Southern California Development Forum brings value through educational, networking and philanthropic events around current developments in the A/E/C world. Read all about our recent events here.
At this month’s Southern California Discussion Panel, John Dang, Business Development Manager of Oltman’s Construction Co., led an engaging discussion on future forecasts of the industrial market in Los Angeles County. Panelists Paul Giorgio, COO of Eldridge Acre Partners; Philip Tsui, Senior Vice President at Trammell Crow Company; and Cameron Merrill, Senior Vice President of CBRE, discussed their insights and trends they are seeing within their perspective fields. All four emphasized how easing costs and strategic planning will improve the market for industrial space.
Key takeaways included:
Challenges in the industrial sector
Challenges in the industrial sector over the past four years have been due to the pandemic. When COVID-19 took the nation by storm, there was a great increase in demand for industrial space in Los Angeles. However, the county lacked the available inventory, which led to a rise in leasing rates. Since 2022, the industrial sector has seen a surge in inventory, which has improved the leasing rates. Tsui added that lease rates are hard to predict in the next two to three years. However, he suggested that if the market follows the cyclic trends, then land value will probably decrease, leading to a decline in property value.
Merrill concluded that companies have become more interested in leasing buildings that have attractive amenities and facilities (loading docks, high ceiling clearance, truck port spacing, etc.). He also mentioned increased interest in locations near desirable residential neighborhoods.
Signs of growth ahead
The panelists are optimistic about the future, noting significant improvements across the industry. Merrill highlighted that we have returned to pre-COVID leasing rates, and inventory levels are seeing a rise in occupancy. Tsui expressed confidence in his projections, noting that land value has decreased from 75% to 50% of his projects’ budgets. This shift indicates a more balanced relationship between land value and property value.Giorgio concurred that positive trends are emerging but emphasized that "those who react quickly are the ones who succeed." He indicates that just like with COVID-19, things can change quickly, so it is important to make key strategic developments and always plan accordingly.
Construction’s effect on the industrial sector
Giorgio compared the industrial market to the retail market, where consumers have always been attracted to prime locations, like the Westfield Century City Mall. In the same way, companies want their industrial buildings to be high-quality and equipped with good amenities, planning their construction accordingly. The best industrial buildings will ultimately stand out and dominate the market.
Dang and Tsui noted that construction costs have decreased by 8%-10% since January 2024, which enhances project viability. They emphasized the importance of planning construction in advance, as companies can save significantly by aligning their projects with market trends.
Predictions for the industrial sector in the next year
All the panelists expressed optimism about the industrial market's future. Giorgio explained that the decrease in construction costs, land values, and interest rates are promising signs. However, to see positive changes, we must be strategic with our planning. Many assume that development is straightforward, but circumstances can change quickly. Developers need to ensure they are creating the "right" project, as what benefits a company today may not be as effective a year from now. Clear communication and proactive planning are crucial.
Tsui agreed and shared that Trammell Crow is moving forward with new development plans for the next six months. "It’s been quiet, but when the time comes, the industrial market will thrive," said Tsui.
Merrill added that many larger properties, currently unused, will be redeveloped into industrial operating sites (IOS), cold storage facilities, and e-commerce buildings. He noted that these are the properties companies are looking to lease.
Legislation’s impact on the industrial sector
An audience member asked how California Assembly Bill 98 (AB 98), a law regulating the development of logistics facilities and warehouses, will impact the industrial market. Giorgio and Tsui agreed that AB 98 will inevitably increase costs due to stricter regulations on construction and will significantly affect the real estate, design, and construction industries.
John expressed concerns about the bill's clarity. “If COVID-19 has taught us anything, it’s to remain composed. We need to understand this bill fully, and a lot of work is needed to achieve that understanding.” He noted that while AB 98 has pros and cons, and while it opens doors for innovative designs and products, it also risks delaying construction plans if they don’t comply with updated regulations. It’s crucial to consider the benefits and challenges of this new legislation carefully.
While the industrial sector has faced significant disruptions over the past few years, the overall outlook remains positive, with decreased construction costs, increasing inventory, and a focus on high-quality developments that meet the changing needs of businesses. As the market continues to evolve, those who are agile and forward-thinking in their planning will be best positioned for success in the years ahead.
At this month’s Southern California Development Forum’s Discussion Panel, Emily Olman, CEO & Chief Media Officer of Hopscotch Interactive, led an engaging discussion on the impact of artificial intelligence, known as AI, in design and construction. The conversation highlighted AI's ability to streamline workflows, increase accuracy, and support better decision-making, and clearly it will impact the entire industry.
To share insights, panelists Sophie Pennetier, Founding Director of Digne; Ed Krafcik, Senior Director at Metropolis Technologies; Matt Ducharme, Principal at Woods Bagot; and Sam Omans, Senior Manager of Architecture Industry & Business Strategy at Autodesk, discussed how AI was being used in their companies. All four emphasized how AI can empower human creativity and play a critical role in addressing environmental sustainability.
AI in Operational Efficiency and Real-World Applications
All the panelists agreed that AI is seen more frequently in our offices as well as our lifestyles more than anyone actually realizes. Omans chimed in on this topic by noting that ChatGPT is the most used platform, reigning in with 20.03% of the searches per month. He explained that using ChatGPT becomes more intuitive with practice, as refining your questions on the platform improves the results.
Krafcik agreed and explained that ChatGPT is also useful in communicating difficult messages with clients. If he just submits his ideas and asks the platform to format the message into an email, ChatGPT will save him time creating his responses.
Pennetier concluded that AI helps her to “do more and think less” in a pinch. The panelists concluded that ChatGPT is a great tool for all industries and should be seen as a timesaver, not as a crutch.
AI’s Impact on Sustainability and the Environment
Pennetier’s consulting firm, Digne, leverages AI to address climate change and implement sustainable practices in their construction efforts.
“AI allows us to run permutations much faster than humans. For instance, by increasing the amount of recycled content in metals, steel, aluminum, and glass, we reduce the energy required to produce them, which in turn lowers greenhouse gas emissions. By thoughtfully considering how we compose these materials, we can significantly reduce the embodied carbon in the built environment,”Pennetier explained. This approach not only promotes sustainability but also contributes to a more efficient and eco-friendly construction industry.
AI’s Role in Education and Skill Development
When most people start their careers, they learn soft skills by accomplishing mundane tasks. An audience member shared his concerns that AI will be a detriment in learning these soft skills. The panelists all disagreed with this statement. To alleviate the audience member’s doubts, Omans compared the expansion of AI to other historical discoveries.
“If we think about European art, many canonical architects that were doing great work had dabbled in painting, sculpture, and other forms of media. Some of these new tools we are talking about are somewhat the same thing. This is like an expansion of our palette. These new tools can expand our knowledge and creativity, ultimately leading us to new discoveries,” said Omans.
However, he advises that we must have agency in our experimentation, or else we will lose discipline. If we continue to use AI when it is not needed, we will lose those skills. Ducharme agreed with Omans and included that our curiosity and hunger for knowledge will never go away, but the way we learn will change as technology grows.
Krafcik reflects this issue of discipline back on the companies. He suggested that the real issue might not be AI itself, but rather the work environment that young employees find themselves in.
“Soft skills do not go away, but they do go away if you are not in the office. How do you get people back into the office?” he said.
It is easy for employees to work from home, but are young workers gaining valuable learning experiences like they would in an interactive office? This reasoning is why Krafcik suggests that companies should examine the architectural design of their offices. There may be opportunities for improvement that could satisfy the professional and social needs of these employees.
AI’s Role in Enhancing Human Potential
As AI advances into our workplace, many people feel that AI will impact job security. An audience member proposed the question: “How do we [as design professionals] not diminish our value by using AI?”
Suggestions included staying up to date on new design tools and bringing an entrepreneurial spirit back into the workplace. A discussion was held on "What value do you add to your work with your own human intelligence?”
Ducharme agreed and also added that AI would never replace human intelligence. As humans, we have to adapt to the changes and use the tools we have to our advantage. This involves spending the extra time gained from using AI technologies to produce outstanding design projects.
There is no question that AI is here to stay. The overall consensus was learning to use it as a great tool to enhance what we as designers bring to the table, not replace it. No doubt this will be a hot discussion topic moving forward.
In recent years, health systems nationwide have been undergoing significant transformations. Faced with the rising costs of care and the unfortunate reality of local hospital closures, these systems are not only adapting to these challenges but also seizing new business and partnership opportunities to enhance their services. Despite these changes, their commitment to providing the best possible care to their communities remains unwavering.
The recent Southern California Development Forum (SCDF) panel discussion, moderated by Angie Weber of CBRE, was a lively discussion of this topic. Panelists included Gizelle Paz of Providence St. Joseph Health, Paul Da Veiga of UC Irvine Health, Tim Hatch of Intermountain Healthcare, and Sophia Lee of Keck Medicine of USC. The panel discussed how the four major health systems in the Southwest are transforming their portfolios and growth strategies, including how they are responding to increasing costs of care, the impact of hospital closures, and how they are developing innovative business opportunities for healthcare delivery – all while continuing to provide the best care to their communities.
The panelists shared their insights and perspectives on recent mergers and acquisitions. Hatch emphasized that hospitals must care for their patients and workers yet contribute to reducing the nation’s healthcare costs. He also emphasized that healthcare is “19% of the gross domestic product, meaning one in every five dollars is spent on healthcare” today. Furthermore, Intermountain has faced challenges with expanding in rural areas, including shortages of qualified construction labor, forcing them to think of other methods of care and building delivery.
The panelists in California addressed the challenges related to meeting the 2030 seismic compliance deadline. In addition to being extremely cost prohibitive, there are concerns statewide of pending shortages of labor in all sectors, including plan review, inspections, design, and construction. The panelists all agreed on the importance of maintaining a constant line of communication with governmental entities to advocate for necessary changes.
Weber presented the issue of determining the right time and place to open new healthcare facilities. Paz discussed the challenges of opening new ambulatory care facilities and emphasized that their decision-making process is largely data-driven. She explained that Providence uses data analytics and collaboration with government affairs to identify where facilities are needed and where they can best serve the community. "We build health reports for a specific set of markets to understand the needs of the market, and then we see if there are opportunities for joint ventures or partnerships." This approach allows Providence to make informed decisions that benefit the people in these communities.
Da Veiga added to the conversation, noting that, before their recent acquisition of 4 Tenet Hospitals, UC Irvine had been investigating available land in north Orange County to align with their strategic growth plans. Before proceeding with development, they make sure to conduct surveys and assessments to understand scope and risks.
To keep up with strategic growth, strategic partnerships are being formed with other healthcare entities. Da Veiga highlighted this by discussing UC Irvine’s partnership with Lifepoint Rehabilitation.
"The benefit is partnering with somebody who specializes in a particular service. They do rehab well… And so, when you partner with somebody who's an expert, I think that it just enhances your brand and stability,” he said. “Leveraging Lifepoint’s expertise improved their overall quality of services while maintaining the UC Irvine brand.” Likewise, Keck Medicine of USC recently partnered with Henry Mayo to bring much needed care to the Santa Clarita Valley area.
Lee agreed with Da Veiga and further added that building in California is prohibitively expensive. She noted that USC is working with healthcare developers to rebuild old offices, which is a cost-effective way of providing healthcare directly in their actual communities. While competition is beneficial for the economy, partnering with other companies can enhance facility management capabilities.
Lee and Weber further highlighted that healthcare has become institutionalized, which means maintaining facilities is increasingly costly but necessary.
“For tenants and landlords, the level of sophistication on both sides is great but we need to do a better job managing, and one of the things we’ve discovered now is that we're adding more to our basis of design as we’re building these smaller clinics throughout the community. In fact, two years after you build a brand-new building, something goes wrong with the air conditioning or water. Building it, in a way, is a lot easier than maintaining it. But today, we must oversee both of them." Despite the higher initial costs, she argued that this approach is more cost-effective in the long term.
Hatch noted Intermountain’s recent partnership with Providence and other leading U.S. health systems to start Civica RX, a nonprofit generic drug company aimed at keeping the costs of medication down and available for those who need it.
When asked the question “How do you handle your facilities from a design and branding standpoint?” Hatch emphasized the need to focus on branding design rather than architectural design.
Lee agreed that most of USC’s branding is based on the culture of their clientele. The level of changes done to a building is based on USC’s branding, and the vernacular of the patients, all of which is enhanced by the value-add strategy.
Weber wrapped up the panel by including how branding has changed over the past ten years. What once seemed insignificant ten years ago is now hugely important and can affect the presence and visibility of health systems.
The recent Southern California Development Fund (SCDF) panel discussion with Garrett Lee of Jamison Properties, Anthony Muhlstein of Newmark, and Harold Wang of Palisades Investment Management, moderated by Michael Bohn, AIA, of Studio One Eleven, shed light on the current landscape of office conversions and adaptive reuse projects. Held at the Biltmore Hotel in DTLA, the May event provided valuable insights into the complexities and promises of this niche in real estate development.
Here’s a closer look at what’s being built and how these projects pencil out financially.
President of Jamison Properties, Garrett Lee highlighted his firm's focus on adaptive reuse projects in Koreatown, Los Angeles. "We transitioned from a commercial real estate office to multifamily development about ten years ago," Lee said. "Post-COVID, we are fully engaged in adaptive reuse projects." Jamison is converting old office buildings into residential units to revitalize neighborhoods and address housing shortages.
Anthony Muhlstein, from Newmark's West Coast Capital Market multifamily team, provided a financial perspective, noting, "We're definitely seeing a lot of interest in office-to-housing conversions because we've been selling a lot of them. However, developers face challenges with execution and the cost of capital." Muhlstein explained that office vacancies are high in areas like Playa Vista and Hollywood, making conversions attractive despite financing difficulties. He added, "The pricing seems to top out between $100 and $150 per square foot, with construction costs around $350 per square foot, leading to financing needs of 8-9%."
Lee also discussed the mandatory retrofits required for Jamison's pre-1978 buildings due to local ordinances. Since these updates are necessary, it makes financial sense to change the use of the buildings simultaneously, enhancing the economic viability of the projects.
The panelists agreed that certain features make office buildings more suitable for conversion. Harold Wang, one of Palisades' founding partners, emphasized the importance of the building's structure: "You need a rectangle floor plate, smaller plates are better, and the floor-to-ceiling height is crucial." Wang also noted that cities with existing adaptive reuse ordinances make the process smoother. "If the city has an ordinance already, that makes things much easier," he said.
Lee echoed these sentiments, adding, "We look for urban core markets with a lot of amenities and walkability. Our aim is to create a mixed-use balance of work, play, and residence to foster 24/7 communities."
Benefits and Challenges
Adaptive reuse projects often offer financial benefits over new constructions. Lee pointed out, "Construction costs have increased 20-30% in recent years, and interest rates have doubled, making ground-up projects hard to pencil out. Adaptive reuse can offer savings in hard costs, making financing more attainable." Muhlstein added, "If you're converting a building at $325 to $375 per square foot, compared to $700 to $800 for new high-rise constructions, you're looking at significant savings."
However, the process is not without its challenges. Wang shared his experience, "City approvals have taken longer than anticipated. Recent policy changes have added to these delays." Lee also mentioned unexpected hurdles, such as mandatory retrofitting for older buildings, which can complicate projects but also offer opportunities to improve safety and sustainability.
Case Studies and Success Stories
The panelists shared examples of successful projects to illustrate their points. Wang highlighted a project in Long Beach, where an old GTE building was converted into 106 housing units with additional townhouse penthouses. "We removed the original rooftop equipment and utilized the space to add value," he explained.
Lee discussed a project in Koreatown, where converting 50% of an office portfolio to residential units created a vibrant mixed-use community. "This strategy also helps fill vacancies in remaining office buildings, creating a more occupied and lively environment," he noted.
The Future Outlook
As adaptive reuse ordinances evolve, the potential for these projects grows. "The upcoming adaptive reuse 2.0 ordinance in Los Angeles is exciting," said Lee. "It will expand opportunities citywide, allowing for more flexibility and creativity in converting buildings."
In conclusion, office-to-residential conversions present a viable and increasingly popular solution to the dual challenges of office vacancies and housing shortages. With careful planning and execution, these projects can offer financial benefits and contribute to urban revitalization. As Muhlstein summed up, "People need products, they have to develop. So we're busy."
This panel discussion highlighted that while the road to adaptive reuse can be complex and filled with challenges, the rewards make it a path worth pursuing.
As the anticipation builds for the 2028 Olympic Games in Los Angeles, there's a flurry of activity behind the scenes to ensure seamless transportation for athletes, spectators, and stakeholders. Recently, the April event for the Southern California Development Forum (SCDF), held at the Biltmore Hotel in Downtown Los Angeles, delved into the intricacies of this topic. The event panel was moderated by Tony Fermelia of HNTB and featured experts Jake Adams, Deputy Executive Director at LAWA; Aaron Galinis, Senior Airport Planner at Hollywood Burbank Airport; and Ernesto Chaves from LA Metro.
Change is Coming at LAX
Jake Adams opened the discussion by highlighting the monumental task of preparing Los Angeles for the 2028 games. He emphasized the urgency to complete crucial projects, such as the people mover and metro connections, at LAX before the Olympics kick off.
“We see this as a transformative opportunity for transportation in LA,” Adams shared. “Several exciting changes are underway at LAX that will make our transport systems better and more sustainable including the landscaping program we were just awarded—it’ll help us look less like a construction site!”
The LAWA team is also focused on increasing the number of off-ramps and hold points to segregate airport traffic from street traffic. Adams shared that his team is enhancing signage and wayfinding programs to accommodate the influx of international visitors as well.
Streamlining Air Travel into Burbank
With hundreds of thousands of tourists expected to make their way to the city of angels, the replacement of Hollywood Burbank Airport’s aging 94-year-old terminal is critical.
"There are many reasons to replace this terminal, but safety is paramount. Doing all of this before 2028 will be tough but I'm happy to say we're on schedule and plan to open in 2026," Galinis said.
He cited the Superbowl LVI as a learning moment for the airport and outlined plans for the new terminal, located in the airport’s northeast quadrant, which is set to open in 2026.Through temporary emergency operations centers, the Hollywood Burbank Airport team will manage corporate aviation and facilitate smooth ground transport operations for tourists and locals alike.
Ground Transportation's Pivotal Role
Ernesto Chaves from LA Metro underscored the pivotal role of surface transportation during the Olympics, with a staggering 1.2 million anticipated daily transit trips.
“Spectators won’t be able to stay in LA proper because hotels will be booked up by the Olympic Games ‘family’—the athletes, referees, media, and other people involved in the games,” Chaves noted. “So, we intend to bring spectators from Orange County, Pomona, Carson, and elsewhere into the Los Angeles area so they can enjoy games and have reliable ground transportation that gets them there.”
At Sofi Stadium, for example, the stadium’s thousands of parking spaces will not be used for spectator parking. Instead, the spaces will house security for the games. LA Metro plans to double the bus fleet, coordinating with transit agencies across the state and country in order to do so. As the Paris 2024 Olympics approach, Chaves’s team is in close communication with their Paris partner IDFM, discussing what they’re seeing and what will translate to the 2028 Los Angeles games.
Preparing for the Paralympics
After the Olympic Games comes the Paralympic Games. LAWA, the Hollywood Burbank Airport, and LA Metro are preparing to further make their facilities accessible. For instance, Adams shared that LAWA is building temporary spaces tailored to the needs of Paralympic athletes. In Burbank, Galinis’s team is prioritizing universal access in the build of their new terminal and LA Metro is focused on addressing much needed accessibility upgrades at stations across all lines.
Building a Legacy
As the countdown to 2028 continues, collaboration, innovation, and adaptability will be paramount in ensuring a transportation system that not only meets the demands of the Olympics but leaves a lasting legacy for the city of Los Angeles. With a clear roadmap and unwavering determination, Adams, Galinis, and Chaves believe that LA is poised to deliver a transportation experience worthy of Olympic excellence.
What is the impact of the ESG movement? ESG -- or environmental, social and governance – more often simply called sustainability – was the topic of the March meeting of the Southern California Development Forum (SCDF), held at the Biltmore Hotel in Downtown Los Angeles. The conversation was led by moderator Abbey Ehman of Creative Artists Agency and featured panelists Lynn Simon, Principal and Sustainability Leader at Arup, Lauren Eckhart Smith, Senior Vice President at Cain Development, and Jim Andersen, Chief Development Officer for Chelsea Investment Corporation.
The ESG Domino Effect
In bustling cities, where concrete meets the sky, a silent revolution is underway—one that places sustainability at the forefront of urban development. Recent environmental reports and shifts in legislation and building codes have supported the development of transformative projects that promise to reshape cityscapes and urban living while minimizing environmental impact and supporting biodiversity. In the greater southern California region, several projects are leading the way.
1950 Avenue of the Stars in Century City
At the forefront of sustainable development stands 1950 Avenue of the Stars. Designed by Johnson Fain with engineering by ARUP, the soon-to-be new headquarters of Creative Artists Agency has made a commitment to attaining a platinum LEED certification. Why is the entertainment industry powerhouse spending millions to move their offices just across the street? Ehman says the future move to what will become the vertical CAA campus is driven by the company’s commitment to providing beautiful spaces for team collaboration and reducing their environmental impact.
“We continue to hear about the recession or economic downtown we are experiencing, yet some of the most sustainable projects are also happening right now. We would be remiss if we didn’t celebrate that,” Ehman shared.
The project exemplifies a harmonious blend of innovation and environmental consciousness with its high-performance features such as facade glazing, EV charging stations, and reclaimed water systems. By meticulously designing each facade to reduce solar heat gain and incorporating a botanical garden atop the parking garage, the space will enhance local biodiversity and provide a peaceful space for those on foot.
“One of the sustainability strategies of note is that the façades are designed differently in order to reduce solar heat gain, optimize thermal performance, maximize views, and most importantly to improve occupant’s comfort and well-being," Simon noted.
One Beverly Hills
Nestled at the border of Century City and Beverly Hills, One Beverly Hills emerges as a testament to luxury living with a green conscience. The 17-acre property will include two residential towers, one 30 stories tall and the other 28 stories tall, making them the two tallest buildings in Beverly Hills. The community will also have a 78-key Aman Hotel, 100,000-square-feet of available commercial space, and an eight-acre botanical garden. To top it all off, the iconic Beverly Hilton will be renovated during the ground-up construction process of the development. The One Beverly Hills project seeks to redefine urban landscapes.
“Sustainability is critical in our line of work, and we all should be doing it,” Smith said. “It's part of our responsibility."
The integration of features like gray water systems, 350 geothermal wells, and an ice cooling system underscores a holistic approach to sustainability. As the project unfolds, it represents an opportunity to create a better tomorrow for Beverly Hills—a future where opulence and eco-consciousness coexist seamlessly.
Midway Rising in San Diego
In San Diego, the Midway Rising development heralds a new era of urban development, breathing new life into an underdeveloped area.
“The whole concept is set up as an equitable place for people to live," explained Andersen. “Our income over income spent on housing ratio is the worst of any city in the U.S. so a community like Midway Rising is desperately needed.”
With a focus on affordable housing, community empowerment, and environmental consciousness, this initiative aims to address pressing social, economic, and sustainability challenges. The 4,250-unit community will include 2,000 affordable units, giving many of the region’s hospitality workers accessible and financially achievable housing options so they no longer commute 50 or miles to work each day. In turn, the community is helping to reduce the region’s carbon footprint while also improving the lives of those who maintain its largest industry: hospitality.
Furthering Midway Rising’s commitment to sustainability is that of the 12.5 acres of parks that will be spread throughout the community. Through sustainable practices such as gray water usage and minimizing on-site parking, the project paves the way for a greener, more resilient future in San Diego. Commerce and tourism haven’t been neglected in the plans for this community either. It’s all seamlessly integrated, Andersen noted.
“The Taylor Swift’s of the world go from Phoenix to LA to Orange County and bypass San Diego because they do not have the facilities. With Midway Rising that’ll change, and all of the major acts will have a place to play,” he emphasized.
Midway Rising will include a 16,000-seat arena majority owned by Los Angeles Rams owner Stan Kroenke. Outside of the arena developers will be building out a space for a larger-than-life jumbotron that will broadcast the arena’s performances, giving everyone a chance to watch and enjoy.
By blending affordable and market-rate housing seamlessly and integrating amenities like job training academies and onsite healthcare facilities, Midway Rising embodies a vision of inclusivity and sustainability.
Celebrating a Sustainable Future
As these projects unfold, they serve as pillars of hope in an uncertain world. By embracing sustainability on a grand scale, they offer a glimpse into a future where environmental consciousness is not just a goal but a way of life. And as we navigate the challenges ahead, let us bear in mind the clear sentiment echoed throughout these developments: sustainability is not just a choice—it's our collective responsibility.
Members of the Southern California Development Forum (SCDF) convened on February 13th, 2024, at the California Club in Los Angeles to unpack the rapidly evolving world of higher education satellite campuses with moderator Deborah Wylie and featured panelists Robert Schulz, Associate Vice President of Real Estate Planning and Development for SDSU and Peter Hendrickson, AIA; Associate Vice Chancellor of Design and Construction at UCLA, for the February 2024 event.
Satellite campuses have emerged as pivotal instruments for extending the influence and efficacy of universities. From mitigating existing infrastructure impediments at an educational institution’s primary campus to nurturing innovation and promoting equity and sustainability, these campuses are fundamentally reshaping the trajectory and accessibility of education.
Overcoming Infrastructure Hurdles
UCLA boasts a distinguished legacy spanning over a century, standing tall as a beacon of perpetual academic excellence and innovation. However, even with its illustrious history and esteemed reputation, UCLA contends with significant infrastructure challenges, including deferred maintenance for seismic mitigation, all stemming from funding constraints. The university grapples with a daunting $2 billion (about $6 per person in the US) backlog, necessitating novel and strategic approaches to sustain its growth and expansion, and to ensure the university continues to provide a quality education to students across the board.
In contrast lies San Diego State University (SDSU), a venerable educational institution with a 126-year heritage, firmly rooted in the southernmost reaches of California. Operating on a budget merely a fraction of that of UC institutions, state schools like SDSU face an uphill battle when it comes to growth and renovations.
Meanwhile, in the bustling city of Los Angeles, the Los Angeles Community College District (LACCD) plays a pivotal role in democratizing access to higher education and fostering socioeconomic progress across Los Angeles County. Like UCLA and SDSU, LACCD encounters funding hurdles and the uphill challenge of swiftly erecting facilities to meet the growing demands of students and communities.
Expanding Reach and Accessibility: The Ascendance of Satellite Campuses
One of the country’s earliest satellite campuses dates back to the University of Wisconsin-Madison's establishment of an experimental "Junior College Center" in 1935; making it the precursor to the modern satellite campus paradigm. Conceived to afford access to higher education for students unable to traverse to the main campus, this initiative laid the groundwork for a global proliferation of satellite campuses, empowering universities to broaden their educational footprint and democratize access.
In Southern California, the likes of UCLA, SDSU, and LACCD have embraced the incorporation of satellite campuses into their frameworks. These campuses play an instrumental role in enhancing student body diversity, dismantling barriers to access and opportunity, and amplifying institutional brands.
“How do we become more of a global university and get it all taken care of so that there's more opportunity? We have a long road to go, but that's going to be key in developing these accounts,” said panelist Peter Hendrickson, AIA; Associate Vice Chancellor of Design and Construction at UCLA.
The transition of Marymount University to the 24.5-acre UCLA South Bay campus heralds a significant milestone, ushering in broader access to UCLA education in previously untapped communities. Furthermore, their acquisition of the nearby 11-acre navy site in San Pedro, poised to accommodate 500 dorms for students, stands as the largest land acquisition in UCLA's history. The two satellite campuses will allow for instruction for nearly 1,000 students in an otherwise untapped market.
Concurrently, in Calexico, San Diego State University has expanded its reach with the SDSU Imperial Valley Campus as well as its Brawley satellite campus. The Imperial Valley satellite campus offers a gamut of undergraduate and graduate programs spanning education, business administration, criminal justice, and social work, among others. SDSU Imperial Valley engages with the local community through outreach programs, partnerships, and initiatives aimed at addressing regional needs and catalyzing economic and social development. Similarly, SDSU's Brawley campus tailors its educational offerings to the specific needs of the region, spotlighting sectors such as education, healthcare, and agriculture; thus, aligning with the geographic and vocational interests of its Brawley student base.
Though their architectural motifs may vary, these campuses exude a captivating allure, meticulously designed to optimize the student experience.
“I tell people, you don't know how important architecture is to us. It's on our logo. So, we'll take it super serious,” shared panelist Robert Schulz, Associate Vice President of Real Estate Planning and Development for SDSU.
Pioneering Change in Los Angeles
For many, community college serves as the cradle of their higher education odyssey. There to fulfill that need is the Los Angeles Community College District. The LACCD has expanded to include a set of satellite campuses across Los Angeles County, democratizing access to education for a heterogeneous populace. These satellite campuses include unique course sections, specialized programs, and cater to distinctive communities within the district. Thanks to a bond passed by voters in November 2022, $5.3 billion was allocated to support the LACCD’s expansion with $500 million of that going to student housing.
Between the East Los Angeles College South Gate Campus, the Los Angeles Mission College East Campus, LACCD's Los Angeles Valley College Van Nuys Extension and West Los Angeles College extension, satellite campuses have given LACCD the opportunity to support students who otherwise would’ve been overlooked. Just because they’re satellite campuses doesn’t mean they are any less architecturally marvelous. They each include design elements reflective of their service area and environmentally sustainable features. Each campus emerges as a vital conduit for delivering educational opportunities that resonate with local communities and their career priorities, producing socioeconomic ascension throughout LA County.
Innovation and Sustainability at the Helm
With an audacious pledge to attain carbon neutrality by 2025, the UC system is spearheading satellite campus sustainability endeavors. An unswerving dedication to environmental stewardship is of paramount importance for universities as they chart the course and expand their satellite campus networks, all while garnering community endorsement and ensuring campus vitality along the way.
Both UCs and Cal State colleges continue to redouble their efforts toward decarbonization, per both Schulz and Hendrickson, underscoring the pivotal role of sustainability in forthcoming campuses. Schulz and Hendrickson went on to share that the communities surrounding their newest satellite locations have expressed a profound vested interest in the environmental ramifications of the new campuses; emphasizing a collective commitment to sustainability.
The realization of a greener future hinges on collaborative endeavors, the panelists avowed. From trustees to architects to developers, the construction of satellite campuses necessitates concerted collaborative efforts, diverse leadership and community engagement expertise, and an unwavering focus on the local community ethos.
A Resolute Future for Education
Satellite campuses embody more than mere physical expansions—they epitomize the essence of progress, innovation, and inclusivity; virtues that every educational institution holds dear. As universities continue to invest in these transformative campuses, they chart a trailblazing trajectory toward a future where education transcends spatial confines. By confronting existing infrastructure challenges, expanding reach and accessibility, embracing innovation and sustainability, and fostering collaboration, satellite campuses are leading the shift in higher education dynamics.
Members of the Southern California Development Forum (SCDF) convened on January 30 at the Biltmore Hotel in Los Angeles to explore the ever-evolving dynamics of the real estate economy with Larry Kosmont, CEO of Kosmont Companies and the featured speaker for this month’s event. Kosmont provided valuable insights into deciphering post-pandemic trends in California's economy. The event shed light on strategies for navigating economic forecasts amidst shifting government policies, changing public financing dynamics, and evolving private investments.
Life in an Ever-Changing World
The aftermath of the pandemic has ushered in a new era where individuals are less inclined to venture outside unnecessarily. Kosmont highlighted the critical challenges and opportunities presented by this "new world," emphasizing the need for attractive spaces in suburban communities, shopping centers and urban areas. The upheaval caused by the pandemic has underscored the importance of adaptability in addressing the digital economy's challenges.
Hot and Noteworthy Economic Trends
The U.S. economy has displayed stronger-than-expected GDP growth, dispelling recession fears. Additionally, low employment and real wage increases have bolstered consumer purchasing power, contributing to a positive employment landscape. Despite a seemingly "boring" economy, positive consumer sentiments- particularly regarding inflation- and GDP growth have marked a return to a more stable economic landscape.
Conversely, the economy faces ongoing challenges marked by shifts in the employment landscape that bring about labor cost challenges, and uncertainties introduced by artificial intelligence (AI). Key areas of concern include:
Inflation concerns persist despite a cooling trend, influencing economic decisions.
Capital markets are on a slower recovery path, leading to challenges in project financing, particularly for office and retail properties.
Geopolitical risks loom large with ongoing international conflicts posing potential disruptions.
Housing affordability remains a persistent and critical issue, particularly in Southern California.
Experiential and Essential Services: Adaptation in Retail Spaces
In the realm of retail, adaptive strategies are becoming increasingly important, according to Kosmont. The concept of "retail-attainment," or blending shopping with entertainment, dining, outdoor amenities, and other experiences, has gained traction to attract and engage customers. Essential services, particularly grocery stores and pharmacies, have demonstrated resilience, retaining steady traffic and demand. The ability to adapt to new consumer demands through enhanced shopping experiences and the exploration of new blended uses is crucial. Even parking lots are being viewed as fields of opportunity, showcasing the need for innovative thinking in retail space utilization.
Underperforming Retail Spaces: A Shifting Landscape
Conversely, underperforming retail spaces face challenges such as rightsizing needs, with dated malls shifting to a blend of other uses due to the rise of online shopping. The tenant mix in brick-and-mortar retail centers and downtown districts is shifting, with diminishing influence from big-box stores. Pop-ups and co-branded marketing events are becoming more prominent, signaling a changing taste in consumer preferences. Vibrant retail spaces anchored by essentials, experiences/lifestyle, and health/wellness are gaining importance, meanwhile low-end centers face vacancies and impaired valuations slashed, making them ripe for redevelopment.
Adaptive Workplaces & Technology: Redefining Work Environments
The landscape of workplaces and technology integration is undergoing a profound shift. The traditional office model is not expected to return as the adoption of telework/hybrid work models leads to a demand for smaller, reconfigurable spaces and a reduced need for centralized office locations. Technology-enabled workspaces, marked by investments in tech to facilitate both in-person and remote work, are poised to reshape businesses. Post-pandemic, there is an increased focus on health, safety, comfort, collaboration, and well-being in the workplace. Office conversions are becoming key in urban markets, with suburban areas potentially witnessing office park demolitions and redevelopment into new uses, though this would necessitate significant investment and capital.
E-Commerce and Fulfillment: Reshaping Retail Dynamics
The rise of e-commerce and fulfillment is reforming retail dynamics as we know them. Sustained growth in online retail is shifting physical stores towards showrooms, necessitating efficient distribution and logistics for delivery with an increased focus on reducing delivery times. Stricter regulations, prompted by community advocacy and increased scrutiny over pollution, traffic, and ecological impacts, are shaping the future of the retail landscape. Residential demands for diverse housing options, particularly affordable and mid-tier options near job centers, are on the rise. The concept of live/work/shop has gained prominence post-pandemic, entirely reshaping housing needs and demands.
California's Vision for the Future
California stands at a critical juncture, steering through a dynamic, innovation-driven economy. The state's impetus for policy change revolves around three pivotal themes: housing, sustainability, and the regulatory environment. Efforts to foster more density in high-demand areas, reduce parking requirements, and transfer control from local governments to property owners are underway in the housing sector. Sustainability initiatives focus on promoting electric vehicles, developing charging infrastructure, supporting renewable energy generation, cutting emissions, and enhancing climate resiliency. Addressing the regulatory landscape involves tackling the high-tax environment and resolving regulatory hurdles for businesses and consumers. California's challenge lies in finding a balance between costs and benefits, and between requirements and flexibility, to chart a course towards a more prosperous and sustainable future.
What’s the future for Los Angeles?
Los Angeles faces substantial challenges, including office vacancies, robust industrial demand, and complexities in the housing market. Despite being a top concern, homelessness and affordable housing face resource constraints, with the city potentially facing a budget shortfall of $400 million.
Drawing inspiration from San Francisco's center city proposed legislation to form a specialized Enhanced Infrastructure Financing District (EIFD), Los Angeles has the potential to leverage tax increments for office-to-residential conversions. This innovative approach could address challenges related to homelessness and affordable housing while streamlining the development process across the city. According to Kosmont, the ongoing development of a Downtown LA EIFD could further contribute to the solution by funding infrastructure, housing, and homelessness initiatives. Simply put, establishing a reliable income stream is imperative for expediting transformative measures necessary to maintain downtown Los Angeles’s vibrancy.
All in all, the insights offered in Kosmont’s presentation underscore the need for adaptability and innovation in navigating the complex real estate economy in the greater Southern California region. Strategic approaches that consider emerging trends and address challenges head-on are essential for success in today’s ever-changing landscape.
The Southern California Development Forum's November 14th,2023 meeting brought together key players invested in the revitalization of the Los Angeles Waterfront, a 400-acre parcel located in the harbor communities of San Pedro and Wilmington. The speakers, representing the diverse perspectives and parties involved in the development of waterfront joined forces at the Biltmore Hotel to discuss the ongoing transformation of the waterfront as it evolves into a thriving, multi-use community hotspot.
A Transformational Vision for the Port of Los Angeles
Michael Galvin, Director of Waterfront and Commercial Real Estate for the Port of Los Angeles, kicked off the discussion by highlighting the significant investment—nearly $1 billion—in the waterfront over the past year. The overarching vision for the next five to 10 years is to redefine the waterfront, moving beyond its historical role in cargo transportation to become a vibrant community space.
Historically, the port has faced serious challenges including air pollution, water issues, and traffic congestion. To address these concerns, Galvin’s team has focused closely on various means to improve air quality in addition to the development of a promenade stretching from the bridge to the breakwater to help support an increase in foot traffic and reduction of vehicular traffic. Their focus though is not only on creating a visually appealing waterfront but also fostering connectivity, hence their plans for water taxis that will link Wilmington and San Pedro.
Emphasizing the importance of community involvement, Galvin stressed the need for residential development and the creation of new industries. He envisions the waterfront as a hub supporting thousands of jobs.
“This space will become a job location that can support thousands of jobs,” Galvin said. “It's about putting all of these different pieces together and keeping people there."
The key, according to Galvin, lies in the public-private partnerships his team has worked to build and the trust they’ve fostered within the community—a trust earned over the past decade by investing in local groups, hearing what their pain points have been, and acknowledging what they hope to see the port become in the future, while strategically dividing real estate focuses among his team.
Public-Private Partnership Driving the Development Forward
Elise Swanson, President and CEO of the San Pedro Chamber of Commerce, spoke as part of the panel and expressed her gratitude for the long-standing public-private partnership between the local San Pedro community, LA-area government entities, and businesses that have helped to continually drive this collaboration forward toward completion.
“We're so fortunate to have a community, government, and business partnership that's been 20 years in the making,” Swanson happily shared. “It’s been a long time coming but it’s like a diamond in the rough- all good things take time.”
The synergistic approach of connecting San Pedro's rich history with a plan for a resident and local business-driven commercial future is a key driver of the development of the waterfront. As Swanson shared, the potential future collaboration with UCLA, given their recent acquisition of the old Marymount campus in the South Bay, will further enhance the educational and cultural aspects of the waterfront that will be available to the community, in tandem with AltaSea’s stake in the port’s renaissance.
AltaSea is Creating a Blue Economy and a Redevelopment Renaissance
Terry Taminen, President and CEO of AltaSea, shared insights into the ecological impact of the waterfront's development. A 90% reduction in air particulate matter: it’s simply incredible. But more than that, it’s critically important for the native species in the water. And those species are at the forefront of Taminen’s mind.
As part of the port’s expansion and redevelopment, there will be a 35-acre property dedicated to AltaSea serving as a multi-use facility focused on the blue economy. Taminen described his vision for aqua culture to permeate through the facility and into the heartbeat of the local culture.
"We want to get kids excited about the ocean, so they'll protect it regardless of whatever field they go into in the future,” Taminen said.
The AltaSea facilities will showcase sea creatures, the power of renewable technologies like wave power, and the incredible capabilities of underwater drones. To round things out, AltaSea will also provide job training for blue economy-focused roles, in addition to hands on educational opportunities for children ages 12 and up to inspire the next generation to be passionate about protecting the planet's oceans.
Construction: The Final Lap to the Finish Line
Thanks to Alan Johnson—Chief Executive of Jerico Development—and his team, construction on the reimagined Port of Los Angeles is rapidly underway. Johnson shared a few of the highlights of the future of the port's commercial spaces including a 20,000 square foot beer garden and an amphitheater—a few of the many amenities that Johnson feels are desperately needed in the South Bay.
“There's a donut hole for entertainment in Los Angeles and it's in the South Bay," Johnson noted when sharing the need for more commercial entertainment, food, and beverage retailers in the South LA area.
Despite facing ups and downs, years of pandemic-related setbacks, and nearly 11 years of preparation and planning before breaking ground, the port is now experiencing a surge in leasing momentum. 5,000 residential units will be a part of the dynamic redeveloped port community and much to the panel’s excitement, the pre-engineering steel buildings are anticipated to be completed in May and June of 2024 with tenant soft openings in mid 2025 and, finally, a grand opening at the end of the 2025 calendar year.
The Los Angeles waterfront has been on a transformational journey to reach this point for over two decades now and the many, many hours of commitment are coming to fruition. From ecological sustainability and blue economy initiatives to community partnerships and vibrant entertainment spaces, the vision for the waterfront extends beyond commerce to create a dynamic space that showcases just how ready and resilient the South Bay is. The Los Angeles Waterfront redevelopment is not just another construction project; it's a testament to the power of collaboration, innovation, and a community's hunger for growth and success.
In today’s corporate landscape, data centers are essential to our everyday work life. A data center can be a building, a dedicated space within a building, or a complex of buildings with the purpose of sharing and storing data. As reported by moderator of the panel, Jason Shepard, Managing Principal for Cresa MCS, there are three (3) types of data center operators:
Many will recognize current software services that depend on data centers such as Microsoft Office and Amazon Web Services, that most of corporate America use every day. While it’s true that the industry has been able to condense the amount of space needed for data storage overall, virtual networks still depend on large-scale physical infrastructure – and having the space for such infrastructure can prove to be a challenge for a condensed market like Southern California.
Because of this, most businesses within Southern California depend on data centers located in Phoenix, Salt Lake City or even further away. However, this creates a problem of data speed latency. As reported by Shepard, “LA to Salt Lake City takes about 18 milliseconds (ms) round-trip, and LA to Denver takes about 27ms round-trip.” He continued, according to AFCOM’s 2023 State of the Data Center Study, “60% of users of survey respondents said that their requirements need to be under 20ms.” According to Amatis, a cloud-based services firm, a latency of 100ms can cause a 1% loss in sales and 40% of online users abandon a website if it is difficult to load within that timeframe.
How Much Power is Needed?
Shepard addressed another problem under consideration, that being the level of power needed to supply data centers. Data centers require a large amount of power, currently acquired through mostly non-renewable resources. However most states in the US are moving towards renewable resource requirements, with California specifically requiring “60% of electricity generation [to] come from renewable sources by 2030, and 100% green by 2045,” (DSIRE).” Arizona on the other hand only has a 15% renewable resource requirement by 2025 (DSIRE), resulting in a extensive data center development in Arizona over California.
From there, Shepard introduced panelists Yigit Bulut, technical leader and electrical designer EYP Mission Critical Facilities, Part of Ramboll, Chris Sumter, partner and EVP of Prime Data Centers, Rhea Williams, CCO of E3 Platforms, and Eric Dela Pena, director of sales engineering for Coresite. Each panelist brought unique perspectives from all around the industry, all working toward figuring out solutions for data centers long term.
Data Center Development, Site Selection and Opportunities
When deciding the right type of data center for a business, Bulut noted three things to keep in mind, “if you have goals of sustainability and energy efficiency while being conscious of capital price, you have to be cognizant of how much you are spending and how efficient the facilities will be.” He continued, “You want to maximize reliability and redundancy. Efficiency, capital cost, longevity - that hasn’t changed – it has just gotten more important.”
Williams, who was recently a Site Selection Principal for Oracle in EMEA focused on European Markets, brought forth her perspective on data center processes overseas. She added, “The large cloud public regions are dictated by customers and sales. They're going to go where customers are based.” Regions, she clarified, are single markets that refer to a specific city or geographical area. In Europe, the main concentration for data centers is tier-1 markets, which were identified as major European cities such as London, Frankfurt, Ashburn, etc. In contrast, Williams noted the highlight of the West Coast American market, “I think we do that better on the West Coast than most the other regions globally.”
On the other end of the spectrum, Dela Pena gave a local perspective, as Coresite has recently entered the Southern California market. When asked what fueled Coresite’s decision to recently look at local open and leasable space, he replied with the following:
“For us, it was an economic decision because of the low cost of power. In the state of California, you don’t get many incentives to come into the market, but from a customer perspective, we were able to serve the needs within a short period at an incredibly low cost.” He later summarized, “this is an underserviced market and developers should probably pay more attention.”
On that same topic, LA vacancy can provide some unique opportunities for data center-purposed acquisitions. Sumter shared one of the latest unique acquisitions of Prime Data Centers,
“Luckily, we have been granted a beautiful property, that being an old post office building that was built in 1993 by the federal government. It came with high posts that enabled mail trucks to drive on the roof to sort out mail throughout the entire building. What does that mean? It means we can build a 3000-pound cabinet in this building that you can light up to about 15 kilowatts.”
Challenges of Price, Energy Procurement and Public Use
One aspect of the panel highlighted the historic movement to cloud data storage, what it did to the price of data centers and the growing need for more data storage. Dela Pena summarized that “when cloud adoption first came about, everyone wanted to rush to it because it required less capital and equipment.” But this came with one caveat, “It’s free to put all your data into the cloud, but it costs a ton of money to pull it back out.” This led to hybrid models, where companies would upload certain workloads to the cloud and a certain amount onsite. But this model mitigates a challenge that is still present, the current cost of data storage without many alternative options due to current limitations of energy resources and state legislation.
Later in the panel, the conversation on the challenge of energy procurement sparked up again. Sumter noted, “In this industry, energy procurement is becoming a much greater challenge.” He continued, “I don’t know what the answer is going to be, but optimistically, places like Tennesse, Oklahoma, Wyoming – tier 2 markets that two years ago I never would of invested in – now suddenly we’re looking to go out and buy property there because power is more accessible.”
One such solution that was discussed was the possibility of nuclear power. “Government approval is a question, but there is so much negative connotation that we need to change. With how far technology has come, there are ways we can use [nuclear power] safely without creating any waste,” Williams added. She believes that the growing need, even outside of data centers, for power on a greater scale will likely drive innovation in this direction. This was echoed by attendants of the panel, with one attendant stating, “Of course, I encourage energy users of solar and wind, but they’re not reliable resources for us.” Although Williams still reiterated the initiative to move in the direction of using renewable resources.
“We do think we can eventually utilize solar as a primary resource. We’re even looking in the middle of nowhere to buy tens of thousands of acres to utilize solar power. Shepard chimed in, “There’s a social piece to this, and it aligns with a greater political conversation.”
Another question for the panel addressed the issue of accessibility to data storage overall, “Do you see the combination of data and power becoming a public utility as one?” Williams quickly responded, “It already has in Europe, and power is fed back into the overall grid. 100% - that is the direction we are headed in.” Shepard concluded the panel response by adding that with each new data center built, they are becoming far more energy efficient.
In sharing final thoughts, Bulut sent attendants home with a concluding optimistic statement, “These issues and others are ahead, and they are always changing, but what makes [data centers] exciting for us is taking on those challenges.” It’s clear that the dependency on data centers will only grow more, as with each passing day there is an increased reliance on virtual data storage. However, with all the solutions mentioned on the panel, it’s clear that a greater conversation needs to be had on making data center development and accessibility available and affordable in the state of California.
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