Sustainability, Flexibility, Amenities Guiding Principles For West Coast Offices
Developers and investors are flocking to West Coast office markets following the growth of tech, healthcare, life science and media. Investors, developers, designers and consultants gathered at San Francisco’s Hibernia Bank during Bisnow's Office Leasing and Development all-day event to discuss the latest office trends, how they are meeting tenant demands and how the Millennial workforce is changing office space.
Kilroy Realty CEO and chairman of the board John Kilroy kicked off the event with a review of current projects and how they tie into his company’s business model. John said the company just completed seven projects over the last year worth a total of $1.6B. Kilroy Realty will invest another $2B to $3B in projects in the next 18 to 24 months.
Over $1B of new projects will start within the next few weeks, including $900M in projects in San Francisco alone, according to John. Kilroy Realty is focused on key West Coast markets, including the Pacific Northwest, San Francisco, Los Angeles and San Diego within the areas of technology, media and life science.
John said Kilroy Realty is a long-term investor and it doesn’t think in terms of five or 10 or even 20 years, but in terms of 100 years. The company uses a European model of creating economic return now and increasing and adding value over time.
Long-term value is created through its commitments to communities, building sustainable projects, adding an element of public art, adding production, distribution and repair (PDR), and often incorporating the preservation of historic places.
Creating spaces for people is all about creating an amenity-rich environment, integrating design and connections to public open spaces and offering flexible workspaces, John said.
“We don’t talk about office,” John said. “We talk about workplace environments.”
Sustainability also is a guiding principle at Kilroy, John said. About seven years ago, the company did an analysis of its portfolio and found only 6% of its buildings were LEED certified. Today, 47% are LEED certified (all of which are gold or platinum) and 65% are Energy Star. John said the firm is No. 5 in the world and No. 1 in North America on sustainability in real estate.
John said sustainability is a big deal because it is not only good for the planet, but also appeals to Millennials, who are “the biggest workforce and they are the most sustainable generation ever. They make choices about the companies they work for based on the culture and stewardship they have on Earth.”
Public art also is a cornerstone of each of Kilroy's projects and it goes beyond a city’s request. Salesforce East (350 Mission) offers an 70-by-40-foot digital art display in the lobby.
John said historic preservation can help brand a site, such as what Kilroy Realty has done with Columbia Square in LA, which used to be a historic CBS site. Viacom and Neuehouse have already leased space.
Kilroy Realty’s forthcoming development of The Academy will tie into the nearby Academy of Motion Pictures and the historic significance of the area.
A focus on preserving PDR space has led the company to invest $2M toward the redevelopment of the Flower Mart in San Francisco, adding 130k SF of PDR as well as rooftop gardens and public spaces. 100 Hooper St, which will begin development this month, will create 315k SF of office and 80k of PDR and is expected to be completed in 2018. A major tech company already has leased space, according to John.
Kilroy Realty is incorporating the concept of super floors into several high-tech and life science projects such as The Exchange in San Francisco and 333 Dexter in Seattle. These super floors combine three floors across multiple buildings, creating larger floor space than what would normally be available in one building on one floor. They can be broken up vertically or horizontally.
John said the sharing environment, a need for urbanization and virtual technology will continue to reshape the real estate industry. Event panelists discussed some of the above trends in more depth.
CBRE president of Greater Los Angeles and Orange County Lew Horne, Colton Commercial & Partners partner and co-founder Jay Shaffer, Salesforce VP of real estate George Kreitem, Colliers International president of the Western region Marty Pupil with moderator Finlay Pacific principal Kareem Barzegar discussed recent leasing trends and how they have incorporated some of these trends into their own offices in Los Angeles and the San Francisco Bay Area.
Panelists discussed how technology is shaping the office structure and culture and how amenities are big driving points for employee retention. Panelists said virtual technology is shaping how they lease property, since it allows prospective tenants to view a lot of different spaces without having to traipse around town.
Moderator AEI Consultants CEO Holly Neber talked with Rising Realty Partners president Chris Rising, Enovity director of development Chris Hazen, TMG Partners CIO Matt Field and The Ratkovich Co COO and EVP Clare De Briere about how their redevelopment projects in Greater Los Angeles and the San Francisco Bay Area incorporate energy efficiency and create less waste.
The developers discussed how tenants are demanding energy efficiency, including installing fuel cells, adding solar shades, using active glass and incorporating control systems.
Unispace global strategy leader Albert De Plazola, Industrious national launcher Leah Alexander and Cross Campus CEO and co-founder Ronen Olshansky along with stok director and event moderator Warren Neilson discussed how the co-working space will grow and become a large part of the office industry, especially for small tenants wanting plug-and-play offices chock full of amenities that can grow with the tenant. Ronen said he expects the co-working space to expand from 1% of overall office space to 15% within the next few decades.
Leah said Industrious will be expanding into the West Coast in a big way and will open locations in San Francisco, Seattle, Denver and Phoenix next year. It opened a location in Los Angeles earlier this year.
Moderator Dern Architecture + Development Michael Dern spoke with stok founder Matt Macko, BuzzFeed director of real estate and facilities Ochi Scobie and Glassdoor director of global real estate facilities Rick Friedman. Panelists discussed their companies’ changing needs and how they anticipate a need for additional flexible office space, a connection to nature and offering amenities to best serve their employees.