By Jim Gray
I was disappointed to read that the Davis Innovation Center near Sutter Davis has been put “on hold.” I offer the following observations and encourage the citizens of Davis and our elected officials to do what our former City Manager and Vice Chancellor John Meyer has offered which is to “double-down” on economic development and keep our “foot on the accelerator.”
SKK Development, Hines, and the rest of the development team had the experience and expertise to have delivered on this project. So what happened? My sense is that there was just too much risk and not enough certainty given the Measure R vote, the checks kept getting bigger (probably $1-2 million dollars already spent), and the time to a real payday kept getting pushed out with no end in sight. Most investment decisions come down to opportunity cost and the allocation of capital. If there are other projects that can be delivered with more certainty, for a greater return and less risk, those projects will most likely attract and retain the investment dollars. These innovation park projects likely will take 25-50 years to build out, no different than Mace Ranch in East Davis or University Research Park in South Davis. The capital expenses are front loaded and it will be years before the investors get their investment back and even longer before they make a profit.
Let’s wish the previous developer team all the best. The obstacles to success are not just about city approvals and processes, but also market and economic conditions. The competition and forces affecting value are not only the other proposed parks in Davis or about getting approved by the Davis voters, but they also include the competition from thousands of acres of already zoned business park land within the region. At the macro level, more and more businesses and their employees are shifting to more urban settings from the suburbs and not only manufacturing but also service jobs are getting globalized. Many users and investors are re-evaluating the suburban office business model..
So what does this mean for the citizens and community of Davis?
As Mayor Dan Wolk says, we need to “Renew Davis” and may I add, to reinvigorate, retain, and attract great companies, institutions and jobs. Clearly, this is a setback to the City. But the City staff and the City Council are not to blame. Fostering economic development is not a sprint or even a marathon. In this case, it is a “relay ultra-marathon.” Let’s reflect on lessons learned, find another team or even invite other sites, and pass the baton to someone to run the next leg.
This is amongst the best City staff and Council that I have seen during the past 35 years. They are to be commended on their efforts to stimulate economic development. We should thank them, encourage them to be resilient, and ask them to stay focused on economic development for Davis. A City and its leaders have to think long term and make plans and investments for 50+ years to leave a legacy for our future generations.
I offer these observations and suggestions in the spirit of focusing forward.
- The City should continue to encourage Mace Ranch/Ramos and Gateway/Nishi, the applicants currently pursuing innovation park proposals, to keep working with the City to gain approval. The City shouldn’t reduce their aspirations and stated goals of what they want in exchange for entitlements, but we need to streamline our regulatory processes! City staff and the paid consultants need a gut check on how complex it is to gain approval in Davis. The level of minutiae being studied and evaluated is unbelievable, enormously time consuming and expensive. Everyone needs to be aware of the real costs and the forecasts for breakeven and returns. If the projects don’t pencil out, they will never get built. About 15 years ago, the University of California at Davis sponsored a request for proposals to build a business park on University land near the UCD off-ramp of I-80. World class developers competed, a team was selected, and then as the plan evolved, and the costs became clear, and the alignment of interests and risks and rewards became more clear, and then like now, the developer put the project on hold. But that doesn’t mean give up. It means that as a City and as a University we have to learn our lessons. We need to consider choosing more affordable properties for development that can be phased and paid for as they build out and that will become sustainable more quickly.
- Developing and offering competitive sites will serve us as a community long term. Companies want choice, and competition will help the remaining applicants stay focused and will likely lead to better projects. And we as citizens of Davis should not put all of our eggs related to future job growth in one basket.
- The City of Davis might consider new public/private partnerships for the underutilized land and facilities of the City and the School District. The City, School District and County all have a mix of latent resources that could be refurbished and enhanced or scraped and redeveloped as infill commercial sites for new labs and offices. Consider the current Civic Center, the Public Works yard at 5th and Pole Line, and potentially relocate the community garden next door to it and then add the School District yard next door. Now we are talking about an infill site with real scale. Then there is the paint ball/go kart track. How about crafting a Request for Expressions of Interest (RFEI) dealing with municipally owned properties? Clearly there are tradeoffs, but it would be valuable to consider.
- As a community we give lip service to economic development, but we have a difficult time approving and implementing real estate development as a necessary component of economic development. Economic development that relies on real estate development is a tough and lengthy process. We have a critical shortage of modern facilities for businesses to start, grow or flourish within our community, and we must address it.
- Finally, let’s as a community along with our Council and City staff amend and fine tune Measure J/R. We can still manage our growth in a manner that makes us a more vibrant, dynamic, affordable and sustainable community.
Davis needs to develop the real estate infrastructure required to lead us into the future. Our forefathers and mothers had the vision to build a railway station, to gain a charter and obtain the land for the University farm now UC Davis. We have had a great downtown evolve. The University evolved and brought us the Arboretum and diversified its offerings beyond Agriculture and Life Sciences to include Medicine, Law, Management, Arts, the Mondavi Center and much much more. We have great schools a highly educated work force, and a high quality of life. We have much to be proud of. Going forward we need leverage our existing assets and position Davis for the future. We cannot miss a long overdue opportunity to bring creative, innovative world-class jobs and companies to Davis. Carry on, double-down, and let’s make it happen!
— Jim Gray is a longtime Davis resident, a Senior Vice President and shareholder of DTZ Commercial Real Estate and a commercial real estate broker and developer for over 30 years.