Are Corporate High-Tech Campuses Really Dead?

Years ago, in the Neolithic 1980s, I was job captain on the planning of a number of then high tech campuses for some of the up-and-coming companies of the day, Sun Microsystems, Rolm, HP and maybe even an IBM. I also did some master planning of campuses that were incubator developments that would later become the Apples and Ciscos. I worked in Scotland, Texas, Colorado, and of course the mothership of technocracies, California.

What was common was not just a cohesive master plan with hundreds of thousands of square feet, but a land use plan with lakes and gymnasiums, restaurants/cafeterias, and other cool stuff. The goal was not unlike a college campus – thus the high-tech business campus began. These ancestors of the 21st century tech campus, especially in Silicon valley, have now been dissolved and reimagined as the technocratic social media campus and other multi-use business parks (old school term) we see today. But what is the future for these companies and their insatiable need for space?

An article that crossed my desk GO HERE from the San Francisco Bay Area real estate news company The Registry, got me thinking. They dug into the past reasons and the murky futures of the high tech campus, albeit from a totally different perspective – the high-density, vertical, downtown mega building in the mega city and its future as “THE” place for this type of campus growth. I wondered what could be expected from these non-suburban company GHQs? Why downtown San Francisco, why New York, why not?

Most tech campuses are still suburban or at least within the urban ring, they are near airports and freeways – workers, even those on the web, still needed to show-up to work. They are near other tech campuses (potential employees), near universities (highly educated – low-pay employees), and less expensive housing (especially now), think Austin, Texas and Raleigh, North Carolina. The vision now is an uber-technocrat in SOHO, New York or SOMO, San Francisco with everything they need just a subway or taxi drive away. That would have never even passed as a shadow through the mind of a business owner back in the day. Then, as even now, home base was near where the owner/founder lived, not where a bunch of black jeaned techies with moussed hair, live. A problem that Silicon Valley has today is that all the cool kids want to live in San Francisco and work in Mountain View, or have a loft in New York City and not work in New Jersey. So the “factory” is moving - a boon to the landlords of the once old and cheap (not anymore) warehouse space in the south of Market area of San Francisco and the Bowery of New York. These are the metro-technicals of the future.

With this comes all the usual problems that retrofits have: severe lack of the essentials such as power, fiber optics, water, sewerage, parking and transit. Cities are bribing these companies to come and rebuild their old infrastructures for deferrals of taxes and fees. Suburban communities would kill for some of these companies, unfortunately the employees would rather be found dead than use the window at a drive-up Starbucks. Such is the life of the urban uber-techie; which black tee shirt to wear with which black jeans? but I generalize and I'm old. For the better cities these can be home runs, ask Boston and even Chicago.

This too will change, and soon, and morph into something different. Is face to face necessary in a high tech world? We are instantaneous and everywhere, so why a campus at all? A million square feet of old creaky wood flooring and spalling concrete columns is urban-chic, but you still need to put people in it. So a longer term vision may be in order.

The billions being spent by Apple for their new “suburban” campus is, maybe, up in the air (my speculation), especially when you lose more than 1/3rd of your market cap in less than six months. So we will wait and see.

Back in the day, when these were developer driven campuses, the first question was “What will it cost to retrofit this complex when the lease is up or the company has been bought out. What will I do with this dinosaur then?”

Not my problem I thought to myself, not my problem.

Stay Tuned . . . . . .

A Tale of One City

An interesting article crossed my desk the other day, primarily because I had, a few years ago, some limited involvement in the project (very limited). The article titled: 12 Things that Could Replace ElkGrove’s Unfinished Mall – Pick One. It is a poll of the residences to see what they think about how to fix a disaster.

Elk Grove Mall - Photo Linda Ford

The mall, in Elk Grove, California, was begun more than 10 years ago, went through a long and arduous approval process (in California they are ALL arduous), then law suits. A fairly classic and uninteresting design was begun by General Growth Properties, then when the economy turn south, taking General Growth into bankruptcy, it was stopped. Now it sits, south of Sacramento, fenced in and a derelict, in the west boomtowns became ghost towns – now we have ghost malls. In the grey fog of the Central Valley of California it looks forlorn and unwanted.

In spite of its abandonment (for all intents), the community sees an opportunity, or at least that was my take from the article. There are a couple of points to be made, the south side of Sacramento needs retail, it grew fast and the last thing of substance to arrive is usually quality retail. The residents have to go north to Sacramento and Roseville to really find quality, and south to a marginal center in Stockton (and that’s a whole other discussion itself).

The Patch (the news outlet that posted the story) is an interesting business in itself that’s worth looking into. Owned by AOL, it operates some 850 local and hyperlocal news websites across the country. Their goal is to provide local information, online. This is a direct result of the loss and collapse of the small town (and large) newspaper industry. Its future is uncertain – now back to the story.

The Patch suggested a poll of the Elk Groveiers. If you had a choice, what do you think of these?

• Casino
• Agriculture College
• Solar Energy Field
• Outlet Mall
• State Prison
• Soccer Arena
• Branch Campus of UC Davis/Sac State/Drexel
• Shopping Mall (Large department stores
• Air Soft Park
• Go Kart Track
• Scandia / Raging Waters / Family Fun
• Aquatics Center

What do you do with a derelict mall, even if the builder wanted to give it away? Development is not a zero sum game, costs have to be recovered, management and maintenance costs are very high, and the city needs revenue, not a drain. And it would be nice if there were jobs, permanent jobs.

I can easily nix the aquatics center, water park, go kart and air soft park, and soccer arena – their costs are high, they can only be open during the summer (mostly), and they produce few permanent jobs (ask Stockton how their venture into arenas went – it helped to bankrupt the town). Branch campuses take years and years to develop – even if the state had money, but it’s almost as derelict as the mall is itself. Solar energy field – warm and fuzzy but no jobs and in winter, weeks with no sun. The state prison does produce jobs and the money flows back through the community, but the state again has no money to take care of what they have now let alone another prison. That leaves the casino, outlet mall, and shopping mall – back where we started.

There are hundreds of villages and small cities faced with this same challenge: How do we move forward and entice (bribe) businesses back into our city, county, and state? What can be offered? Today land is relatively cheap, so free land is not an option that works. Customers and an educated work force are critical to the decision makers. They have a business to run, make sales, make profits – we seemed to have forgotten this.

Here are some off-the-cuff ideas: reduce impact fees to almost zero, reduce property taxes for a set period of time, wave mitigation fees, and eliminate social obligations in conditions of approval (extractions for community needs such as parks, roads, and public health). The goal is help support running a business that adds to the community with jobs, wages, and long term tax revenues. The idea of a new downtown (found here) is interesting – in the days of wine and roses maybe, today impossible.   

Cities will have to compete for businesses and encourage them to return, ask once complacent states like Michigan and California how they are doing.

Stay tuned . . . . . . . .

NOODLING AROUND

It Comes as No Surprise:

The Wall Street Journal posted a delightful article (for me), about Los Angeleans and their belief in the world as their own entitlement oyster. It seems that Los Angeles International Airport (LAX) has literally begun to pull the plug on free parking for electric cars. Up until very recently you could park your Leafy-tesla-volter in one of their charging stations for FREE for 30 days. The whole article is simply about very rich people (you have to be to afford one of these cars) who feel entitled to all the joys of free parking, free access to HOV lanes, and subsidies from the government. What the problem is now is that there is not enough free parking, well welcome to the real world. CLICK HERE

  

Ada Louise Huxtable (March 21, 1921 – January 7, 2013)

When I was at Michigan State University so many decades ago, we were introduced to Ms. Huxtable’s critical writings on the great architects of the time, Mies van der Rohe, Frank Lloyd Wright, Minoru Yamasaki, and many others. She, along with other critics of the time, helped to form our opinions and beliefs about architecture and urban environments. Her columns in the New York Times left little in the new architecture unchallenged. For some architects she was like their mother looking over their shoulder, always demanding the best and pointing out the insufficient. She and her pen will be missed. CLICK HERE  

Can Housing Get Us Out of Our Mess?

Housing has never been this affordable. Prices have dropped significantly over the past four years (for those not paying attention), mortgage rates are at historic lows, and there is increasing pressure from rising rents. The result is that ownership of single family housing is again on the rise. Contrary to all the doom-and-gloomers who predicted the end of ownership housing as we knew it, it’s making its way back. Good article here in the Washington Post from earlier this week. CLICK HERE

The Premature Declaration of Death

Way back in the early 1990s I was told that master planned communities (MPCs) were dead, too expensive, environmental burdens were too much, infrastructure costs pushed profitability over the edge of reason – especially in California. Then they arose from the grave, then in 2007 fell back into the hole and dirt was being thrown on the body, especially in California. In this post by RCLCO Advisory, they list the top-selling master planned communities across the United States. While the total numbers are less than 2% of the total for new homes built last year, it still shows a trend. This trend is that there are bright spots across the country for MPCs. Of the top 20 communities, 9 are in Texas (Why is it always Texas?), 5 in Florida (the #1 is the huge The Villages senior community), 3 in Nevada (yes, the worst housing market in the U.S.) and the remaining are in Washington D.C., Colorado, and one in California, the huge Irvine Ranch now in its 53rd year (so hardly a new MPC). So nothing in California, totally understandable and predictable – and will be for a long time. CLICK HERE  

Stay Tuned . . . . . .

Housing, Housing, Housing

The Housing Rollercoaster

My finger is in the air and it says that housing is improving, but from which way does the wind blow? To listen to the news outlets and conduits of information, housing is hot in San Francisco, (mostly rental), not so hot in Sonoma County (single family), hot enough to set a fracking well on fire in North Dakota, and reprocessing foreclosures is hot in Chicago, HERE and existing homes sales are up – not a lot, but up. HERE

   

So what’s the problem?

Right now the two hottest issues in housing are apartments and foreclosure rentals. Apartments, especially in growth areas such as Washington D.C., San Francisco, and Silicon Valley are just plain nuts. Rents are climbing exponentially, they are now rising faster than compounded interest. To even quote numbers would be foolish; tomorrow they would be out of date. Supply and demand and the trends will continue until, well, until they don’t. There’s a bubble brewing here and when it blows it might be messy for the banks and backers. My guess is the builders know this and are waiting for the right moment to slow things down. Then again, I have before believed that builders are smarter than the average bear. Watch your backs here.

Rental foreclosures are just holding pens, like the ones in a stockyard. Lots of capital chasing empty houses and Fed backed short sales and escapes in the night. And like stockyards, these pens are holding those unfortunates waiting to be slaughtered; too many chasing too few. I wouldn’t be surprised that some early foreclosure buyers are packaging their collections and reselling them (at a higher price of course). Does that sound familiar? This is an area for foolish money and dreamy minds. It is not unlike the trend back in 2004-2006 where private groups pooled their capital and bought single family homes – thus driving up the prices. All hoping for long term returns in rent and eventual resale. Most of these ‘hopeful retirees’ had to go back to work, we all know that story. So big caution here as well.

I called out the public merchant builders almost two years ago to look at the fracking world of the upper Midwest and Pennsylvania. There would be big opportunities here for single family homes and maybe even rentals. Time has proven me right, but from what I see these public builders are staying away. This may be good for the locals but terrible for new immigrants to the state and the work force. My guess: North Dakota isn’t ‘cool’ enough for builders. Too bad, not only is there gold underground but on the land above as well.

The next few years will be very interesting when it comes to for sale single family homes. The foreclosures will shake out, rentals will stabilize, and then single family homes will be back. We will grow another 35 million people in America by 2050, like it or not. That is one million homes a year, all things considered. We are currently thrilled with the reports of 377,000 new home sales in 2012. What does this tell you? We are falling behind. Two things will happen, this will change and new home prices will continue to rise – again. This will also drag along existing homes prices, especially in the better neighborhoods. If we can’t keep up, I can smell a bubble, again.

Hold on tight, the next few years will be a rollercoaster.

Stay Tuned . . . . . . .