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The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a panel discussion about the future of aviation in April 2021.
Justin Towles, senior policy advisor at Akin Gump, a leading global law firm providing innovative legal services and business solutions to clients worldwide, served as moderator for panelists from Gevo, Los Angeles World Airports, Joby Aviation and Urban Mobility Labs. Towles began the conversation by asking what the future looks like for sustainability in aviation.
Sustainable Solutions for Jet Fuel
Patrick Gruber, chief executive officer and board member at Gevo Incorporated, said Gevo is a company with a focus on making sustainable aviation by utilizing renewable resource-based jet fuel with a net zero carbon emission.
“I think in the future in 2050, we’re going to see a mix of solutions. Which [primarily] is going to be hydrocarbon-based jet fuel, but you might see other applications of hydrogen or electricity happening in certain places where it makes economic sense,” said Gruber.
William Goodwin, deputy general counsel for policy and regulatory affairs at Joby Aviation, talked about how Joby Aviation is in the process of developing an eVTOL aircraft, an electric airplane that will be able to take off and land vertically. This would be the first vehicle of its kind to be a quiet and emissions free aircraft.
David Reich, deputy executive director of mobility planning and strategy at Los Angeles World Airports, shifted the conversation to explore the future of airport transportation, such as electrification for not just passengers but for employees as well.
“There’s been a revolution of mobility in the last decade, and a lot of that is affecting airports and will continue to affect it,” said Reich.
Reich spoke about plans for the future to improve the airport environment and relieve congestion in the central terminal area, also known as the horseshoe.
“Our $14 billion capital investment plan, which includes a $5.5 billion landside access program, will be the new automated people mover which will be on a fixed guideway. It will be autonomous and above all electric. This will increase HOV use by connecting to our metro system, “ said Reich.
Clint Harper, advanced air mobility integrator, urbanist and economic developer for Urban Mobility Labs, spoke about working on integration within the city of Los Angeles to improve the airport ecosystem.
“We have an opportunity to break down traditional transportation silos and lead the way through intermodal planning to create a balanced, sustainable and efficient mobility system,” said Harper.
Understanding Sustainability In a Business System
Gruber explored how sustainability functions by providing a transparent understanding on how greenhouse gas emissions are problematic and how the future of aviation will implement more renewable electricity.
Topping greenhouse gas emissions in the world at 73% is fossil-based energy such as electricity, natural gas for heating and production, etc; transportation is a contributing factor at 16%. All of these factors come into play in a business system.
“We are going to build our own renewable energy sources. A business like ours is going to make both hydrocarbons for jet fuel and we will use renewable energy along the way,” said Gruber.
In summary, the future of aviation looks promising for both airport transportation and aircrafts through the implementation of sustainable practices.
The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a panel discussion in February 2021 about the future of prefabrication and modular construction. Any component of a building that is manufactured in a factory before arrival and installation at a building site is prefabricated. Modular construction is a type of prefab construction but it involves an enclosed space like creating a room.
Ray Boff, national prefabrication strategy leader at DPR Construction, a commercial general contractor, served as the moderator for panelists from UC San Diego, RMOD a Relevant Group Company, HCA Healthcare and UC Davis. Boff began the conversation by asking why prefabrication and modular construction are important now.
Prefabrication and Modular Construction Gaining Momentum
Darren Seary, a vp of modular operation at RMOD said prefabrication and modular construction are a necessity right now because a 2019 report by McKinsey shows that California is going to need an additional 3.5 million housing units by 2025. Seary said the industry is looking at alternative means of construction to achieve that target.
Jim Carroll, associate vice chancellor and university architect at UC Davis, is facing some challenges to constructing the number of properties needed by 2025. He is concerned about prevailing wages since the projects are extremely expensive.
“You have to ask yourself, do we really have the trades to be able to build with the speed and consistency that we really need to get some of these units up fast,” said Caroll.
Eric Smith, associate vice chancellor in the capital program management of UC San Diego, is also worried about the need for student housing. The university could deliver housing faster if it had a modular design for manufacturing and assembly techniques to bring the cycle forward, he said, which would be a huge benefit in terms of the ability to house students at a lower cost, as well as bringing revenue that comes from the housing.
UC Prefabricated Projects
UC San Diego is working on two projects. One is getting ready to start construction while the other has been interrupted briefly by Covid-19. The university is using a system-wide scale, unit-wide scale and component scale to develop housing for one of the projects. As a result, UCSD is building bathroom and kitchen pods, which help save time on construction.
UC Davis has two resident hall projects over the last five years and also has two public-private partnerships projects. Caroll said that one of the challenges is quantifying advantages to make off-site work more competitive.
“I think the contractors are giving us more repetitive build capabilities and saving the money themselves on the offsite efforts,” stated Caroll.
Healthcare Industry Use of Prefabrication
Natasha Morre, senior process improvement analyst in capital deployment of HCA Healthcare, said that the health care industry has been toying with prefabrication for years. Morre is looking at patient remodels, exterior walls and more complex MEP racks. Morre’s team is also trying to figure out how to get the maximum benefit of prefabrication for freestanding emergency rooms and has started prefabricating items that repeat in their hospitals.
“Prefabrication and modular allows us to speed to market without sacrificing the cost of quality,” said Morre.
In summary, there are prefabricated modules of all types in all places. Each location offers unique opportunities and capabilities.
The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a panel discussion about justice, equity and inclusion in the real estate industry in January of this year.
Chris Rhie, associate principal of Buro Happold, an international consultancy of engineers and consultants, served as the moderator for panelists from the Mayor’s Office of Oakland, the planning department for the City of San Diego and the City of West Hollywood. Chris began the conversation by asking what it means to have equitable access to physical spaces.
Warren Logan, policy director of mobility and interagency relations for the Mayor’s Office of Oakland, is focused on advancing racial equity in transportation. To help the city connect people from their homes to jobs, Logan wants to expand access to different types of transportation that include bicycling, scooter riding and light rail transit.
“The goal is to advance mobility justice, to change the way that we move around the region and to restore some of the really racist harms and injustices that prevailed by putting freeways where they work,” said Logan. “In Los Angeles for example, you can track where all of the lowest income people were located, based on where the freeways were placed.”
Lindsey Horvath, mayor of the City of West Hollywood, is working to bring an extension of the Crenshaw rail into West Hollywood to connect the two communities. Horvath’s team is also creating a new social justice task force, which will be comprised of residents, business owners, community members and stakeholders. To help create an equitable policy to access West Hollywood.
Housing Stability For All
Nancy Graham, development project manager of the City of San Diego’s Planning Department, believes that the city will not have equity until everyone owns a home. Graham’s department, which is working diligently to build as many homes as possible, understands that the development community needs a lot of regulatory flexibility to respond to constantly changing markets. The city is allowing developers to choose the height of the property near transit and the number of units.
James T. Butts, mayor of the City of Inglewood, has placed a 3 percent cap on rent increases per year and a moratorium on evictions to help residents stay housed during the pandemic.
Horvath is also supporting renters in West Hollywood. “I think we are the first and maybe the only city in the country to incorporate the idea of stabilizing rents,” said Horvath. “People were really looking to protect housing and I think we're seeing housing as a primary issue of equity.”
Logan recognizes a shift in the demographics in Oakland. He claims that Oakland’s black and brown neighborhoods used to center in the downtown area, but now, Logan is seeing those residents move to places farther away.
Graham is also seeing residents moving farther out of San Diego and her team is trying to make sure that jobs follow the new housing.
Equity With A Budget
San Diego has spent about 10 percent of its budget on social services for its most vulnerable community members. Before COVID-19, San Diego had $100 million in reserves, which was about its annual budget.
“You have to be nimble with your budget and plan to make sure that you can weather a very difficult storm like COVID-19 because the people who are at the margins are even further marginalized and more at risk,” said Graham.
Equity In The Real Estate Industry
The architecture, engineering and construction industries can help advance equity. Logan is constantly pushing contractors and subcontractors to hire people from Oakland.
In West Hollywood, Horvath is encouraging larger development projects to include public space on private land.
“If you make land more open, you start building community,” said Horvath. “You can make a better project if you bring equity onto the table.”
Feel free to use these equitable strategies to support your community.
The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a panel discussion in late November 2020 about the future of student housing in the Southern California market.
Jason Taylor, vice president of American Campus Communities, one of the nation's largest developers of high-quality student housing apartment communities, served as moderator for panelists from The Scion Group, Brailsford & Dunlavey, UCLA and USC. Taylor began the conversation by asking what changes they see in student housing.
Student Housing Is Still Thriving
In most university markets, occupancy levels outperformed expectations for the fall of 2020. Students in their freshman year view on-campus living as a rite of passage.
Colleges and universities are faced with financial challenges. Current short- and long-term financial strategies must be redirected to address potential cash flow shortages, financial solvency and future viability.
The drop in enrollment at community colleges ranges from 10 to 30 percent, said Kim Wright, a senior associate with the program management firm of Brailsford & Dunlavey. She noted that many low income and first-generation students choose not to enroll this year and that international student enrollment had also seen a significant decline. But Pearlman anticipates higher student enrollment at the community college level in the near future because of the unavailability of beds at four-year state institutions which have seen double-digit increases in applications. He said that community colleges are adding housing during the pandemic to compete with other community colleges.
USC welcomed about 720 spring admit first-year students, who started their college careers in January 2021, while UCLA saw record enrollment for its current freshman.
“We could have been close to 100 percent occupancy based on demand. Our students wanted to be here,” said Brian MacDonald, director of residential education for UCLA. He doesn’t expect a change in occupancy for the winter quarter and he is optimistic about the spring.
New Student Housing on Demand
UCLA and USC have put their RFPs for student housing projects for 2021 on hold but Wright predicts that there will be an uptick in the freshman and sophomore classes for 2021 and 2022, and suggests that colleges should plan to move forward with the RFPs so they will have enough housing for the next couple of years.
She added that students prefer to live in studios or one-bedroom units where they can live by themselves. Cost, location, and WiFi are key elements for students when considering housing.
The Evolving College Campus
Since the 2008 recession, nearly all universities in the U.S. have been forced to evolve their funding sources to be competitive. They have adapted to reduced public funding, maximized other revenue streams or simply created new revenue opportunities. Many schools are cash poor, real estate rich and are looking to monetize their land to help diversify their sources for income. This approach is being used for student housing but not for active multi-family housing projects or retirement villages. Other mixed-use projects can alleviate financial pressures on a campus, while surrounding the campus with productive uses of space.
“Arizona State University Mirabella is moving forward with multiple construction projects around the Tempe area including a research facility, public transportation and a retirement center. The project can generate a lot of revenue to help with other campus projects and priorities. It will diversify the revenue stream that is outside of student housing to support student housing and other campus life aspects,” said Wright.
In summary, there will continue to be a need for student housing. Four-year state institutions and community colleges should continue to build new housing.
The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a virtual town hall with Dave Gilmore, President and CEO of DesignIntelligence and Design Futures Council, about the pandemic’s impact on the real estate industry and the economy. Here’s what Gilmore is expecting in 2021:
Consumers Driving Construction
Consumers will drive further declines in the construction of new retail, entertainment, commercial office, aviation and higher education spaces. People are not buying and consuming the way they used to and if the political and social conflicts continue in the United States, economic distress will remain.
“Ultimately, everything comes down to how consumers consume. So, if you and I are feeling good about ourselves, we spend. If we're not feeling good about ourselves, we pull back and the markets falter,” said Dave Gilmore.
Commercial Office May Not Grow
The commercial office space will continue to see minimal activity for the first half of 2021. A study by Cisco Systems interviewed 1,500 executives across the United States and found that 90 percent of the companies would not bring back their employees into the office. Alternately, they are leaning toward a remote worker infrastructure.
Commercial real estate investor confidence continues to be subdued as well. People aren't paying their loans and the loans are defaulting. Institutional term loan defaults are estimated to exceed $100 billion through 2022. To make matters worse, the total commercial debt combined with multifamily debt has now approached $4 trillion at the end of the second quarter.
Residential Investments at Risk
The CARES Act placed a ban on all of the mortgage holders so that they could not take action on late payments, until August 31. 15 million residential mortgages are now at risk of foreclosure. Gilmore expects these homes to foreclose in the next 12 months.
Schools and University Cling to Safely Standards
K-12 schools and college universities need to standardize policies and processes to ensure the safety of those who are attending in-person classes. Higher education depends on the effectiveness of the vaccine and if people feel comfortable attending in-person classes. But many students are making the switch to online courses.
There will be an increase in K-12 construction with building designs that adapt to a pandemic. More kids will go back to school.
“We think that public bond money is going to be made available because people don't want their kids at home working from a screen, which is different than the higher education context,” said Gilmore.
Hospitality at Risk
Until the vaccine is distributed, the hospitality industry such as hotels and resorts will remain flat. 50 percent of current assets in the hotel market are now moving into default. There might be a series of fire sales of assets in 2021.
Healthcare Will Receive Funding
Hospitals and healthcare facilities will receive adequate financial support from both the state and federal sources to ensure their facilities are best provisioned for ongoing Covid-19 outbreaks. Nevertheless, many of the hospitals are radically under-optimized. There is an opportunity for those asset owners to improve their space.
Sports, Entertainment and Mass Transit in Danger
Even when the vaccine becomes available, will people be willing to sit close to one another? The pandemic has made it difficult for people to gather in large groups. The entertainment and sports industry are predicted to be flat for two years. Also, about 50 percent of the airport projects that were planned or started got postponed or canceled.
Key Takeaways for RE Leaders
Real estate leaders must refresh and transform their brand identity to create new value offerings and to initiate new financing structures. This is a period for redefinition since this is not a normal recession. We have been living through a series of crises and we are still in the middle of them. Healthcare, economic, political and social sectors are hitting us all at once.
Identify and secure the essential people in your organization that you depend on and will generate value for the firm. Invest in an authentic internal relationship. Consider getting creative about new models for recognition, rewards and compensation.
Reduce your physical footprint because you do not need it anymore. Adopt a mantra of less is more. If you're in charge of the money prioritize your top 10 spend and then reduce it to seven. Operate like every dollar counts because it does.
“It's time to reconsider the art and science of business development. If you've been doing business development based on the old paradigms and the world is radically shifted around you, maybe there is a new way to consider business development for the future of your firm,” stated Gilmore. “It is time to get crazy about environmental and social responsibilities. It's time to get crazy about doing the right thing for the good of all.”
Feel free to keep these helpful tips in mind to refresh your real estate firm to support the industry in 2021.
The Southern California Development Forum (SCDF), an organization that provides networking opportunities for those in the real estate community, hosted a panel discussion in late September about opportunities for social change in our industry. While the conversation wasn’t real estate related, racial injustice does affect the industry. SCDF invited several members of the Los Angeles business community to share their views on how positive change can be advanced and what some businesses are doing to champion this cause.
Tre Borden, principal of Tre Borden Co., a company focused on building creative communities, served as a moderator for panelists from LA Mas, 2nd Call, Homeboy Industries and ACE Mentor Program LA/OC. Borden began the conversation by asking how panelists have adapted their organizations to support racial justice over the last six months.
Feeding and Healing So Cal
Homeboy Industries is considered one of the front runners in an organization that is committed to pushing social change. The organization continues to rehabilitate former gang members and felons which has been its mission for the last 30 years. In fact, fifty percent of its staff are former clients, which lends a great deal of credibility to its mission.
“We can't rely on government programs or any of the foundations. The business community needs to take on this responsibility of creating jobs and providing good jobs because that's how we make long term structural change,” said Thomas Vozzo, Homeboy’s CEO.
The organization is also providing food for those struggling during the pandemic. The food program, which has served thousands of seniors, now has a city contract.
“So not only are we keeping people working but we're also feeding people at the same time,” Vozzo said.
In response to the Black Lives Matter movement, LA Mas, an organization that designs initiatives to promote neighborhood resilience, has narrowed its mission to support individuals living in Long Beach, South LA and East LA rather than the entire LA Region. LA Mas has a diverse leadership team and supports working-class communities of color, explained Elizabeth Timme, co-executive director.
“We have started feeding 700 residents of northeast Los Angeles, most explicitly in Elysian Valley,” she said, adding that her staff will complete anti-racist training in the next few weeks.
Skipp Townsend, executive director for 2nd Call, an organization that offers parenting, anger management, domestic violence and re-entry programs, also began food distribution in South Los Angeles. 2nd call hopes the program will began the healing process between Black and Brown residents of the area.
Backing the Next Generation
The ACE Mentor Program LA/OC supports youth with after-school classes and scholarships because it believes that higher education is a strategic way of changing the lives of the next generation. Ricardo Zendejas, mentor and board member for the organization, said they were able to adapt their program into a virtual environment during the pandemic. ACE annually serves about 10,000 students of which about two-thirds are minorities. The program has awarded approximately $20 million in renewable scholarships over the course of 26 years.
“I went through the program back in 2003 as a senior in high school and I've got the program to thank for staying with me throughout college,” Zendejas said. “I got my undergraduate degree at UCLA, my master's at Stanford, and throughout the whole program the sponsor companies provided internships.”
In summary, you can make Southern California a more prosperous place by supporting scholarship programs, donating food to those in need or creating jobs that will provide long-term structural change.
Like so many other business sectors, higher education has had to make massive adjustments to remain sustainable during the pandemic. For many of us going virtual and working remotely is relatively seamless. In the higher education field, going remote is nothing new. Online education has been offered for at least twenty years. However, it was rarely offered as the sole method of learning. The conundrum for higher education going completely online is that there are so many facets of college life that must take place in the real world, not a virtual one. This is especially true for the many facilities that comprise a university campus in order to create synergy among students, faculty, athletes, alumni and more. For the month of June, we spoke with designers and construction planners from three California universities, as well as a member of the California State University Chancellor’s Office, for some inside information regarding the adjustment of our university system to the new normal.
New Normal, New Budgets
Paul Gannoe, chief of facilities planning and design at the CSU Chancellor’s Office, opened the conversation with a reminder that many of these decisions are often, or perhaps always, a direct result of a budget.
“The CSU was slated to get a little less than what we had asked for, but it was manageable,” he said. “Then when COVID-19 came, we had to make revisions to accommodate for the changes.”
Gannoe also mentioned the difference is that if the CSU takes the budget cuts up front, then the cuts can be restored at a later time when federal funding potentially arrives in October. In regards to budgets and financing, the CSU has also sold about $600 million worth of debt and is working on allocating that funding toward projects already in the pipeline at several universities. The Chancellor’s Office is also working with the Department of Finance on approvals for those projects, while also seeking up to $650 million worth of new construction. From a capital funding standpoint, the CSU is currently in good standing due to favorable interest rates, and a forecasted softening in construction market pricing.
Mark Zakhour, CASp, director of design and construction at Cal State Long Beach, pivoted from the stable funding of projects, to point out that many of these projects will be delayed.
“Fortunately, we were able to keep our active projects moving forward,” he said. “We didn’t have to stop anything due to COVID-19, which was a primary concern.”
While none of the active projects at Cal State Long Beach were delayed, Zakhour did say that many of the projects in a planning or design phase are taking a pause. Among these projects is a new student union, which took a pause in the middle of a fee referendum. The university was looking into ways to navigate additional fees for students, in order to help pay for the project. Then all the students went away. Some of those projects have to take a pause, especially the student housing projects.
“We know that our revenue is tied to enrollment, and I know that's going to be something else that will cause us to expect less revenue,” said Zakhour. “Housing reserves have taken a huge hit because housing and dining plans are basically stopped. Some housing may be assessed for renovations, depending on what next year looks like.”
Most panelists agreed that probably around October, is when their campuses will begin to initiate new developments again.
New Designs for a New Normal
Catherine Kniazewycz, campus architect and director of design and construction at CSU Northridge added that on top of the proposed budget cuts to campus facilities, there may also be new design standards moving forward.
“In addition to the likelihood of new design standards which comply with social distancing, there is also an additional need for cleaning inspections, sanitizing, and other precautionary measures,” she said.
Jill Anthes, executive director of planning and design at San Francisco State University alluded to a different approach to the possibility of new designs. At SFSU, they have an architecture team working in conjunction with their campus, as well as with Cal State East Bay and Cal State Chico. However, she did add that the architecture team informed her not every campus is modifying their design. Some campuses are using a different schedule or longer cost estimates or more insurance to accommodate social distancing. Once there has been more collective experience with distance learning, the CSU will be able to take a more wholistic approach. All panelists agreed that future planning is a bit premature at this stage, as it is really too soon for anyone to make any serious long-term decisions.
The incorporation of density to the suburban-style sprawl that is Southern California’s cityscape is a topic that has been debated on repeatedly in the last year or so. With bills like SB50, SB4, and a push for transit-oriented developments, all of which seek to incentivize pro-density development at the forefront of the housing crisis, it’s hard to imagine how much longer the battle will continue. Nevertheless, opposition by NIMBYism and neighborhood groups, often seems to prevail. Those in favor of density wonder how much longer this can last. The urban landscapes of Southern California have long since run out of room to build out – when will we collectively decide to build up?
Real Estate as an Economic Driver
Moderator Edgar Khalatian, of Mayer Brown, LLP introduced the panel and opened the discussion, which kicked off by John Keisler, economic development director at the city of Long Beach pointing out that real estate development is often an economic driving force, not only for private businesses, but also for the state and local governments. John pointed out that real estate development, business development, and workforce development all work in tandem to push the economy forward. Of course, without a surplus of raw land, the development has nowhere to go but up. Keisler noted how the city of Long Beach has extensively reviewed various ways to grow GDP overall, which consists of ways to maximize every space, person and asset. This has a ripple effect of creating opportunities for workers, investors, and entrepreneurs.
Wells Lawson, senior director at Los Angeles County Metropolitan Transportation Authority (Metro), noted that Metro is also taking more of a community-based approach in maximizing space, but to the liking of area residents. In contrast to previous years, Metro has examined the concept of “transit-oriented communities” as a way to mitigate pressures of gentrification and evaluate what kinds of economic opportunities transit brings to a neighborhood in the context of the local workforce. Metro involves the community in new projects, by taking into account any feedback from residents that is gathered during community outreach. This feedback is incorporated into proposals and development guidelines to ensure the project facilitates economic development and stability within the community, rather than becoming detrimental, such as in the case of gentrification. What this boils down to is that communities often are in need of more affordable housing. Khalatian posed the question whether or not involving the community has resulted in less housing, or less affordable housing. Lawson informed that as a result of increased community involvement, Metro has revised it’s housing policy to ensure transit agencies are held to a level of accountability in providing affordable housing.
Preservation in the Face of Progress
In the effort to densify what was once a sea of single-family homes, opposition parties often note the preservation of the “classic California” look as a concern. Ken Bernstein, principal city planner at city of Los Angeles noted that creating places that contribute to density and economic development, while retaining the classic design, is a key factor in the effort to cohesively densify our city in a way that works for everyone. As we shift to higher transit usage, pedestrian-friendly design with active street frontage and 360-degree design takes priority, but not at the expense of how the project relates to longtime neighbors. Another concern of any new development in Southern California, whether it is pro-density or not, is the climate impact and the projected response to the unique climate of Southern California. Bernstein noted that if all of these design and sustainability guidelines can be met, the chances of a pro-density, transit-oriented development receiving community approval are much greater.
As of now, the city is operating on an outdated 1946 zoning code. Most of these updates are being rolled out through the city, while simultaneously reshaping the quality of the new design. In addition to updating the zoning code, many of the new projects in development, are able to pass through the transit-oriented community design guidelines. Bernstein also added that most new developments are using TOC housing incentives and 42% of new housing is going along new transit routes – which is exactly where the city wants to see new housing built.
Density Where it Belongs
As the sole developer on the panel, Greg Ames, managing director of Trammell Crow Company Los Angeles brought a “purist” view of development in the context of transit and density. Because Trammell Crow Company does not carry its own portfolios, but rather develops into the portfolios of its investors. Developers like Trammell Crow Company are largely concerned with the long-term feasibility of projects, and how they might stand up to the many “what-if” scenarios that loom over construction. Ames noted that transit-oriented development is especially interesting to Trammell Crow because of the versatility of these projects, but also because of the opportunity to truly shape a district in a way that is beneficial to the community. Ames cited the developments taking place in North Hollywood, in partnership with Metro, as exactly the type of neighborhood where density belongs.
Ames also mentioned the fact that adding density to a neighborhood also makes the area more of a destination – further cementing the concept of real estate development as an economic driver. Adding density brings homes and jobs, but entertainment uses are also relevant. Shopping, dining and other entertainment can create a destination for residents living in a more traditionally zoned area of single-family homes. In any case, development is necessary to further propel the economic engines of Southern California in this time when the only way we have to go, is up.
For residents of the Los Angeles Metro Area, the recent developments at Los Angeles International Airport (LAX) have been notable. The increase in construction corresponds to a surge in growth in the aviation industry. The International Air Transport Association (IATA) forecasts that the number of passengers transported by airlines will reach 8.2 billion in 2037, up from a projected 7.8 billion in 2036. The updated forecast is based on a 3.5% compound annual growth rate for the industry. When looking at the hard numbers, the actual annual growth in air travel has grown considerably more than 3.5% annually. According to Statista.com, the year 2017 saw a whopping 8.1% increase in passenger demand. As consumer demands rise for air travel, so do their standards as well as the need for speed and efficiency. Moderated by Matt Ross, senior vice president of AvAirPros, our February aviation panel explored ways in which designers and developers are harnessing technology and modernizing infrastructure in order to accommodate growing numbers.
One challenge, from a design perspective, is very similar to the challenges met on other project sites. Robert Schultz, P.E., A.A.E., and chief airport planner for Los Angeles World Airports highlight the need to design spaces for flexibility. This was noted by multiple panelists as an obstacle in aviation facilities across the spectrum. He added that in general, the focus moving forward is to add flexibility, but to also create more positive travel experience while enhancing how the airport staff interacts with customers. Designers are leveraging technology, as well as the data acquired from technology in order to curate these experiences and spaces. Patrick Lammerding, deputy executive director of Hollywood Burbank Airport added that the observation of airport visitors has been paramount the evolution of airport design. This is done by accounting for the entire experience from entering the terminal to boarding the plane. Designers use data points such as what concessions are frequently visited, how long the customer spends at a concession or dining location, what additional amenities are used and more. All of these factors shape how airports are designed.
The use of space and the efficiency of a facility is also crucial to passenger flow – important for both safety and a positive customer experience. All panelists noted that each Southern California airport has its own unique limitations, many of them involving space, or a lack thereof, for our region’s many travelers. Stephanine Gunawan-Piraner, senior civil engineer at Long Beach Airport, pointed to new ticketing lobbies, which include self-service kiosks and common-use ticketing space. These allows airlines to expand and contract service as needed and allows airports to use space more efficiently. An airline that has a large number of passengers will need more of these kiosks and can use them in order to move through the airport more quickly. For off-peak traffic times, these systems are not so urgently required, and the space can be utilized for other airlines as needed. Another development is the evolution from multiple, individual terminals serving one concourse. The direction is shifting to terminal processors serving multiple concourses. This can be done through real-time traffic monitoring by consolidating and connecting terminals to provide more operational flexibility.
Other innovations include investment into biometric identification systems, automated bag drop systems and overall improvements to security screenings and digital passenger services. A common theme across all panelists was the need to save time. Don Ostler, program manager for Southwest Airlines at LAX gave a startling statistic regarding time. He shared with the audience that major airlines such as Southwest, can save over 70 operating hours per day across their fleet by simply shaving one second off of each flight turnaround. Kaveh Dabiran, west region director for United Airlines also noted the extreme priority placed on time by larger airlines – every second counts in this industry. As demand continues to rise, the innovations in technology will no doubt continually see integration into the aviation world.
Kicking off the new year, SCDF hosted a panel focused on a widely-discussed topic – the state of the local economy. More specifically, members of our community have been concerned with how the factors at play internationally, will affect our local industry. Architects, general contractors, engineers and more, all joined us last week for a full house of development community professionals eager for a variety of opinions regarding the 2020 economic outlook. This particular panel differed from others in that it was smaller, and did not have any members of our community speaking. Instead, we opted for a localized view from expert sources. Joining our panel discussion was Dr. Monica Morlacco, assistant professor of economics at University of Southern California, as well as Eric Hayes, associate economist at Los Angeles Economic Development Corporation’s Institute for Applied Economics. Both panelists presented the audience with different ways global impacts translate into local effects.
Global Forces at Work in the United States
Among the key points made by Dr. Morlacco was that big, multinational business is only getting bigger, and this has many different side effects. Unfortunately, the majority of these effects are not so great for the average consumer or worker. Morlacco pointed out that since 1980, there has been a steady increase in the average markup – which is the amount companies typically charge over and above their costs, to sell their goods at retail. This is largely the case for U.S.-based corporations, where the average markup now hovers around 61 percent, compared to 21 percent in 1980. Since 1980, much of the increase in markups has come from large firms. Their growing influence and increase in size is concurrent with the diminishing power of antitrust laws in the United States, as well as the increased costs of simply doing business. Logistics, litigation, and administrative costs have seen substantial cost increases which may not be as easily absorbed by smaller firms. However, it is important to note the other cultural and geographic factors which play a role.
Technology, which has disrupted almost everything to some degree, has skewed consumer preferences toward big business as well. The effects of e-commerce and online networks tend to keep customers locked in to a specific platform or brand. A tendency for consumers to remain brand-loyal and static in their choices can translate into difficulties entering the business marketplace. This metric is referred to as turnover, or the rate at which new businesses establish entry, and conversely, old businesses exit the marketplace. Dr. Morlacco also highlighted the fact that there has been a broad decrease in turnover and a broad increase in concentration across most industries in the United States.
In addition to technology, the largest corporations are also able to establish global value chains in order to optimize business functions, and these large conglomerates quite simply have the resources to do so. These global value chains are best defined as a network of production, trade, and investments where different stages the product cycle span multiple countries. A great example of this would be shoes and apparel. The product may be designed in the United States, materials sourced in South America, manufactured in Asia, and then distributed worldwide. Many everyday consumer goods are likely the product of a global value chain.
Effects on Our Local Economy
In light of the recent trade wars, residents of Southern California are forecasted to see an increase in consumer prices across most product types – this includes housing. However, the most pertinent information to our region has to do with shifting demographics and unemployment rate. Currently, our state, and the nation, have unemployment rate of 3.7 and 3.9 percent, respectively. The national unemployment rate is the lowest it has been in over 50 years. However, all economic cycles are subject to disruption, and for California, our population may be a deciding factor. What may surprise many of us in Southern California, is the fact that our population has actually been decreasing this past year. For a continually robust economy, a steady population growth is required as it is an essential component of a strong labor force. Not only has Southern California, particularly Los Angeles, been losing residents to outward migration, but the birth rate has also dropped. Birth rate is an important metric to economists as it is an indicator of the future working population who will not only spur additional economic growth, but pay into social service programs.
A more peripheral effect of the birth rate might be the tendency for parents to become homeowners, an increasingly inaccessible milestone for Southern California families. To put this into perspective, the minimum qualifying income for a home in Los Angeles County is $127,200. The median household income in Los Angeles County is $68,093 – which is vastly less than what is required to own a home. This leaves the average renter spending approximately $31,000 in rent annually. Still, low rates of homeownership in Los Angeles are also attributed to other outside factors, such as a scarcity of housing permits issued by local governments.
Despite all of this, California is likely to continue on a path of moderate, but sustained growth throughout the year. Venture capital investments to large tech and media companies that call our state home will prevail. Lastly, the tendency for our state to be an incubator for innovative ideas and a pool for great talent will likely keep the California afloat throughout the year and many more to come.
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