ROI of sustainability

ROI of sustainability

By: Tony Pauker and Mary Lydon

[space]In past columns we have discussed sustainability, green building materials and global warming. But are we really talking about real estate and is there a connection?

[space]Portions of this seemingly unstoppable movement are deeply rooted in the concern for the environment and the science-based proof of the impact that greenhouse-gas emissions have on the quality of life of all beings on the planet.

[space]This has created two extreme camps: Camp 1 has deeply held beliefs about environmental degradation and the impacts added to that degradation by humans.

[space]Camp 2 has equally held beliefs that the concerns are rooted with inaccurate science. For a moment, let’s pull out of the equation the emotionally charged belief that humans are adding to global warming or that the science is wrong.

[space]Clearly, even without these components, we see that the climate is changing. It is with this baseline proof that we need to look at the real estate industry business model and develop strategies to take advantage of this new addition to the equation.

[space]The new global economy, especially with the emergence of Chindia (China and India) and Dubai, has massive influences on land use and real estate. Energy, efficiency and cost are the components that will play an increasing role in the return on investment or ROI.

[space]The era of readily available and cheap energy is over. We now know we have a finite amount of fossil fuel. Most energy experts suggest that even if we tap the vast Alaskan and Gulf of Mexico oil reserves our current rate of global usage will deplete these resources in the next 50-100 years. Even if we go a step further and find innovative methods to extract oil from oil shale, it is still a finite resource. Experts also suggest that the oil production peaked in the past few years, meaning that we have entered the era when the amount of oil that can be economically extracted will decline. The average consumer feels this most harshly when filling up at the pump. However, similar cost pressure affects heating oil, the electricity that powers our air conditioners and lights, the cost of our food, air travel and the hundreds of thousands of products that contain petroleum as their base. It is clear that none of these items are getting any cheaper.

[space]As land use and real estate leaders, we need to decide if we are victims or leaders. We will not solve our two- century-old focus on fossil fuels overnight, but we stand at a crossroads of economic competitiveness and energy leadership. For example, Toyota, which has led the world in the production of hybrid vehicles, has a market capitalization more than five times greater than Ford and GM combined. The reason is fairly simple; they are leading the world in solving transportation needs in concert the energy efficiency. Another leader is the Texas oil and gas entrepreneur Boone Pickens, who is making a $2 billion investment in wind energy. In a recent article in Fast Company, Mr. Pickens stated with gusto that his decision to go green is not as much about the environment but rather about the ROI. Reliance on foreign-controlled sources of energy will not only get more costly, but also become far more challenging in a global environment where we must compete for shrinking resources. Wind is renewable, domestic, and poses little environmental risk.

[space]We can see examples of how this is affecting real estate and land use locally and as individual developers, investors and property owners. The renewable energy opportunity of Imperial County, which has been identified as one of the leading locations in our nation for the development of wind and solar power, is driving great opposition to the Sunrise Power Link. Looking at the individual building or at the asset level, we see that energy and operating costs are on the rise. The higher the operating costs the lower the ROI, which lowers the value of the asset. This indicator alone builds the case for putting sustainable energy and building efficiency into place. When evaluating any income-producing property from here on out, tenants want to limit their occupancy cost (including utilities) and have a steady and predictable cost structure. Landlords seek the same metrics. If building operating costs were to see the price spikes we see at the gas pump our battered real estate industry would be in far worse shape. While utility rates have not spiked yet, it is not likely they will decline.

[space]LEED standards are one popular metric to judge and control energy usage. However, within five years, LEED will be standard in municipal building codes. In terms of new development, it is already becoming clear that space that does not meet LEED standards is simply less economically competitive. The issue is not what energy- efficient “brand” one stamps on a building. Rather, it is what systems can be built into new building, what forms of urban design and land-use planning can be instituted, to limit or even decrease the amount of energy they use. Reducing usage and thus reducing cost simply flows to the bottom line. We have entered an era when our sustainability decisions are no longer a strictly emotional or environmental issue; they are clearly an economic issue.

[space]On June 26, at the Balboa Theatre, ULI San Diego/Tijuana will be presenting awards to 15 outstanding smart- growth projects, plans and people. Smart growth is defined as economically feasible, environmentally sound and equitable to the community at large. Smart-growth principles are becoming a necessity of the ROI equation. Please join us to celebrate San Diego’s award-winning smart-growth winners and to get ideas for how to increase the return on your real estate investments. For tickets, go to ulisd.org.

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The new green belief system

The new green belief system

By: Tony Pauker and Mary Lydon

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“There are two ways to be fooled. One is to believe what isn’t true; the other is to refuse to believe what is true.” – -Soren Kierkegaard, philosopher

[space]At a recent community planning charrette setbacks for a multi-family home development adjacent to a waterway near the bay were being discussed when one of the members suggested the setbacks take into consideration rising sea levels due to global warming and the dialog ceased. All eyes were on the member who made the suggestion and one of the others said, “Oh, you are of that belief system?” A religion is a set of beliefs about our perceptions of reality. Our belief system assists our decision making process, how we live, what we buy, our relationships, where we live, how we create our cities, who we believe we are and how we think things work in this world. From the experience above we can see how the green revolution could be interpreted as a belief system. These beliefs are transforming the way we see life on this planet and with the passions that are invoked whether one believes or not the outcome may very well birth a new religion that provides a whole systems approach to how we live, work, play and worship that is sustainable, equitable and in balance with the environment and each other.

[space]Not since the Renaissance has a time been more representative of that rebirth than now. Major institutions representing decades-long belief structures are going through a metamorphosis where some may transform, some may not and never before creations will be innovated. At the EcoCity World Summit last month in San Francisco, Stanford climatologist Stephen Schneider opened the conference by stating that science has now proved a preponderance of evidence that humans are adding to global warming and it is up to the community at large to determine the risk they will take to mitigate human impact or not. He stated that incentives need to be developed for industries, companies, cities, states and nations to lower emissions and that capital needs to enter into the equation that in addition to innovation, will make many rich. He stressed that strong leadership would be the first step towards effective implementation.

[space]Brent Toderian, the new planning director for the city of Vancouver presented that their city’s new planning process will move from a livable city model to an EcoDensity model where green and affordable enter into the livable equation. Another innovative government model was presented by Dan Beard, the chief administrative officer for the U.S. House of Representatives. Speaker of the House Pelosi ordered a plan to be put in place to make the House carbon neutral because she said the Capitol needs to be a beacon of environmental stewardship.
[space]On the private side, Charlie Ricker from Bright Source Energy laid out their company’s goal of developing and commercializing new solar thermal technology that can compete with fossil fuel plants. They recently signed 5 contracts with San Francisco-based PG&E to provide 900 MW (enough to power 500,000 households) of solar thermal power to Oakland, the largest solar power plant deal to date. Thankfully private industry is taking the lead on this because when Congress passed the energy bill last December, it did not extend any stimulus for wind and solar energy production, but oil and gas kept all their credits. This is counterintuitive for these times. Japan and Germany both have a solar incentive program that will last 12 years and 20 years, respectively. Hopefully, industry will continues to lead the way and inspire Congress to do the same which would allow the country to move our attention away from Iran and re-invest military spending toward issues that are more relevant such as alternative energy incentives, education and health care.

[space]We have a local EcoCity trendsetter among us as well. Community HousingWorks, developer of Solara, the first apartment community in California to be fully powered by the sun is one of the winners of the prestigious national Urban Land Institute Award for Excellence which they will receive this morning at the ULI Spring Conference in Dallas. The jurors were impressed with the green features for sure, but were most impressed with the heart and soul that went into the details of this catalytic project. Community HousingWorks was also a recipient of a ULI San Diego/Tijuana Smart Growth Award in 2007.

[space]ULI San Diego/Tijuana will host the fourth annual Smart Growth Awards program on June 26 at the Balboa Theatre, where we will recognize the innovators, implementers, visionaries, risk takers and believers who are the emerging leaders of the green renaissance.

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Cooperation needed to succeed in emerging sustainable economy

Cooperation needed to succeed in emerging sustainable economy

By: Tony Pauker and Mary Lydon

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Joseph S. Nye Jr., is former assistant secretary of defense and dean of Harvard University’s John F. Kennedy School of Government. He is author of “Soft Power: The Means to Success in World Politics.” Soft power is a term that distinguishes the subtle effects of culture, values and ideas on others’ behavior from more direct coercive measures called hard power such as military action or economic incentives. In these changing times, soft power may be a tool to a more effective transition to the new social and economic structure that we are being propelled into.

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Since the industrial revolution our means of success has brought phenomenal new technologies in the areas of communication, agriculture, transportation, entertainment, manufacturing, finance, research and development. But when we look back to see what has been left in its wake we see war, poverty, environmental degradation, growing disparity in incomes, specie extinction, unprecedented CO2 levels in the atmosphere, melting snowcaps and disease. This is certainly not the full picture, but when one makes a comparison from this perspective there does seem to be something missing from the equation. Soft power could be a bridge to help solve some of our great challenges by connecting our advanced technology to a more solid sustainability platform.

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There are 218 sustainability-focused organizations in San Diego, and if you Google sustainable technology on the Internet, you come up with more than 10 million results. Both locally and internationally, there is not a lack of focus on sustainability. It is very clear that we do have the technology to move sustainable measures into place, but what is also just as clear is that we have not evolved our social skills to make it happen.

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Cooperation, as defined by Wikipedia, is the process of working together which can be accomplished by both intentional and non-intentional agents. In its simplest form, it involves things working in harmony, side by side, while in its more complicated forms, it can involve something as complex as the inner workings of a human being or even the social patterns of a nation. It is the alternative to working separately in competition. Cooperation is a key factor of soft power. Other components of soft power include: listening, tolerance, willingness to try new ways, for the good of all approaches, truth – such as incorporating the true costs for products and services to include environmental cleanup and renewability factors — and enlightened leadership.

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So how do we implement these big-picture dynamics into San Diego so we can participate and reap the benefits of this new world? This spring, we are already starting to see new buds of cooperation emerge. A collaboration between the county Department of Health, the American Planning Association, Walk San Diego, New School of Architecture and Design and the Urban Land Institute is working to develop models for healthy communities through the built environment. San Diego Roots, in partnership with the San Diego Natural History Museum and OB People’s Market are working to develop an organic farm and education center model that demonstrates how growing food locally is less expensive and better for the environment. The formation of the CleanTech Initiative through the Regional Economic Development Corporation in an effort to promote the expansion, attraction and retention of businesses that develop products and technologies that provides environmentally sustainable solutions. The National Energy Center for Sustainable Communities in Chula Vista focuses on building neighborhoods that consume less energy and produce less waste and is the first of an international network. The city of San Diego Environmental Services Department has taken a leadership role to work in concert with City Departments and the community to advance all aspects of more sustainable policies and procedures, and measures outcomes through a series of City Council-approved indicators and a Climate Protection Action Plan. Primary target areas include energy-efficiency and renewable energy, alternative vehicles and fuels.

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These are but a few emerging local initiatives and our challenge to you is that you get involved and become the water to help these kinds of visionary, cooperative-based, sustainability-focused technologies grow and flourish.

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Infrastructure: invest or collapse

Infrastructure: invest or collapse

By: Tony Pauker and Mary Lydon

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I was struck how a short drive could be so symbolic of our current land-use and budget situation. Early one Monday morning, I rolled out my trash and recycling bins. That always gives some guilty pleasure, like getting dessert for free at a restaurant. That is probably because I don’t pay for pick up. It had rained the prior week so I then got a push broom and swept the street in from of my house. We only have our streets swept the fourth Thursday of every other month — six times a year, assuming no one is parked on the street. While I like a clean street, I really dislike swimming in the oil ash and grit I sweep up, and everything in the gutter eventually ends up in the ocean if it is not swept. When that was all done, I started my drive. My first call was to the Streets Division of the city to request the large and growing pothole a block down be repaired. It seems only a half-inch of rain wreaks havoc with our streets (and it is a dry year). To the city’s credit, that pothole was patched within a few days. Later that day, I described my morning to a colleague who lives in a new master-planned community. He shares not of my issues (except he pays for his trash pickup).

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What this Monday-morning experience shows is the state of our infrastructure, budget and the development cycle. After World War II, San Diego we saw a massive wave of growth to house our returning GIs and supply homes for those employed in our growing defense industries. From La Jolla and Pacific Beach to Clairemont, Linda Vista, National City and much of what is the “core” of San Diego, this growth not only brought housing, retail and employment centers, but also saw the development of much of our pre-freeway backbone infrastructure. Over the ensuing decades development leap-frogged these communities into more planned communities — everywhere from Scripps Ranch to eastern Chula Vista to Carmel Valley and beyond. Each of these newer communities also saw new infrastructure, some of even with assessment districts to assure its long- term maintenance. While we grew outward, our older areas such as our downtown saw a lack of investment. Over the decades, this has led to decay of the infrastructure. But there are examples where we have turned this trend around. Without the incredible efforts of CCDC, it is very unlikely that downtown would be in as good shape as it is. CCDC perhaps creates a template that can be modified to work in other urban neighborhoods.

[space]As a small developer focusing on infill areas, we clearly hear the public outcry about the lack of infrastructure. Any new development is perceived as furthering the burden of our crumbling infrastructure. If you want to build, you better remove those overhead power lines, build a new park, fix the street and sidewalk and provide a bunch of new parking so I can keep parking my car in the street and use my garage for storage. In a new master plan, the situation is simple. Before you start you pass a bond, use the proceeds to pay for infrastructure, and the new residents and businesses pay for the bond through a slight increase in property taxes. New residents are more than happy to accept this fee because of the benefits they receive.

[space]In our older communities, we have come to expect very low costs to enjoy our location. Proposition 13 established our tax rate, more recent propositions mandated new taxes require a two-thirds majority of the electorate to levy such fees, and our charter establishes free trash service. I, too, certainly enjoy a free lunch. We have also been able to cast a blind eye to the physical impacts on our city — that is until our beach is closed due to a sewer spill (or just rain), or until we hit a pothole, or until our once verdant park is a weed patch. City budget issues aside, can we accommodate new infill growth AND enhance the quality of life in our older communities? It must be not only because we have to address the issues, but also because other cities have proven it is feasible. Denver and Phoenix have both shown leadership on improving infrastructure citywide. In San Diego, we passed Proposition MM to repair and build new schools with great success. We have proven we can build (and fix) smarter.

[space]This year, the Urban Land Institute will hold its fourth annual Planet Awards for Smart Growth and Sustainability June 26 at the Balboa Theatre. Awards will be presented for best practices in land use that are ecologically sound, economically viable, socially beneficial and culturally appropriate for development projects or plans and visionaries that accommodate our growing population, grow our economy, and enhance our lifestyle and well- being. Finding solutions to our neglected infrastructure is smart and adds to the sustainability of our region but will not be easy. Creative solutions must be found and more than likely we will need to pay for those solutions. Neglecting smart growth and sustainable strategies is potentially threatening to our city. As Jared Diamond writes about in his best-selling book “Collapse,” societies choose to fail or succeed. By ignoring warning signs, especially when a pattern of catastrophe surrounds us, we consciously choose our own peril.

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The pole shift to a global green economy

The pole shift to a global green economy

By: Tony Pauker and Mary Lydon

[space]The Mayan calendar marked the year 2012 as the end of their “26,000 year cycle.” The Mayans may have been prophetic. Some have said that their culture was in tune with nature, and others have claimed the Mayan culture collapsed as they outstripped the resources of Meso-America. Today, there is a global awareness on global resources — it ranges from the price of oil (purely driven by supply and demand) to real concern about global warming. What is clear is that by 2050, the world will be different. We may very well be living in a warmer place and drive vehicles power by something other than petroleum.

[space]How many times have you heard the words green, sustainability, carbon footprint, LEED-certified, renewable, organic, solar powered, wind-powered, etc. this week alone? Frequently, we do not even know what these terms mean, but they do seem to be becoming part of our consciousness. A year ago, these concepts seemed on the fringe, but today they are mainstream topics of commerce and science.

[space]The eco-fringe has been replaced by two camps rapidly converging: the world of science demonstrating the impacts we place on the planet and the entrepreneurial business world recognizing an opportunity and embracing the potential. Think about even the smallest examples — a few years ago you could not buy canvas grocery bags, now most markets will credit you a few dimes if you bring your own bags.

[space]There are bigger examples. Just a few weeks ago, the United Arab Emirates claimed stake to make Abu Dhabi the center of the future of sustainable energy rather than the title they currently hold as one of the world’s highest per-capita greenhouse-gas emitters. That is quite a statement from a place sustained by oil; but it is also an acknowledgement that a well-capitalized creative economy responds the forces of supply (less oil) and demand (for more sustainable options). Fortunately, it has plenty of capital to invest in this endeavor. The emirate has plans for futuristic travel pods that do not require gas, solar and wind energy to power its cities and water desalination plants. Their plans for a 15,000-resident city will be approved by the World Wildlife Fund to assure it meets with their sustainability principles. No project costs estimates as of yet, but it is anticipating early move-in dates by next year, with project completion scheduled for 2016.

[space]To support the sustainable cities of the 21st century, the Urban Land Institute, in partnership with The Financial Times, is sponsoring a New Sustainable Cities Award. The Sustainable Cities Award acknowledge exceptional examples of sustainable land-use models that exhibit significant new ideas and perspectives for future practice, rather than celebrating past achievements. Nominations need to demonstrate financial viability, as well as replicability and a capacity to inspire others. Seven awards will be handed out at the first-ever Sustainable Cities conference, which will be jointly hosed by The Financial Times and ULI in London on June 16. The Ecocity World Summit will convene the ECOCITY 2008 conference in San Francisco in April to explore re-designing around dense urban development with land uses, architecture and infrastructure for pedestrians, bicyclists and transit, powered by renewable energy. Locally, we are not ready to celebrate our successes on these fronts, but we have many potentially exciting opportunities that will set the stage for such accolades in the future.

[space]This column has looked out way beyond our San Diego boundaries but the intention with this big look is to inspire and encourage San Diego to find and create its own sustainable vision for itself. San Diego is a fairly new city as it relates to the rest of the country, and we’ve always struggled with who we wanted to be when we grew up. Perhaps by aligning with the leading edge of this green pole shift, we will finally find our identity.

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Housing market cooling provides time to reflect

Housing market cooling provides time to reflect

By: Tony Pauker and Mary Lydon

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The economics of housing are a foundation of urban planning as it is a foundation of the domestic economy. Massive amounts of American’s net worth are tied up in their houses. But housing is also connected to our money supply, education, job growth, competitiveness, retirement, city budgets, library hours and much more; it is a lynch pin of the US economy. In California, the housing fallout will be severe as we grapple with an estimated $14.5 billion gap in our state budget. Governor Arnold Schwarzenegger has ordered agencies to immediately trim spending by 10 percent — and what a difference a year makes. This could mean cuts to nursing homes, indigent care and increases in state college tuitions and more. All of this due to one market segment: housing. There is clearly an interdependence that we are more and more beginning to realize between all of the systems within an economy and the well-being and sheltering of its people. Now, during this market cooling, is a perfect time for San Diego to pull together a holistic optimal vision for our region that plans for a great city, which holds up to the future requirements of a healthy and sustainable community and economy.

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The last housing cycle started in 1998. What began as a gradual recovery from the eight-year slump of 1990-98 turned into an overheated frenzy by 2002. This was largely fueled by interest rates at unprecedented lows coupled with relaxed mortgage underwriting. Despite the current subprime fallout, there was actually a great deal of good that did occur. Many more Americans were able to become homeowners because of this fundamental shift in mortgage underwriting. The negatives however are clear. For every 10 new homeowners we will lose one or two to foreclosure. We will lose many lenders and builders and in turn we will see job loss. From a land use perspective we also entered a time when we built just because we could, not because we should. The result? We built subdivisions way too far out from urban centers. We built projects out of scale with neighborhoods and we built housing with less than great architecture. With the pending General Plan and many community plans being updated, now is a good time to consider planning (not reacting) in a thoughtful way.

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Global issues will become a big driver for the foreseeable future. When this cycle began, little thought was given to global demands for raw materials, energy and capital from China and India. Clearly that has changed. Global demand, and the issues of greenhouse gas emissions are affecting us. How and where we build does have global consequences. Eighty percent of global warming occurs in the cities of the world. Currently, 50 percent of the world’s population lives in cities and by 2030 it will rise to 60 percent. What’s remarkable is that in the last cycle being “green” was not part of the vocabulary of most developers. Now as we move into the next cycle many private developers are taking it upon themselves to create energy efficient buildings using green building materials and systems for both ethical and profitable reasons. In addition to leadership from the private sector, a well-thought out, balanced, integrated plan needs to be developed on the public side which creates a system that improves energy efficiency in our cities.

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From a leadership perspective, leaders — both public and private — must begin working into their plans and policies the ups and downs of the natural rhythm of the cycle. This is expected of private-sector leaders, but elected officials need to understand this as well. What will be needed are leaders who make decisions based on the good all for which is a very tall order — especially in four-year election cycles. As physicist and 1994 Nobel Prize for Economics winner, John Forbes Nash scientifically proved with his Games Theory, when we make decisions based on the good of all, we all win. If you’ve ever experienced this dynamic at a team building workshop it’s remarkable to experience the great sense of accomplishment when the group discovers the key to everyone winning and it’s heart breaking when there are those in the group who disregard the good of all for the chance that they might be able to push ahead a little further if they go it alone — greed at its finest. We need to make sure that our regional team, which is comprised of people, the built environment, the economy, the natural environment, leaders and governments, work toward solutions where we all win.

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ULI San Diego/Tijuana has plans to work on many of these areas by creating dialog to look for creative ideas, best practices and systems that can be realistically implemented. Our Bi-National Mayor’s Forum will be the centerpiece of our work in 2008 where we will bring all the Mayors from the county of San Diego and Baja to talk about the top 10 issues that we will need to work on together as it relates to sustainability, viability, competition and quality of life. ULI, in partnership with a broad range of leaders in our region, will help set the tone for San Diego to become one of the key enlightened regions of the 21st century.

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San Diego’s Future – Make No Small Plans

San Diego’s Future – Make No Small Plans

By: Tony Pauker and Mary Lydon

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In January San Diego will celebrate the 100th anniversary of the Nolen Plan, San Diego’s first long range urban planning document. John Nolen was a relatively unknown Philadelphia landscape architect hired by San Diego businessman George Marston to prepare a comprehensive development plan for the city. Some of the most memorable suggestions were a civic plaza along the bay and a paseo along what is now Broadway to Balboa Park.

[space]What may be most significant about Nolen was not the 1908 plan, but rather the focus on planning. Prior to Nolen the city was not laid out with a focus on long range planning and civic vision, rather plans were driven by individual real estate deals. In some cases the long range planning implications have worked out quite well – such as Alonzo Horton’s compact city blocks in “New Town” which provided more valuable corner lots. In other cases the shortcomings and lack of planning affect us to this day.

[space]Looking back, and looking ahead, one sees how much the region has changed and how important the role of appropriate planning has become. A century ago planning was primarily focused on two dimensional planning and landscape architecture. The great planners of the era, like Fredrick Law Olmsted and Daniel Burnham helped shape some of the greatest American cities – like Chicago and New York’s Central Park. Those plans were designed to create great public and pedestrian places, but did not concern themselves with the issues faced in a more complex twenty first century – like traffic, the natural environment, public input, building codes, and thousands of property owners and their plans.

[space]Since Nolen, our region has had some examples of great civic planning. These range from some of the most interesting master plans to great small scale neighborhoods. In most recent years, however, our efforts at planning have become mired in local issues rather than looking at the region comprehensively. Our plans are limited in scope to small areas that do not function together. Planning has also taken on the role of looking at far more than the act of physical land planning. We look at issues of community, environmental sustainability and our role as stewards of the natural environment as opposed to masters of it.

[space]Nolen’s 100th anniversary year ushers in several major planning efforts that will have a profound effect on our region. In January the City of San Diego’s General Plan update comes before the City council. While San Diego is just one of eighteen cities in the County, the City’s General Plan can set the tone for the region. Our recent fires have initiated another planning effort. As we look to rebuilding after the second wave of catastrophic fires in four years, planning must focus on how we build in fire prone areas, and where we choose to build. It is imperative that great planning be driven by how the environment built or not, interacts with people – not just by roads designed to hold emergency vehicles. We may also see plans for a new football stadium. While it is easy to argue about costs and locations, what we have seen from Petco Park is that a well conceived plan can greatly enhance not only a world class sports venue, but spark a multi billion dollar renaissance in its surrounding areas such as that of the east Village. Finally, planning in our region is beginning to focus more and more on sustaining our region environmentally. Like it or not, $4 per gallon gas and less water from the Colorado River and Delta will affect how we live, plan and build. We can choose to embrace these inevitable changes and even prosper from them.

[space]What I hope we have learned from John Nolen is that we must plan. We still do not have a great civic plaza on the bay or a paseo along Broadway, and maybe we do not need them. What we do need is to continue planning. While sometimes we can let things happen and the results are great – I doubt the Gaslamp would have been what it now is had it not been from Mr. Horton’s small blocks. However, if we are to be a great region we must plan to make it happen. As Nolen contemporary John Burnham said – make no small plans and we encourage San Diego to answer this call from the past.

[space]Over the next several months many of the land use and real estate organizations in San Diego will have programs dedicated to John Nolen, planning and the San Diego region. On January 8th the Urban Land Institute will host a breakfast in observance of the centennial of Nolen’s first plan for San Diego, commissioned by George W. Marston and other City Fathers. We will look at his plan as one with continued vibrancy and relevance from our contemporary perspective in hope of inspiring us to a greater vision for the future of our region.

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Another Fire a New World

Another Fire a New World

By: Tony Pauker and Mary Lydon

Last week the Urban Land Institute was gathering for its Fall Conference in Las Vegas. I had my bags packed and ticket in hand but was torn between heading off to one of the most prestigious real estate conferences in the country or staying behind and being with my fellow San Diegans during a “family” crisis. Realistically there was nothing for me to do in San Diego but I felt pulled to stay. When friends who needed to evacuate called looking for shelter I knew what I could do to play my role. So I turned over my house as my contribution and headed off to visit with 7500 of my closest ULI associates.

The conference was fabulous. Kofi Annan, the former United Nations secretary- general and Nobel Peace Prize recipient, delivered a keynote address. Other speakers included economist Michael Boskin; former Medtronics Chief Executive Bill George, now a professor of management practice at the Harvard Business School; and Queen Noor of Jordan.

But when I was back in my hotel room I turned on CNN to watch in horror, the city that I love and that sometimes drives me crazy with its small town mentality, engulfed at the edges in flames.

Interestingly enough, when I arrived back home on Friday I watched the news that portrayed a San Diego that took my breath away. What I saw was government, fire fighters and citizens operating in unity. Our government officials, local newscasters and fire chiefs were doing an outstanding job of effectively and accurately communicating the plan and the progress. The citizens evacuated peacefully and willingly amidst fear and the unknown.

Support flowed in from businesses, non profit organizations and San Diegans in general. But on Saturday as I was cleaning up after my guests departed I burst into deep sobs feeling the grief of what was lost. I thought how could I experience elation and grief simultaneously and it reminded me that life is like that.

The crisis has spawned all kinds of discussion about how to better plan our communities at the edge. Wildland-Urban Interface Zones, Shelter in Place, and better science-based evidence to understand why houses ignite and burn down. ULI plans to be a part of our regional discussion as we move forward in a thoughtful way of implementing a holistic strategy for developing and rebuilding at the edges.

The world is very different now as compared to three years ago during the Cedar fires. Today the reality of climate change has tipped over into every aspect of our thinking, planning and living. This alone requires that our leadership stay ahead of the learning curve so they are in a position to make decisions in our best interest.

Last year the ULI San Diego/Tijuana Real Estate Trends conference focused on the great infrastructure deficit facing not only San Diego but the entire country. A few months later a national dialog ensured spurred after the bridge collapse in Minneapolis this past summer. This year our Trends program will focus on Sustainability where leaders can learn what is emerging in this new world we find ourselves in. The day will include a special keynote address by Hunter Lovins founder of Natural Capitalism Solutions named a Hero for the Planet by Time magazine, Ms. Lovins works with corporations and governments worldwide to develop and implement sustainable energy and resource systems. Panels include sustainability trends for all product types and how climate change will impact CEQA. Each attendee will receive a copy of Emerging Trends in Real Estate® a trends and forecast publication with a 29-year history, and is the most highly-regarded and widely-read forecast report in the real estate industry. Emerging Trends in Real Estate® 2008, undertaken jointly by ULI and PricewaterhouseCoopers, provides an outlook on U.S. investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues.

If you are a leader you will put yourself at the forefront of thinking and implementation of best practices by attending the ULI San Diego/Tijuana Real Estate Trends Conference being held on November 13th from 7:30am to 1:30pm at the Hilton Torrey Pines. Register at www.ulisd.org.

 

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Economic and sustainable real estate trends intersect in San Diego

Economic and sustainable real estate trends intersect in San Diego

By: Tony Pauker and Mary Lydon

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Major changes in the regional economy continue to reshape San Diego land use and real estate. The frenetic growth of the housing market from 2000 to 2005 led to a huge increase in not only prices, but also building permits. Existing apartments followed suit as many of the better quality (and sometimes lower quality) units were converted to condos. Shortly thereafter, the regional office market exploded after a decade of inactivity, and suddenly downtown had two new Class-A office towers with more on the way. And we saw the first office condos. A recent $1 billion-plus investment in San Diego office space by the Irvine Company was followed by their purchase of another Class-A office tower in UTC for over $600/square foot. The hospitality industry has taken a quantum leap forward with numerous downtown hotels opening and projects planned for Chula Vista, Oceanside and the Embacadaro. When you add the increased focus on cross-border development, we find ourselves in a place we’ve never been before.

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Economists believe our region will weather the current downturn in the housing market that has led to apartment developers eagerly responding to increased demand. The meltdown of the subprime mortgage market has affected the commercial sector where we are witnessing some caution on the part of lenders causing a delay on the start of major projects. As we look to the New Year, we should expect to see more efforts to develop affordable housing and LEED certified buildings.

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The transformation of downtown San Diego has proven we are not only a community of single-family enclaves, but also a metropolitan 24-hour city. The growth in traffic has made commuting difficult and the land available for large master planned communities has mostly been built out. Consequently, much of the development activity over the past half-decade has looked inward. Not only has downtown become more vertical, so too have our “other” downtowns such as Oceanside, Escondido, and even National City and Chula Vista are exploring more vertical metropolitan models of development. Our residents have embraced this change by living closer to work, or working in the home. Some people have called these development models “sustainable,” others call it “smart growth.” No matter what title you use, it all points to a shared goal — a higher quality of life. While relatively new to many of us San Diegans, this concept is pretty much business as usual for those from Chicago, San Francisco, New York and major European and Asian cities.

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There has now emerged another evolution of this sustainable trend — “green” building. Not too long ago, the label “green” may have been a pejorative term applied to those shopping at a co-op wearing hemp clothing. Now it is as mainstream as Wal-Mart, Toyota and Starbucks. No one even blinks when someone drives a Prius to Starbucks, asks for organic coffee and recycles their cup.

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One big reason behind this change, is a growing awareness that these trends have real dollars and cents implications for our daily lives. For example, San Diego’s arid topography means our water is imported and the costs are on the rise. Our landfills are nearing capacity. Where the cost of discarding construction waste was once nominal, recycling may prove to be more cost efficient. The operational costs of heating and cooling a 20- year-old office building may be several times higher than the same costs for a new LEED-certified building that uses reclaimed water for irrigation. Apply a 6 percent cap rate to those savings, and we are talking real money. As we look across the region, major new developments by Hines, Westfield and Del Sur are leading the way in sustainable development because it not only helps the environment, it is also good business.

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At ULI San Diego/Tijuana, we will explore how economic and “sustainable” trends intersect in our region at our 2007 Real Estate Trends Conference November 13 at the Hilton Torrey Pines in La Jolla. Titled “The Dollars, Sense and Leadership of Sustainability,” we will feature noted economists, environmental experts and leading developers who are cracking the code on the economics of sustainable development. We invite you to join in the discussion. You can find all the details at ulisd.org.

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Infrastructure investment: a great rate of return for our future

Infrastructure investment: a great rate of return for our future

By: Tony Pauker and Mary Lydon

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In April 2007, the Urban Land Institute published “Infrastructure 2007: A Global Perspective.”

[space]The report gives an overview of the state of our nation’s infrastructure and some of the emerging solutions for the declining state of highways, bridges, water, electricity, airports, subways, rail and fiber optics within major cities throughout the world.

[space]It was a call for action, emphasizing that we shouldn’t wait for our bridges to collapse before moving forward. Tragically, that admonition rang true with the collapse of the 35-W Interstate Highway in Minneapolis last month.

[space]Investment in infrastructure remains a touchy subject because it requires more fees and/or taxes and any discussion of future needs means we have to embrace growth.

[space]Besides being politically unpopular, infrastructure needs are decades into the future, well past the current election cycle.

[space]Consequently, the focus is often on how to restore what we currently have and not on rethinking the model and finding efficiencies for a problem that costs billions to solve.

[space]The city of San Diego estimates the existing unfunded infrastructure deficit is between $2 billion and $3 billion. This does not include future needs or the needs of the remaining 17 cities in the county.

[space]We need a big picture approach to finding solutions for funding future infrastructure needs.

[space]A great way to start would be a regional plan that examines our realistic growth and evaluates our needs in terms of highways, transit, zoning, commerce and exit interchanges.

[space]SANDAG’s Smart Growth Map — which identifies nodes of transit-oriented development — gives San Diego a running start for defining where infrastructure and density is best suited.

[space]One of the best examples of the need for regional solutions are the tremendous water challenges the entire Southwest faces from drought, agribusiness, water run off and the purity of aquifers.

[space]Our main sources of water, the Colorado River and the Bay Delta, are diminishing due to environmental issues, run- off and decreased snow mass from increased carbon dioxide emissions.

[space]At the same time, we are faced with almost 100 miles of coastline begging for a desalinization facility.

[space]We’ve done a good job of increasing water efficiencies indoors and now the focus needs to move outdoors, specifically around landscape management and hydropower technologies.

[space]Conservation and “smart” watering systems might appear simple to implement, but the bottom line is that major changes in the way we live and do business are required of everyone and that is difficult to achieve.

[space]Take the future of San Diego’s agribusiness. The cost to farming is now driving farmers out of business, a move that could greatly diminish our food supply and its safety.

[space]Solutions to all of our infrastructure concerns might be to implement user fees, which will make people, think more about their lifestyles. When people understand the true cost they adjust accordingly.

[space]Privatization and public/private partnerships could spawn higher gas and sales taxes, special district taxes, property taxes, parking space tax, etc., forcing users to make economic choices that will fund infrastructure.

[space]But while we look to our future needs, how do we simultaneously solve our existing infrastructure deficits?

[space]We cannot expect the state or federal government to bail us out of this predicament. All of us cannot afford to abandon older communities which typically have the greatest deficits and move into greenfield developments with sparkling new roads, sewers and public parks.

[space]Is the private sector an answer? Privatizing infrastructure in the United States is nothing new, but there are many new funds, sponsored by global investment banks, private equity firms and institutional money managers who are looking to place money from pension funds, insurance companies and high net-worth individuals into infrastructure investments.

[space]These funds are a new asset class that offers secure, long-term cash flows, inflation protection and opportunities for reducing overall portfolio volatility and risk.

[space]In San Diego, the new state Route 125 toll road is a great example of a public/private partnership, which may become a model for future roadway financing strategies.

[space]In 2050 we will either be able to look back at this pivotal time and see clearly the decisions and commitments that we made for the good of all that created a region that is environmentally sound, economically feasible and socially equitable or we won’t be able to look back at all because we won’t be here.

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