John A. and John M. Sobrato - Builders of Silicon Valley

The Sobratos

Years ago, in the ancient pre-tech and pre-Jobs era of the late 1970s and 1980s, I had the opportunity to work on a lot of projects in the early orchard-clearing days of the Silicon Valley. I was involved in the design of retail centers, the first high-density housing (2 story garden apartment walk-ups), the first high tech campuses, and later some of the first new high-rise commercial buildings.

A leader in this new form of development – the build-to-suit manufacturing/research/office complex was a gentleman from San Francisco, John A. Sobrato. For a kid working in one of the Bay Area’s premier landscape and planning offices it was a kick and a fantastic learning experience. The firm, Guzzardo and Associates, handled anything and everything – but large scale planning was the most exciting.

John Sobrato was a close friend of the owner and my boss Tony Guzzardo and over the years allowed me to peek into the early exotic and exciting world of high technology in the South Bay. These were the days of hundred of acre campuses, of one-story office/research buildings that sprawled across the region from Milpitas to Sunnyvale, and the growth that has pushed the region to the top of the world. And if there was a ground zero it was Cupertino - Sobrato's office was just blocks from Apple GHQ. In time (and for some with the Sobrato's help) the home to Apple, Sun Micro Systems, HP, and hundreds of other small companies.

This short video interviewing the Sobratos was produced by THE REGISTRY   

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The model is changing, in fact has changed. And it is good to see that the Sobrato’s have changed with it.

Stay Tuned . . . . . . .  

Oversupply – Everywhere

“Buy land, they ain’t making any more of the stuff.”

Will Rogers

Even with the inevitable and growing dearth of housing, one commodity is still in great supply around most cities, land. During the past twenty years every city that could expanded their supply of job-producing lands for everything from retail and commercial acreage to industrial, warehousing and office. Now there is zoned land everywhere for non-residential use and it’s forcing down land prices, all to their own competitive disadvantage. And sadly the jobs aren’t coming either.

Restrictions on housing development, especially in most areas of California’s 50 mile coastal strip, and the foreclosure crisis have pushed prices up and up. Foreclosures have led to higher prices simply because these units have been pulled out of the retail market and are now being rented. As with all things this is temporary but the result is a severe lack of housing and increasing prices. You mess with the demand-supply balance and that’s what you always get. Some builders I know in the Central Valley of California have not built one house in five years.

And that’s what’s happened to commercial real estate in all its various forms, oversupply. Commercial lands in foreclosure are being quietly peddled in bankruptcies at fifty cents on the dollar or even less. Along the freeways there are miles of land zoned as commercial/business/professional and they can’t give the land away at any price. Cities are left scratching their collective heads. There are bright spots such as San Francisco and some areas of the Silicon Valley – but other areas are begging for users and jobs.

Housing always leads, or it used to. More homes means more people resulting in more demand for commercial uses; that was the usual mantra. Now, not so much. Areas immediately to the east of the San Francisco Bay area are now, once again, beginning to supply low-cost housing to the job centers in the East Bay and Silicon Valley. Buy a nice house at a great price and receive, at no extra cost, a daily five hour commute regime. But you’re fortunate. A similar home in the San Jose are will cost you three or four times the price, and to be honest the internal commutes within Silicon Valley are almost just as bad.

We have overbuilt retail, we still have empty office buildings, and signs saying “Available” hang on empty warehouse buildings. Anyone want a million square foot warehouse? No, how about an enclosed shopping mall? Amazon is flying into the logistic centers that surround our major cities, demand secrecy, and then provide jobs at about 1 per 1000 square feet. Cities need four and five per 1000 to even come close to justifying the infrastructure costs. That rebalance won’t happen for a long time.

I see a lot of rezoning of commercial lands to residential in the future. One way or another, the costs of the infrastructure already in the ground will force cities to make these changes – someone has to pay for the bonds.

But the bright side is that these lands are a bank account that can be drawn on when the time is right. During the fifties and sixties a lot of development came from outliers who, like the sod-busters of the late nineteenth century, opened the way for the massive suburban growth and the spectacular rise of the American economy.

And I can see this again in America’s future – I’m hardly a Pollyanna, but when the time is right there will again be another dramatic shift to the suburbs.

Stay Tuned . . . . . .

I Wonder As I Wander

I have been wondering (a lot) about where growth and development will happen as we move from this cycle of collapse and retreat. I won't be pointing fingers or shaking my fist at the stars - too easy and accomplishes absolutely nothing. For this session let's just lay back on the couch and think a little about the future.

Obvious Trends:
Currently there are strong regional growth areas, such as Silicon Valley and other high tech areas that will continue to add jobs and more importantly entrepreneurial growth - from little acorns come huge oaks. While sadly I think that most tech manufacturing will still be outsourced overseas, the intellectual capital side will significantly support residential growth and the expansion of nearby existing research facilities. But housing will not be cheap, if anything, too expensive. I am also seeing sales of once high-tech land rezoned into residential use in these same markets - this is market driven as home prices continue to rise. The first builders in are the big regional players followed quickly by the national public companies.

Retail is in turmoil. After almost twenty years of building too much square footage there is a strong sense that this retrenchment (i.e. selling off malls for other uses, converting urban retail to multi-story residential) will have ongoing and serious effects on existing retail centers. The two major players, Simons and GGP are fighting it out in the marketplace with rumors of acquisitions and privatizations. There are too many big box retailers cannibalizing their own markets. Regardless of the "green mindset" people will drive to buy. Look for a return to and growth of well supported and "improved" older downtowns. Retail will continue to be more than loading up the SUV at Costco (but don't short their stock either).

The Boomer market is a head-scratcher. While there is a strong, albeit small, retirement community market - many of these are too remote to be effective. The days of the huge Del Webb communities are probably gone, they will be more modest and actually focused on one particular regional submarket such as south and west side of Chicago, affordable areas of New Jersey, the nearer suburbs of the San Francisco Bay Area. Most Boomers still want to be near their children and grandchildren but an international airport as well. The "urban" life is not for most of them, but think urbane. I also think there is a huge opportunity to develop dense and well amenitized senior neighborhoods with attention to great security and medical support. The things that scare most older people are being alone, ill, and forgotten. Senior and assisted living communities (at all economic levels) can provide these comforts. A good model is Sunrise - but costs are very expensive. This will be a big, big, political issue. Far more then even today's medicare debate, just wait and see.

Look for more and more assisted living communities - this doesn't take a genius to figure out. But they are still more often than not mom and pop operations. I see trends to larger and more resort oriented assisted living facilities. Not everyone is senile and bed ridden - at some time we will all need just a little more help.

What I also hope to see is more regional and sub-regional support for transit systems. This mania for high speed rail will pass as urban areas suddenly realize that the funds they desperately need are going to remote and underutilized areas. Look for expansions of systems such as BART and other Metro lines. One impact is the blowback form neighborhoods faced with freeway widening - they will not except it. The days of stacked freeways are a long time, if ever, away.

And lastly (as noted in last week's blog) look for renewed pushes into the regional edges. Land is cheaper (and way cheaper today than five years ago). This helps to support the primary reason for this edge growth - better and less expensive housing. It drives the enviros and pols crazy - but as always the marketplace will win out in the end. 

Stay Tuned . . . .

Location, Location, Location and the Bus

One hundred years ago the Van Sweringen brothers built Shaker Heights on the east side of Cleveland. This property, once owned by a Shaker religious colony, was developed into a new community with imaginative street layouts, parklands, and rigid design controls over the architecture and construction. It has been a very, very successful community since its inception, the address ranks with Scarsdale, Pacific Heights, and Beverly Hills as the place to live in their respective cities.

What was different about Shaker Heights was that the Van Sweringen’s built a railroad from their new community to downtown Cleveland to help market the properties to the downtown executive and it worked. When completed, as a part of the acquisition of a much larger railroad network, the community exploded through the 1920s until the slowdown of 1929.

Sidebar:

This acquisition of the railroad, well beyond the track needed to reach downtown Cleveland, led to their development of the Terminal Tower. The Depression eventually bankrupted and destroyed the brothers. They died in their 50s broken and almost penniless.

Now back to the story.

“They built a railroad to serve their community,” I don’t know a single developer who would even consider the thought. Can you imagine the impact to areas like Gilroy and Tracy, California if the private side were to step up and extend BART to their communities? Well I can at least dream. But there has been a work-around that has interesting ramifications, for want of a better term, I’ll call it the Silicon Connection.

There has been a serious increase in home and residential values and rents in San Francisco near makeshift bus stops where private charter buses that serve Google, Apple and Facebook pick up San Francisco residents. KTVU, a Bay Area TV station, focused on the story (the 3:30 minutestory is HERE).

The techies get the best of both worlds, a cool job in Silicon Valley and the opportunity to live in San Francisco (your author lived there 20 fantastic years). Some may not even own a car.

It has also had a serious impact on home values near these stops, they have risen sharply against other SF properties far from these makeshift stops. For sale flyers even note how far the house is from a Google Stop. The buses follow the employees, when there is a critical mass – a bus may magically appear. Here is an older story about the buses (HERE).

But as with all things, there are those that don’t appreciate these buses. When there are hundreds of the Google buses roaming the freeways no one cares, when they come down your residential street, now that is a bus of a different color. All the green friendly excuses: fewer cars, mass transit, reduced congestion, and efficiency go out the window when the neighborhood has to deal with these machines. Go (HERE) for the other side, you might also check out the comments – there are a lot of techies that have anger issues and social disconnections out there.

The buses are pretty cool and very high tech themselves (GO HERE). 

And while regional transit systems continue to rely on Fed dollars and regional taxes, these buses are privately owned, respond to the customer’s needs, and do not use tax money. Whether the employer pays for the service or the user pays a percent of the cost is irrelevant. It is done outside of the realm of the public sector – but be careful, I can see cities and counties trying to get their noses under the tent.

Stay Tuned . . . .