Bay Area corporations doing 20-year projections on where future workforce might be coming from should take note that out in San Joaquin Valley, the city of Lathrop (near Tracy) is planning a 25 to 30,000 resident community on 4,800 acres with house prices starting at $150,000. Included in the development plans is a business park envisioned for 15,000 jobs and executive housing with backyard boat docks accessible to the 1,000 miles of Delta waterways. Add this to Mountain House, also near Tracy, which will be home to 44,000 residents, and you can envision the next Contra Costa I-680 Corridor...

In the San Ramon Valley Herald 6/26/02, mention was made of a number of California cities that now do not allow compact parking spaces, recognizing that when the compact stall trend first began in the 1970s, we were all supposed to be driving little compacts with great gas mileage, but in reality, the SUV and minivan craze has created a parking nightmare for many. "In 2001, small cars represented just 41.2 percent of automobile sales nationally, down from 23 percent a decade earlier. Over the same period, sales of SUVs, vans and light trucks increased to 44.9 percent of motor vehicles sold in 2001, up from 33.3 percent in 1991." How many times have you found a compact car in a full-size stall, thus forcing larger cars into compact spaces? Older buildings do not have the luxury of making all stalls full-size or they would lose 20 percent of their parking. Many office building leases have a clause allowing the landlord to make changes in parking configuration and charges. What about sending a notice to the tenants informing them that there will be a $20/month additional charge for compact cars tagged parking in a full-size stall? Give the $20/month collected to the property manager in charge of enforcement, or use the money to give ice cream or BBQ parties for all the tenants who comply with these new regulations.

Our building management systems are becoming more computerized and Internet-driven, with hand-held PDA interface and Bluetooth wireless connectivity to the central systems. Computerized sensors on the HVAC components can now signal when a system is acting even slightly erratic or is potentially about to experience mechanical failure. Security systems can be integrated in doors and hallways, and monitoring systems are available at relatively inexpensive costs for every exterior and interior building point imaginable. However, with recent suspected terrorist hackers trying to access government systems, how susceptible are these new office building systems to outside intruders? According to the San Ramon Valley Herald 8/27/02, "Suspected al-Qaida cyber terrorists have been quietly casing the computers that govern the Bay Area's powerplants, water systems and emerging response capabilities, prompting a high-priority security push by the FBI and experts at Lawrence Livermore Labs...U.S. investigators have found evidence that al-Qaida operators spent time on Internet sites that offer software and programming instructions for the digital switches that run power, water, transport and communication grids." If a coordinated cyber-attack on trophy properties were part of a larger scheme, will our building systems function to protect us or can they be turned against us? If a ventilation system control was turned the wrong direction during a chemical attack, or the wrong doors were locked or unlocked, what might the result be?

At the recent Realcomm Commercial Real Estate Tech Conference in Las Vegas, I moderated a panel comprised of leading REIT and institutional owners titled "Who's Pushing the Envelope?". One of the many interesting concepts discussed was the impact of the global economy on the way we think about our business. A long time ago (i.e. 1960s and before), American factories produced a great amount of our goods. In the 1980s and 1990s, our factory production shifted to Mexico and other less expensive nations. In the San Francisco Chronicle 6/21/02, "Since the end of 2000, about 250,000 factory workers in Mexico have lost their jobs. Some of the same work that left North Carolina textile plants and Chicago auto parts assembly lines for Mexico in the 1980's is now moving to Asia. The reason is the same : cheap labor." In the CC Times 6/14/02, "About 100 credit card call-center employees at ChevronTexaco Corps' Concord office will lose their jobs in November or December as part of a move of some call-center operations to a new office in the Philippines." So what does this have to do with REITS and institutional investors? An increasing number of commercial property ownership and management functions do not have to be done on site, in the same region or even in the same country. Property analysis prior to acquisition can, in part, be done in India the same as many highly technical engineering and programming assignments are currently done digitally. With many surveillance camera systems now capable of being done off-site through secured Internet sites, does the monitoring have to be done in the U.S. Pinkerton office or can it be done in the Pinkerton office in Brazil? (assuming they have one there...) Local security can be notified should a physical investigation be required. What other functions can be done elsewhere by highly trained professionals at a fraction of the current cost?

Another element also emerged during this Realcomm conference...the click-to-brick concept of just a few years whereby an office tenant would use the Internet to search for space, do market comparables, take a virtual tour of the space, negotiate on-line, hammer out the lease terms and language on-line, and then sign digitally, thus going from A to Z using the power of the Internet. Many industry professionals now view this to be an unrealistic objective. Instead, portions of the transaction will be expedited and enhanced through the Internet. Property management, tenant interaction and hundreds of other aspects of leasing, managing and owning commercial real estate will be vastly improved through harnessing the increasingly powerful and user-friendly Internet, but this does not mean everything has to go on-line. Just as few folks would buy a home, site unseen, without at least a personal inspection of the neighborhood, views, layout, etc., so too will human interaction still be a required element in the leasing and purchasing of commercial real estate. (Whew, I almost thought I was out of a job!)

According to a recent article in the San Francisco Chronicle 6/02/02, "California's bioscience industry is expected to add nearly 40,000 jobs by 2005...The more than 800 bioscience companies in Northern California employ in excess of 85,000 people, including about 52,000 in the Bay Area..." At first glance this looks like a partial cure for the Bay Area's severe office/R&D space "hangover." Many lab users have a much lower space utilization density than traditional office users, i.e. a normal office density of 200 sf per person means this job influx might represent 8 million square feet of space. For lab usage, it might represent as much as 20 to 30 million square feet of lab space. However, the bioscience industry likes unique, specialized labs with lots of fume hoods, special gas piping, very specialized heating, cooling, air filtering, mechanical systems, etc., which is why, in spite of today's huge excess space inventory, Genentech is building its own expansion facility, as are Bayer and numerous other lab users...

Did you know that new personal computers might be emitting enough pollutants to impair typing skills? According to a recent article in Tri-Valley Herald 7/3/02, a study done in Denmark found that "Most pollutants come from the monitor, where the hot cathode ray tube in a running computer causes more volatile chemicals to escape into the air. The flame retardant used in computers is also a source of the chemicals." Errors jumped an average of 22 percent when workers used the new PCs versus three-month-old models (and I thought I was being nice letting my staff get the newest equipment...).

Buildings (June 2002), in an article titled "The Next Evolution of Data Center Design," stated that data center design has not changed for more than 30 years, but computer equipment has changed drastically. "The existing method cannot effectively cool the heat dissipation generated by today's computers...Today's computers dissipate heat at up to 10 times faster than what was produced just three years ago." One solution - cool the cabinet, not the room, taking the conditioned supply air and pushing it through the electronic equipment ... for more information, contact the author R. Stephen Spinazzola at website www.RTKL.com.

In the July 1, 2002 California Real Estate Journal, "According to a 1999 nationwide study by Knoll Inc., a global office furniture manufacturer, the cubicle size for midlevel professionals has shrunk in the past decade from an average of 10 feet by 8 or 10 feet, to 8 feet by 6 or 8 feet. This space reduction has affected not just those relegated to cubicles. During the same time, the density of employees in offices has nearly doubled...The 360 full-time office workers who responded to the Knoll Study said the number one impact of increased office density is a lack of adequate storage, followed by problems with HVAC control, followed by acoustics, all of which can be detrimental to worker productivity and satisfaction."   I try to remind my clients that the cost of real estate is far surpassed by the cost of employees, and at some point diminishing returns means lowered productivity, a dissatisfied workforce and higher turnover. In other words, be careful how far you take your employee density...

As always, don't hesitate to e-mail or call me if we can be of assistance in your corporate expansion, consolidation, renewal or overall strategic planning. Have a great, safe rest of your summer!