By David M. Greenwald
Executive Editor
Davis, CA – One of our commenters posted a link with listings (link) which shows a list of commercial offerings in Davis. It looks like an impressive list until you actually go through the listings and categorize them by type and you realize a few things very quickly.
I entered the information from the listings into a spreadsheet and posted it (here). Back-of-the-envelope stuff but it illustrates the problem with looking at numbers of commercial listings and saying, hey look, we have tons of space we can already utilize.
The first thing that jumps out is some of those spaces are retail spaces—we’re talking about spaces in the U-Mall which is being redeveloped, Target, and Davis Commons. In all, eight of the 31 listings are for retail spaces.
The biggest segment is office space. That makes a lot of sense. While many companies are going back to in-person, the pandemic has changed the nature of the office environment probably permanently and so, yes, there is a lot of office space.
This is a key point, because, for the most part, you are not going to be looking to office space if you are looking to move a lab or R&D to Davis.
I said yesterday that you can’t put a lab into office space. That probably oversimplified the point. You would have to do some major renovation and upgrades to be able to do it.
Most office spaces do not have the wiring, the HVAC, and other infrastructure needs to be able to support much more than an office. And I can tell you personally that, even with our organization, the current office space lacks a lot of what we needed. If we had our own on-site server, we would need to move to another location.
So yes, you could renovate a lot of the older and more antiquated offices at great cost, you could develop the buildings themselves also at great cost, but most businesses that would need space the size that exists in Davis, are small start ups and they don’t have the resources to do that and the business owners are not interested in spending the money to upgrade when they know eventually someone will rent it as is.
There are a few larger spaces available even for office—the old Enterprise printing press, for example, is available, not sure what condition that building is. I did see a few flex spaces available on the list—most of them smaller than 5000 square feet.
I saw exactly one lab-ready space available on Drew in the University Research Park at about 6500 square feet. One problem we have from the listings: unless you actually contact the agent, you have no idea if that space is still available.
Bottom line is that rather than disproving the notion that we lack space, going through this listing of 31 spaces proves what we already knew—there is not much left for lab and R&D in Davis. What is available is on the small side and, from what I understand, is quickly snatched up.
Just talk to someone like Tim Keller, because if there was appropriate space for labs and startups of the sort that they are looking to move to DiSC, they would already be snatched up by someone like Keller or the like.
Keller in a March interview with the Vanguard said that “Davis has been ‘leaking’ extremely valuable companies for decades now. Because we have a lack of commercial space, a lot of companies set up shop in Woodland, West Sac, or elsewhere. These are companies founded by Davis residents—and those residents are forced to commute out of Davis to work.”
He later added, “We need to ensure that the actual build-out comprises mostly flexible buildings that are easy to subdivide into suites that are in the 1,000-2,000 square foot range. That is what startup companies need…”
Keller completely filled the space at Inventopia and has been looking for additional space to expand—but so far has had no luck.
Some may have noticed last fall that there was a listing for about 85,000 square feet at the Mori Seiki site along Second Street. If you drive by that spot now, you will notice that sign is gone. I have been told there will be a big announcement about that at some point here—maybe even this week.
The bottom line is that there is some available retail and office space in Davis—but in terms of actual flex and lab space, it’s pretty much non-existent or not ready to use.
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There is a huge assumption in the last ten words. Will someone actually rent many of these spaces “as is” eventually? How long has the Borders-Whole Foods space been vacant? Has the strip mall north of the Co-Op been vacant long enough to qualify as urban blight?
If we care about the health of the community we live in, it is time to deal with the tattered edges of our commercial infrastructure. I believe the list of commercial vacancies referenced in this article is just a portion of the actual commercial properties that are lying fallow, generating no rent for their owner(s) and/or landlord(s). Many of those building owners are “trapped” in much the same way that owners of residences were “upside down” when the housing bubble burst in 2008. Many of those buildings can already be classified as urban blight.
Perhaps it is time to think about the resilience and sustainability of our community and consider an Urban Blight Eradication program modeled after the City’s formal Open Space Program, which was established in 1990 to implement long-standing policies that called for the protection of the farmlands and habitat areas that surround the community. Since that time, it has been a national model for open space preservation … a living, breathing public-private partnership.
Which ones?
You want the city voters to tax the city’s property owners to pay for redevelopment of commercial sites in Davis? The amount raised by the Open Space tax wouldn’t be enough to fund any meaningful redevelopment.
What is the commercial vacancy rate in Davis, and how does it compare to the region?
The property is under lease, so the property’s owner is still being paid. It may be annoying to the City due to the lost sales tax revenues, but it isn’t really an issue for the property owner.
Last I checked, the strip mall was fully occupied, with the exception of the two sites at the North end, which are subject to a hazardous waste cleanup project due to the former Dry Cleaning business and the leaking gas tanks from the old gas station on the corner.
Speculation with no basis in fact. That is what you generally get with “I believe…” statements.
What evidence is there that commercial property values in town have significantly dropped in recent years due to a “bubble burst?” Your statement is nonsense, especially when you consider that many of the properties in question have been under the same ownership for multiple decades so the initial investments in the buildings have long ago paid off. The owners are not “trapped,” nor do they have much incentive to take on the financial risk of redevelopment.
and in your entire post.
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All true statements, and none of them contradict an assessment that the property qualifies as “underperforming” in its contribution to the local Davis economy.
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What is the status of that hazardous waste cleanup project? What aspirations for that parcel did the Downtown Plan Update settle on? Feel free to disagree, but I stand by my assessment that that whole strip mall is “underperforming” in its contribution to the local Davis economy.
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In your comment above, you are only looking at the situation from a Balance Sheet perspective. The expression “upside down” did relate to the value of an owned parcel dropping below the outstanding mortgage balance. However, it also referred to situations where a previously positive bottom-line on the parcel’s Income Statement goes negative because all or part of the parcel goes from leased to vacant … leaving ongoing expenses without sufficient ongoing revenue from rents to cover the expenses.
You are correct that Davis has been largely immune to Balance Sheet “upsidedowns” but that immunity from property value decline does not insulate owners from Income Statement “upsidedowns” and very few properties have leases like the Borders-Whole Foods property where monthly rent payments are made even though the property is vacant.
Many parcels are held for long periods with negative cashflows (e.g., property taxes) with expectations of large capital gains. It’s the reason why investment hurdle rates are so high for real estate development. In addition, the tax code has been written very favorably for real estate developers so they don’t face substantial cashflow pressures for buy and hold. Why do you think Trump paid $750 in federal taxes? Our tax code leads to some pretty stupid outcomes.
I don’t disagree Richard. However, rather than prejudging the local Davis situation with only anecdotal remarks, I strongly believe Davis needs to be proactive, and in my opinion the first step in a proactive plan would be to create a a publicly shared Economic Development Plan that includes well thought out information about not only the supply of building space, but also the demand for that space that might come from various segments of the national economy.
Some of that well thought out information would be a profile of each underperforming (whether vacant or not) commercial property. Bringing the owners of those underperforming properties into a regional planning process that supports Davis’ vision of what it wants to be in the future would expose them to other alternatives for their properties other than the very passive (some would say regressive) approach they are currently following by default.
I responded to the false and disingenuous statements in your post, not your new ‘reimagined interpretation’ of your original comments. ‘Moving the goal posts’ is another disingenuous action on your part. I see that Groc has taught you well.
No, I was correcting your false and disingenuous statements. If you want to make a new statement, do so, but anytime you attempt to twist my words or meaning to better fit your new argument, as you have done here, you are yet again being false and disingenuous.
Reading is fundamental Mark. If you go back and reread my original comment, nothing you have included in your “imagined” interpretation of the word “vacant” changes the fact that the space is vacant.
This is my fourth comment in this thread. I will refrain from posting any more comments in this thread today.
There are 9 large restaurant spaces vacant at the moment in Davis, mostly downtown. One is slated for redevelopment and two others have announced leases, although one will just create another vacancy. I know at least 2 restaurateurs who wanted to lease space but were given unacceptable terms (e.g., the tenant must invest in upgrades but will be given only a 5 year term). One went to Sacramento instead and the other is up in the air but will have to move eventually.
There a few landlords in town who control much of the space. Thanks to Prop 13, they have little in cashflow demand so they can sit on the sidelines, withholding property so as to drive up rents. (I prepared the winning case for the State of California in the FERC 2000-01 Energy Crisis case that was based on demonstrating withholding so I know what I’m talking about.)
The answer is to create cashflow pressure on landlords, perhaps through a vacancy tax that makes up for foregone sales tax revenues.
I think you mean the old Post Office at 315 G, which later became the Enterprise editorial offices. The press was housed at 302 G Street, which is now Fit House. I worked there for a time in the mid-’70s, the sound and smell of the press is unforgettable. (While I was there old air compressor that ran the press seized up and the Enterprise was throwing it out, so I took it home and repaired it. I still use it occasionally in my shop.)
Thanks for clarifying that.
To refine the point regarding office conversion just a hair;
The owners of a lot of “office” spaces are actually not WILLING to allow lab uses into their buildings. Even if a potential occupant had the time and money to do the conversion themselves, many landlords dont want their properties modified so extremely. You need lots of power, you need holes in the roof for vent fans, some users want floor drains…
Consider this example… Inventopia’s old lab space on 5th street… when we moved out I told the landlord that I had a number of companies that would like to lease the space (As-is) when we left, but he elected to invest in a remodel to turn the space BACK into office and away from lab, because he didnt want the hassle of dealing with another lab company.
Now, the matter of producing lab space with that kind of cost stucture AND providing it to startup companies who might in the best cases only have 1-2 years of funding in their accounts… and you can see why landlords are hesitant… I dont blame them at all.
So we really cant just look at a space with a for-lease sign and say “why not there”… a lot of properties with for-lease signs on them are not, in fact available, and if they are.. you have to consider whether or not the business model of the ownership of the building is ALSO compatible.
This has always been my biggest concern about DiSC – because it is not “just more space” that is needed, it is also a different business model, and the buildout has to be done in a certain way to allow for flexible use. This will be a lot of my own focus after DiSC passes – to ensure that in the subsequent planning process, that we get a lot of smaller flex spaces with lots of power and utilities, which are easily re-configurable like our current space on Pena – and not a bunch of big tilt-ups that really only work for huge companies.
Thank you for clarifying this point.
I don’t know how suitable it would be for lab space, but one pretty big parcel I haven’t seen discussed is the Hibbett property. That’s half a city block plus a few lots, 3 phase power is already on site, and fiber isn’t far away.
Jim…
I assume you meant Hibberts…
Awkward configuration of site… existing utility connections, water, and particularly sanitary sewer connections, are definitely question marks, and would likely entail major upgrades… cutting thru the street to get to the mains… access to Fifth and G streets is marginal, given to proximity of the Fifth/G signal, and traffic patterns due to the ‘road diet’ on Fifth… Sixth street is a viable option…
Yes, the Hibberts site should be considered “in the tool box”, if the owners want it to be, but does not ‘solve’ anything… would be expensive to make it fully ‘suitable’…
By scale of costs, and owners’ interest, it is not a substitute for the proposed DiSC site or others… unless, of course, you ascribe to belief that all property is up to local government to presume to control, without owner consent, and either any owner should pony up any/all funds to comply with local zoning/land use desires of “the people”, OR local taxpayers pay all costs. I happen not to ascribe to those beliefs.
But until the owners/buyers of the property I believe you describe “want to go there”, it is not an alternative sufficient to justify opposition to another proposal, at a different site…
Yes (typed it on my phone).
I wasn’t suggesting the Hibbert site as a replacement for a DiSC-like development, just that it’s a large vacant mostly-commercial parcel. Last time I spoke with one of the Hibbert gals, they had an interested buyer but were still trying to work out the details. Multi-use seems logical, and there’s precedent for downtown combination lab-residential (the Arbor building).