September 2008 June 2008 January 2008 September 2007   

Building in the Age of Optimization

By Kay Wilthew

Builder Wen-I Chang believes in achieving balance. He balances beauty with functionality, luxury with efficiency and business success with social responsibility. Chang lives and breathes the cause-and-effect business model practiced by his company, Atman Hospitality Group, Inc. This model encompasses the three most important aspects of Chang's business philosophy: take care of the planet, take care of the people and profit will follow.

"I want entrepreneurs to understand that to pursue profit is the essence of the business," says Chang. "However, we should look at the three top lines; or as I say, the 'three Ps.' The first is profit, the second is planet and the third is people. Everyone knows we have to take care of the planet and we have to consume less. But for taking care of people there are several angles." An important benefit of green hotels is better working conditions. And Chang also believes in sharing the wealth. "Once we begin to make some profit, we pay a bit more to the employees. It unifies the whole of the business, almost like a family." This "green spirit" results in a quasi-green hotel - Brawley Inn in Southern California maintains an enviable employee turnover rate of only 10%, far less than the industry average of 40%.

Building green is not an "all or nothing" prospect. Builders can ease into the green-building mode, making small changes that can have a big impact. "They can start, for example, using the Solatube that directs sunlight from outside into the ceiling and then defuses it evenly," advises Chang. "That's very inexpensive and they create such a dramatic demonstration." Or, hotel builders may opt for a "recycle" theme, identifying recycled materials used in the guest rooms. "From recycling the water, to the lighting, to changing an energy sensor, these are all little things involving very little expense. So, just in some way, begin anything you can."

Chang learned to navigate the green-building environment while constructing his Gaia Napa Valley Hotel, the first LEED Gold green hotel ever built in the state of California and the U.S. "Even our consultants used trial and error; they were also on the learning curve. With that kind of situation, and since we were on the forefront, we had to make decisions under uncertainty."

Many energy-efficient products were used in the hotel's construction, including low-flow showerheads and dual-flush toilets, low-energy transmittable windows, a less noisy and energy-efficient ventilation system, Solatube tubular skylights and solar panels. The hotel provides a forum for Chang to impart his environmental ideology to co-workers and guests, transforming visitors into advocates. Gaia Anderson Hotel became a medium to "deliver messages," as Marshal McLuhan put it. "We try to interact with the customer. As soon as they walk out the door, they'll start to think of the possibilities."

The Napa Valley building experience served Chang well on subsequent projects. And with the expansion of green-building practices, more products have hit the market. "We became smarter as we started to make selections and compare prices. For example, when we built the first green hotel, there were just one or two manufacturers for green roofing.

Now we found 25 or more manufacturers, which made the inclusion of this feature more feasible. So, that gave us choices, not only in products but also in engineering options for designing the actual structures."

Chang's decision to take the green path has proven a lucrative choice. The fully green Gaia Anderson Hotel and Spa has achieved 80+% of occupancy in the third month of operation and already enjoys a black ink bottom line. The Gaia Merced Hotel & Spa in Merced, CA, is awaiting final city clearance on the brown field, and then development will forge ahead. Chang intends to contribute 2% of total room revenue toward environmental and humanitarian efforts.

Chang believes that for commercial builders, the age of profit maximization is over. "This is now the age of optimization. You inherit responsibility. We, as business people, have to look beyond the short-sight profit; that is false profit because of our impact on the earth." And for the countries rich in natural resources yet whose people live in poverty, builders must acknowledge accountability for the equitable use of those resources. "We also have an impact on social degradation. If we rationalize that poor countries' resources are used up while that country becomes proportionately poorer, the business entity must take proportionate responsibility, both environmentally and socially."

The extra cost of green items is generally amortized within seven years. "And since we usually return our investment equity five years after opening, an additional one or two years' investment for the earth is worth it. After seven years, the remaining years are 'free,' anyway."

Chang is altering the mindset of the building industry, the American consumer and especially the guests of his hotels. "That's why my slogan says, 'Changing the world, one traveler at a time.' We have to be passionate. If we can successfully shift the mindset, then we'll do it. Even if a project has not been involved in LEED certification, we as a business entity must go deeper, rather than just look directly in front of us. Business is so powerful; once we do business in this way, others will follow."

Atman Hospitality Group, Inc. is located at 395 Oyster Point Blvd., Suite 213, in South San Francisco. Call (650) 588-5599 or visit atmanhospitalitygroup.com for more information.

September 2008 Commercial Edition Issue

By Wayne Mascia

The commercial real estate sales market and the residential real estate market may or may not at any given point in time experience the same difficulties. The reason, of course, is that the forces that drive each sector are different. The commercial sales market is driven by returns and available funding through institutional lenders, and home sales area driven by available product and low interest rates through banks and mortgages companies. As only a cursory reading of the media, in August 2007, not only was residential real estate lending sent reeling by the credit crunch brought on by subprime lending, but because of that crisis, commercial real estate lending was also affected, albeit differently for the different categories of commercial buyers.

We all have come to understand the problems caused by the credit crunch in the residential market - defaults on loans, depressed housing prices, lending companies going out of business and huge losses at established companies - both here and abroad.

As a result, the commercial industry has had problems created for both buyers, developers, owners/users and investors. Each category, of course, has different goals, horizons and borrowing parameters, and these are beginning to become more apparent as we progress through 2008.

Developers, for example, purchase property to improve and either dispose of or lease it, ideally for a profit. They use short-term financing, typically from one to two years and priced on a variable rate tied to short-term indexes. Their perspective focuses on market indicators and property fundamentals, rather than on the cost of capital. While the recent Fed rate cuts are likely to make their cost of money more attractive, on the other hand, a slowing economy associated with those decisions is likely to have a more negative impact on the feasibility of any project in the year ahead. According to Mark Regoli of South Bay Development Company, the crunch and its aftermath will have an effect on project feasibilities: "We expect that buildings will be tougher to sell. There will be fewer buyers in the market," he speculated, "but at the same time, it will create opportunities for some."

For established, well-qualified developers, capital will be both available and attractively priced. Lenders, of course, will scrutinize projects to assure that they can perform in today's market. Owners/users, on the other hand, are buyers who intend to occupy the property to use in their businesses. They generally seek long-term financing with fixed rates since their horizon can be a decade or longer. Many make use of U.S. Small Business Administration financing that is both attractively priced and can be highly leveraged. They repay the loan out of the cash flow of the business.

Investors bring yet a different perspective to property purchasing and financing. Interest rates to this category of buyer are particularly important since their return is basically the difference between their cost of funds and the net operating income generated by the lease or leases on the property. Due to the inability of banks to place their securitized residential loans and the myriad of other costs associated with the credit crunch, inves- tors are likely to find capitalization hard to find and more expensive and, in turn, are likely to be the hardest hit of all the commercial real estate buyers, at least for the next several years.

As South Bay Development's Mark Regoli notes, "Investment buyers are going to have to accept lower yields and this, in turn, will lead to repricing of commercial real estate as an asset class."

Finally, we in the commercial brokerage community are likely to find the next year particularly challenging as we adjust and advise our clients to adjust to the new financial realities. In the perspective of history, Regoli put today's credit crunch in context: "We have seen how a lack of liquidity has impacted on markets in the late '80s and '90s and it seems to be repeating itself. Just like they told us in business school, real estate is a very cyclical business."

September 2008 Commercial Edition Issue

Innovation and Structural Considerations

By Paris A. Tabor, P.E.

With the increased implementation of green-building practices, concepts from the past have been resurrected and are being presented as advancements within the construction industry.

The evolution of solar panels has progressed considerably since the emigrant Californians invaded Oregon in the 1970s with their geodetic domes, "holistic" gardens and Dialing for Dollars with McCormick and his puppet characters, Charley and Humphrey. At that time, solar panels were homegrown - I mean home built - and were used to run the florescent lights, off the grid, nurturing "holistic" gardens in people's garages. They never moved their VWs into the garage - very strange.

Today, solar panels implement a combination of revolutionary materials to drive efficiencies from below 10% to the high teens. SunPower model 215: an individual 32"x62" panel produces 215 watts at 17.3% efficiency.

Current solar panel systems have been refined to "stand off" current roofing material with sufficient attachment to withstand wind uplift loads, while providing adequate ventilation below the panel for maintenance purposes.

Since solar panels are typically installed postconstruction, the additional
2.4 lbs./square foot beyond the existing roofing material weight may warrant evaluation of the current roof structure, reinforced concrete, concrete composite deck, metal pan with foam insulation or wood assembly for its ability to vertically support the added assembly. Also, the added panel weight may increase the seismic lateral loads at the roof level sufficiently enough to exceed the existing shear wall panel capacities and/or wind loads. Solar panels will act as hydrofoils even on flat roofs, creating uplift connection and framing concerns. Thus, within high wind or seismic regions, having a structural review and implementing recommendations by an engineer may be prudent.

COMMERCIAL APPLICATIONS

Solar panel arrays are rapidly appearing within new retail construction as well as existing buildings, which are being structurally evaluated/rehabilitated to accept rooftop-mounted solar panel arrays and associated equipment: control panels/converters.

The electricity produced utilizing the rooftop-mounted arrays are easily powering the interior store lights for thousands of big box stores like Macy's, Lowe's, Target and Walmart; imagine the number of arrays you can put on a 50,000 square-foot box store.

Solar arrays have been recently accepted by commercial building owners without reservation and have been used for green campaigning to customers and tenants. But who wouldn't be bragging about being ecologically friendly, as their rooftop-mounted arrays convert up to 22% of available sunlight into electricity!

TRANSPARENT RESISTORS: NANOTECHNOLOGY

Remember those emigrant-Californians? Apparently, their offspring are now researchers at Oregon State University (excellent school … OK, I'm an OSU '82 grad) and have in the past couple of months collaborated with HP to develop transparent transistor and optoelectronics (thin film), creating a solar energy system that is expected to be twice as efficient and half the cost of traditional solar panels. GO BEAVERS!

Solar energy is present every day (unless you are in Alaska, then you get really long days or really long nights). We have hundreds of millions of accessible square feet of retail rooftops in the USA, which all see the light of the sun. Our task is to effectively and consistently capture this energy resource with rooftop-mounted solar panel arrays while folding it into current designs, architectural and structural, which enable the installation of optional solar equipment.

September 2008 Commercial Edition Issue

By William Scott Shepard

Most architects, builders and contractors have heard of or been involved in litigation brought by plaintiff homeowners, apartment residents or office workers where the plaintiffs contend that a whole host of medical problems have been caused by their exposure to mold growing in their home, apartment or office building. Typically, plaintiffs will be able to show that leaks or poor maintenance allowed water to enter into or exist inside the structure that eventually led to the growth of mold. Plaintiffs then allege multimillion-dollar personal injury claims alleging that "toxic mold" is the cause of all of their myriad medical problems.

However, after some early plaintiff success in achieving large jury verdicts, defendants in mold injury cases are starting to see some real success in defending against these types of cases. The Achilles' heel of these plaintiff mold injury cases comes down to the plaintiff's inability to prove actual causation of personal injuries (i.e., that mold was present in the property, mycotoxins that can cause some health problems were present in the mold, the plaintiff was exposed to the mycotoxins and this exposure to a specific mycotoxin caused the specific severe health problems alleged).

OVERVIEW

Mold is a naturally occurring organism that is found everywhere, both indoors and outdoors, and serves the very useful function of breaking down dead organic matter in nature. Mold produces spores to reproduce, which travel through the air. When mold spores land on a moist environment, they begin to grow, surviving on the material and moisture on which they land. For indoor mold, the host could include lumber, drywall, window sills, building paper, carpet backing or padding, etc.1

THE PROVEN HEALTH EFFECTS OF EXPOSURE TO MOLD ARE FAR LESS THAN ALLEGED

Inhaling mold, touching mold or ingesting mold is known to cause allergic reactions in humans who are sensitive to mold, and worsened asthma for those who already have asthma. Only approximately 5% of the human population is likely to have an allergic reaction to exposure to mold. The allergic responses to mold may include hay fever-like symptoms such as sneezing, runny nose, red eyes, wheezing and/or a skin rash, or a worsening of asthma.2

What has not been proven medically is that exposure to mold causes any more serious health problems or conditions, other than those just mentioned, that are triggered by an allergic response. The plaintiffs' bar contends that exposure to mold can cause far more serious health problems. However, in 2002, the American College of Occupational and Environmental Medicine issued a position statement that discussed the state of scientific knowledge as to the nature of fungal-related illness, and found that "[c]urrent scientific evidence does not support the proposition that human health has been adversely affected by inhaled mycotoxins in the home, school or environment."3 Later, in 2004, the Institute of Medicine issued its report (the IOM report). The IOM report concluded that there was not sufficient evidence of a causal relationship between damp and moldy indoor environments and adverse health effects in humans. The Institute of Medicine's findings have also been confirmed by a later survey of the scientific literature conducted in
2006.4 The medical and scientific data available does not support the contention that exposure to mold in a typical home or apartment suffering from water infiltration will lead to the whole range of nonspecific medical complaints raised by the typical plaintiff.5

THE PRESENCE OF MOLD DOES NOT PROVE EXPOSURE TO MYCOTOXINS

One way to combat a typical mold injury case is by using available expert witnesses and medical evidence to show that the mere presence of mold in a dwelling unit does not prove exposure to mycotoxins. Not all molds can or do produce mycotoxins that are alleged to make people sick.6 In addition, the conditions and factors as to when a mold will actually produce mycotoxins are not well understood.7 But, it is safe to say that finding that mold is present inside a building by no way means that mycotoxins are present or that a resident has been exposed to, and received, a sufficient dose of mycotoxins.8

CONCLUSION

There is hope in the fight against mold personal injury claims. Architects, home builders and building owners should retain competent medical experts and attack plaintiff medical injury claims at their weakest point - causation. Current medical evidence does not support that exposure to mold causes any health problems more severe than an allergic reaction to mold, similar to hay fever symptoms.

References 1. EPA, A Brief Guide to Mold, Moisture, and Your Home, (2007), p. 2; EPA, Mold Remediation in Schools and Commercial Buildings, (2001), p. 2 & Appendix B, p. 39; American College of Occupational and Environmental Medicine Position Statement, Adverse Human Health Effects Associated with Molds in the Indoor Environment, (October 27, 2002), p. 1 (hereinafter ACOEM, Adverse Health Effects). 2. EPA, A Brief Guide to Mold, Moisture, and Your Home, (2007), p. 2; Bush R., Portnoy J., Saxon A., Terr A., Wood R., The medical effects of mold exposure, J. of Allergy and Clin Immunol (2006)(hereinafter Bush); Vol. 117, p. 326; ACOEM, Adverse Health Effects, supra, p. 1. 3. ACOEM, Adverse Health Effects, supra, p. 1. 4. Bush, supra, J. of Allergy and Clin Immunol, Vol. 117, p. 326-333; ACOEM, Adverse Health Effects, supra, p. 3. 5. Bush, supra, J. of Allergy and Clin Immunol, Vol. 117 at p. 329. 6. Id.; American College of Medical Toxicology Comment, Institute of Medicine Report on Damp Indoor Spaces and Health, (2004) p. 2; ACOEM, Adverse Health Effects, supra, p. 3; Geffecken v. D'Andrea (2006) 137 Cal.App.4th 1298, 1308. 7. ACOEM, Adverse Health Effects, supra, pp. 3-4. 8. Bush, supra, J. of Allergy and Clin Immunol, Vol. 117, p. 329; ACOEM, Adverse Health Effects, supra, pp. 3-4.

September 2008 Commercial Edition Issue

Value Through Innovation

By Russ J. Stacey

The résumé for Webcor Builders reads like a "what's where" in the state of California. Some of the notable structures dotting the landscape that Webcor has built include Oracle World Headquarters, the Letterman Digital Arts Center (the first private development in a national park), California Academy of Sciences, Millennium Tower (the tallest concrete structure in San Francisco), San Francisco's St. Regis Hotel, the W San Diego and the Californian on Wilshire in Los Angeles. But it is a current undertaking in Oakland nearing completion that has proven to be a most challenging - and rewarding - venture for Project Director Todd Mercer and his team.

Covering two square blocks on the shore of Lake Merritt, the Cathedral of Christ the Light is a showcase of stunning architectural features and ambitious technology. The cathedral's unique, oval-shaped edifice has been engineered to last for three centuries and to withstand the force of a 1,000-year earthquake. The project includes a distinctive, 1,500-person sanctuary, a mausoleum, conference and residential facilities, office and retail spaces and a subterranean parking garage.

Over 60,000 tons of concrete were poured to create the project, but it isn't the enormous volume that injects Todd's voice and demeanor with pride. "The complex geometrical shapes formed with the concrete are unique and challenging. To create them, we used self-consolidating concrete - something that we had limited experience with on such a large and complex scale. We had to figure out how to use it, how to incorporate it into the project and how to navigate several roadblocks. The result is some of the highest quality and most complicated exposed architectural concrete in the region." For its work on Cathedral of Christ the Light, Webcor was awarded the 2007 American Concrete Institute (ACI) Award for Architectural Concrete for Northern California.

One might think that with that much concrete, the building would look like a fortress. However, much of that concrete has been used to form a curving base for the soaring and luminous sanctuary that sits atop. This inspired space is covered by 1,028 panes of fritted, transparent glass and topped by an oval-shaped oculus roof over 100 feet high. The cathedral's signature roof and ceiling required a unique "top down" erection sequence with a shoring tower used to support the roof before the installation of the permanent support structure. "We were even able to utilize standard scaffolding," Todd explains. The permanent support structure is as unique as the roof and consists of 26 curving glue-laminated ribs made from Douglas fir and 26 straight fir mullions, which had to be painstakingly put into place.

After breaking ground in 2005, the magnitude of the mission is sinking in as they wind down the project to its completion. "What makes it really monumental is the fact that it's going to be here for a very long time and that it's a community building. I've left a part of me in it," Todd says. "I truly believe that there isn't anybody that could have completed this project at this level of quality, in this timeframe and for the same cost that we did. Webcor's expertise in structural and architectural concrete was critical in achieving the desired design aesthetic and award-winning quality that parishioners and community members will be able to enjoy for centuries to come."

Founded in 1971, Webcor is currently ranked as the largest commercial construction firm in California by volume and is consistently ranked among ENR's top 30 general contractors in the nation. The firm, with over $2.4 billion in open contracts currently in place, has built a reputation for cost-saving collaboration with its clients and its forward embrace of technology. With over 50 million square feet of results, Webcor's experience includes commercial office buildings, high-tech corporate campuses, high-density residential projects, parking structures, luxury hotels, cultural facilities and many renovation and restoration projects as well.

Though Webcor has grown exponentially over the years, Todd's passion reflects the company philosophy. "We become builders because part of us wants to know how things work and how things go together and then be involved in the building. Part of it is we want to be able to point and say, 'Look what I worked on. Look what I was a part of.'"

Whether constructing sustainable, cost-effective solutions for a modest-sized arts organization or erecting a skyscraper for a mammoth corporation, each project for Webcor presents its own cadre of interesting hurdles to dissect, overcome and learn from. Or, as Todd put it, "They all have a different spin to them, but each is special for different reasons."

Webcor's corporate headquarters is located at 951 Mariners Island Blvd., 7th floor, San Mateo, CA 94404. Call (650) 349-2727 or visit webcor.com for more information and for their other locations.

June 2008 Commercial Edition Issue

Graphic Reproduction Provides or the Big Picture

By Russ J. Stacey

Graphic Reproduction's roots go back to 1959 when founder and owner Walt Walker started the company. Now a fixture throughout the San Francisco Bay Area, Walker and his team still pride themselves on a cornerstone of their success: delivering what customers need, when they need it. "Recently we had a customer come in on a late Saturday afternoon," he says. "An architect brought in a job en route to his 52nd wedding anniversary. We delivered his job at 8:00 the next morning. We do live up to our word that we're there whenever you need us."

In the middle of the night, on weekends, during holidays - meeting customer deadlines is serious business. "We're committed to having each printing phase of a construction project done on time," adds sales manager Bret Foster. "That's always been our focus, and the equipment and technology that we've invested in supports that commitment."

The company, with three locations, offers a robust variety of reprographic services for the engineering, design, architectural and construction professions - from CAD plotting, document scanning and binding and finishing services to 3-D printer model making. Foster also emphasizes their comprehensive online plan room and document management service. "We can keep construction drawings and documents in an organized system. It's in a digital format, easy to access, easy to customize and password secured. For more elaborate benefits, the online plan room offers what Foster calls a "cradle to grave building concept." Uploaded files can be taken from the conception of a building project to completion. For instance, drawings and specs can be converted to an OCR format to create smart documents, which can be quickly imported and indexed into the system. All project documents can be stored in the system, including project schedules, bid instructions, punch lists, warranties, contracts, RFIs, MSDS, construction site photos and manuals. Contractors can easily perform their takeoffs electronically. Plus all documents are tracked using a Version Control System, which always knows which document is current. A large construction project currently underway in the plan room is the 1,000+ Clark Construction drawings for the John Muir Hospital expansion in Walnut Creek.

Newly acquired copier technologies like the Konica Minolta 1050 allow Graphic Reproduction to run 12x18 paper stock, which few copiers can do. The advantage it has over standard 11x17 sheet-fed copiers is that the extra inch allows for documents that are typically bound on the left side to be viewed much easier.

For speed, the KIP 9000 series wide-format plotter produces 1,200 prints an hour to produce construction bid sets. With its image-enhancement technology, plotting drawings at 600 dpi renders superior quality line and screened information, smoothing out curved lines to eradicate annoying, choppy, half-dots.

And Graphic Reproduction does its part to be green. "We are able to run copies of half-size drawings two-sided, translating to a 50% paper reduction in putting out construction bid documents," Walker says. The company offers wide-format recycled paper, and their eight large-format plotters, the KIP 7000 and 8000 series, are Energy Star-rated as well as being the only 100% toner-efficient machines in their class, meaning there is no toner waste.

Always looking to the future, Graphic Reproduction was the first reprographic service in Northern California to introduce - and is still the only one to possess - a 3-D model-making printer. An invaluable tool for developers, planners, architects and builders, it produces three-dimensional models of a building project, whether in the conceptual phase or during construction.

For customers who can't or choose not to make a large investment in copy or plotting equipment, Graphic Reproduction offers on-site facilities management services. They can install wide-format copiers, and either train the customer on how to operate the equipment or have one of their technicians do it. "The advantage is the customer doesn't have a huge capital outlay on a piece of equipment that'll be outdated in a year or two," says Oakland branch manager Dave Bethea.

Graphic Reproduction has 34 vehicles to deliver their many services. "The largest dispatch fleet for pickup and delivery," Foster says. "We service the entire Bay Area, plus Sacramento, Stockton, Santa Rosa and San Jose. We use an automated GPS system for monitoring pickups and deliveries that also improves response-time efficiency. We have a sophisticated job order tracking system for scheduling and tracking orders while in production."

"Plus we have a lot more equipment, so the job order turnaround time on larger projects is much quicker compared to other shops," Bethea says. "And we have the expertise."

Graphic Reproduction has three locations: 1381 Franquette Ave., Bldg B1, in Concord; 496 Natoma St. in San Francisco; and 2327 Union St. in Oakland. Call their Concord location at (925) 674-0900 or visit graphic4u.com for more information.

June 2008 Commercial Edition Issue

By Wayne M. Mascia

Looking for new offices or other facilities for your business? Whether your need is for expansion or you are looking for your first space, sublease facilities are and always have been a viable option. Sublease space represents facilities offered by other businesses that, for a variety of reasons, find such space in excess of their current needs.

Typically, technology companies find they have overestimated their space needs because anticipated expansion did not occur, or any of a hundred possible economic or business calculations simply did not materialize. They find themselves locked into excess leased space they don't need that represents an often expensive drain on resources.

For both overall space available and for the subcategory of sublease space, Silicon Valley is no different than any other market - perhaps just more so. Availability is a constantly changing picture, subject to economic shifts and the realities and perceptions of those businesses needing and supplying commercial real estate space.

Our data indicates that for the last five years, the amount of sublease space on the market has varied from a high of 44% of total space - the situation in 2002 during a time of corporate downsizing, buyouts and general consolidation - to a current low of 21%, reflecting economic expansion and buoyant expectations.

Because of the obvious pressure on businesses needing to sublease excess space, such facilities generally provide very competitive rates and sometimes unusual opportunities and therefore should not be overlooked. At the same time, subleases do require careful attention to the details and documents used, to be sure you get what you expected.

Unlike direct-lease transactions of a lessor and lessee, a sublease involves three parties: the master landlord, the lessor and the sublessor. All parties have their own competitive interests in the sublease negotiations. As brokers representing the tenant, we always recommend that our client engage the services of an attorney to review the master lease and sublease documents to assure their own interests and needs are met.

As brokers having negotiated numerous subleases, we have found that several issues consistently surface during discussions that should be reviewed carefully by the tenant. First is to thoroughly review and understand the master lease, which will continue to rule your occupancy. It may be, for example, you who were verbally assured the lease expiration date was fi ve years hence, when in fact the lease says three years. There may be restrictions on use of the building, which would impact your intended business use. If you later find out about these potential limitations, which are locked into the master lease and cannot easily be changed, any bargain may be problematic.

In reviewing the master lease, you should be alert to several other typical issues. For example, in case of default, make sure the lessor cannot terminate the lease so long as you continue to pay the rent to the lessor. You will want to be sure that as a sublessee you have the right to sublease your space should your own situation change. Finally, you will want to be sure that when you surrender the premises at the end of your sublease, you are clear about your responsibility of returning the space to its original condition.

These cautionary notes notwithstanding, as you begin exploring the market with your broker, the inclusion of subleased space could present some intriguing opportunities.

June 2008 Commercial Edition Issue

A Growing Trend in Storm Water Management

By Robia S. Chang and Carolyn Nelson Rowan

Communities are increasingly using an approach known as "low-impact development" (LID) to control storm water pollution. Instead of making large investments in complex and costly engineering strategies for municipality-wide storm water management, LID manages storm water through lot-level design strategies that mimic natural hydrology and processes. LID is customized by development and implemented on site by developers. LID addresses runoff close to the source, for example, by disconnecting roofs and paved areas from traditional drainage infrastructure and directing runoff to natural areas such as vegetated open spaces, which look like landscaped areas but are actually engineered systems that use plants and soil to trap and treat various contaminants. Other common LID practices include rooftop gardens, tree planter boxes and the use of permeable pavement in low-traffic areas, parking areas and walking paths.

For the most part, LID has been a voluntary approach, promoted by localities and adopted by developers. But recent developments in California permitting signal an increasing trend to require implementation of LID techniques.

Earlier this year, the San Diego Regional Water Quality Control Board approved a storm water runoff permit that will require the San Diego County, the Port District and the county's 18 cities to increase the testing and monitoring of runoff, street sweeping and sewer-line cleaning. Significantly, the renewal permit also requires the use of LIDs to control storm water pollution. Specifically, the permit requires routing of runoff from impervious to pervious areas and the use of permeable surfaces for portions of low-traffic areas. All sites greater than one acre will be subject to these same permit conditions within the next three years.

Similarly, a draft permit issued to Ventura County by the Los Angeles Regional Water Quality Control Board requires that all new development and redevelopment projects integrate LID principles into project design. The permittees, including the County Watershed Protection District, the Ventura County and 10 cities within the county, are to develop a LID Technical Guidance Document for use by planners and developers within 18 months of the issuance of the permit.

Most recently, on May 1, 2007, the San Francisco Bay Area's draft permit, which covers 76 municipalities, was released for review. As expected, all "regulated projects" must integrate LID principles. "Regulated projects" include commercial development projects that create 10,000 square feet or more of impervious surface (collectively over the entire project site), excluding interior remodels and routine maintenance or repair. Beginning the fourth year after permit adoption, the square footage threshold will drop to 5,000 square feet.

These regional developments in storm water management signal widespread change within California. As the focus of long-term planning shifts to include a more thorough review of environmental impacts, developers should expect that all state and local jurisdictions regulating storm water will require LID storm water pollution control for future developments.

June 2008 Commercial Edition Issue

By Perry A. Tabor, P.E.

The California Historical Building Code (CHBC) provides specific regulations (alternative building codes) for the preservation, restoration, rehabilitation, relocation or reconstruction of qualified historic buildings or properties so as to preserve their original or restored architectural elements and features. At the same time, it provides for the safety of occupants and for the reasonable accommodation of people with disabilities.

While these alternative solutions are intended to protect historic buildings from the adverse impact of certain requirements of the regular building code, they also translate into cost-effective incentives as described by the California Office of Historic Preservation.

A "qualified historical building" is defined as any building, group of buildings, district, site or object that is listed by any level of government as having historic importance. This also includes those resources listed in the state of California's evaluated inventory, and given any level of significance other than "not eligible." Also included are ships and railroad rolling stock of historical significance.

The CHBC recognizes and endorses the need - on a case-by-case basis - to find and adopt reasonable alternative situations where strict compliance with established statutes or regulations would jeopardize the historic building's appearance or rehabilitation of economic viability (i.e., full upgrade of building).

The "triggers" for full upgrading to current standards, with respect to length of vacancy, change of occupancy or percentage of value of the work proposed, and which exist in other codes, are not recognized by the CHBC, which concentrates instead on the preservation-sensitive resolution of genuine safety considerations.

Structural/seismic upgrading issues are governed by the CHBC, permitting design based on real values (performance) of archaic materials and solutions based on engineering principles and professional judgment (providing a framework within which unique solutions may be custom tailored to the specific problems related to each unique historic resource), rather than solutions limited to code-based (prescriptive) formulas. This flexibility usually translates into a higher degree of retention of the historic fabric.

You may very well benefit if your building qualifies as a "historical building." Places to research whether your prop- erty "qualifies":
- The Office of Historic Preservation - computer lists of the National Register and California Register
- Local planning office - The planning department is usually the best place to find local lists
- Local heritage or history commissions
- Local neighborhood or preservation organizations - These groups may have access to official lists, but can't create official lists
- Local, state and federal agencies that promulgate projects - CalTrans, Department of Water Resources, Department of General Services/Real Estate Services Division, local water agencies and local public works departments

June 2008 Commercial Edition Issue

By Wayne Mascia

On a drizzly day in mid-October, all the brokers in the office bundled onto a bus for a tour of all the new commercial projects under construction and sites planned to be initiated in 2008 and beyond. Intended as more than a simple inventory update, the tour was to give us the collective opportunity to gauge and analyze the trends looming on the near-term horizon and their impact on the landscape and economies of the region.

As confirmed by a view from just about any upper-floor window in the Valley and certainly from our tour bus windows, numerous high-end office projects of three, four and five stories are now under construction and will add 2.1 million square feet of new space in 2008 alone. Spearheaded by developers Jay Paul, Menlo Equities, California Bavarian Construction and others, such projects signal the new building boom is more than a rumor. Among the trends in a market already mature is the fact that much of the new construction is taking place where previous facilities built in the late 1970s and early '80s must be demolished to make way for campuses of two- and three-story buildings. Led by veteran Sobrato Development Companies with 516,000 square feet in Santa Clara and Sunnyvale Town Center, such new facilities are supplementing the previous tilt-ups that characterized these markets in the past.

Even more dramatic, Tishman-Speyer, Hunter-Storm and others are eyeing eight office towers totaling 400,000 to 800,000 square feet in Santa Clara's North First Street area. Such projects not only contain the of- fice towers that are the symbols of the new development dynamic, but also major hotels (in this case featuring 230 rooms) and retail space on the same site.

When it comes to such mixed-use development, few signal the new dynamic more than the area for the city of San Jose's "Vision 2030" in the city's North First Street corridor. A truly bold project on approximately 230 acres, loosely bounded by North First Street, and highways 237 and 101, it envisions 32,000 homes and apartments, retail, schools, entertainment and services within a short distance of the facilities in which the inhabitants work. Like comparable visionary urban projects across the country, Vision 2030 will be characterized by higher density construction, new lifestyle patterns and more intensive utilization of the available area. Realization of the Vision 2030 project will require the demolition of 4 million square feet of existing buildings, but in the larger context of the Silicon Valley, more than 5.5 million square feet has already been razed to make way for residential and supporting development of the new urban infill. While issues of balancing public and private responsibility for costs and other details remain, developers and city officials do seem both committed and enthusiastic.

Certainly, we were all stunned to realize that many of the new projects planned necessitated the destruction of existing facilities, many of which were less than 30 years old. In light of today's environmental sensitivity where recycling is viewed as a virtue, it can be difficult to comprehend that the life of many Silicon Valley buildings is but 30 years. On the other hand, changing space configurations have rendered them obsolete by design and shifting function. Further, the value of the land itself, which has increased from $2 a square foot in 1977 to $60 today, obviously places a monumental premium on obtaining higher use to maximize return on investment.

Our tour disclosed that many of the new projects are staggering in scope and ambition, yet again promising to change the landscape of Silicone Valley commercial real estate. Look at the numbers: 15 new high-rise office buildings totaling 5 million square feet; two hotels with a total of 340 rooms; 15 retail projects totaling another
1.3 million square feet; and countless infill residential units covering the gamut of lifestyle options. While the last building boom in the mid-1980s consisted almost exclusively of single-story buildings suitable for manufacturing, this building boom is characterized primarily by high-rise office buildings designed to attract engineering and business users in close proximity to supporting amenities. Commercial designs in addition to green features are likely to be architecturally imposing, giving the Valley a new face and vibrancy.

As exemplified by products of the new building boom, Silicon Valley promises to become taller and denser, yet ironically more human and environmentally friendly. The new commercial facilities address shifting technology industry demands for working environments that stress creativity while addressing employee needs like never before. Further, these commercial properties are very consciously being developed in an overall community context that, unlike the previous often myopic attention to economic function alone, will see a greener, more livable, more productive Silicon Valley.

January 2008 Commercial Edition Issue