Wednesday, December 24, 2008

Hat tip to Rolff for our politically correct greeting..

Please accept with no obligation, implied or implicit my best wishes 
for an environmentally conscious, socially responsible, low stress, 
non-addictive, gender neutral celebration of the winter solstice 
holiday, practiced within the most enjoyable traditions of the 
religious persuasion or secular practices of your choice, with 
respect for the religious/secular persuasions and/or traditions of 
others, or their choice not to practice religious or secular traditions at all;


A fiscally successful, personally fulfilling, and medically 
uncomplicated recognition of the onset of the generally accepted 
calendar year, but not without due respect for the calendars of 
choice of other cultures whose contributions to society have helped 
make America great, (not to imply that America is necessarily greater 
than any other country or is the only "AMERICA" in the western 
hemisphere), and without regard to race, creed, color, age, physical 
ability, religious faith, or choice of computer platform.

(Disclaimer: By accepting this greeting, you are accepting these 
terms. This greeting is subject to clarification or withdrawal. It is 
freely transferable with no alteration to the original greeting. It 
implies no promise by the wisher to actually implement any of the 
wishes for her/himself or others, and is void where prohibited by 
law, and is revocable at the sole discretion of the wisher. This wish 
is warranted to perform as expected within the usual application of 
good tidings for a period of one year, or until the issuance of a 
subsequent holiday greeting, whichever comes first, and warranty is 
limited to replacement of this wish or issuance of a new wish at the 
sole discretion of the wisher who assumes no responsibility for any 
unintended emotional stress these greetings may bring to those not 
caught up in the holiday spirit.)

To all my other (are there any?) bicycle riding Friends:

Merry Christmas and Happy New Year. 


Thursday, December 18, 2008

Bernie Made-off with Christmas

As I sit here listening to CNBC and all of the talk is how "Bernie Made-off with Christmas".. Really?  (can't wait for that SNL skit) At some point, I'm wondering how anyone "in the know" could have allowed this to fraud to continue for so long. The statements to clients mentioned options purchased (calls) and sold (puts) on individual trading days where the total outstanding contracts were less than 20% of the totals that Bernie documented to clients.. Didn't someone check?

Now, it's getting into the real estate market in NY..

Indeed, at an industry fund-raiser at the Grand Hyatt hotel in Manhattan last weekend, much of the chatter over sushi and crudités was about money feared lost with Mr. Madoff, according to people who attended. And a Manhattan psychotherapist who counsels real estate leaders and bankers said most of the patients he has seen this week have close friends and relatives who lost money with Mr. Madoff.

The victims include executives at the global commercial brokerage CB Richard Ellis, most prominently Stephen Siegel, a major Bronx landlord who is chairman of worldwide operations at the brokerage and whose wife, Wendy, helped organize Saturday’s fund-raising dinner.
One of my new favorite blogs is London Banker and from last Friday's entry, Deflation has become Inevitable..

It is now clear to me that policy makers in the West are determined to apply every available resource to underpinning failure, misallocation and executive excess. As this discourages the honest saver from parting with cash, policy makers are ensuring that deflation will wreak its havoc on the financial and real economies of the world. Only when that deflation has played out and rational policies that reward market-based management and returns are restored will it be worthwhile to invest again. In the meanwhile, any wealth saved securely from state seizure will "swell" to buy more assets in future - a key aspect of deflation and a key means of restoring the control of the economy into the hands of more farsighted savers and investors.
The other interesting item from the WSJ - Economy section this morning, is the story about many towns, within an hour drive from where I sit, are going bankrupt..

The city of Vallejo, Calif., gained national attention earlier this year by filing for Chapter 9 bankruptcy protection. Now, two neighbors are fighting to avoid the same fate, as the state's economic crisis spreads.

Isleton and Rio Vista, small towns roughly 50 miles northeast of San Francisco, say they have begun consulting with bankruptcy lawyers as they draw up plans to deal with their mounting budget crises. The towns' leaders say they hope to avoid bankruptcy, but concede the move may eventually be their only option.

Wednesday, December 10, 2008

Wholesale Inventories Drop most in 7 years

Bloomberg reports that "inventories at U.S. wholesalers fell in October by the most in seven years as the biggest drop in demand ever caused companies to scale back.

The 1.1 percent decline in the value of stockpiles was larger than forecast and followed a revised 0.4 percent decrease in September, the Commerce Department said today in Washington. Sales plunged 4.1 percent in October, the most since records began in 1992.

Wholesalers had enough goods on hand to last 1.16 months at the current sales pace, the most since February 2007. Excess stockpiles heading into the holiday shopping signal companies may have to slash prices to trim stocks."

Thursday, December 4, 2008

Timeless Management "Laws" came up with a list of 5 timeless management laws (summary below):

  1. Manager assumes all responsibility: Your performance isn't determined by your personal accomplishments, but by those of your entire team.
  2. Manager is confident: It is important to project decisiveness and self-assurance in every situation if you want your employees to trust your leadership abilities.
  3. Manager knows the staff: The same way a sales person needs to be familiar with the product line in order to do the right job, it is crucial to be aware of your employees' respective strengths and weaknessess.
  4. Manager provides regular feedback: Whether things are going well or taking a turn for the worse, keep your employees apprised of their progress within the company.
  5. Manager leads by example: Employee often emulate their superior's behavior because they perceive it as a model of success.

Wednesday, December 3, 2008

JP Morgan is playing hardball

From the WSJ report, looks like JP Morgan is playing hardball with its clients (the likes of Ross Perot and the Guggenheims) going into default. 

The woes of Guggenheim, which was founded by the philanthropic New York family best known for the Guggenheim museums, is the latest example of turmoil in the $1 trillion commercial-mortgage market set off by worries over increasing defaults. Late last month, a $1.5 billion real-estate debt fund with investors including the family of onetime presidential candidate H. Ross Perot was forced to liquidate to pay off creditors.

The seizure and sale of collateral by creditors is adding to the downward pressure on prices of debt backed by office buildings, hotels, shopping centers and other commercial property.

In both cases, J.P. Morgan was one of the lenders. It sued the Perot fund last week. In the case of Guggenheim, the fund agreed to turn over the collateral to the bank after it failed to raise additional capital. J.P. Morgan has gained the reputation for playing hardball since it demanded $5 billion in collateral from an ailing Lehman Brothers Holding Inc. just days before Lehman sought bankruptcy protection.

Saturday, November 22, 2008

The Great Chimerica Depression

Inspired from several articles (Washington Post, Bloomberg, China Financial Markets and Naked Capitalism), there is a history lesson from the great depression that we can learn from given the current credit crisis.

Bottom line: The US is deleveraging from a private consumption-based economy to a more publically financed economy, just as the Europeans did during the 1930s; and, China is subsidizing its export overcapacity in order to prop-up its government's primary objection: sustained growth - just as the US did in the 1930s.

At the heart of this crisis is the huge imbalance between the United States, with its current account deficit in excess of 1 percent of world gross domestic product, and the surplus countries that finance it: the oil exporters, Japan and emerging Asia. Of these, the relationship between China and America has become the crucial one. More than anything else, it has been China's strategy of dollar reserve accumulation that has financed America's debt habit. Chinese savings were a key reason U.S. long-term interest rates stayed low and the borrowing binge kept going. Now that the age of leverage is over, "Chimerica" -- the partnership between the big saver and the big spender -- is key.
From Bloomberg:
China is struggling to stave off the effects of a worldwide economic downturn with 4 trillion yuan ($585 billion) in stimulus spending on new roads, railways, airports and low-rent housing. Asia's second-biggest economy grew 9 percent in the three months from July to September, the slowest pace since mid- 2003, threatening the expansion to which the Communist Party has pegged the credibility of its one-party rule.
From China Financial Markets:

If unemployment is rising, however, it does mean that there will be serious pressure to do whatever it takes to support employment growth. One thing that I am worried about (and this was the subject of the “longish writing commitment” I mentioned above) is that it puts pressure on the government to engineer measures to expand export growth. For example I suspect that the fight over whether or not to continue appreciating, and even depreciate, the RMB is intense. 
But if you think of China’s role within the global balance of payments, it seems to me that this is little more that a form of Smoot-Hawley-with-Chinese-characteristics. Global demand is slowing, just as it did in the 1930s, and China as the leading source of global overcapacity is trying to address its global demand problem by shifting the burden abroad.
In the 1930 it was the US who had huge overcapacity which it exported abroad (via huge trade surpluses) and it was Europeans who were over-consuming, financed by capital exports from the US.  When the credit crunch came it was unreasonable, as Keynes argued bitterly, to expect the rest of the world to continue demanding US goods, especially since the financing of their consumption had been interrupted.  Since US production significantly exceeded US consumption (with the balance consisting of course of the trade surplus), the need for demand creation most logically rested in the US.
Today it is China who is exporting overcapacity and it is the US who is consuming too much, fed by Chinese financing.   With the collapse of bank intermediation US households and businesses are cutting consumption and raising savings.  This is a necessary adjustment. Calling on the US government to engage in massive fiscal expansion to replace lost private demand is crazy.  It means that we should continue the current game that has led us into so much trouble, but instead of having US over-consumption and rising debt at the private level we must have it at the public level.
This can’t work for long.  The world has excess production and there is a need for the US to reduce its demand and increase its savings. The only proper place for new demand to originate is, once again as in the 1930s, from current account surplus countries.  They should be engaged in demand creation, not supply creation.  If they continue trying to export their way out of a slowdown, there will almost certainly be a trade war, as in the 1930s, and the full force of the adjustment will be borne by the current account surplus countries, again as in the 1930s. Remember that back then the current account deficit countries, like Germany after 1932, found it relatively easy to limit the impact of the crisis by forcing balanced trade — which has the effect of increasing demand (domestic) and reducing supply (foreign). 
[remembering that Germany, France and England defaulted on its debts - Germany suffered a tremendous GDP collapse (-40%) between 1929 and 1933. Germany unemployment in the years following 1929 reached over 30% (more than USA) (data from Findlay - O’Rourcke - Power and Plenty - Ch.8).This level of unemplyment was one of the reason that pushed Hitler to power in 1933.It is not nice to say but was Hitler Economic Policy, with substancial deficit spending (to build arms and highways), to reach full employment again in 1937. On my opinion that was one of the reason of the substancial support of German people toward Hitler in the following years (1938-1945).This is a reminder that substancial financial and economic crisis have strong political implications.]
From Naked Capitalism:

Note the Chinese have a problem that probably did not obtain in the US during the Depression: a huge disparity in living standards between the exporter and importers. Remember, there was still a great deal of international labor mobility in the early 20th century, and that helped dampen wage differentials between countries. Presumably, many of the goods the US exported in the 1920s would have been the sort that US consumers would buy. By contrast. a lot of the goods made for export to the US would not appeal to the mass market in China. I do not know how specialized manufacturing is and how hard it would be to reorient production for the domestic market. But American like to overconsume in quantity as well as type (when I lived in Australia, I was struck by how much smaller their closets are than ours. It was refreshing, in a way).

Friday, November 7, 2008

Capital Market News

§  Dems crafting $100B stimulus plan, tax-cut package
Democrats began work Thursday on a second economic-stimulus package. The plan could include $100 billion in stimulus spending, as well as middle-class tax cuts that could be implemented as early as next year. President-elect Barack Obama is expected to discuss the plan today in his first news conference since the election. The Washington Post (11/7)

§  Real estate funds go after capital despite down economy
Opportunistic real estate investment managers are still attracting capital, even as the credit crisis continues and economic growth falters. Research from real estate fund of funds manager Clerestory Capital Partners shows that 187 funds were seeking about $155 billion in the third quarter. "Lots of real estate fund managers see potential once-in-a-lifetime investment opportunities coming," Clerestory principal and co-founder Tommy Brown said. Europe Real Estate (11/7)

§  Fed pumps additional $100 billion into commercial-paper market
The Fed's program to bring liquidity back into short-term corporate lending is showing results, with lending under the Commercial Paper Funding Facility increasing to $243 billion over the past week, from $144 billion a week earlier. Businesses and financial institutions were forced to look to the Federal Reserve for help after the traditional sources of debt, including commercial paper, dried up in the wake of the Lehman Brothers collapse. One analyst said the Fed "is tapping all the keys on the keyboard, and it does seem to be helping." (11/6)

Fed's balance sheet expands to record $2 trillion
For the first time, the Federal Reserve's balance sheet exceeds $2 trillion as the central bank continues to lend huge sums of cash to financial institutions to keep short-term funding markets alive. The Fed's balance sheet grew from $1.953 trillion Oct. 29 to $2.058 trillion on Wednesday. Banks pulled back on direct borrowing from the Fed's discount window, but the industry remains dependent on the lender of last resort. CNBC/The Associated Press (11/6)

Wednesday, November 5, 2008

Latest Construction News

§  With loan delinquencies up 10%, projects spawn liens, suits
With construction loan delinquencies jumping to an estimated 10% in the third quarter, an increasing number of commercial construction projects are being slapped with liens or ending up in litigation. The Granby Tower project in Norfolk, Va., has sparked four lawsuits since construction ended last year, and the Spire condominium project in Chicago has collected several liens before construction has even begun. "The magnitude of the crisis is historic," said Ted Novak, a Chicago real estate attorney in practice for 30 years. "Activity has stopped." (11/3) , (11/3)

§  Cost of construction materials rises in September
Construction materials cost 0.5% more in September than they did in August and 12.7% more than they did a year earlier. One of the largest increases, 6%, was for asphalt and asphalt roofing. Commodity prices in general are expected to weaken into winter because of surplus materials and lower fuel costs. Reed/ACP Construction Data (10/31)

Testing the fire resistance of HOW joints
Requirements for fire-resistant walls have brought up questions about the state of head of wall (HOW) joints in Type IIB structures, so the Metal Building Manufacturers Association and Hughes Associates tested the joints. They found that HOW joints between a fire-resistant wall and a roof assembly meet the one-hour fire assembly ratings criteria. Three new UL assembly listings were issued as a result. GoStructural.Com (10/31) 

Wednesday, October 29, 2008

100-City Rental vs. Ownership Study

The Center for Economic and Policy Research (CEPR) has come out with it October 2008 report titled "Ownership, Rental Costs and the Prospects of Building Home Equity: An Analysis of 100 Metropolitan Areas," which compared the ownership and rental costs in 100 major U.S. metropolitan areas and projected the potential for a first-time homebuyer in those cities to accumulate home equity.  Since the publication of that paper, housing prices have continued their steep descent in much of the country and rents have risen modestly.  The study shows that recent price declines indicate many communities are moving back toward the historical track of modest equity increases for homebuyers. The findings point out that is still unwise for policy makers to attempt to directly intervene in housing markets to maintain what are historically unprecedented high home prices.  

Monday, October 27, 2008

CFNAI down to -2.57

The Chicago Fed National Activity Index was −2.57 in September, down from −1.61 in August. Most of the index's decline in September was driven by the steep drop in industrial production, as reflected in the contribution of the production and income category of indicators. However, all four broad categories of indicators made negative contributions to the index in September

The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

Friday, July 4, 2008

Six Months into 2008, the CMBS Market Has Failed to Recover

Jul 2, 2008 11:06 AM

When the credit crunch first broke in earnest last fall and froze the U.S. commercial mortgage-backed securities (CMBS) market in its tracks, the most bullish prognosticators predicted a mere blip. Many expected issuance in the U.S. to be down from $237 billion in 2007, but thought it could reach $150 billion. The conservative estimates put the expected 2008 volume at $100 billion.

Today, those worst-case scenarios are looking wildly optimistic.

Through the end of June, U.S. CMBS issuance had reached just $12.1 billion according to Commercial Mortgage Alert, an industry newsletter. Overall, that's a 91 percent drop compared with the first six months of 2007. In June itself, $1.3 billion of CMBS bonds were sold. That was up slightly from the $900 million in May, but down more than 96 percent from the record $37.4 billion in June 2007.

In all, analysts are no longer calling for any kind of rebound this year. Analysts from J.P. Morgan Chase & Co., in fact, expect the second half of 2008 to be even quieter than the first, with full-year CMBS issuance volume totaling $20 billion.

What's the upshot of all this? Since CMBS loans accounted for about 70 percent of all commercial real estate financing in 2007, it means prospective borrowers still have no place to turn and the slowdown in investment sales that has plagued the sector won't be resolved any time soon, according to Sam Chandan, chief economist with REIS, Inc., a New York City-based provider of commercial real estate information.

The fundamental problem is the wild uncertainty within credit markets. CMBS spreads to 10-year Treasuries have not only widened considerably from a year ago, but continue to fluctuate from month to month. As a result, it’s more difficult for borrowers to decide whether or not to take conduit loans. Further, alternative sources of funding, such as banks and life insurance companies, aren't offering the same generous terms CMBS lenders did in the past, nor are they greatly increasing their allocations to commercial real estate. Lending on commercial real estate is down across the board from 2007.

Within the CMBS sector, spreads have begun to widen once again. As of June 25, spreads over Treasuries on five-year, fixed-rate AAA conduit loans stood at 165 basis points, above the 52-week average of 147 basis points, reports Commercial Mortgage Alert. Spreads on 10-year, AA loans were at 475 basis points, above the 52-week average of 370 basis points, and spreads on 10-year BBB loans were at 1,250 basis points, compared to a 52-week average of 931 basis points. For borrowers, those rates are simply too high. Moreover, loans from other sources offer competitive pricing--an area where previously CMBS loans had an edge.

"With spreads as wide as they are, loans that are destined for securitized pools are not as competitive,” Chandan notes. “Investors are demanding extraordinary premiums as opposed to the types of spreads we’ve observed in recent memory.”

With CMBS out of the picture, the retail real estate sector saw a 53 percent drop in overall lending activity in the first quarter of 2008, according to data released last month by the Mortgage Bankers Association (MBA), an industry organization. Commercial bank originations in the commercial/multifamily sector fell 28 percent in the first quarter of the year, according to the MBA, to $228 billion. Originations by life insurance companies decreased 25 percent, to $119 billion.

All of that means that it continues to be difficult to complete investment sales deals on properties that don’t include in-place financing, says Philip D. Voorhees, senior vice president of retail investments with the Newport Beach, Calif.-based office of global brokerage firm CB Richard Ellis. Life insurance companies and regional banks tend to be much more selective in the kinds of properties they will finance, Voorhees notes. The life insurance firms, for example, require that a property feature a location in a major metro market, a vacancy rate lower than 5 percent and credit tenants before agreeing to issue a loan. They also insist on loan-to-value ratios of 60 percent to 65 percent, lower than most investors feel comfortable with.

“They’ve only got so much to lend out and that is drying up. Similarly, the local banks are reportedly approaching capacity,” Voorhees adds. “We lost one of our biggest sources of debt in the conduit market and nobody is there to replace that.”

As a result, the volume of sales transactions closed by Voorhees’ team year-to-date has been about 30 percent off compared to the same period in 2007. Voorhees has some hope the situation will improve by the fourth quarter. But with more than $11 billion worth of securitized loans becoming eligible for refinancing in the next six months, Chandan says it’s not likely.

“There are concerns about limited liquidity in the market,” he says. “We don’t expect to see significant gains in transaction volumes in the summer or early fall.”

--Elaine Misonzhnik

Sunday, May 4, 2008

FW: [CCIM GEN] Commercial Arena Update



Thanks, Sean..


Sean M. Broderick, CCIM

Pacific Pride Properties

209-642-4133 (direct)

866-579-0796 (fax)


Notice: This transmission is for the sole use of the intended recipient(s) and may contain information that is confidential and/or privileged.  If you are not the intended recipient, please delete this transmission and any attachments and notify the sender by return email immediately.  Any unauthorized review, use, disclosure or distribution is prohibited.


From: CCIM MailBridge on behalf of Pete Alvarez, CCIM []
Sent: Friday, May 02, 2008 6:35 PM
Subject: [CCIM GEN] Commercial Arena Update


CCIM MailBridge General Message

Fellow CCIM's

Snap shot of the Market place by product type:

Abundant Economic data this month…some is even encouraging..
Office Segment:  is softening with vacancies rising and absorption falling (medical office's ok …)
Retail Market :  concerns about consumer spending continue to rise causing the market to be down from '07 levels   (grocery stores are doing good!)…
Multifamily:  healthy, as demand continues to grow faster than supply in most places…rents still increasing.  Supply of condos converted to rentals is being absorbed easily in most metro  as potential homebuyers remain renters due to 1. lack of credit availability, or 2. desire to wait until residential  prices fall further before buying a home...
Residential:   …not much good in this sector. Many economists are projecting further declines in values before a market clearing pricing level can be reached…most are projecting this will occur late this year and first half of next year.
CMBS/CDO markets still dormant and the life insurance companies are cherry picking but leaving a lot of deals on the table.
 Consensus is that commercial real estate fundamentals are still sound   …supply and demand are relatively balanced, delinquencies and defaults are low, Although slower, rents and NOI are increasing   and  the construction arena is not  out of whack w/ projected demand.


Have a great day.


Pete Alvarez, CCIM 




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Wednesday, March 5, 2008

LEED Certifications

Received an email today from Jim Nowak regarding LEED certifications in California from the California Centers Magazine:


(CALIFORNIA CENTERS MAGAZINE) "Going Green” is the new catchphrase for the shopping center industry. A speech by former President Bill Clinton to the ICSC Spring Convention in 2006 encouraged the industry to set an example to developers in all sectors by building environmentally sensitive projects. This year’s Spring Convention contained an elaborate exhibit dedicated to sustainable building initiatives, offering examples of projects around the globe and the methods they used to conserve natural resources.

But in California, sustainable design is nothing new, encompassing everything from lighting to water usage to recycling and using recycled materials, according to developers and architects with projects there. At least 50 retail stores are pursuing Leader in Energy Efficient Design (LEED) certification,the current standard for sustainable design created by the United States Green Building Council. The Golden State has been “green” for years.

“The state of California has had its own energy code for quite some time,” said J. Tipton, (Tip) Housewright, a principal of Dallas-based architecture firm Omniplan. “The rest of the country is catching up.” The trend has been decades in the making. In fact, in 1978, the state established Energy Efficiency Standards for Residential and Nonresidential Buildings, a code that has been regularly updated, most recently in 2005. (The next update will be in 2008). Additionally, in December 2004, California Governor Arnold Schwarzenegger signed an executive order requiring all new and renovated state-owned facilities meet the LEED Silver standard, with the goal of reducing electricity consumption in state buildings by 20% by 2015. Through the order, and the Green Action Building Plan, the state also hoped to push private developersinto observing sustainable practices.

Individual municipalities have done more: In December 2005, the Pasadena City Council passed an ordinance requiring all new commercial and residential construction to be LEED-Certified at a minimum. Developers exceeding the minimum qualify for a rebate from Pasadena Water and Power. Pleasonton, too, now requires a minimum of LEED Certified for commercial projects. “California has the advantage because there are codes and laws already on the books,” adds Lance Collins, a LEED-accredited senior designer at Long Beach, Calif.-based Perkowitz + Ruth Architects, which has advised several municipalities, including the cities of Long Beach, Pasadena and Los Angeles on their programs.

But few codes make specific provisions for the unique needs of shopping centers, which operate much longer hours than office projects. Even so, designers and developers say, retailers and the shopping center industry has been embracing “green” initiatives for quite some time, pursuing energy savings for more basic financial reasons. British supermarket chain Tesco has proclaimed its intention to build sustainable stores as it enters the United States in California, Nevada and Arizona with its Fresh and Easy concept. Few retailers have been as committed to “green” building as Wal-Mart, whose initiatives have ranged from changingits display lighting to LED to regulating idling by its truck drivers.

Major developers including Cleveland-based Forest City Enterprises and Chicago-based General Growth Properties have created sustainable development divisions or initiatives. California developers are looking at each development project-by-project, adapting to each market’s needs. “Westfield historically has been a strong supporter of community and our efforts to make our shopping centers more environmentally friendly have continued, with an increased focus over the past year or two on developing a global approach to these sustainability issues,” said Frank Lowy, chairman of Sydney-based Westfield (which owns 24 centers in California), at the company’s annual meeting in May.

The initiatives being pursued or followed encompass a variety of construction elements. But each development requires a unique solution. “Most people are looking on a national basis,” said John M. Genovese, senior vice president of The Macerich Co., Santa Monica, which owns regional malls throughout the state. Macerich is now beginning to look at various opportunities to improve the sustainability of its centers, Genovese said, ranging from relatively simple equipment replacements to using recycled materials during a renovation process. “All of our projects are different, and our initiatives depend on the situation.The chance to be green is great for the environment.”

Lighting, the largest single energy cost, has long been a focus of sustainability: The installation of skylights in both new enclosed malls and retrofits was as much about reducing energy costs as ambience.“Natural lighting is something stores in the rest of the country can focus on,” said Alexandre Sims, a project manager for the Irvine, Calif., office ofarchitectural and engineering firm BSW International. “There is a definite benefit to being in more natural light.” Even more affordably, lamps can easily be substituted in the same fixtures, Housewright suggests. Westfield, which has 24 centers in California, is engaged in a major interior and exterior lighting retrofit, and has completed 12 centers in San Diego, Los Angeles and New Jersey.

Another possibility is a center producing energy itself, such as with solar panels, which would seem particularly ideal in largely sunny areas such as California.Westfield, in fact, has recently completed a substitution of continuous electric power to solarpowered photocells on two Southern California centers, and is evaluating the results for a possible portfoliowide retrofit. Macerich is examining some possible initiatives, including placing solar panels on the covering of surface parking.

But solar cells are not an easy panacea. The panels are heavy, and few existing centers can bear the additional rooftop weight. Yet roofing can still provide a number of alternatives. Most centers in the 1980s were built with a simple “black”roof.Today’s technology can include an Energy Star-rated single-ply white roofing membrane, which reflects more light and is therefore cooler. “That can reduce the energy load by 8% to 10%, without adding a lot of weight,” said Mary Kell, a LEED-accredited architect with BSW International. “Another easy step is to look at the mechanical, such as HVAC, and go to Energy Star-rated units,”Collins said.Even restaurants can begin to utilize more efficient appliances, Sims adds.

Energy is only one component of sustainability. Recycling of waste materials has long been practiced at existing centers around the country. Now, recycled materials may be used in center construction. “More and more materials are coming out that were recycled just for that purpose,” Genovese said. In fact, Macerich recycled 83% of materials resulting from the demolition of the vacant anchor spaces that precipitated the current redevelopment at The Oaks in Thousand Oaks, Calif. “You can look at everything, from the materials you use, to new flooring” Housewright said.“Even reusing a building’s shell is sustainable.”

Another major factor is water. Conservation of water resources is increasingly becoming a concern throughout thestate, even to determining the viability of some developments. “In some areas, you couldn’t build unless you had enough water credits,” Sims said. “It even affected the ability to do a simple addition.”

Westfield is testing a “weather track” smart irrigation system in San Diego, which tracks weather forecasts and adjusts irrigation schedules accordingly. Landscaping retrofits now are done with droughtresistant plants, the company told California Centers. Using pervious paving, which permits more runoff to run back into the ground, instead of asphalt in parking lots is another way to conserve water. Low-flow plumbing fixtures are another relatively simple replacement recommended by several designers.

Other initiatives are less obvious, such as using more local materials to cut back on transportation. Regardless of which systems and techniques are used, going green can have a number of benefits beyond long-term sensitivity to the environment. Lowering energy consumption can obviously save costs over the long-term, and increasingly communities are either requiring sustainable initiatives or look morefavorably on them during the permitting process.

“One thing that we’ve seen is that [green developments] attract a different [more upscale] tenant,” Collins observed. Those tenants tend to pay higher rents, creating yet another benefit. Another possibility, Genovese notes, is that excess power could be sold back to the community’s grid system. With all of these initiatives, however, few centers are pursuing LEED certification. More than 50 projects in the state have applied for the designation, according to the USGBC, but big boxes dominate the list.

But just because a project hasn’t applied for the certification doesn’t mean it isn’t compliant, Kell notes. “The process is a bit complicated,entails a lot of paperwork and is very expensive, ” Kell said. “There are a lot of buildings that are LEED Silver, but have not been certified. But the benefit is still there.”

Green building could cost marginally more, with estimates ranging from as little as 2% for basic compliance to up to 10% to achieve LEED Platinum status. But costs are declining, speeding payback and making sustainable building even more attractive. And as a result, no one expects “green” building to go the way of other development trends, such as the power center craze or design fads. The benefits – financial, environmental and social – are too strong to be ignored. And as usual with development trends, California has been ahead of the curve. “It is a true change, a necessity,” Collins said. “And something that is soon to be mandatory.


Jim Nowak, CCIM

Site Systems, Inc.