a desirable location from that perspective,” Reed said. “We are happy to have them” now.
Annual Holiday Celebration For Kids Plays AgainFor the 15th consecutive year, the non-profit and business partnership known as “We Care” will bring holiday tidings to deserving children in 27 North American cities, including San Francisco.
The program is held through the Boys & Girls Clubs of America and is sponsored by furniture manufacturer Herman Miller Inc. The event includes entertainment, arts and crafts, and holiday snacks.
San Francisco’s We Care event will be Dec. 1. at the Boys & Girls Club in Columbia Park at 450 Guerrero St.
The annual event draws support from the entire Bay Area architecture, design and construction community, said Cecilia Lyra of Herman Miller, the regional We Care coordinator. She cited in particular Herman Miller dealers CRI, Interior Motions and Pivot Interiors and Cort Furniture Rental.
In the past, as many as 300 elementary-aged school children have participated in the San Francisco gathering, Lyra said. Herman Miller focuses on transform-ing the gym at the Boys & Girls Club into a winter wonderland, while participat-ing companies including general contractors, architects and interior designers focus on setting up and equipping some two dozen tables with supplies, so kids can make presents such as picture frames, key chains and mosaics, get their faces painted and pictures taken in costumes. n
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PEOPLE on the moveBroker Expands Capital GroupWill Connors (left) has joined Newmark Knight Frank Cornish & Carey Commercial Capital Group as managing director. Together with Erik Doyle and Sean Fulp, Connors will be responsible for managing clients’ institutional investment requirements in the Western region.
Connors brings more than 14 years of commercial real estate transaction experience to the position. He held positions with RREEF LLC, Lowe Enterprises Inc. and, most recently, Equity Office, where he was responsible for acquisitions and dispositions nationally for a 60 million square-foot portfolio. He has sourced or divested in excess of $2 billion in office and industrial assets and contributed to the acquisition of an additional $4 billion of office, industrial and retail properties.
Residential Broker Announces New Manager in Western San FranciscoTara Donohue, a San Francisco Realtor since 1988 who joined Zephyr Real Estate in 2006, has been named sales manager of Zephyr’s West Portal office.
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Donohue was a top-producing agent while also an assistant sales manager at both the Pacific Heights and West Portal offices for the past four years. She steps into the spot opened by Don Saunders, who is leaving the industry after 33 years to enjoy a more leisurely lifestyle.
Architect Adds Sustainable Design Expert in South BayJessica Kennedy (left) has joined Gensler, the international architectural, design and planning firm, in its San Jose office. Kennedy brings seven years of experience in sustainability consulting for Fortune 1000 companies and other key players in the technology, telecommunications, health care, financial services, real estate, media, entertainment and education sectors.
Prior to joining Gensler, Kennedy opened and managed the San Francisco office of Brightworks, a sustainability consulting practice. Under her leadership, the branch grew to become the largest and most profitable office in the company. She also practiced architecture with GBD Architects and CH2M Hill.
As an expert in sustainability strategies, Kennedy has spoken about green data centers at events sponsored by the Global Strategic Management Institute and the Association for Computer Operations Management, and she has led design work-shops at the U.S. Green Building Council. She is also a member of CoreNet Global.
Investment Services Company Promotes From Within Salvatore S. Saglimbeni (left) has been named a vice president investments by the board of Marcus & Millichap Real Estate Investment Services.
Saglimbeni began his career with Marcus & Millichap in January 2004, specializing in the sale of multifamily properties. Most
recently, he held the position of associate vice president investments.
Real Estate Services Experts Expand in San FranciscoJim Korinek (left), a 15-year veteran of institutional investing with experience in life-company and pension-fund advisory organizations, has joined CBRE Capital Markets as executive vice president in the San Francisco office. Korinek has extensive experience in helping to arrange real estate debt transactions, including conventional, bridge and structured loans. He also has focused on equity capitalizations
using preferred-equity and joint-venture structures.
East Bay Brokerage ExpandsSid ewing (left) has joined Jones Lang LaSalle as a senior vice president and will continue his focus on the Oakland market.
He spent 18 years with CB Richard Ellis and has been active in Bay Area commercial real estate since 1991. He was an advisor in the 2010 purchase of Oakland’s City Center, and in the last five years
has handled transactions totaling more than 9.7 million square feet valued at approximately $725 million.
In addition to the sale of City Center, he has advised on the sale of Safeway Inc.‘s corporate headquarters, Lake Merritt Tower I and II (a development site) and the Ordway building in Oakland. He has represented the buyer or seller in more than 50 transactions in Oakland and the East Bay in the last 10 years.
Commercial Broker Acquires Silicon Valley BoutiqueLos Altos brokerage Ron Labetich Co. has been acquired by Cassidy Turley and will continue to do business at its existing office location at 339 S. San Antonio Road. The purchase brings Cassidy Turley its 15th Northern California office.
Labetich (left) founded the company in 1991 and joins Cassidy Turley as partner. Scott O’Brien, a leasing and sales specialist at Labetich, will join as vice president. The firm has focused on commercial real estate in Santa Clara and San Mateo counties, with a primary emphasis on the city of Los Altos.
Labetich is a former Cornish & Carey Commercial president and has sold and leased more than $300 million of commercial real estate. He has also participated in the development of over 500,000 square feet of commercial properties on the Peninsula, completing over 1,300 commercial real estate deals during his career.
Since joining the Ron Labetich Co. in 2002, O’Brien has been involved in hundreds of transactions.
Law Firm Expands Commercial Real Estate PracticeScott Rogers and Ted Klaassen have joined the Palo Alto office of Rutan & Tucker LLP.
Rogers brings 30 years of experience with a wide array of commercial real estate projects representing both institutional and private interests in transactional and litigation matters. His expertise includes all aspects of real estate investment. Rogers’ representation of lenders includes loan-origination and loan-enforcement matters including workouts, foreclosures, collection actions, note sales, REO dispositions and co-lender issues.
Klaassen represents developers, investors, corporations and institutional clients in a broad array of real estate transaction and litigation matters. His experience includes acquisition and disposition, development, redevelopment, construction, title review and leasing. As a trial lawyer, Klaassen has court and jury trial experience in both state and federal courts and often counsels his real estate clients through pre-litigation dispute resolution. n
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Visiting a car dealer isn’t normally an architectural or aesthetic treat. But Palo Alto’s new Fisker-McLaren dealership is no ordinary auto showplace, even by Silicon Valley’s push-the-envelope standards.
The wraps have come off the two-in-one retailer, showcasing two distinct brands of luxury cars—the pioneering Fisker plug-in electric hybrid and the ultra-engineered McLaren sports car inspired by Formula One technology. The venues are designed with an artfulness, tech savvy and environmental sensitivity that evoke the spirit of the vehicles. They suggest how architectural design can help sell cars.
The dealership that opened in October on a redeveloped corner at El Camino Real and Arastradero Road is a natural fit for affluent, eco-conscious and tech-rich Palo Alto. One showroom displays Fisker Automotive’s sleek Karma sedan. With a starting price of $95,900, it is aimed at those seeking a chic set of electric wheels to ride the green wave. The adjacent showroom features the McLaren MP4-12C, which retails for $231,400 and up. Built by the British maker of Formula One race cars, it is intended for the elite collector with a need for speed, engineering and customization. “There are two dis-tinct architectural styles and languages that mirror the car styles, brands and customer experiences,” said Erik Rogers, an architect at Valerio Dewalt Train Associates, a Chicago-based firm that designed the new site.
In McLaren’s case, designers tried to evoke the experience of visiting a mu-seum; in Fisker’s case, an art gallery. McLaren’s 2,500 square-foot sales floor is in a gleaming, circular glass building that draws immediate attention to the supercars displayed like trophies inside a giant, glittering case. Visitors can look at Formula One memorabilia or watch racing videos in the Formula One Lounge. The 1,700 square-foot Fisker display area is more visually complex, featuring exposed steel beams over a polished concrete floor. Translucent ex-terior walls give the showroom an open, airy feel.
“On one side, you have eco-chic. On the other side, you have precision engineering and relentless cutting edge,” said Adam Simms, co-owner of the dealership. “The challenge was ‘how do you bring eco-chic together with super-exotic?’ They have their distinctive presences, yet they complement each other.”
Simms and his partner, Bay Area auto-sales giant Tom Price, leased and upgraded the site, which had been vacant for three years. The 13,400 square-foot complex has two buildings for showrooms and two for repairs and detailing. The entire multimillion-dollar project was done with sustainable materials and standards, commissioned by the city of Palo Alto and expected to achieve certification equivalent to LEED Silver.
Being green and luxurious is central to the story of Fisker Automotive. The company was co-founded in 2007 by Henrik Fisker, who developed the BMW Z8 roadster and Aston Martin V8 Vantage Coupe. The Anaheim company has raised more than $1 billion, including a $529 million loan from the Department of Energy’s Advanced Technology Vehicles Program that has been caught up in the political controversy over government subsidies for clean tech. Fisker has lined up more than 40 North American dealers and recently delivered one of the first Karmas to actor Leonardo DiCaprio.
The electric vehicle market is emerging with cars, such as the Tesla Roadster, Chevrolet Volt and Nissan Leaf, which promise to be even cleaner than conventional hybrids. Traditional hybrids are powered primarily by gasoline and supplemented with electricity, while plug-in hybrids rely mainly on an electric motor with a gasoline engine as backup. Plug-ins make electric-only driving possible.
The four-door Karma, with 400 horsepower, can go 50 miles on its lithium-ion battery before a gasoline engine kicks in to extend the range another 250
Good and PrettyArchitects model dealership
on autos’ personalities.
by Maria Shao
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“The challenge was ‘how do you bring eco-chic together with super-exotic?’ They have their distinctive presences, yet they complement each other.” Adam Simms, co-owner, new Fisker-McLaren auto dealer in Palo Alto
miles. Other green elements include a solar panel built into the car’s roof and interior wood reclaimed from forest fires and lake bottoms.
In the Fisker building, 80 percent of the construction materials by volume are recyclable. Exposed steel beams and columns are perforated to reduce weight and materials usage. Translucent exterior walls are made of two thin layers of polycarbonate with a honeycomb pattern inside, which reinforces the wall while allowing less material to be used. A reddish brown panel, which runs along the back of the showroom and links to the McLaren venue, is made of sustainably harvested wood veneer sandwiched around resin. The freestanding Fisker sign out front has solar panels and batteries to illuminate it at night.
The Fisker building, with an accompanying patio, feels accessible and public. The exterior walls admit an abundance of natural light, while becoming more opaque later in the day. Front panels can slide open to turn the entire show-room into an open-air pavilion that takes advantage of Northern California’s moderate climate. “Being an eco-chic vehicle, you want to feel the outdoors,” said Rogers. “These types of cars can be intimidating. You want to break down barriers. We want the community to feel comfortable.”
Designers also tried to create a feeling of community among those buying into the electric-vehicle philosophy. The sales floor has a reading area and a touchscreen table, where customers can learn about the car and technology. Fisker baseball hats and jackets are on sale. “You sign up to be part of that family,” said Antonio Caliz, director of the Palo Alto office of Valerio Dewalt, which has 10 architects in Palo Alto and 40 in Chicago.
McLaren’s venue is more intentionally striking, befitting a 600-horsepower car that can clock 200 miles per hour. The MP4-12C, with two wing doors and a carbon-fiber chassis, is introduced by McLaren Automotive of England, part of the McLaren Group. McLaren has selected 10 U.S. dealers to sell its rare street car.
The glass-enclosed circular showroom draws the eye immediately to the cars displayed. A white circular inlay on the floor is for spotlighting one car. With glass walls, white finishes and gray porcelain floor tiles, the showroom itself is minimized. An octagonal fascia over the building is clad in aluminum for a high-tech look.
Furnishings convey McLaren’s racing heritage, precision engineering and technology. A receptionist’s desk is made of carbon fiber. Cabinet joints and floor tiles line up precisely. The Swiss-made cabinets feature information on Formula One racing and display helmets, gloves, bodysuits and other memora-bilia. There will be an actual McLaren race car on display, part of the company’s Formula One exhibit that travels globally. Customers can watch racing videos in a lounge equipped with leather sofas and a kitchenette.
The upscale dealership has been welcomed by Palo Alto officials. “Sales of high-end luxury cars and the taxes and revenues that come with it are very excit-ing to the city,” said Thomas Fehrenbach, economic development manager for Palo Alto. The project “fits our market segment very well,” he said. “We have a high-net worth population. This community is environmentally focused, and they’re early adopters of new technologies.” They should also appreciate some sophisticated architectural design. nIM
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Robust job growth, strong investor appetite for Bay Area apartments, and now new entitlements and zoning are fomenting change at Executive Park, a
nondescript enclave sandwiched between Candlestick Park and Highway 101 at San Francisco’s southern edge. Some six years after San Franciscans first began to consider the changes, the Board of Supervisors this summer approved a rezoning plan that paves the way for construction of 1,600 new apartments and condos, 70,000 square feet of retail space and 2,400 parking spaces.
With the changes, the highly visible tract of land is one step closer to becoming a gleaming gateway to the City by the Bay. Waterfront plazas, pedestrian-friendly streets, bike lanes and a bus rapid transit station are proposed for the community, which overlooks the San Francisco Bay to the south and is embraced by Bayview Hill Park to its north. Under a community design created by San Francisco’s Heller Manus Architects, the new development would include three high-rise towers among 13 residential buildings. “The views are spectacular even from the mid-rise buildings,” said Clark Manus. “It’s an opportunity for people to live close to the city and the water.” The neighborhood is expected to draw professionals and young families seeking places to live,
Site UnseenA hidden, underdeveloped
site on San Francisco’s southern frontier is poised for renewal.
by Michele Chandler
“The views are spectacular
even from the mid-rise buildings.”
Clark Manus, Heller Manus Architects
particularly as the region’s economic picture improves and area companies step up hiring.
The project includes 14.5 acres now owned by The Yerby Co., as well as another San Francisco developer, Universal Paragon Corp. Their portion of the project is located within the larger 71-acre Executive Park development, which is slated to have a total of 2,800 residences. On its portion of the property, Yerby plans to demolish a 100,000 square-foot office building at 5 Thomas Mellon Circle and replace it with 500 apartments. George Yerby, the company’s princi-pal, said he plans to sell the property outright or bring on a joint-venture redevelopment partner; his site was to go up for sale in October.
Universal Paragon also plans to tear down its two office buildings nearby and construct 1,100 apartments and condos in their place. Another 70,000 square feet is slated for retail businesses—likely to include a coffee shop, hair salon, bank branch and other services geared to neighborhood resi-dents. “There’s a strong demand for apartment construc-tion in the city. As that demand gets filled in the downtown and Mission Bay sites, we’re poised to take the next wave of growth,” said Jonathan Scharfman, Universal Paragon’s general manager and director of development.
While the process to transform the Yerby and Universal Paragon sites from office complexes to residential neighbor-hood is in its early stages, investors see potential because of their proximity to San Francisco area jobs, said Philip Saglimbeni, vice president with Institutional Property Ad-visors, which is owned by Marcus & Millichap Real Estate Investment Services. When his company marketed parcels of vacant land intended for residential development in Ex-ecutive Park earlier this year, local, regional and national
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companies expressed strong interest. Those parcels could be developed into for-sale housing or apartments, Saglimbeni said. “The opportunities are rare, so when they show up, they will get substantial attention,” he said. “The reason that people want to be there is they can access the Peninsula job corridor fairly easily.”
Right now, retail and related services are noticeably ab-sent in Executive Park, a downside to the community. But, Saglimbeni said, “As you populate the area and get consumer services in there, then it becomes that much more appeal-ing. It will come together when you have resident services.”
More public transportation is also planned. Current land-owners pay an annual fee to cover the cost of private shuttles that take Executive Park residents to BART and the Third Street light rail station. The recent rezoning also includes the addition of a bus rapid transit station to the neighborhood.
Executive Park isn’t the only new residential community in the works on San Francisco’s southernmost flank. Several other redevelopment efforts are underway to convert office parks or factories into residential communities. To the east, there’s the redevelopment of the 702-acre Candlestick Point and Hunters Point Shipyard, which is to be converted to multiple uses, including housing, retail and entertainment venues, open space and 2.5 million square feet of commercial property that is envisioned as a science and technology campus for emerging technologies, according to the San Francisco Office of Economic and Workforce Development.
To the west of Executive Park on the opposite side of Highway 101, Universal Paragon is developing another resi-dential community on land that has been vacant since the Schlage Lock Co. closed its factory in 1999. In addition to 1,200 homes and a large park, that property will include a full-service, independent grocery store likely to draw Ex-ecutive Park residents.
Executive Park also will join three existing condo, town home and apartment developments that opened in the area during the past few years. One of the most visible, Candle-stick Cove, a condo and apartment development by Signa-ture Properties, opened two years ago. Michael Ghielmetti, Signature’s president, said that while condo sales have “run up against the broader economy and the broader housing downturn,” about four condos a month have been sold since springtime. The development’s 100-unit apartment building is totally full.
Executive Park also is close to major employment centers beyond the city itself, including South San Francisco, a ma-jor life-sciences industry hub located just five miles south. More than 75 biotech companies, including Genentech, the largest with 11,600 employees, are located there. While the city believes that the industry will create more jobs in the future, “Right now we don’t have a whole lot going on. I don’t know that anyone’s adding new jobs right at this mo-ment,” said Susy Kalkin, chief planner with the city of South San Francisco.
But the need for new housing is coming as business re-bounds, hiring increases and the region’s population continues to grow, said Mike Lappen, the city’s economic develop-
ment coordinator. Projections from the Association of Bay Area Governments, a regional planning group, already indi-cate that South San Francisco must make room for 10,000 new housing units by 2030, Lappen said. “The need is there, it’s coming. It will obviously have to be a mixture of rental and for-sale units, but they’re all going to be high-density,” he said.
With that reality, Kalkin said the city is drawing up its own plans to build housing when the time is right. “We’re not relying on San Francisco to provide the housing for em-ployment growth generated in South San Francisco,” she said. “We have zoning in place for substantial residential growth, should someone be interested in taking that on.”
Jonathan Scharfman, Universal Paragon’s general manag-er and director of development, believes Executive Park can satisfy housing needs for workers taking new jobs at gaming, biotech and technology firms throughout the region, since the community is located midway between downtown San Francisco and San Francisco International Airport.
Still, Universal intends to wait before starting its new development until after some apartments already approved are constructed. Market conditions at the time the financ-ing is completed will determine whether those units are rentals or for-sale. “There’s a tremendous amount of activity in the capital markets investing in apartment sites for devel-opment in San Francisco, more activity than we’ve seen in years,” Scharfman said. n
Below:George Yerby, principal, The Yerby Co.
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commercIAL
Earlier this year, there were clear signs that the national economy was improving and the Bay Area commercial real estate market was
heating up. Companies were adding jobs, vacancy was declining, and demand for space was on the rise. After a long period of frustration, many land-lords and their brokers became more bullish and promoted a return to a landlord’s market.
Then, in August and September, a wave of global financial instability left a chill in its wake. The IMF warned of a world-wide, double-dip recession. In most of California and corporate America, office tenants have become more cautious.
Now, amid reports of continued torrid office demand in some parts of the Bay Area, the question arises: Are we immune to the uncertainty and vola-tilities in the larger markets? That depends. Overall recent regional statistics suggest the following: The Bay Area is a stark example of bifurcation, with premium Class A and creative warehouse and R&D space in high demand in pockets such as Palo Alto, Moun-tain View and South of Market in San Francisco, while Class B and Class C space in outlying submarkets often languishes. Those dichotomies are likely to continue.
The tech sector has fueled an explosion of local activity, particularly along the Peninsula in areas near Caltrain such as Palo Alto, Menlo Park and San Carlos. Giants in the social media, gaming, Internet, cloud computing, storage and hand-held device industries have chosen to establish their corporate headquarters in this region. Google Inc., Apple Inc., Microsoft Corp., VMware Inc., Motorola Mobility, Hewlett-Packard Co., and Symantec Corp. all signed major deals in the last two quarters and control much of the market. Investors are diving in. Some are paying what might be considered inflated rates. To justify their investments, they will try to drive up their rents.
A market is considered balanced when vacancy reaches 10 percent. While R&D vacancy is less than 6 percent in Palo Alto, less than 9 percent in Mountain View, and well below 5 percent in Cupertino, it’s a different story as we head away from the Peninsula and further into the South Bay. In San Jose and most of southern Silicon Valley (North Santa Clara, San Jose, Milpitas and Fremont), vacancy is currently within a few points of where it was a year ago, and in any case remains well into the double-digits in many markets. In San Francisco, vacancy for the
most sought-after brick-and-timber space South of Market may be 5 percent, but office vacancy is 12 percent in the Financial District.
High-quality space is becoming increasingly sparse, with fewer larger blocks of contiguous space available to growing companies, forcing many cor-porations into submarkets where they typically find commodity, inferior Class B space that needs tenant improvements. As demand increases throughout the area, speculative development may bring more quality space online.
While national unemployment is now 9.1 percent, the Bay Area is faring better than the rest of the state, showing modest job growth of 0.4 percent in August, with unemployment of 8.8 percent in San Francisco’s metro area and 10 percent in Greater San Jose. But until jobs reach their pre-recession
level, which might take another couple of years, a full Bay Area market recovery probably won’t come.
Average asking rents for Class A buildings in downtown Palo Alto are now $78 a square foot a year, almost double the rate of two years ago. In SoMa, which is comprised mostly of converted warehous-es, rents are $45 a square foot to $50 a square foot a year, up 30 percent in the last 12 months. The aver-age San Francisco CBD Class A asking rents are $39, up nearly 20 percent in a year, and high-rise view space is up to $70 a square foot a year. At the same time, asking rents for Class A office space in San Jose’s central business district have seen only moderate in-creases in the last couple of quarters, now tracking at $32 a square foot a year.
Looking ahead, are we really headed for a double-dip recession? Will Greece inevitably default? The visibility on these questions is hazy at best. Other perspectives are clearer. In most markets in Cali-
fornia, the current slowdown will probably hinder recovery. But in the choicest Bay Area markets, we probably should not expect weakening demand. So as quality space availability tightens and prices escalate, even as leasing metrics for lesser space improve slowly, tenants must search to find the best of both worlds: cool digs at fair prices. Those who find success will be nimble and lock into leases before prices hit the roof, not making the mistake of many companies that sit on the fence too long. Also, they will be flexible about geography.
Companies that are already leasing space in the de-sired markets should consider early lease renewal be-fore expected spikes in rental market rates. They also should negotiate for longer-term deals (seven to 10 years) if they have strong, long-range business plans.
Companies looking to break into the hot pockets can expect slim pickings. In San Francisco, that means SoMa wannabees will likely need to check out the Mid-Market, Yerba Buena and South Finan-cial submarkets. For those who covet Palo Alto and Mountain View, the next Peninsula stops are Sunny-vale and Santa Clara. Then, it’s down the South Bay to San Jose and up the horseshoe to Milpitas and Fremont. Tenants will pay considerably less for rent in these submarkets, but if they insist on high-image creative space and other amenities, in most cases they will need to upgrade the available space, adding amenities and optimizing efficiency through alter-native workplace strategies.
Many buildings are still under heavy debt and at risk for delinquency, so smart tenants won’t make assumptions about the landlord’s financial stability. Credit-worthy tenants should stress their own stabil-ity, knowing that landlords prefer strong companies. They also will plan ahead for an infrastructure to ac-commodate wireless environments, office sharing, smaller workstations and sustainable features.
It’s understandable why companies want to stay in the Bay Area. Maybe the Rolling Stones had it right: “You can’t always get what you want, but if you try some-times, you just might find, you get what you need.” n
Craig Zodikoff can be reached at 415.394.1030 or [email protected]. Janna Luce can be reached at 415.395.4464 or [email protected]. Scott Kinder can be reached at 408.551.5314 or [email protected].
Landlords BewareTenants may feel shut out of some of the most popular office markets, but overall
the bay Area still has lots of available space.
by Craig Zodikoff, Janna Luce and Scott Kinder
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WorKTecH
Demand for, and use of, office space is changing radically as workers’ habits are modified by mobile technology, as the 70 million Millennials enter the workplace and
as transportation systems groan beneath the weight of too much use and not enough care.
As the baby boomers age and the so-called digital natives of Generation Y join the workforce, the Internet will become the backbone and irreplaceable tool from which thought and output emanate. The role of social media in the workplace and as a plat-form for working will increase. And as transportation congestion intensifies, it will force new commute patterns, pushing compa-nies away from central cities to smaller and much more numerous urban nodes. The distinction between what is urban and what is suburban is no longer clear.
As the world’s population rises from 6.5 billion to 9 billion by 2050, the populations living in cities will double from 3 billion to 6.5 billion, according to the United Nations, said Philip Ross, chief executive of UnWork.com, a UK-based consultant that looks at the future of work. The current practice where huge numbers of people commute daily to and from workplaces often located in a central location, spending hours traveling, will no longer suffice.
Yet, according to a survey of 600 business executives worldwide published in May by UnWork.com and business-center operator Regus PLC, only 12 percent of people say they want to work from home. Rather, people want to go to a formal work location at least some of the time, and their ideal commute lasts 15 minutes or less.
The demand for office property will fall precipitously, Ross said. He cites the same May survey in which more than 71 per-cent of respondents from the largest companies—those with 1,000 workers or more—said they do not believe that the next generation of workers, those 70 million or so digital natives born from 1980 to 2000, will accept the traditional workplace. Not quite 60 percent of those same respondents said the need for office space will shrink as work styles change and activity-based office use takes hold.
Ross was one of more than a dozen presenters who spoke on the radical transformation of the American and global workplace being precipitated by the convergence of technology, demographics and the demand for perpetual innovation. India and China both have their own versions of digital natives, as well. Ross’ Worktech 11 West Coast conference was held at the new Nokia Inc. Ameri-can headquarters at the Sunnyvale Town Center, itself a symbol of workplace trends. The event was sponsored by Unwired Ventures Ltd., a British company. The Registry was a media partner.
Citing Anil Gupta of the Smith School of Business at the Uni-versity of Maryland, who is a recognized expert on globalization, Ross said that the notion of a corporate headquarters will evolve away from a physical building to become a virtual network.
The current preoccupation with successfully blending work and life has been a part of city planners’ and architects’ thought processes since the 1700s, said Hamid Shirvani, president of California State University, Stanislaus, and a scholar of architecture and urban de-
sign. The rise of the American suburb came only after World War II with the creation of Levittown (in New York, then Pennsylvania) and Americans’ love affair with the single-family detached home and a yard.
Only in the 1980s when the issue of affordability arose did an acceptance of town homes come about, he said. Near the same time, there was a rise in interest in rebuilding center cities, and huge projects including housing, hotels and shopping were conceived to bring people back to downtowns. Downtown Los Angeles is a good example where they have been partially successful in bringing in hotels and shopping, he said, but “it is not a living city,” and many of these projects have not been successful.
“Now what is happening is that a good number of corporations are going to suburban areas for a variety of reasons including cost, image and to put the entire operation in one location,” he said. The trend is epitomized by Nokia, as well as Apple Inc., Google Inc. and Salesforce.com. Commercial nodes are emerging where there is a collection of offices, housing, shopping and other offerings within walking distance. “The definition of what is urban and what is suburban is blurring,” he said.
At least half of the companies with which he comes into contact want Class A office space proximate to transit in a large commercial and urban setting like Sunnyvale Town Center or Bay Meadows in San Mateo, said Tom Sullivan, a founding member of San Francisco developer Wilson Meany Sullivan. “There have been dramatic changes in corporate location criteria in the last six to eight years,” Sullivan said. It is also being expressed in the way his company builds offices. Wilson Meany is turning to concrete-frame office buildings over steel because it believes concrete is more flexible and better captures the “industrial aesthetic” that tenants and younger workers favor today, he said. “They want open floor plates to accommodate increasingly dense configurations.”
Wilson Meany is currently developing the second phase of Bay Meadows, an 83-acre mixed-use campus adjacent to a Caltrain station in San Mateo. The second phase is slated to have up to 1.5 million square feet of offices, 93,000 square feet of retail and 1,000 to 1,100 apartments and homes. The offices at Bay Mead-ows, which WMS has begun to design but not yet build, will be concrete, he said. He also said his company is designing a concrete building in Silicon Valley specifically aimed at evoking an industrial sensibility, though he declined to give details.
The last decade has brought a complete change in their corpo-rate real estate strategy, said Luigi Sciabarrasi, head of real estate and facilities at Symantec Corp. “Individuals want flexibility and balance, and the trend is accelerating.” The company has actively equipped workers with technology. “We are constantly reposi-tioning and consolidating our real estate to save money,” he said.
The work habits and outlook of the under-30 set will challenge traditional workplace norms, starting with a near complete reliance on digital media and the Internet for work and personal goals, said Marie Puybaraud, director of Global WorkPlace Innovation for
Siri-ous ChangesInternet, electronic gadgets have
only begun to transform workplace.
by Sharon Simonson
Johnson Controls Inc. Johnson Controls has more than 150,000 workers worldwide in more than 1,300 locations.
Digital natives prefer to have three screens in front of them when they are working, such as a laptop or a desk computer, a tablet and a smart phone. They vacillate between intense focus on a single screen and less intense focus across screens. “If their friends are not online, they are not friends anymore,” Puybaraud said.
Companies unable or unwilling to supply the full panoply of electronic accoutrements will have to decide if they want to allow personal computing devices as part of their workplace. “When [digital natives] are asked to live without technology, it feels like punishment,” she said. “They are globally connected. They are always connected, and they are always communicating.” The distinction between professional and work life is fuzzy. In the workplace, that means employers and workers are going to have to think about the role of Facebook, for instance. “There are no boundaries,” she said.
Sudhakar Lahade, senior design researcher for furniture maker Steelcase Inc., said for as much as has been written about digital na-
tives, the preoccupation has been with their characteristics (“they are multi-taskers and tech-savvy”) rather than their behavior and attitudes. “What makes you a certain generation is what happens in terms of the economy and technological influences, what are your shared memories, politics, common events,” he said.
For a generation of Americans, the assassination of President John F. Kennedy was a defining life event, but it meant far less to most of the rest of the planet. For Gen Yers, the events that matter are technologically related and globally significant. The defining generational events have been the creation and rise of Google, You-Tube, Twitter and President Obama. “This is a key differentiator,” he said.
For Generation Y, work follows family and friends in importance, the workplace is wherever they happen to be, and the work they chose must seem “meaningful and important” to them.
Jeremy Neuner, cofounder and chief executive of NextSpace, a co-working company with 500 members and locations in Los Angeles, San Francisco, San Jose and Santa Cruz, said his primary take-away from the day is that collaboration is not an automatic result. “Just because you create this environment doesn’t mean people will collaborate. It has to be more than space. It has to be a really, really intentional space,” he said.
Mindy Glover, the manager for the U.S. property group of U.K.-based mining company Rio Tinto, echoed the sentiment: “If we create beautiful places for people to collaborate, how do we make sure that we capture the knowledge?” Rio Tinto has 77,000 employees in more than 40 countries. n
The next generation of workers, those 70 million or so digital natives born from 1980 to 2000, will not accept the traditional workplace.
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Above:A rendering of the Bay Meadows project in San Mateo shows the proposed development of the 83-acre site with offices fronting the Caltrain line and station and retail and housing behind.
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PLAnnInG
In an era and region as consumed by environmental sustainability as is the Bay Area, it might seem impossible that a city would approve a shopping center with many of the same trappings as ones that gained development
rights decades ago. But that is exactly what is happening in San Jose.Forty-three acres at Almaden Expressway and Chynoweth Avenue are currently
being proposed for development into a 400,000 square-foot suburban shopping center characterized by a collection of retail buildings surrounded by vast stretches of surface parking lots. If constructed, Almaden Ranch is likely to be indistinguishable from a like center in Stockton or one built 20 years ago in the South Bay.
It does not link to a light rail station situated roughly a half mile away because the station and center are separated by a creek. A pedestrian bridge would cost $5 million or more and is not within the mitigations that the city can demand of the developer anyway, Gerry de Young, president of civil engineering firm Ruth & Going Inc., told the planning commission. An earlier plan included housing, but it was stripped out because mitigating the traffic problems would have made development costs soar. Representatives for the Loma Prieta chap-ter of the Sierra Club and Greenbelt Alliance both declare themselves under-whelmed. The Sierra Club says the development should be halted outright until something better can be created. One planning commissioner described the developer’s latest attempts to make the center more pedestrian friendly as “put[ting] lipstick on this pig.”
Mark Wolfe, a San Francisco land-use attorney who spoke at a public hearing about the environmental impact report on behalf of a neighborhood association, said the analysis failed to address “potential urban decay,” a requirement under CEQA, he said, to determine if more retail space in the vicinity would push other commercial space in the trade area to go dark and remain so. While city staff said they did not believe such an analysis is required, at least one planning commissioner, Christopher Platten, disagreed, saying he believes such decay is already occurring.
Why is San Jose considering such a throwback? The reasons are numerous, and the city’s position complex. San Jose’s dire fiscal straits and the opportunity for additional sales and property tax dollars are an obvious answer. In backing the $75 million project, city staff noted the economic development goals that
it would help to achieve in determining its consistency with the city’s current land use plans. But, there is far more to the city’s position than that, said Norman Kline, the planning commission member who recently led the 4-1 vote not to approve the project’s EIR.
The community may aspire to something closer to Santana Row, a highly visited 42-acre mixed-use development in central San Jose with more than 500,000 square feet of shop and restaurant space, a theater, a hotel and hundreds of housing units. But, such an endeavor is not physically possible at this location and is unlikely to be financially feasible anyway, Kline said. For the city, the fear is that the tract remains undeveloped and comparatively unproductive for another decade or more if this plan or something close to it is not approved, he said. “You can only push the developer so far before they throw up their hands and say, ‘I can’t make this work.’”
The plan is engendering intense resistance from the South San Jose neighborhood where residents say that their lives are consumed by the traffic that already plagues the area. That traffic is in many ways due to the prepon-derance of retail already located nearby. A casual listing of the outlets within a mile of the Almaden Ranch site includes the nearly 1.2 million square-foot Oakridge mall; a Costco, a TJ Maxx, a Ross Dress for Less and a Trader Joe’s; a Whole Foods, a Safeway and a Bed Bath & Beyond—to name but a very few. Residents’ ire has been inflated by the pending opening of a new Wal-Mart in an existing vacant building within a half-mile of the proposed center. While complimenting the developer for his responsiveness and attention, residents question the need for any additional retail in the area at all.
Meanwhile, Back at the Ranch
A proposal to build another suburban shopping center has elicited vociferous
resident resistance. but it may be the only solution.
by Doug Caldwell and Sharon Simonson
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“There’s little attempt at originality in enlivening the visual landscape. In that regard, it is a blight–the same cookie-cutter output anywhere around the country.” Jane Frommer, San Jose resident
But the developer, Deke Hunter of Cupertino’s Hunter Storm, and Commis-sioner Kline both note that studies consistently show that San Jose continues to lose retail sales to neighboring cities, which contributes to its financial predicament.
Despite the city’s much ballyhooed “Green Vision” to transform San Jose into a global center of clean technology innovation including an emphasis on sus-tainable development, multiple low-density shopping center developments have gone up in the last several years. The Target-anchored MarketCenter adjacent to downtown was completed in 2006 (a year before the Green Vision plan was adopted), and a Lowe’s anchored center on the cusp of the city’s airport, also developed by Hunter Storm, came somewhat later. Both consist of single-story retail development surrounded by large swaths of surface parking. In the case of the Lowe’s anchored center, Hunter Storm partnered with Eli Reinhard and his Arcadia Development Co., the team also behind Almaden Ranch.
While the dissonance between such development and the city’s Green Vision is obvious, Kline said he has no doubt that MarketCenter has been a tax-raising success for San Jose. The parking lot is perpetually full, and Trader Joe’s aisles are often overflowing with people.
San Jose’s sales tax collections for the fiscal year just ended were $138 million, 8.4 percent above collections in 2009-2010, according to the city manager’s Web site. But collections for the 2007-2008 fiscal year, before the maximum effects of the Great Recession took hold, were $154 million, 2.7 percent more than the year before, which was in turn a nearly 7 percent increase from the year before that. The sales tax rate in San Jose is 8.25 percent, 1 percentage point higher than the state’s. That 1 percent could translate into millions of dollars in new revenue for the city, once Almaden Ranch is fully developed.
“I understand that local government is in great need of the tax income—at this point, any income,” said Jane Frommer, a resident living near the proposed development who has opposed it. “I think that’s a strong driving force in favor of this project.” But Frommer and others say the proposal misses a very last opportunity in her neighborhood to create a true shopping destination, which, in the long run, would serve the city’s financial interests to a far greater extent. “You could be in Indianapolis. You could be in Mobile,” she said. “There’s little attempt at originality in enlivening the visual landscape. In that regard, it is a blight–the same cookie-cutter output anywhere around the country.”
Shiloh Ballard, vice president for Housing and Community Development with the Silicon Valley Leadership Group and a resident near the site, told the planning commission that a proposed development in neighboring Los Gatos on a land site of roughly the same size as Almaden Ranch is being envisioned as a large mixed-use destination center. “The town of Los Gatos is in the process of planning that site and what they have envisioned there is some sort of Santana Row South,” she said. “I am concerned about that potentially pulling from this, which makes it even more important that we get this site right.”
While San Jose Mayor Chuck Reed was unavailable to comment for this story, a spokesman for his office said the city is scrambling to find any extra money to avoid deeper cuts in services. Councilman Don Rocha, whose district includes Almaden Ranch, echoed that. “My knee-jerk is I’m happy that any invest-ment is being made in San Jose,” the councilman said. He also defends the devel-opers, saying they have listened to residents and tried to respond constructively.
Area residents agree. “They actually have been fairly receptive to our feed-back,” said Jerry Lane, who lives adjacent to the proposed development. Like other homeowners, Lane said the proposal poses “huge” traffic issues, but he says he’s more concerned about the city’s apparent desperation than fearful of the developer’s motives. “How is putting a Lowe’s there really going to increase sales tax revenue? All you’re really going to do is spread what sales might have been made at Home Depot to Lowe’s,” he said. “You’re sort of torturing your existing business base [and] crowding your streets.” The exact composition of retail at Almaden Ranch has been the subject of speculation, but definitive announcements of lessees have not been made.
“It’s easier to say what you don’t want there,” than what you do, said Frommer. n PH
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In addition to sounding très sophistiqué, the word triage embodies a very reasonable concept. If you’re running out of blood transfusions, give them to those who still
have a heartbeat. In an emergency context—say a plane crash—everyone agrees this is the only possible approach. Yet, anywhere else, people perceive triage as problematic.
Triage applies brilliantly to medical care in a time of limited means, such as now. The concept is logical, rational and fair, until your mother is the one left with the sad smile and prayer book while her hospital roommate is wheeled into surgery. Fail to apply it, however, and you have terminally ill 87-year-olds getting heart transplants. Given the public hysteria surrounding the notion—recall all the braying about “death committees”—our Medicare crisis will likely grow far worse before triage is treated with any more respect than French military strategy.
But while it may be years from acceptance in health care, triage may be worth considering in real estate development, not so much from the developer’s perspective, but the public’s. That no proposed development can afford an infinite number of public benefits is axiomatic, at least to its proponents. And given that the number and cost of city exactions imposed on new projects increases annually, a fair question might be: Would society profit by re-examining the usefulness of its exactions and deciding to forgo some in favor of other, more pressing public needs?
This isn’t a call to save developers money. On the contrary, let’s assume that any given project can—without breaking the economic camel’s back—afford to add 10 percent to its total construction costs to pay for public benefits. Let’s further assume a civic-minded developer accepts this 10 percent cost but would like to see the money well-spent and is therefore willing to suspend or at least further dilute the already watery nexus requirement that the exaction must offset a project impact. And finally, let’s assume that the city in which the project is located is suffering from poor public schools, police and fire cutbacks, a dearth of low-income housing and crumbling infrastructure, which is to say, any community in the state of California.
With these pressing public needs, should we, as citizens, really be requiring developers to put in drinking fountains for dogs, public art that is—thankfully for everyone—never noticed, unneeded community rooms, or closet-sized parks that the public couldn’t find even with a map? And rather than just focusing on these relatively minor exactions, let’s
A Sod Roof Too Farrethinking the public use
of private exactions.
by John McNellis
This isn’t a call to save
developers money.
step right into it and question “green.” Inasmuch as environ-mental sustainability is NorCal’s secular religion (without the benefit of separating church and state), this is admittedly touchy. Not embracing green is tantamount to clubbing baby seals. Yet, while it may be a near certainty that mankind is contributing heavily to global warming, it is at least as likely that the difference that green buildings in Northern California may have on global warming trends is so infinitesimal as to be effectively zero.
When one considers that LEED-compliance alone can add about 1 percent to 10 percent (depending on the LEED level adopted) to a building’s hard cost, it is fair to question whether that money might be better spent on more palpable public needs. If a city had the choice between devoting $1 million in fees toward low-income housing or having a developer spend that same $1 million on green mandates, is the city itself really better off with a new building with a sod roof and 10 electric car-charging stations?
Other exactions are now so entrenched in the minds of virtually everyone—even developers—as to go unrecognized as public benefits at all. Putting aside structural engineers and steel workers, how much have we, as a society, actually benefitted from the billions that have been spent seismically upgrading buildings? An estimated 3,100 people died in the 1906 San Francisco and 1989 Loma Prieta earthquakes. This means we have averaged about 19 deaths a year in Northern California due to earthquakes in the last 162 years. Counting only modern times since the 1906 earthquake, that number drops to 0.5 deaths a year. Western heat waves, Northern black ice and Southeastern hurricanes kill far more people every single year. Yet we spend billions seismically upgrading old buildings.
The math may be cruel (again, if it’s your mother), but billions spent to save half-a-life a year simply cannot be the best allocation of limited resources. If you, as a city council member, were asked whether to have a developer spend $2 million upgrading a brick building that had already withstood the ’06 and ’89 earthquakes or have her pay into a fund that would hire 20 new public school teachers, which way would you vote?
Green is good, and it may even be very good, but there may be a better use of resources. If there is only $100 to go around, should it all go to green? nFor more about John McNellis or McNellis Partners, please visit mcnellis.com.
reTAIL
30 theregistrysf.com n ov e m b e r / d e c e m b e r 20 1 1
With the nation and state mired in deep recession, the regulation of land use and development appears to be proceeding along the business-as-usual path. Expressing
frustration with this state of affairs, Gov. Jerry Brown recently quipped that “there are too damn many regulations.” A target of the governor’s ire is the California Environmental Quality Act.
CEQA is a 40-year-old law that requires public agencies to analyze and mitigate significant environmental impacts of proposed development projects before acting on them. On its face, the requirement for informed environmental decision-making stands to reason and makes sense. Yet, the law applies equally to a project on a vacant pasture as it does to a parcel located in a downtown urban setting. It can take years and cost hundreds of thousands of dollars to produce an environmental document capable of surviving the administrative and judicial gauntlets. In the meantime, development sites remain vacant, no new jobs are created, no new homes are built and no new taxes are generated—all outcomes that we can ill afford to ignore.
Over the years, many attempts have been made to streamline environmental review for infill development projects, and some have found their ways into the law. These proposals range from a blanket exemption from CEQA for infill to streamlining the environmental review process generally. Unfortunately, these measures have had only limited effect in encouraging on-the-ground infill growth.
One particular, egregious shortfall of CEQA is in its treatment of projects that propose to reuse existing facilities or to redevelop previously developed sites. Disregarding reality, CEQA often treats vacant structures and formerly developed parcels as if they have never been occupied or put to any productive use. This is because the permitting agency must frequently use the existing and empty structure or unoccupied site as the baseline against which the project’s environmental impacts are measured. This means that costly, time-consuming and unnecessary studies must be done before vacant buildings or unoccupied built sites may be reused or redeveloped. The Bay Area has seen multiple, recent examples of actual projects affected by this issue. A proposal to reoccupy a vacant East Bay commercial building located near a transit center with a new retail use was delayed by nearly a year while environmental studies were prepared. An office tenant decided against reoccupying an empty downtown San Francisco building because of the potentially lengthy CEQA process, and a retailer proposing to replace two vacant commercial buildings in San Francisco with a new store and parking structure was delayed by more than five years.
Perhaps not coincidentally, given the lack of regulatory incentives encouraging infill development, a movement is afoot to reform CEQA as evidenced by the governor’s signing last month of three bills aimed at streamlining the environmental review process. SB 226 expands the statutory definition of an urban infill project and directs the governor’s Office of Planning & Research to amend the regulations implementing CEQA, known as the CEQA Guidelines, to create statewide standards for infill. Although the bill focuses on a streamlined review process for such projects and does not explicitly require the guideline amendments to create CEQA exemptions for urban infill, some commentators believe that this is the law’s clear implication.
Another law, AB 900, provides for an expedited judicial review of any project certified by the governor as an “environmental leadership development project.” Such projects include residential, commercial and recreational infill projects certified as LEED Silver or better by the U.S. Green Building Council; wind and solar-powered electricity-generating facilities; and clean-energy manufacturing projects. To qualify, a project must result in an investment of at least $100 million in the state’s economy, create high-wage, high-skill jobs, not result in any net new emissions of greenhouse gases and incorporate binding and enforceable measures to mitigate adverse environmental impacts.
SB 292 is the narrowest of the three bills and provides for expedited judicial review of any CEQA-based challenges to a proposal to develop a new sports stadium complex in downtown Los Angeles.
While these reforms are a good first step, much more can and should be done to encourage infill development. The existing statutory and categorical exemptions for infill projects should be revised to eliminate many of the limits, including restrictions based on project type, size and density. Second, the legislature should provide a statutory exemption from CEQA for the reuse of any structure or improvements involving minimal expansion. Lawmakers also should alter the definition of what constitutes the existing baseline, so that credit is always provided for prior use of a site or fully permitted use of a site, perhaps subject to a reasonable time limit on cessation of prior uses. Third, agencies should rely on the streamlined environmental review process mandated by CEQA whenever a project is consistent with a plan or zoning ordinance for which an environmental impact report had been certified.
The governor has said he would like to see great CEQA reform and is well-poised to lead in this regard given his experience attempting to streamline the entitlement process for residential projects in downtown Oakland while he was mayor. The legislature should likewise join the CEQA reform effort. Implementation of even some of these measures could greatly enhance the prospect of economic recovery in California, while continuing to provide the requisite level of protection for the environment. n
Anna Shimko can be reached at 415.781.7900 or [email protected]; Matt Francois can be reached at 415.627.3628 or [email protected].
Making CEQA Workdespite recent reforms, the california environmental Quality Act still undermines legitimate and much-needed commerce.
by Anna Shimko and Matt Francois
one particular, egregious shortfall of ceQA is in its treatment of projects that propose to reuse existing facilities or to redevelop previously developed sites.
Why did the accountant cross the road? To bore the people on the other side! Budump bump! But seriously, folks,
seriously, accountants do get a bad rap sometimes—just as Realtors do. I recall a friend who, lacking a certain affection for our profession, referred to real estate agents as “used-house salesmen.” Sure, not all accountants are the extroverted, gregarious, life-of-the-party types, but you’re not paying them to entertain you, right? I recently had the pleasure of sitting down with Joseph Dalli, a certified public accountant who operates out of Belmont. With the political season getting into full swing, there is a lot of talk about tax reform, not least of which are the proposals to eliminate federal mortgage-interest deductions and the lowering of federal mortgage lending limits via Fannie and Freddie. My objective was to get a bean counter’s perspective on some of the potential effects on the real estate theater. It was time well-spent, and contrary to my most primal fears, not only was it not boring, but rather entertaining. Go figure.
Dalli provides accounting services to both individuals and small businesses. He estimates that 70 percent of his clients are W-2 employees and 30 percent are self-employed 1099 contractors. He notes the rise in the number of his self-employed
32 theregistrysf.com n ov e m b e r / d e c e m b e r 20 1 1
rob’s reality
A residential column
It’s not how much you make, it’s how much you keep.
Go FigureAmerican tax law and homeownership are inextricably linked.
by Rob La eace
clients since 2008, as folks unable to find jobs elsewhere have ventured out on their own. He saw the same phenomenon between 1989 and 1991 during that economic downturn. I asked if he’d noticed a change in the number of his clients buying or selling homes in the past three years. “No”, he said. “I think the ones that are selling now are selling because they have to.” Rather, he has seen a lot more of his clients facing with foreclosures and short sales—something that he did not see in great numbers during the recession of the early 1990s. The difference from his point of view is that the homebuyer of the 1980s was generally more qualified and brought a healthy down payment to the table. The sobering fact that only two of his clients have successfully negotiated a loan modification with their lenders may be supporting evidence. Even folks that are trying to hold onto their homes can’t seem to find a way to do so.
In the midst of our red hot rental market, Dalli said he is seeing a greater number of his clients leasing out the properties that they have not been able to sell, but the numbers are too small to say if it is an observable trend. Some of his clients in short-sale and foreclosure situations have, for right or wrong reasons, leased their homes to generate six to ten months of cash flow while the bank carried the cost of their monthly mortgage. I suspect the reason fewer of Dalli’s clients attempted long-term leasing has to do with geography. The Peninsula is heavy on single-family homes and sparse in condos. In San Francisco, for instance, where the condo market is larger, when people expand their families and outgrow the condo, they typically lease it out and rent larger homes until the condo sells. Families that are already in single-family homes often have a bit more room before the growing pains get unbearable, thus they stay put.
Delving into the taxation arena, I was interested in his thoughts on the most relevant changes in recent years to our tax code as they related to real estate. “The Mortgage Debt Relief Act of 2007 is the most significant change in the past several years,” he said. Historically, a debt that was canceled or forgiven was viewed, essentially, as income. The act eliminat-ed taxation on debt relief for mortgages of up to $2 million. He believes the law, introduced in Decem-ber 2007, serves to fix some previous inequities. In the past, a family could not take a deduction for a capital loss on a principal residence because Uncle Sam saw it as acceptable to tax you on the debt you were forgiven.
Second on his list of significant items were 2006 tax law changes that slowed an investor’s ability to use the exemption on capital gains for a principal residence when used in conjunction with a 1031 exchange in-vestment property. In the past, a person with multiple investment properties that had been tenant occupied, could sequentially occupy the properties for a two year
period, sell and reap the $250,000 single/$500,000 mar-ried capital gain exemption benefit . The new law now places a five-year minimum occupancy time frame.
With our robust Bay Area median income, I figured the alternative minimum tax, or AMT, must come into play often in income-tax accounting for regional earners. More clients than ever are getting hit with the AMT, Dalli said. “And it’s the government’s ‘al-ternative,’ not yours”, he jokes. Essentially, there are two parallel tax systems, he says. Once your taxes are calculated based on your standard bracket, many of your itemized deductions (state income withheld, DMV fees, itemized business deductions, etc.) are added back in to yield your AMT taxable income. If the tax paid based on your AMT income is higher than the tax paid under your normal bracket, guess what? You pay the higher of the two. The nastiest part of all is that there are no good planning methods to work around AMT. Any couple earning a combined annual income of roughly $80,000 to $100,000 can get hit with it—and it’s particularly punishing on the self-employed.
As the AMT relates to real estate, it can throw a big wrench in the works. Imagine budgeting for your first home purchase assuming a deduction for property taxes, then finding out that you fall into the AMT category and are denied that significant deduction? This could put your whole monthly payment budget out of whack by hundreds of dol-lars. The AMT is a huge government money maker. In 1970, AMT brought $122 million in revenue to our government. In 2010, it took $100 billion out of taxpayer wallets. This is less disposable income, less money for cars homes and home improvement. You want to stimulate the economy? How about removing or adjusting the AMT, Uncle Sam?
Lastly, I asked for Dalli’s thoughts on the elimina-tion of the mortgage interest deduction that’s being scuttled about the chambers of Washington. “The assumption,” he said, “is that this would not apply to rental property—as all is deductible on these homes because they are run as businesses. Should the de-duction on principal residences go away, it would be extremely significant.” He reasoned that if the tax advantage remained intact on rental property, more folks would lease out their homes and become rent-ers themselves. A higher percentage of tenants and rental property would lead to degradation of neigh-borhoods and lower rents. Property values would almost certainly decline over time.
One of the most powerful mechanisms to affect economic incentives in a capitalistic economy is al-tering of tax code. As a broker for whom I worked always said, “It’s not how much you make, it’s how much you keep.” Simple and true. n
Rob La Eace can be reached at 415.290.7228 or [email protected].
january february march april may june july august september october november december
calendar11/12November
10The Registry Bay Area Real estate Journal and Colliers International host “Landscape 2012: Real Estate
Beyond the Obvious,” from 5 p.m. to 8 p.m. at the Julia Morgan Ballroom in San Francisco. Visit www.theregistrysf.com for more information.
BOMA San Francisco will host The Annual Buildings Codes Seminar – 2011 Codes Update and Overview from 8 a.m. – 12 p.m. at San Francisco. Visit www.bomasf.org for more information.
BOMA Oakland/east Bay will host the BOMA Bay Area Toby Awards. Visit www.bomaoeb.org for more information.
BOMA Silicon valley will host a Construction Management Seminar from 8 a.m. – 11:30 a.m. at San Jose Airport Garden Hotel, Mediterranean Center Building, 1740 N. First St., San Jose. Members $40 and non-members $65. Visit www.boma-sv.org for more information.
BOMA Silicon valley will host a membership luncheon from 11:30 a.m. – 1:30 p.m. at San Jose Airport Garden Hotel, Mediterranean Center Building, 1740 N. First St., San Jose. Members $50 and non-members $75. Visit www.boma-sv.org for more information.
BOMA Silicon valley will host an Emerging Leader’s – Jump Start Your Career event. Visit www.boma-sv.org for more information.
15NAIOP San Francisco Bay Area will host a panel discussion and cocktail reception called CEO Forecast 2012 from 3:30 p.m.
– 6 p.m. at Four Seasons Hotel, 757 Market St., San Francisco. Visit www.naiopsfba.org for more information.
16BOMA San Francisco will host an Emergency Preparedness Committee Workshop called Shelter-in-Place: Do
You Have a Plan? from 12 p.m. – 1 p.m. at The Pyramid Center, 600 Montgomery St., 48th Floor, San Francisco. This is a free members-only event. Visit www.bomasf.org for more information.
17CReW east Bay will host a financial panel called Where’s The Money? Visit www.eastbaycrew.org for more information.
BOMA young Professionals will host a Fall networking mixer from 5:30 p.m. – 8:30 p.m. at Otis Lounge, 25 Maiden Ln., San Francisco. This is a members-only event and the cost is $25 per person. Visit www.bomasf.org for more information.
BOMA San Francisco will host a membership luncheon from 11:30 a.m. – 1:30 p.m. at The City Club, Main Dining Room, 155 Sansome St., 11th Floor, San Francisco. Members $55 and non-members $70. Visit www.bomasf.org for more information.
BOMA young Professionals will host a Fall Networking Mixer from 5:30 p.m. – 8:30 p.m. at Otis Lounge, 25 Maiden Ln., San Francisco. This is a members-only event and the cost is $25 per person. Visit www.bomasf.org for more information.
Appraisal Institute Northern California Chapter will host a workshop, chapter meeting and networking social at Four Points by Sheraton, Pleasanton. Visit www.norcal-ai.org for more information.
17-18IFMA Silicon valley will host a CFM Exam Review Class from 8 a.m. – 5 p.m. at SAP, 3475
Deer Creek Rd., Bldg. 7, Palo Alto. Members $350 and non-members $500. Visit www.ifmasv.org for more information.
29Appraisal Institute Northern California Chapter will host an event in which the Fresno area appraisers gather at
Fort Washington Country Club in Fresno. Visit www.norcal-ai.org for more information.
December
1Appraisal Institute Northern California Chapter will host an East Bay Branch Chapter Workshop and Networking Social at Pyramid
Breweries in Berkeley. Visit www.norcal-ai.org for more information.
BOMA Silicon valley will host a luncheon called Share Your Holiday. Visit www.boma-sv.org for more information.
6CReW Silicon valley will host an annual holiday celebration at SV Capital Club, 50 W. San Fernando, Ste. 1700, San Jose. Visit
www.crewsv.org for more information.
7BOMA San Francisco will host a Holiday Party from 5 p.m. – 9 p.m. at Julia Morgan Ballroom at The Merchants
Exchange, 465 California St., San Francisco. Visit www.bomasf.org for more information.
uSGBC Northern California Chapter will host a Greening Existing Buildings: Energy Retrofit Strategies workshop from 9 a.m. – 3 p.m. at Adobe, 321 Park Ave., East Tower, Conference Room, San Jose. The cost is $75 per person. Visit www.usgbc-ncc.org for more information.
8NAIOP Silicon valley Chapter will host a webinar called Availability of Debt and Equity for Financing starting at 10 a.m. Visit
www.naiopsv.org for more information.
uSGBC Northern California Chapter will host a LEED Green Associate Exam Prep from 8:30 a.m. – 5 p.m. at USGBC-NCC/AIA SF Offices, 130 Sutter St., Ste. 600, San Francisco. Visit www.usgbc-ncc.org for more information.
uSGBC Northern California Chapter will host a Branch Holiday Social from 6 p.m. – 9 p.m. at Hot Italian, 16th and O St., Sacramento. Members $25 and non-members $40. Visit www.usgbc-ncc.org for more information.
14CReW east Bay will host a holiday party and silent auction. Visit www.eastbay-crew.org for more information.
CReW San Francisco will host an Annual Business Meeting and Holiday Luncheon from 11:00 a.m. – 1:30 p.m. at City Club of San Francisco, 155 Sansome St., San Francisco. Visit www.crewsf.org for more information.
15 BOMA Oakland/east Bay will host a holiday party. Visit www.bomaoeb.org for more information.
CoreNet Global Northern California Chapter will host a chapter meeting. Visit nocal.corenet-global.org/NorthernCalifornia/Home/ for more information.
reports COMMeRCIAL LeASeSACTIvITy
34 theregistrysf.com n ov e m b e r / d e c e m b e r 20 1 1
Address CityLease Size Sq. Ft.
Name of Tenant/Rep (Brokerage) Name of Landlord/Rep (Brokerage)Notes (ie. Lease type and/or lease longevity)
Alameda County
1251 Doolittle Dr San Leandro 123,200 KWW Kitchen Cabinets/David Henderson (Colliers International - Oakland) Balco Properties Ltd/Lee & Associates New Lease.63M
4140 Dublin Blvd Dublin 108,644 Taleo Corporation/Cushman & Wakefield Tishman-Speyer/Brian Lagomarsino, Ted Helgans (Colliers International - Pleasanton) Blend & Extend
4140 Dublin Blvd Dublin 71,972 Fluor Enterprises Inc/Cushman & Wakefield Tishman-Speyer/Brian Lagomarsino, Ted Helgans (Colliers International - Pleasanton) Class A. Expansion
30340 Whipple Rd Union City 48,644 Sysco/Fresh Point / Cassidy Turley BT Commercial RREEF/Mark Maguire (Colliers International - Oakland) & Cassidy Turley BT Commercial New lease, 126M
6160 Stoneridge Mall Rd Pleasanton 41,635 Ericsson Inc/Jones Lang LaSalleMLIC Asset Holdings II LLC/Loren Honda, CCIM, Marshall Snover, Ted Helgans (Colliers International - Pleasanton)
Class A. Expansion
30310 Whipple Rd Union City 40,055 Velocity Express, Inc/Cornish & Carey Newmark Knight Frank
RREEF/Mark Maguire (Colliers International - Oakland) & Cassidy Turley BT Commercial New Lease, 38M
30401 Whipple Rd Union City 38,856 Abaxis Corporation/Cornish & Carey Newmark Knight Frank
RREEF/Mark Maguire (Colliers International - Oakland) & Cassidy Turley BT Commercial New Lease, 62M
6262 Patterson Pass Rd Livermore 37,092 EZ Mailing Services/Michael Lloyd, SIOR (Colliers International Pleasanton)
WCV Commercial Properties/Michael Lloyd, SIOR, Mike Carrigg (Colliers International - Pleasanton)
2694 West Winton Ave Hayward 30,300 Techtron Products/Cassidy Turley BT CommercialUBS Realty Investors, LLC/Greig Lagomarsino, SIOR & Rick Keely (Colliers International - Oakland)
Renewal, 61M
6140 Stoneridge Mall Rd Pleasanton 24,548 Ericsson Inc/Jones Lang LaSalleMLIC Asset Holdings II LLC/Loren Honda, CCIM, Marshall Snover, Ted Helgans (Colliers International - Pleasanton)
Class A. Expansion
1950-1952 Sabre St Hayward 24,083 Pan American Ceramics Falcon Real Estate/Joe Yamin & Greig Lagomarsino, SIOR (Colliers International - Oakland) Renewal, 12M
1608 4th St Berkeley 20,040 Sensys/Aileen Dolby (Colliers International - Oakland) Dennis Wong/Aegis Realty Partners New Lease, 65M
46501-46515 Landing Pkwy Fremont 19,315 Micro Lambda Inc./Rojas (CB Richard Ellis) Renco Properties/Heinrich (Cornish & Carey Newmark Knight Frank) Renewal
2401 Poplar St Oakland 16,240 Flat Rate Moving/CB Richard EllisCadeau/Gabe Burke (Colliers International - Redwood City) & Brennan Carpenter (Colliers International - Oakland)
Renewal, 6M
1520 Crocker Ave Hayward 16,032 Day-Lee Foods, Inc./ Hitoshi Takahashi & Ken Tsukahara (Colliers International)
RREEF/Greig Lagomarsino & Rick Keely (Colliers International) Renewal
1946 Sabre St Hayward 15,789 U’s Again/Andrew Stoddard (NAI Kilpatrick) Distribution 1/Greig Lagomarsino & Joe Yamin (Colliers International)
Renewal & Expansion of Existing Tenant
1943 Rutan Dr Livermore 10,665 Performance Contracting GroupCal West Industrial Holdings LLC/Michael Lloyd, SIOR, Mike Carrigg (Colliers International - Pleasanton)
Industrial
3179 Diablo Ave Hayward 10,320 Murray Heating/Cassidy Turley BT Commercial RREEF/Mark Maguire (Colliers International - Oakland) & Cassidy Turley BT Commercial New Lease, 26M
357 & 359 Stealth Ct Livermore 9,900 Optima Network Services Inc/Michael Lloyd, SIOR - Colliers International Pleasanton
Stealth Street Partners/George Wineinger - Colliers International Pleasanton Industrial
1999 Harrison St Oakland 9,404 Brightsource Energy/Ken Meyersieck & Trent Holsman (Colliers International - Oakland)
Brown, Eassa & McLeod (sublessor)/Ken Meyersieck & Trent Holsman (Colliers International - Oakland)
Sublease, 23M
3476 Diablo Ave Hayward 7,850 Delcon/Cornish & Carey Newmark Knight Frank RREEF/Mark Maguire (Colliers International - Oakland) & Cassidy Turley BT Commercial Renewal, 62M
1 Kaiser Plaza Oakland 6,646 Armstrong & Associates/LCB AssociatesCIM Group/Ken Meyersieck, Trent Holsman & Scott Greenwood (Colliers International - Oakland)
Renewal, 62M
1252 Quarry Ln Pleasanton 6,505 PositiveID/CM Realty Eden Glen Technologies, LLC/George Wineinger(Colliers International - Pleasanton)
Tenant Relocated from Fremont
1999 Harrison St Oakland 5,906 Mechanics Bank/Cornish & Carey Newmark Knight Frank
Beacon Capital Partners/Ken Meyersieck & Trent Holsman (Colliers International - Oakland) Renewal, 132M
4301 Hacienda Dr Pleasanton 5,534 Javelin Strategy & Research/Cornish & Carey NKF ECI Three Las Positas LLC/Brian Lagomarsino, Ian Thomas (Colliers International - Pleasanton)
Renewal & Expansion
Marin County
1115 Magnolia Larkspur 6,550 Westamerica Bank/Matt Storms (Keegan & Coppin Co., Inc.)
Dennis Gilardi/Matt Storms (Keegan & Coppin Co., Inc.) Retail Gross Lease
3950 Civic Center Dr, Ste 200 San Rafael 5,930 OnMobile USA, LLC/Theo Banks
(Keegan & Coppin Co., Inc.)Broadreach Capital Partners/Brian Foster (Cassidy Turley BT Commercial)
Office Full Service Lease
Napa County
801 Hanna Dr American Canyon 60,000 Groskopf Warehouse & Logistics/Kevin Doran &
John Rico (Keegan & Coppin Co., Inc.)Upvalley Associates, LLC/Bret DeMartini (Grubb & Ellis)
Industrial NNN Lease
San Mateo County
150 North Hill Dr Brisbane 10,919 Department of Genral Services Real Estate/Wright (CB Richard Ellis)
DLC Brisbane/Pope (Cassidy Turley BT Commercial) New
COMMeRCIAL LeASeS CONTINueD
n ov e m b e r / d e c e m b e r 20 1 1 theregistrysf.com 35
COMMeRCIAL SALeS
Address CityLease Size Sq. Ft.
Name of Tenant/Rep (Brokerage) Name of Landlord/Rep (Brokerage)Notes (ie. Lease type and/or lease longevity)
1400 Fashoin Island Blvd San Mateo 10,129 Ring Central/Moeller (CB Richard Ellis) 1400 Fashion Island LLC/Held (CB Richard Ellis) New
Santa Clara County
4655 Great America Pkwy Santa Clara 257,155 Avaya/Sugimoto (Cornish & Carey Newmark Knight Frank) Prudential/Marent (CB Richard Ellis) New
450-470 Trimble Rd San Jose 82,800 DHL Solutions/Greig Lagomarsino (Colliers International) Prologis Renewal
232 East Java Dr Sunnyvale 35,716 Real Time Innovations/Brady (Cresa Partners) Kranz Family Trust/Houston (CB Richard Ellis) New
1001 Pae Mill Rd Palo Alto 29,661 Baker Botts/Grado (CB Richard Ellis) Mozart Development Company/Dallmar (Cornish & Carey Newmark Knight Frank) New
550-576 Sycamore Dr Milpitas 22,655 Rural/Metro of Northern California, Inc. Inland America/Prosser (CB Richard Ellis) New
2284 Ringwood Ave San Jose 21,781 Plasma Ruggedized Solutions, Inc./Prosser- (CB Richard Ellis)
Ther Associates Fund VII/Prosser (CB Richard Ellis) Renewal
150 Charcot Ave San Jose 18,454 Hitachi Via Mechanics/Dizon (CB Richard Ellis) Silicon Valley CA-I, LLC/Friedrich (CB Richard Ellis) New
170-198 Barnard Ave San Jose 15,383 AAA Flood & Fire CSHV Little Orchard/Sutherland (CB Richard Ellis) New
170-198 Barnard Ave San Jose 5,769 HWA MEI Inc. CSHV Little Orchard/Sutherland (CB Richard Ellis) New
Sonoma County
420 Aviation Blvd, Ste 101, 102, 103 & 106 Santa Rosa 21,726 L-3 Communications/Jeffrey Wilmore
(Keegan & Coppin Co., Inc.)Monroe Forsyth, Inc./Shawn Johnson (Keegan & Coppin Co., Inc.)
Office Full Service Lease Extension
3841 Brickway Blvd, 2nd Flr Santa Rosa 10,042 Tektronics/Sean Heaton (Cushman & Wakefield) Basin Street Properties/Shawn Johnson, Danny
Jones & Brian Keegan (Keegan & Coppin Co., Inc.)Office Full Service Lease
2975 Dutton Ave, Ste A Santa Rosa 9,750 Adaptability/Nick Egide (Meridian Commercial) Guido & Theresa Farina/Chris Castellucci (Keegan & Coppin Co., Inc.)
Industrial Gross Lease
1650 Northpoint Pkwy Santa Rosa 6,860 Garda CL West, Inc./Michael Thompson (Cushman & Wakefield)
Vimark, Inc. / Mike Flitner & Shawn Johnson (Keegan & Coppin Co., Inc.)
Industrial Gross Lease Extension
3025 Dutton Ave, Ste B Santa Rosa 6,100 Sonoma County Superior Court/Denis Plehn (Cornish & Carey Newmark Knight Frank)
Canteen Service of Northern California, Inc./Gil Saydah (Keegan & Coppin Co., Inc.)
Industrial Gross Lease
Address City Property Size Buyer Seller Sale Price Price/
Sq. Ft. Project Type Brokers
Alameda County
2425 Whipple Rd Hayward214,172 sf & 4.2 acres
LBA Realty WP Investments Confidential Confidential Manufacturing/ Warehouse
S: Greig Lagomarsino & Mark Maguire (Colliers International) & Cioth & Edmund Najera (Eastdil Secured)
2801-2809 Faber St Union City 55,632 Union Property Group Huntleigh Development N/A Warehouse/
Distribution
B: Lee & Associates; S: Chet Barney (Colliers International - Oakland) & Cassidy Turley BT Commercial
42820-42876 Albrae St Fremont 26,400 Fremont Chinese Evangelical Free Church
Fountains Business Park LLC $2,500,000 $94.7 Manufacturing Wong (Cornish & Carey Commercial
Newmark Knight Frank)
42680 Christy St Fremont 21,646 Speacialized Coating Legacy Partners Confidential Confidential Industrial
B: Mark Maguire, Kevin Hatcher & Greig Lagomarsino (Colliers Inter-national); S: Steve Kapp (Cornish & Carey Newmark Knight Frank)
San Francisco County
2190 Beach St San Francisco
14,000 sf (21 units) Gruber Family Partners Andrews Trust $5,400,000 $385.71 Apartment
B: Bert Benisch (BHG Mason McDuffie Real Estate); S: Ron Giannini (Keegan & Coppin Co., Inc.)
Santa Clara County
405 River Oaks Pkwy San Jose 123,561 The Irvine Company Guggenheim Plus Acquisitions $21,000,000 $169.96 R&D/Flex Schmidt (CB Richard Ellis)
Sonoma County
3990 Brickway Blvd Santa Rosa 60,400 sf Redwood Empire Food Bank
Sonoma Airport Properties, LLC $5,000,000 $82.78 Industrial
B: Dave Peterson (Keegan & Coppin Co., Inc.); S: Sean Heaton (Cushman & Wakefield)
705 Stony Point Rd Santa Rosa 18,800 sf Bedrosian Tile Pierce Hardy, LP $1,000,000 $53.19 IndustrialB: Shawn Johnson (Keegan & Coppin Co., Inc.); S:Cheri Bomar (84 Lumber Co. Corporate Counsel)
16390 4th St Guerneville 11,084 sf Ray Allens Resort & Hotel, LLC
Sterling Savings Bank $850,000 $76.69 Retail
B: Doug Bohling (Artisan Sothebys Intl); S: Rhonda Deringer & Dave Peterson (Keegan & Coppin Co., Inc.)
1820 & 1830 Meda Ave Santa Rosa 4.64 acres Pitts Investment, LLC Ceruleun Asset, LLC $700,000 $3.46
Residential Development Land
B: Chris Pellascini (Tombe Realty); S:Ken Bizzell & Joel Jaman (Keegan & Coppin Co., Inc.)
FINAL oFFer
36 theregistrysf.com n ov e m b e r / d e c e m b e r 20 1 1
JIM TROuT❯
The foul world economy over the last four years has sent shudders through real estate far and wide. As they are expected to do, trophy assets have survived best. But this cycle also has delivered another class of real estate survivor: the humble data center. These highly improved, technically complex buildings are mushrooming in companion with the Internet’s expansion and the proliferation of electronic and mobile devices.
Backed by Silver Lake Partners and based in Santa Clara, Vantage Data Centers is one of a growing cadre of developers—public and private—who are dedicating themselves to the sector. Data centers cost a hundred times what an industrial property costs on a square footage basis and on an absolute dollar basis. With Silicon Valley’s tech-centric company base and Santa Clara’s cheap power, the region has become one of the most important data-center markets in the country. Trout hails from Digital Realty Trust Inc., a rival and far larger public data center developer and landlord based in San Francisco with extensive Bay Area holdings. He also has professional ties to CoreSite Realty Corp., another publicly traded developer with thousands of square feet in data center space under construction in Santa Clara today.
Most classes of real estate are driven by job creation and the need to accommodate more people. That is not what seems to drive demand for data centers.
JT ❯ Their demand is tied to the growth of the Internet, and it is positively correlated with the expansion of the technology sector. Office is positively correlated with job creation. Retail with job creation and discretionary income. Industrial with goods flow, durable and non-durable goods. With data centers it is IT (information technology) resources and computing volumes. The X factor is that a lot of discretionary income is also associated with data center growth because of discretionary spending on electronic goods and gaming. In a way the data center industry is a reaction to the recession because people use their electronic resources and technologies to reduce their costs.
So when a person sends an email or accesses a web page, does that action or request run through a data center somewhere?
JT ❯ Yes, and sometimes many. There is the triggering request and then a response from a data center or data centers. There are millions of physical fibers and electrical connections that touch millions of servers around the world. A large company like a Yahoo! may have to access multiple servers to get one piece of data. There may be 20 reactions. It has to do with redundancies, too. With a Facebook, there are databases that are storing information. The cloud—and the term is really over-used—allows you to have globally accessible information that can be ferreted out as needed. It is really complex, and those
The Virtual Drives The Real
Ph.D.s will never tell you how it all works. But the system is not static. They don’t sit around and say, ‘We did it.’ They are working all of the time to make it go faster. Now we have full movies that are flowing over the Internet, and so you are dealing with the compression and density of information. That is what is being worked on now—making those packets of information move faster. Google, Microsoft, Facebook, Yahoo all have tens of thousands of servers in many locations.
It seems that the demand for data centers should be almost unlimited.
JT ❯ A lot of the world’s data centers are inefficient. The Proctor & Gambles of the world, if you look at how they have deployed their corporate Internet, it is sitting in data centers and hundreds of office buildings around the globe. It is also expensive, but they are hitting the extent of their IT resources. I have a job and others have a job at Vantage because it is going to take a long time to digest all of these problems. There is a lot of work being done to increase efficiency. A lot of servers aren’t being highly used. So because of that we will lose a doubling and tripling in the scale of the demand. There will still be a lot of growth, but it will not be unlimited demand.
Why focus on wholesale rather than co-location or retail customers?
JT ❯ Wholesale allows us to have the highest margins, and we can do large-scale deployments. The retail (or colocation) side is aligned with regional demand and growth. An Equinix or a Savvis are large retail providers and focus on that. We have not, but I don’t have 3,000 people on staff; I have 40. It is higher margin, and it is more applicable to growth in the market. Data centers are going to get larger and more efficient.
Why have Santa Clara and Silicon valley emerged as such a key a data-center concentration?
JT ❯ Santa Clara emerged as a global data center market because of the need for companies to be close to their data centers. It has to do with customer-to-customer interaction, being close to a large consumer base, and then IT resources. Companies grow here because of the integration of management thought and people. Santa Clara and Silicon Valley also have one of the largest concentrations of fiber already in place. Silicon Valley is still an epicenter, and it will have a prominent position, but it will be slowly diminished. It won’t decrease in size but its prominence will decline. There is too much going on for it to be eroded. We see new companies that didn’t exist a year ago renting 1,000 new servers. The application of mobile devices mostly and rich media will continue to drive activity. We also have the expertise to run data centers. The Facebooks are going to start leaving Silicon Valley and going to other areas for data centers, but that doesn’t mean you won’t have the data centers here at all. n
by Sharon Simonson
Chief Executive Officer, Vantage Data Centers
