We are continuing our coverage on the green initiative, and how it affects our clients and business. The Green Initiative has many different players, and Sascha Wagner, IIDA, CID, LEED AP, and Robin Bass, LEED AP , architects from Huntsman Architectural Group here in San Francisco, argue a convincing case for owners and tenants to Go Green. Check out the full article here

His stance echoes our recent post on the green initiative (See BayAreaComRE article), and it’s always good to hear from someone on the front line. Here are a few excerpts from his story. He shows why tenants and landlords can save in the long run, and offers some practical solutions with tenant improvements and business operations.

“The question for both parties is how to do this in a way that makes a meaningful difference to both the environment and the bottom line. With the right resources and approach, this does not have to be an either-or scenario…And tenants and owners better act fast. Regulatory changes are on their way, and what is an incentive today may be a mandate in the very near future…”

“Potential cost savings are not limited to the construction process alone. Operating costs are by far the largest expense of a building, when considering its entire life-span. Reducing ongoing expenses is made even more relevant by today’s economic pressures.”

Keep tracking our coverage on the Green Initiative!

BayAreaComRE has appeared on a USC Real Estate School graduate’s blog “The Daily Drach“, and just recently made the top 10 watch list on a NYU Real Estate student’s blog “A Student of the Real Estate Game”. Check out our article here. We follow both these guys. They have great insight into real estate and we are stoked to get on their radar.

John Drachman, author of the stellar real estate blog, The Daily Drach, mentioned BayAreaComRE on his blog today. We have followed John for a long time and post his blog in our BlogRoll below. Check out all our favorite blogs and news sources.

Here is what The Daily Drach is all about. “This blog will continue the tradition John Drachman started while in grad school, sending Daily Drach emails to classmates on stories, videos and personal commentaries on what was going on in real estate. He finally stopped being lazy and created the blog so that more people could be a part of it.”

C&W published several different media sources to update you on the world economy, the Americas and our local markets. Here is a summary of our report on the US economy, which you can view and download below via Scribd. Enjoy!

Cushman & Wakefield sheds positive light on the US economy, with greens shoots in GDP, consumer spending and business investment, even labor markets are beginning to stabilize. The number of layoffs has fallen in 2010 and temporary employment rose, a sign total employment will improve. Consumer spending saw a 2.3% annual increase from May to November of 2009 (the most recent data available). Even more promising, business increased their investment in equipment and software spending at an annualized rate of 13.3% compared with an increase of 1.5% in the 3rd quarter.

We at BayAreaComRE are happy to report good news, but recognize there is still a long way to go. The 4th quarter GDP growth of 5.7% was mostly attributable to restocking inventories, see WSJ article here. Here in SF, the office market appears to have bottomed but there is little sign of a quick recovery which is dependent on job growth and companies relocating to San Francisco. Large companies continue to downsize which will offset any gains by small firms expanding. Landlords are still very aggressive in lowering rents and increasing TI allowances.

Here are the fourth quarter 2009 Global MarketBeat reports. The link below walks you through a brief flash introduction followed by a global map where you can download the latest MarketBeat reports from markets around the globe. Thanks to the C&W Research Team for providing this great resource. (http://www.cushwake.com/cwmbs4q09/)

Listen to the podcast below by Ken McCarthy, Managing Director, US Research Services for C&W via Cushman & Wakefield – Global real estate solutions – Knowledge Center.

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In some out of market news, the Edith Green-Wendell Wyatt Federal Building in downtown Portland will begin a $133 million renovation project this year – Oregon’s largest federal stimulus package to date. The U.S. General Services Administration will team up with SERA Architects to create one of the largest vertical gardens in the world, at 250 ft. This costly, laborious project aims to reduce energy waste and consumption by up to 65% compared to other high-rise buildings. In terms of dollars, that translates to an approximate $280,000 reduction in annual energy costs.

The hefty investment (and ultimate savings) comes as no surprise once you factor in the cost of gutting some of the interior in order to replace the single-pane windows that are leaking air and water, replacing the west side facade, re-locating many of the federal employees within the building during construction, purchase of the trellis plants (aka “climbing vines”) and other eco-friendly materials.

The reconstructed building will be utilizing a multitude of technological advances, “elevators that generate electricity on the way down, solar arrays on the roof, smart lighting systems that adjust to the daylight available, using some of the collected rainwater to flush toilets.”

It couldn’t come at a better time says Kevin Kampschroer, the General Services Administration official in charge of the greening of the federal buildings, “it’s not structurally unsound, but it’s not going to get any better”

San Francisco’s GSA building has won multiple design awards including Time Magazine’s distinguished “Top 10 Architectural Marvels” award and the White House’s “Closing the Circle” Award which honors sustainable federal developments. Portland is definitely taking a step in the right direction by pushing the GSA to be a leader in sustainability.

If you haven’t checked out our “Recommended Reading” section please do, we’ve included some very helpful books that we’ve read and highly endorse (link here). At the very bottom of the Recommended Reading page we’ve just posted an awesome article by Malcolm Gladwell from a recent New Yorker entitled “The Sure Thing – How Entrepreneur Really Succeed“. It’s widely apparent that Gladwell is a progressive thinker and modern savant, and this excerpt really drives that point home. But why do we think you should check it out? We consider, although slightly behind the times in a few aspects, the commercial real estate industry to be highly entrepreneurial. Whether it be brokerage, investments, management, or any facet of the game, creativity and passion are rewarded.

To that point, Gladwell’s main thesis in the post is that often times, the concept of the cowboy, risk-taking entrepreneur is misleading, and that it’s the calculated “risk averse” entrepreneur that succeeds in the end.

“…entrepreneurial spirit could not have less in common with that of the daring risk-taker of popular imagination. Would we so revere risk-taking if we realized that the people who are supposedly taking bold risks in the cause of entrepreneurship are actually doing no such thing?”

Gladwell continues by cataloging some of the most revered businessmen of the last several decades; Ted Turner and his bets on an Atlanta television station and the Atlanta Braves, John Paulson of Paulson & Co. who shorted the most recent real estate cycle by purchasing default swaps in 2006 against the jovial mortgage lenders (considered to be “The Greatest Trade Ever“), Giovanni Agnelli, the founder of Fiat car company, and his gamble with other peoples money to start a car company, and on and on and on. The most important theme that all of these successful entrepreneurs share is that they are extremely calculated risk takers who exploit a market inefficiency. These are not “leaps of faith” as dramatized by public media, they are painstaking calculations often pushing the individuals to “work so hard to find the sure thing because anything short of that gave them ulcers.”

This serves as a great lesson for people in the RE industry, especially those that have lived through this last cycle. A lot of the inane investments and deals that were made in 2005-2007 we’re on a whim, with very little due diligence. We don’t want to spoil the goods of the article, but the 5-10 minute read will further the notion that the time and focus you spend on your work now, if calculated and methodical, will reap great rewards in due time.

REITs have been well positioned to acquire distressed assets, as the Wall Street Journal reports, because they have been able to raise more money that the private sector.

That being said, before investors sprint back to REITs, we want to highlight some of the trends that could impede this economic green shoot. Commercial properties may not have hit bottom, especially in office, and higher vacancy and lower rent-roll means higher landlord concessions and lower profit. San Francisco is nearing the bottom in office rates, but 2010 lease roll-overs threaten to stagnate absorption.

“Certain asset types have definitely hit bottom, but in others, like office, I see a lot of headwinds. And I would argue that office values have not hit bottom,” says David Bernhaut of Cushman & Wakefield Capital Markets Group in a GlobeSt article. He believes multi-family and industrial have reached the bottom.

REITs (Real Estate Investment Trusts) exemplify the changing landscape of the real estate business, highlighted in this wsj article. While in previous years, investors bought into REITs to earn steady gains above the stock market, there is a strong “correlation of real-estate stocks with the broader market.”

Even though future interest rate hikes and decreased property values expose REITs to more pain, there have been clear signs of a recovery.

“Perhaps most important, REITs have already soared from their lows. The Dow Jones Equity All REIT index, which lost three-quarters of its value between February 2007 and March 2009, has doubled since last spring. REITs now trade at a roughly 20% premium to the net value of their real estate, research firm Green Street Advisors estimates.

To bulls, that premium is deserved given hopes that commercial-property values will rise as the economy recovers. Feeding that optimism: Publicly traded REITs, unlike many private rivals, have raised debt and equity to strengthen their balance sheets, giving them the cash to buy distressed properties.”

NAREIT Vice President of Research and Industry Information Brad Case says the decline in REIT returns in January is not cause for concern and that conditions in the commercial real estate market have REITs well positioned for long-term growth. “Even in the longest and strong REIT upturns there are months with negative returns,” Case says. “But REIT investors are not looking at one-month returns but what they are likely to be seeing over the next several years.” Key to that long-term growth will be the health of the banking sector, Case says.

Cushman & Wakefield Inc. today announced that Glenn Rufrano has been named President and Chief Executive Officer of the company.  Mr. Rufrano, who will also be appointed to the company’s Board of Directors, will join the firm March 22 following the completion of his tenure as CEO of Centro Properties Group.  He will be based in New York.

Mr. Rufrano is a highly accomplished global real estate executive who has held leadership positions at public REITs and in the private real estate investment arena.  Since 2008, he has been CEO of Australian-based Centro Properties Group, and previously he served as CEO of New Plan Excel Realty Trust Inc. from 2000 to 2007.

Prior to joining New Plan, from 1983 to 2000, Mr. Rufrano was a co-founder of The O’Connor Group (currently known as O’Connor Capital Partners), which has invested in real estate internationally.  He also spent more than five years at Landauer Associates Inc. where he was involved in the sale of some of the most prominent office properties in the United States.

“We are delighted that Glenn will join Cushman & Wakefield as President and CEO.  His extensive real estate experience and management background make him the ideal leader to grow the company and further expand the brand worldwide,” said Carlo Barel di Sant’Albano, a Cushman & Wakefield board member and Chief Executive Officer of EXOR S.p.A., the investment company of the Agnelli family and the majority shareholder of Cushman & Wakefield.  “We are confident that Glenn has the vision to lead Cushman & Wakefield, creating meaningful value for our clients, employees and other stakeholders.”

“Cushman & Wakefield is one of the most recognized and respected commercial real estate services firms in the world, and I am looking forward to contributing to its growth,” said Mr. Rufrano.

Mr. Rufrano is a graduate of Rutgers University and holds a master’s degree in real estate from Florida International University.  He serves on the Boards of General Growth Properties Inc.  and New York University’s Real Estate Institute, and was previously a director of Trizec Properties Inc., a public REIT which owned office properties throughout the United States, and Criimi Mae Inc., a mortgage REIT.

As Cushman & Wakefield’s President and CEO, Mr. Rufrano replaces Bruce Mosler, who became co-chairman of the Board on January 1, 2010.

Cushman & Wakefield published our Year-End 2009 Office MarketBeat report for San Francisco. We highlighted a few key points, but you can view the full report via Scribd below. Enjoy!

Unemployment in San Francisco’s Metropolitan Statistical Area (MSA) increased to 8.9% at the close of 2009, the highest in over 30 years.  This still compares favorably to California’s unemployment rate of 11.7% for the same period. The largest job losses were concentrated in banking and finance, retail, and construction industries. The technology sector, however, is contributing to new demand in the Bay Area, and will play a significant role in the recovery of the local economy.

Market Overview: The San Francisco office market struggled in 2009, with over negative 2.3 million square feet (msf) of overall absorption citywide.  Third and fourth quarters showed small positive absorption in the Central Business District (CBD), which indicates the worst may be behind us. First quarter 2009 marked the lowest amount of city-wide leasing activity in over ten years, although activity increased significantly during the second half of the year, attributable to the abundance of high-quality office space that is now available at a discount of the rents offered in 2008.

Sales activity, while still anemic, surged in the fourth quarter, particularly in the CBD, as sellers became more motivated while buyers were attracted to historically low pricing.  Transactions in fourth quarter of approximately $160.5 million composed 90.8% of total office sales volume for 2009.

Thank you to Jessica Chase of our Research Group for helping us gather this information.

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…to Joe Stampone for mentioning our blog in his “10 Commercial Real Estate Blogs to Watch in 2010” post this morning.  Here’s what he had to say:

“I just discovered this blog a few days ago, and I’m glad I did. It’s authored by Jon Dishotsky & Justin Bedecarré of Cushman & Wakefield and provides information and breaking topics from various sources including news outlets, online publications, inside deal makers and first-hand accounts of the Bay Area Real Estate Market. Looking through the past articles they also cover a range of topics from social media to green/sustainable building. As it’s a relatively new blog, I expect to see some major changes over the course of 2010, I look forward to seeing what these guys can do.”

Thank you for the mention Joe, we’re blushing.

Don’t forget to add us on Twitter , add our feed, and sign-up for our newsletter (to the right under “email subscription”).

“There’s no reason Europe or China should have the fastest trains…workers will soon break ground on a new high-speed railroad funded by the Recovery Act. There are projects like that all across this country that will create jobs and help our nation move goods, services, and information.” President Obama’s words echoed in the congressional chamber during his first state of the union address of his presidency and a roar of applause lifted from both Republican and Democratic sides of the aisle.

The pledge of over $8 Billion to begin work on the 14 metropolitan-area-connecting high speed rail system, and over $2.5 Billion to California seems like a pretty penny, but what are the implications of this enormous endeavor? Is the result of a more interconnected Northern and Southern California truly on our horizons, or does California’s current credit rating and monstrous deficit hurdle pose an abominable challenge in getting the high speed rail system completed.

Reason.org, a non-profit free speech political watchdog group, had the following to say about the proposed high speed rail system, highlighted in their 196 page due diligence report published at the end of 2008, which they re-affirm holds true as of Obama’s Speech last evening:

“It appears unlikely that sufficient private funding and public subsidies will be found to finance the complete HSR plan. There are no genuine financial projections that indicate there will be sufficient funds to complete Phase I, much less Phase II or any other phases. It is possible that the system will either be built only in part or not at all.

Claims of profitability could not conceivably be credible under even the most optimistic assumptions, unless some or all capital and debt costs are ignored. This due diligence analysis indicates that the San Francisco-Los Angeles line alone by 2030 would suffer annual financial losses of up to $4.17 billion, with a small profit possible under only the most optimistic and improbable conditions.”

So where does that leave us? It sounds like with any major infrastructure projects, there will be a lot of political posturing and speculation as to the end result. What do we know? The rail system will create a lot of jobs from the planning, architectural, and engineering worlds (good for COM RE) and although the costs are unfamiliar at this point, one thing is certain; connecting the two economic epicenters of California via a 3 hour commute has numerous unknown paybacks by today’s measures. The California High-Speed Rail Authority is projecting that for every $1 billion spent on the project, 20,000 jobs will be created, leaving a $4.5 billion investment to translate into 90,000 jobs across California. This also pushes the San Francisco Transbay Terminal plan further towards the finish line, Bay Area Com RE reported on this a while back (here & here). We’ll stay relatively objective when commenting on politics, however we’re all for projects that create jobs, incite public and private development, and advance the infrastructure of our back yard. We’ll continue to track this story as future developments progress.

Below is a rendering of “FLY California” in action and the route it will take North from Anaheim and then North from San Diego, jump to the 1:05 mark to see the Bay Area portion of the line.

The Registry reported that “AEW Capital Management has $1 billion in equity and debt to invest in real estate on a nationwide basis in 2010, and the San Francisco region is one of its target markets, said Tom Mullahey, West Coast acquisitions director for the company. AEW is eyeballing retail and industrial properties as well as apartments and senior housing, he said.”

AEW purchased Stevens Creek Shopping Center in San Jose last year, but will now focus on San Francisco. This news backs up our recent story that San Francisco is ranked 3rd in foreign investment opportunities, See BayAreaComRE story.

“AEW’s $1 billion in dry powder is held by a combination of commingled funds and separate accounts. The money manager will seek properties across the risk spectrum including core and value-added opportunities. One of its capital sources will be AEW Value Investors II. This is a closed-ended, commingled fund for which AEW has raised $650 million in equity.”

See the full story at The Registry.

The Bay Area is the epicenter of the world’s tech and Internet revolution. Period.

We at BayAreaComRE will investigate how this trend has evolved into social media, and why there are both global and local implications. Social media emerged as the forum for networking, research and innovation, collaboration and entertainment. BayAreaComRE will track this burgeoning, maturing and evolving industry and its significant impact on our business, commercial real estate.

Social Media comprises marketing, gaming, networking and many more facets that affect both corporations and small businesses, individuals and industries. It has inextricable trickle down effects with jobs, innovation, and, of course, office space! We are experiencing a prolific economic transformation, and social media is a driver and a trend-setter.

We recently attended a CoreNet event featuring social media’s effect on business. The numbers are staggering. Its message is, well, viral – Utilize social media or get left behind. To get perspective, let’s look at the proliferation of some of the prominent technological advancements.

Years to reach 50 millions users:

• Radio – 38 Years
• TV – 13 Years
• Internet – 4 Years
• iPod – 3 Years
• Facebook – 100 million users in less than 9 months
• iPhone Applications – 1 billion in 9 months.

 

“This will prove to be an exciting year for social media and the professionals who strategically use these sites to build brand awareness and relationships. The new developments in the medium are sure to come. Adapting to the times and looking forward is virtually certain to be the most effective trend for any perceptive professional (2010: The year social media comes of age for businesses by Sam Brace via Coy Davidson).

Social Media has buoyed the Bay Area economy, while the traditional service sectors have lagged. Social Media companies have raised funding, hired, innovated and absorbed immense amounts of office space. Consider companies like Salesforce.com, Facebook, Twitter, AKQA, Zynga, Playfish, and many more who are growing and adapting with this trend. This is a testament to the diversity of the Bay Area economy, and we are happy to be a part of it.

Look for our upcoming first feature on Social Media: Gaming.

It’s not a matter of “if” or “when”, the green movement is gaining momentum now, and top corporations and building owners are proactively getting with the times. The moral argument is finally being met with the economic argument.

As energy costs go up, the way to reduce expenses is reducing usage. Building owners can save as much as $100,000 a year by efficiently managing their building’s waste. Landlords can gain back the costs it takes to reach LEED certification after the first year. Additionally, tenants who seek green build-outs pay only 5-12% premiums.

Take a look at the list of Cushman & Wakefield clients who developed Green initiatives to date: UBS, MetLife, JPMorgan, TIAA-CREF, AEGON, Adobe, Salesforce.com, Prudential, Kennedy & Associates, PG&E, Bank of America, CBRE Investors.

There are 250 LEED-EB certified buildings in the US, the marjority of which are in California, and 28 buildings in the Bay Area. Cushman & Wakefield manages over 5 million square feet in the Bay Area with LEED-EB certifictation, which is about 25% of all buildings in this area.

Visit US Green Building Council to see what buildings have reached LEED status and many other recourses for commercial properties. We are excited to be part of the solution in improving the environment and making better business decisions as well.

Most people in the commercial real estate industry have heard that Tishman Speyer, and a legion of investors, have defaulted on over $4.4 Billion in debt secured by the Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan.  The magnitute of this implosion is monumental, and truly serves as a bellwether to the boom-bust nature of this most recent cycle. The $6.29 Billion price-tag for the 56-building, 11,000-unit development that Tishman and it’s investors paid was considered the high-water mark in 2006, but nobody could have forecasted the tremendous drop in value to a current estimated valuation of $1.8 Billion. Burdensome debt, cross-collateralized and esoteric financial instruments, lackluster and declining economic fundamentals, high costs of capital, and a litany of other causes have boiled together in this default stew which is leaving the investment community with a sour taste in its mouth.

The New York Times ran a great graphic (below) highlighting  which investors and partners are getting wiped out at what levels. The next steps are messy, involving creditors, special servicers and a drawn out foreclosure process, not to mention the pain and loss nearly all of the equity and mezzanine debt holders are stomaching. For more, see the links below.

The full NYT article can be found here.

The WSJ article can be found here.

Lenders continue to bid aggressively on high quality loans with institutional borrowers. Spreads have tightened 15-25 basis points in the past 30 days for fixed rate 5-10 year loans. In addition, we are seeing more interest from regional and money center lenders trying to make 3-5 year floating rate loans. The banks are still requiring full or partial recourse for most of their financings, but their rates, even with LIBOR floors of 1-2%, are attractively priced.

As the number of seriously delinquent loans continues to increase, there is growing capital pressure on the special servicers from loans that require funding to cover debt service, operating costs and other fees. Nearly 9% of all Commercial Mortgage Backed Securities (CMBS) loans have been referred to the special servicer, which includes delinquent and defaulted loans as well as loans seeking extensions or other loan modifications. This capital pressure comes at an unfortunate time since many special servicers are struggling to remain solvent as the value of their portfolios of subordinate CMBS securities have cratered (special servicers were also active buyers of CMBS paper; that’s generally how they secured the special servicer designation in the first place). LNR, with a special servicing portfolio of $17B, is reportedly readying itself for a bankruptcy filing. This follows on the heels of Capmark’s filing in October and closely mirrors the situations at Centerline and Anthracite. The end result may be a greater willingness to push assets out the door rather than extending loans or holding them.

As of January 2010, 13 of the 15 largest delinquent CMBS loans were secured either by New York City multi-family (e.g., Riverton) or lodging assets (e.g., Extended Stay). While the problems in CMBS are being felt in every asset class and every market, it is interesting how concentrated the largest problem loans are in terms of geography and asset type.

More information can be found here.

Thank you to Chris Moyer of Cushman & Wakefield Sonnenblick Goldman, for the update.

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Members of the Association of Foreign Investors in Real Estate nominated San Francisco as the third most desireable city in the U.S. to invest in real estate. The fourth quarter 2009 survey was conducted by the James A. Graaskamp Center for Real Estate, Wisconsin School of Business. Overall, foreign investors believe that on a global scale, the U.S. is the most promising environment for real estate investments. These investors believe that the U.S. has historically demonstrated the greatest opportunity for real estate capital appreciation over time. San Francisco in particular has been in and out of the top five list since 1992. This year, San Fran came in behind New York and Washington D.C., respectively. Over the last decade foreign investors have been mostly absent from the San Francisco real estate market, until recently. Steve Pan, a Taiwanese investor, bought 49 Stevenson for $24.2 million earlier this month after taking a break from his aggressive investments in the early 1990s. Pan’s reentry into the San Francisco market could potentially draw other major Taiwanese investors who want to take advantage of the somewhat distressed properties the city has to offer. As the markets begin to beef up and money becomes more accessible, the local market will slowly reap the benefits of foreign investors.

Rent is Lower. Vacancy is Higher. Unemployment is Higher. Yes, we all know this. These economic trends are commonplace jargon and affect companies and individuals alike. But the negative externalities of these economic factors bore by property owners, lenders and stock holders are causing serious concern. Loans that are maturing in the next few years have an increasing delinquency rate as well as CMBS (commercial mortgage backed securities).

What is in store in the immediate future? “Kicking the can down the road”

A major concern articulated by National Real Estate Investor (See full article here)  is lenders are putting a band-aid on the problem, compromising our economy’s stability. Furthermore, the highest percentages of extensions have occurred  in the past two years, just as delinquencies in both CMBS and maturing loans increase to record levels.

“According to Anderson, there are two likely scenarios. The rosiest picture entails banks extending the loans, adding to the next year’s already growing volume of underwater maturing loans.

The Armageddon scenario could go something like this: An unforeseen panic or event pressures banks and other lenders to unload problematic loans, taking hefty losses on maturing mortgages that are under water or otherwise unable to qualify for refinancing.”

When did we go wrong?

Over 63% of the delinquent unpaid balance through November 2009 came from transactions issued in 2006 and 2007, with nearly 36% of all delinquency found in 2007-issued transactions.  When we extend our review to include the 2005 vintage, an additional 15% of total delinquency is found; thus over 78% of CMBS delinquency comes from 2005 to 2007 vintage transactions.

What are the expert predictions?

Realpoint (See full report here) predicts that, “Based upon an updated trend analysis, we now project the delinquency percentage to grow to between 5% and 6% through the first quarter of 2010 (potentially heavily stressed scenarios through the mid-2010).

“In 2011, 49% of maturing loans will be under water, followed by 63% in 2012, 61% in 2013, and 57% in 2014. In all, from 2010 through 2014, the total amount of maturing loans expected to be under water is a whopping $770 billion.

BayAreaComRE will keep tracking this story and how it unfolds in the Bay Area.

Some great articles from around the horn…

REITs Poised to Continue Recovery in 2010 - via Costar

Material costs continue to squeeze contractors – via Biz Times

Oakland’s 1111 Broadway earns LEED Gold – via Biz Times

[Ken] Rosen on Housing, Mortgage, and CRE Markets – via Squarefeetblog

We may have introduced this before, but the New York Times has a great new Bay Area Blog - check it out here

There’s a great article from Saturday’s New York Times that highlights the rise and current deterioration of one of the largest commercial and multi-family property owners in the world, Tishman Speyer. The developer is struggling with a portfolio of Chicago assets that it bought on behalf of its investors / partners at the peak of the recent real estate boom, most notably the Chicago Mercantile Exchange and the Civic Opera House.

The article goes on to explain how this is not uncharted territory for Chairman and Co-Cheif Executive Officer Jerry Speyer, who’s managed the company through various cycles since its founding 1978. The major factor lending to his past successes is the vast network he’s created, which the article further diagrams.

For the full story, click here.

What are the components of an office / commercial space that you typically don’t notice, but have a major impact on the place you spend nearly 30 – 50% of your living time?  Bay Area Com RE is going to give you some insight on what we think is important when evaluating new office space, the products and bones within it, and how that effects employee morale and productivity.

One such topic is lighting in the workplace. Task and ambient lighting, in an ideal world, should come from natural sunlight, however not all offices can afford such a luxury. Below we’ve detailed the various types of lighting systems in an office and their effects on the workplace.

Prismatic – It used to be common to use a prismatic lens in a troffer (light holder) to spread the light out evenly and slightly reduce glare by refracting the lamp image over greater surface area, rather than having the bare lamp visible. Studies found that glare from prismatic lenses was distracting and caused headaches because of the contrast of very high and uneven brightness above the eyes and much lower light levels at the task.

Parabolic - Prismatic lens fixtures were supplanted by polished aluminum parabolic louvers in recessed fluorescent troffers. The idea was to push the light down while eliminating excessive brightness. In fact, the louvers were so well-designed that they eliminated all fixture brightness and became dark holes in the ceiling. This allowed offices to reduce the light levels required to complete a task. With the parabolic louvers, occupants’ pupils didn’t need to contract to compensate for very bright fixtures, so they could take in more of the light available at the task. After years of using very low brightness louvers, studies discovered that occupants were actually more comfortable when they were able to identify a light source in the room. People’s primary experience of light begins with the sun and a sky. The perception of a space lighted with highly reflective parabolic louvers was repeatedly described was “cave-like” due to the dark walls and the dark ceiling (from www.facilitiesnet.com).
Indirect – Indirect lighting ostensibly makes space more comfortable and appear larger than if the openings were closer to the ground and only allowed light in nearer to the floor. But purely indirect lighting often emulates an overcast day and can have a flat and dull effect. Without the addition of brightness or points of sparkle, employees may tend to be lethargic and find it harder to work efficiently. Without access to daylight and exterior views, this effect will be exacerbated and may contribute to increased absenteeism and low morale. This situation can be helped by adding points of sparkle to a space and other points of interest that offer brightness. Replacing indirect pendants with semi-indirect (perforated housing that allows fixtures to glow) or even direct/indirect lighting (allows some light to exit the bottom of the fixture) will help mitigate the problem. Direct source lighting approximates the sun on a cloudless day; points of sparkle are like streams of light passing through branches of trees. Art work or other focal points around the perimeter to replace the ever-changing natural horizon can complement the lighting design, just as the lighting complements use of the space. The result supports productivity two ways: by providing the proper amount of light and by taking advantage of indirect but psychologically powerful effects of light on people.

It’s important to be educated about your options and also be wary of the costs of upgrading lighting to an indirect / natural combination, and whether a landlord is likely to pay for these systems or if it’s prudent to install in a building you own / operate. There’s also a lot to be said about the removal of old systems and their eventual impact on the environment when thrown in landfills. The most sustainable way to operate in commercial real estate is to utilize whatever systems are already in place, that has the smallest impact on the environment in the near term. So if your office has received the gift of great lighting, you’re already doing your part to be green.