By David M. Greenwald
In his guest piece with the Vanguard, George Heubeck brings up some important points. However, there a number of problems with the piece, as well, that need to be clarified or corrected.
There are a substantial amount of inaccurate or misleading comments.
For example, he noted, “In February of 2019 staff reported to the City Council that there were 27 parcels within the City of Davis that total 124 acres that are suitable for development.”
This is misleading. Anyone familiar with our analysis of these 124 acres knows that a good portion of those are owned by Sutter and Kaiser and are set aside for medical unit expansion. There are another 30 or so acres that are tied up because they are part of the Frontier Fertilizer site. That leaves roughly half of the total to be developed and, with the exception of the 14-acre property that was considered for Panattoni, the rest of the parcels are scattered and are less than seven acres in size.
To put that into perspective, if Mori Seiki wanted to move to Davis now, they would have no place to go.
George Heubeck further notes: “The Sacramento Business Journal reported this summer that Mark Friedman’s Fulcrum Property Development Company which owns the 33 acre University Research Park is pushing a large office complex through the entitlement process on a portion of their remaining vacant land in south Davis.”
This is also misleading. It has offices on the ground floor, but the main purpose of the development is workforce housing for people who work in the University Research Park—it does not provide 
substantial amounts of space for offices.
George Heubeck writes, “Another example of why it is premature to vote now to entitle the DISC is the Metro Air Park adjacent to the Sacramento Metro Airport. The concept for Metro Air Park has been promoted since the 1980’s. This proposal did not become viable until 2018 when Amazon agreed to build an 850,000 sq.ft. fulfillment center at the Metro Air Park.”
But in an email from someone who works for Metro Air Park, they set the record straight, arguing that this comment is either “ill-informed” or “deliberately presenting a false impression.”
He told me, “The I-5/Metro Air Pkwy interchange is a facilities mitigation requirement of the MAP project and is 100% funded by the MAP property owners through the MAP Community Facilities District (CFD). MAP ownership has paid for the design, ROW, environmental review & mitigation needs, as well as all construction costs for the project. Sacramento County ‘agreed’ to manage the construction of the interchange because Federal Highway Administration regulations do not permit private construction of facilities on the Interstate Highway System.”
He said, “Based on Mr. Heubeck’s background he should have known of that requirement.”
Further, “The June revisions of the MAP PFFP by the Sacramento County Board of Supervisors was to update the 2008 plan based on completion of many facilities and the removal and addition of other facilities because of changes to the projects design and needs.”
Someone who read the updated PFFP “would have seen that any reduction in plan area ‘development’ fees were offset by a commitment by the MAP property owners to fund any shortfalls through increased and extended Special Parcel Taxes.”
George Heubeck continues: “The absorption rate in Davis and Yolo County on the west side of the causeway does not support a project of the DISC’s scale, or the need to entitle all of it now through a development agreement. “
But that’s not what the Studio 30 report concluded a decade ago. In fact, that report noted that the historical absorption rate for Davis is low. But they estimated “that Davis can capture 5% to 10% of regional absorption, or about 90k-150k SF/yr through aggressive site development and marketing.”
The Studio 30 report concluded that the Sacramento Region “has strong absorption” and that “Davis’ share of the region’s absorption could be increased.” But in order to do that, they need a “scalable group of sites” that are “necessary to increase the range of absorbable companies.” They concluded, “Adjacent lands are good candidates for a successful innovation park setup”—that includes the current site east of Mace.
This was studied thoroughly a decade ago, which led to the current process.
One of the reasons that Davis has a low absorption rate is that the existing sites are small and scattered—which is why Danielle Casey told us last August that larger companies are not even looking at Davis because they know they have no landing spot.
Finally, George Heubeck writes, “The DISC proposal on the ballot for Davis voters lacks adequate developed parks for its interior area and a mechanism for the developers to fund their maintenance. This is particularly egregious in light of the Developer’s intent to use seven acres of the City’s Open Space land for a portion of the DISC’s agricultural buffer.”
But this repeats the misleading claims of the No on DISC campaign. The developer requested to use the seven acres of open space land—but the city declined to act on that request. Whether they do or not, the seven acres will remain as open space for agricultural uses per the Project Baseline Features—and if they get those seven acres, the city gets compensated for that land, which would enable the city to purchase additional land with Measure O funds.
There is no nexus between parks and the agricultural buffer, and to imply there is, is again misleading.
—David M. Greenwald reporting
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Especially for those readers who are not familiar with the City report, It would be useful to publish here in the Vanguard, both a list of the parcels and a link to the actual report.
Glad to see you acknowledge this, as it’s another example of the ongoing conversion of existing commercial space (to accommodate an ugly apartment building with NO Affordable housing, in this case).
There’s no demand for office space.
Their workers are already living somewhere, so it’s unclear who this “workforce housing” will actually house. But clearly (as in the case of DISC), that’s where the profit lies, for developers. They don’t actually want to build commercial, as it doesn’t support itself in the face of lack of demand.
Need more examples?
Or, how about the photos that Matt provided, regarding existing commercial vacancies?
They will, after the election. And, the city will grant it.
Do you suppose that’s what voters had in mind, when they approved the open-space program? (Providing agricultural buffers for developments, so that they don’t have to provide their own?)
Bonus points for running owls off the site.
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This whole section makes no sense. George Heubeck’s original point on the Metro Park eluded me yesterday, and David Greenwald’s point in bringing in the e-mail he received is equally elusive. I’m unclear why David included this material in today’s article. It appears to have nothing to do with DISC. The motive of the e-mail writer is easier to understand. He/she clearly has a personal axe to grind with George Heubeck.
Revising today’s article to delete this whole section as extraneous would be my suggestion.
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Studio 30 meet COVID 19.
I would be much more comfortable with the Studio 30 conclusions if they were updated to include the impacts on their absorption rate conclusions of the work-from-home transformation in the office/flex space demand that COVID has wrought.
Exactly, I thought the whole economy was in a transformation to work from home. That things needed to change and would change now that workers see they can be productive from home.
Read this fast, my comment will most likely self destruct in 5 seconds.
said like a ‘liberal arts major’… might explain delays in developing, manufacturing vaccines… building, repairing, maintaining roads… developing/building low/no emission vehicles… producing food… selling/providing food… providing water… taking care of wastes… transportation, including delivering food, ‘toys’, etc… public safety… etc., etc., etc…
Yeah, right… the whole economy can work from home… got it… you have true wisdom…
Think again… just a suggestion…
But another theory (which I ascribe to), says you need physical spaces to get the most important work done…
That report should also be updated to address the impact that the planned Woodland technology park would have. (The one that “failed” in Davis, moved 7 miles up Highway 113, and subsequently added 1,600 proposed housing units.)
Still wondering if Woodland might be the location where proposals go to die a “second death”. I guess we’ll see.
Ron O, I disagree with you regarding the Woodland park. The Studio 30 report included the Woodland park in its findings … just in a different location.
Perhaps its a better example of actual viability/demand, then what was claimed in the “Studio 54” report.
(I realize I’m using the incorrect name, but the “age” of the report seems to correspond with 1970s assumptions and goals, in regard to massive car-oriented business parks.) 😉
We can also examine the failure of MRIC itself, etc.
But again, not one shovel of dirt has been turned in Woodland, nor have any commercial tenants been announced since it failed in Davis some 3 years ago, or so. Even with the 1,600 additional housing units planned for that site.
Ron O., I’m not sure how such an examination of MRIC might be conducted, nor what the relevance of such an examination might be.
I believe you are grasping at straws with this line of commentary.
You are correct, in that the evidence of lack of demand is already demonstrated by these failures, and that there’s really nothing more to examine regarding that.
Lack of demand is also demonstrated by the vacancy photos you’ve posted, the conversions of existing commercial sites (for housing), and the lack of viability of the DISC proposal, beyond the stages which include housing. (Which you’ve acknowledged.)
The reason that we’re seeing DISC go forward at this time is because of the dense housing proposed at the site. It is subsidizing the commercial component, in the early stages.
So, if one thinks that a dense housing proposal belongs there (much larger than The Cannery), then I guess they’d support this proposal. We already know that the “usual suspects” will.
You don’t think they can fill 90,000 square feet a year?
Ron,
A couple things. Yes there is a lot of available commercial space available in Davis. The question is if it’s the right kind of commercial space? Most general class A & B office space is good for low impact (on the building use) like financial services or software development. But you can’t easily move a machine shop, chip design/manufacturing firm or bio/ag lab facilities into most (if not all) of the commercial space available in Davis. So the question to the commercial real estate agents out there is what is the true appetite for this kind of business park? The lack of a known anchor tenant or at least likely anchor tenant is very troublesome at this point.
But ultimately to me the question is if you truly believe a new business park is good for the city of Davis. For me the answer is yes because it fuels economic growth (funds more nice stuff…parks, rec…roads…etc… for the residence of Davis).
I look at the need for housing to subsidize the commercial component (despite David’s protests that there’s no way the developer could be doing that) and the convoluted overly expensive sustainable utopian vision to a necessary evil for getting the project past the voters…due the idiotic Measure J (otherwise the area could be zoned for commercial/industrial and a biz park could be built without all the hoops to jump through and complicate the project). So it will be no surprise to me if the thing doesn’t get leased out as it’s been pitched to voters. I’ve said before that I could see a large Cannabis packaging and distribution operation go in there. But it’ll all be sort out eventually even if the biz park has some downtimes. The biz park will become a productive source of jobs and revenue for the city in the long run.
Yeap.
Reminds me of the story of Goldilocks and the Three Bears. To paraphrase:
“This one is too small”.
“This one is too expensive”.
“This one” (on prime farmland, adjacent to a freeway, with 5,600 parking spaces, and subsidized by housing) is “just right”.
(Despite also being several miles away from UCD, through town.)
Yeap.
If they wanted to build a business park, they could have done so. They were provided with that opportunity, more than once.
In fact, they could do so just about anywhere in the county, adjacent to any of the more-welcoming cities.
And yet, they don’t. The reason being that there’s no demand for it, unless subsidized by expensive Davis housing.
West Sacramento could probably easily accommodate this type of thing without even expanding their urban footprint.
Perhaps more importantly, I see this as just another step toward expanding the city of Davis. What makes you think that the clamoring for the next peripheral housing development (partly as a result of this) won’t occur? (And, what happens to the “fiscal profit” at that point?)
Me neither.
Well, I guess that’s “green”. At least the product itself. 😉
Ignore
While that’s all true and I’ve said before that Davis has an extreme sense of self importance. But there is something to being “close” to a university if you’re trying to attract tech talent. It’s like it used to be if a tech company was located in Palo Alto, Mt. View or Sunnyvale. There’s a premium to being located in the nicer (expensive) areas. Now to what degree the cost of the premium is….I don’t know.
As for the size issue? That’s a real thing if major tenant improvements need to be made. You can’t do that with some small space next to a gym or a swimming pool/lessons company. You can’t do major tenant improvements if you have some small offices right above a downtown coffee shop. It’s a special sub-market that it would be nice to have better knowledge of going forward.
As for the subsidizing of the commercial project by the residential? The success of the project all comes down to the cost per square foot they can lease it out for. The easiest would be a lean and mean project that could straight up compete on price. But no…to get the project passed it has to be sustainable, eco-friendly and a vision of a mixed use utopia. All of which make the project more expensive. But even just projected revenue from the housing sales will allow more flexibility on leasing prices to lure prospective tenants. So there’s some silver lining or two wrongs making a right about this project hopefully being competitive and ultimately successful.
Ya think? 😉
DISC is some 4-5 miles from UCD. The Woodland technology center proposal is 7 (easier) miles. It was previously proposed for a site about a mile or two from Davis, before it failed there (and the site converted to accommodate the WDAAC senior housing development, and its “Davis Buyer’s program – or whatever it’s called).
(No – I’m not a fan of any of these.)
Davis housing prices command a premium, but that does not necessarily translate into premiums for commercial space.
West Sacramento is probably the cheapest and most viable location, of all. As demonstrated by the companies that make 1) undersea oil exploration equipment, and 2) the other company which makes RoundUp – both of which left Davis for what I understand was “fire-sale” leasing prices.
(No comment.) 😉
(To clarify, the Davis innovation center was initially proposed for a site within about a mile of UCD.)
Hell, even UCD itself proposed an innovation center (on campus), which ultimately failed for unknown reasons. Perhaps related to the lawsuit against UCD of which one of the esteemed council members (and primary boosters of DISC) was a party to, in regard to UCD’s development plans at that time.
On a somewhat related note, it appears that the Bay Area (technology) housing premium is now being inflicted upon Montana (among other places), as a result of the kick-starting of telecommuting.
https://www.msn.com/en-us/news/us/new-homes-on-the-range-weary-city-dwellers-escape-to-montana-creating-a-property-gold-rush/ar-BB1ad6mO?ocid=msedgdhp
I’m not sure what to think of the following, other than being amused by it. Sounds like a place that David would be exceedingly concerned about, at least. But, it reflects “who” is able to take advantage of it, I suppose:
Two questions for Matt and Ron:
1. Do you think Davis could absorb 90,000 square feet a year in commercial space?
2. If a Mori Seiki wanted to move to Davis, where would it go at present?
This is from another source/letter:
But from my perspective, this is the wrong question to ask in the first place (if the city wants to establish any kind of meaningful urban limit line).
How much room do you suppose that any of the cities in the Bay Area (which aren’t expanding outward) have? And yet, they are home to some of the most productive companies on the face of the earth.
Basically a non-answer. We’ll see what Matt comes up with.
David, I can only speculate with respect to your first question. Your second question is rhetorical given that Mori-Seki’s current parcel is 14.29 acres. However, when Mori Seki came to Davis its needs were only a third of that. Their subsequent expansion bumped the acreage requirement up to the current total. The only parcel that could accommodate 14.29 acres is APN 071-130-005, which is 43.85 acres. The lower 20 acres of APN 071-130-006 is also large enough. Both of those would be challenging lifts though.
To speculate on your first question I’ll use a few numbers.
— Using my 8′ by 12′ kitchen as a proxy template for the size of a typical office that means an office uses approximately 100 square feet in an office/flex environment.
— 90,000 square feet therefore yields 900 offices.
— Is 900 new jobs a year reasonable? I don’t know, but it appears to be a reasonable hurdle rate.
— UCD spun off approximately 15 new companies a year in the past few years.
— If all of them stayed in Davis and had 5 employees each (on average) that would account for 90 of the 900 jobs.
— So, 90% of the 900 jobs each year would need to come from companies beyond UCD.
Why don’t we put it in more concrete terms. Mori Seiki is around 150 sf. Nugget HQ is just over 32, and the complex is 64. So you are talking about three Nugget size developments a year. Or two Mori Seiki’s ever three years.
Better check your #’s, David… or, your units…
0 is nothing, unless there are several of them, preceded by a comma…
… or, did you mean ksf?
Also assuming you are using net sf (or, ksf) of bulding footprint, not lot/parcel size…
It probably should be noted that Nugget isn’t exactly a “new” company, and that the premises it’s abandoning (in Woodland, I believe) might remain vacant. Probably a familiar story, in general.
I also understand that part of the reason for the move was to consolidate its operations (and as usual, have “easy-access” to an overburdened freeway).
Not sure why that’s important. Most companies moving into larger spaces are move ups.
Point being that it can leave hard-to-fill vacancies behind.
Also, not all companies are “moving up”, by “moving out”.
Some (maybe even most) of them are also seeking cheaper locations if they’re expanding.
But underlying all of this is the unstated goal of never-ending growth.
David, here is a quote from the March 10, 2017 EPS report prepared for the 3280 Chiles Road project
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90,000 square feet per year would be just short of triple the “34,000 square feet annually since 2002” amount that EPS cites in its report.
We have the same data in the Studio 30 report who noted that we have a low absorption rate
But they believed with that 90 to 150 thousand square feet absorption is possible.
Their key points:
Existing sites are small and scattered
Historic absorption for Davis is low
Sacramento Region has strong absorption
Davis’ share of the region’s absorption could be increased
I’m asking you whether you believe we can achieve that level. Not what the level has been.
David, as I said, 90,000 square feet per year would be just short of triple the “34,000 square feet annually since 2002” amount that EPS cites in its report. What are the business fundamentals that would need to change from their 18-year historical pattern in order to achieve such a 3x level of achievement?
Even more importantly, achieve that 3x not once, but rather consistently year after year after year.
One of the most important business fundamentals is UC Davis’ collaboration with the project, and as I have pointed out many times to you, instead of Chancellor Gary May issuing a public statement that he supports DISC, Mabel Salon, who is several levels below the Chancellor on the UCD Org Chart issued UCD’s public statement, which was that they do not oppose DISC. Not a good sign.
The Amazin’ Mets won the World Series in 1969 by a miracle, but for the next 16 years their performance fell short. Then in 1986 they again hit their version of 90,000 square feet per year, and then for the next 34 years they again fell short.
Given its historical performance and the fact that the DISC economic analysis tells us that the pricing of DISC facilities is going to be well above the regional per square foot price average, Davis hitting 90,000 square feet just once would be an Amazin’ feat, but achieving that level year after year after year seems highly, highly, highly unlikely.
I really wish you would have called me back yesterday and we could have had this conversation. The biggest hindrance is the lack of space that was ready for businesses to move into. We have no 90,000 square foot facility. We had to spend a couple of years building a 30,000 one. That’s a big issue. I urge you to read Keith Echols comments about the existing space limitations, they are spot on according to the people I have spoken to who actually do this for a living and understand the field and don’t have to make 50 year old baseball analogies.
David, I understand the point you and Keith are making, and I’m definitely not discounting it, but I believe you are overlooking one of the key statements in the EPS report, specifically that “As of fourth quarter of 2016, the City’s R&D/Flex market experienced a vacancy rate of about 14 percent.”
Reducing that vacancy rate by more than two-thirds to a more healthy level of 5% or below is one of the business fundamentals that will need to be addressed. The No on B proponents argue that DISC will actually increase the vacancy rate in that existing R&D/Flex space vacancy rate, creating blight in Davis.
I’m heading off to a cancer biopsy, so I won’t see any response you may post until this evening.
Good luck with your health – far more important than this debate.
You’ve touch on an important constriction, Matt… FAR (floor area ratio)… an arbitrary standard, that works against densification and/or good utililization of land and other resources… imbedded in planning documents, including the GP… which sorely needs to be revised and updated, on many levels… each of its elements…
GP update/revision should be in the top 2-3 goals of anyone seeking to be on the CC…
Amen…