Analysis: The Need For Workforce Housing Versus Commercial Space

Right before Thanksgiving, the Social Services Commission took up the 3820 Chiles Road project.  For the most part the response was positive as many see the need for the city to develop workforce housing – a need that this project squarely seeks to address.

However, there has been mentioned concern about the conversion of the project away from commercial zoning.  Last week, we ran an analysis based on the EPS report that found that the property was inappropriate for adaptive reuse or R&D uses.

For some this might appear to be at odds with the city’s need to develop R&D space at an Innovation Center.  One of the important things to remember is that when Lawrence Shepard purchased this property, it was his intention to keep with current usage and indeed keep the existing building.

UC Davis after twenty years of use had an option to purchase the property outright, but declined citing it’s isolated nature from other parcels.

As the EPS report concludes, “one reason the site is not viable for office/R&D/Flex development is that it is not located in a larger innovation or research park or district, such as the Interland Research Park (Now University Research Park) or along 2nd Street.  The City will be better able to attract new office/R&D/Flex users in available space in these existing or new innovation park/ districts.”

It is important to understand this point – because it is the main driver not only for residential development at this cite, but also for the overall innovation strategy that the city first started undertaking with the Innovation Parks Taskforce and the 2010 Studio 30 report.

The MRIC report in 2015, reported, “as of May 2015, there are approximately 153 net acres remaining within 32 properties…” that are zoned for commercial use.   What the developer here found is that most commercial interests are simply not interested in developing a 5 to 7 acre site for R&D.

Instead they found “R&D and office tenants prefer to co-locate with similar uses and with service providers in a “campus” environment.”

This map really demonstrates the city’s innovation strategy in a way that written description cannot.  What we see on this map is really an emergence of an Innovation Corridor in Davis.  Indeed had Nishi been approved in 2016, we would see the line of innovation space extending even further to the southwest.

As it stands right now we see the Sierra Energy/ Area 52 research park that is in various stages of development.  That is followed by what is now known as the University Research Park.  There is a long innovation corridor along Second Street which includes among others Schilling Robotics and DMG Mori.

And then we can see it extended beyond Mace Blvd. should MRIC re-emerge next year as a project proposal.

The only other somewhat large possible property for R&D space is the “Meyer Property” which is located along Chiles south of I-80.  This was put forward as a potential location for a Business Park/ R&D space a few years ago but the proposal fell through.  This was the proposed Panattoni development in 2015.

They were proposing to develop the just under 15 acre site with between 150,000 and 225,000 square feet of new Class A office, lab and technology space on the site.  That site remains the largest undeveloped site with the city currently approved for development.

The problem however facing the city is that while it does have 153 net acres on 32 properties – those properties are scattered and most are less than five acres.

In some cases you can question how much effort a given developer put into developing the site for current use.  In the case of 3820 Chiles, they spent a few years.  They went as far as to bring in Barry Broome from Greater Sacramento hoping to attract a big time occupant and it just didn’t work.

The developers at Chiles made a concerted effort to develop the land as R&D space after UC Davis declined the option to buy due to its isolated nature.  They learned quickly – and their knowledge is backed by the consultant report – that the land is too small to really host R&D.

So they pivoted and worked on a concept to bring workforce housing into Davis.  As the map demonstrates, the focus on commercial should on these larger parcels along the Innovation Corridor.  But Davis has other needs as well.

The need for workforce housing is real in Davis.  It was a point that was made by some in opposition to building student housing.  IT was a point made by opponents to WDAAC.  And they are right about the need for workforce housing – even if they perhaps have overlooked a number of other needs.

The University Research Park proposal provides us with a good example of the need for housing in conjunction with R&D development.

Jim Gray and Dave Nystrom made this point with regards to their proposal for mixed-use workforce housing within the University Research Park.

As Mr. Nystrom explained, “one of the challenges (businesses in the park) face is hiring people because it’s so difficult to find housing in Davis.  People I think have an expectation that if they’re going to work in Davis, they’re going to live in Dixon or Woodland or West Sacramento because the housing market is just so tight.”

I think many people have a misperception for housing commercial development works.  Companies for the most part do not simply look for available space and move in.  They have to often be recruited.  They are looking for the right environment and one concern of theirs in determining whether they should pick one spot over another is the question as to where their employees are likely to live.

To put it simply, why would a company come to Davis if they are not convinced their employees can live here in town when they have other locations with better housing options for their employees?

As such, 3820 Chiles might not be the best location for R&D space because of its size and somewhat isolated location, but it is relatively close to places of work for employees and can serve that clear need in this community quite well.

In short, the applicants at 3820 Chiles believe that while the property is not large enough for R&D, it can house higher density workforce housing – something it seems most feel we desperately need.

The city who has just brought back Ashley Feeney as Community Development and Economic Development Director, can focus on the larger parcels to try to find companies to fill our commercial needs, but we also have a need to figure out where to house these individuals – 3820 Chiles would serve as one such location.

—David M. Greenwald reporting


About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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44 thoughts on “Analysis: The Need For Workforce Housing Versus Commercial Space”

  1. Ron

    More of the same b.s. from the Vanguard.

    The Meyer property is near 3820 Chiles Road.  There’s lots of other commercial development along that road, which isn’t highlighted on the map.

    One of the reasons that 3820 is not being pursued for commercial is because of the potential of MRIC.  This is about the 3rd or 4th time that David has ignored what the analysis says, regarding that. I’d suggest that it’s not in the city’s interest to ignore the distinct and real possibility that MRIC will not be approved.

    The analysis also states that there’s a 40-65 year supply of commercial properties within the city.

    Developers don’t want to build commercial developments.  They want to build housing.  It has nothing to do with recruitment of employees.  Even if it did, why would the city pursue creation of (both) jobs and housing for non-residents? (What would be that point of that, exactly?)

    I believe that David is simply writing these one-sided articles to create disharmony and comments.

     

    1. David Greenwald Post author

      Meyer site is empty, it’s also more than twice the size of 3820.

      “One of the reasons that 3820 is not being pursued for commercial is because of the potential of MRIC. ”

      Nowhere has that been stated.

      1. Ron

        For the umpteenth time, the analysis states the following:

        “In addition to tying up millions of dollars in infrastructure, this exacerbates risk by making the project vulnerable to any new, larger research park approved in the interim, like the Mace Ranch Innovation Center.”

         

        Note that 3820 is not the only significantly-sized commercial site that’s recently been under consideration (or is already approved) for housing. This is a city-wide phenomenon.

        1. David Greenwald Post author

          And for the umpteenth time it is not stating that MRIC is the reason for not pursuing commercial. They laid out in their analysis a whole host of reasons for why the site doesn’t work well including its size and lack of proximity of other R&D and industry trends and because of that, the relative small size of this parcel would be vulnerable to the what the map shows very clearly – the line of connected innovation along the corridor. You’ve continually ignored this point in mischaracterizing the reasoning. Basically if you want to do R&D in Davis, you can see where on the map it is most likely going to be.

        2. Ron

          The property is 7.4 acres.  There aren’t many businesses which need more than that.

          The rest of your statement shows that there really isn’t significant demand for commercial properties, compared to residential properties.  (The same reason that there’s a 40-65 year supply of commercial sites within the city.  Which is also the same reason that other large sites within the city have been converted, and 2-3 other innovation center sites have been converted to housing.)

          Claims regarding proximity, synergy, and access are more b.s. (Strange, how they never claim the lack thereof for housing developments.)

          Commercial development along 2nd Street took decades to build out.  In fact, it still isn’t.  Sometimes, it takes patience on the part of cities to fulfill plans.

          Regardless, I wouldn’t be counting on approval of MRIC.  Perhaps the city shouldn’t, either.

        3. Craig Ross

          Ron, you read what you want to read and disregard the rest.  It doesn’t matter that most companies don’t need 7.4 acres, we are talking about R&D companies needing to develop campus atmospheres.  The report that you have selectively pulled from explains it pretty thoroughly, plus in this case, the developers actually spent several years trying to get companies to come and didn’t succeed.  I think you would save everyone a lot of trouble if you simply stated to each article: “I don’t want housing.”  And left it at that.

        4. Ron

          Craig: I think the developers and their allies would save everyone a lot of trouble if they acknowledged that they simply want to convert existing commercial sites to housing, and add housing on the periphery, as well.

          I’d also suggest that (regardless of what any individual thinks of the idea – including me or you), I wouldn’t count on (another) peripheral development being approved anytime soon. Therefore, the city might want to proceed carefully, before sacrificing any more sites within the city.

        5. Ron

          I think the story might be different, if developers weren’t having success in converting commercial sites to residential.  (And, with some hoping for MRIC – again, with residential.)

          We heard this same story regarding Families First site.  And, Plaza 2555, etc.

          Developers don’t want to build commercial developments.  They want to build housing, because that’s where the money is (for them – not the city).  It has nothing to do with recruitment, location, synergy, or any other fake reason put forth.

          As a side note, there’s an article in today’s Enterprise which mentions the possibility of including residential at Davis Commons.

          Again, I wouldn’t count on MRIC being approved, nor would I be changing plans in the city with any expectation otherwise.

        6. Craig Ross

          The guys at 3820 did want to build commercial.  In fact, they wanted to preserve the existing building and simply fill it with a new tenant.  So you’re response isn’t in line with what happened.

        7. Ron

          There were issues with the building. There is no reason that it couldn’t remain commercially-zoned (other than lack of market demand, and obvious profitability for housing, instead). 

          The same reason that the other innovation centers were withdrawn (and replaced with housing, instead). The same reason that MRIC is hoping to create a residential development on prime farmland.

        8. Ron

          Craig:  That’s one of the fake reasons. The latest in a series of them.

          Maybe these folks can live at one of the other sites being converted to housing.

          But again, there’s no justification to create both jobs and housing for folks that don’t even live in the community, other than to simply “grow” and satisfy developer goals.

          There’s lots of communities that do welcome this type of growth, but Davis may not be one of them. I guess we’ll see, if the council tries to shove this down Davis’ throat.

        9. Craig Ross

          You called it a fake reason, you must have a reason for doing that?  I’ve talked to companies (not developers) and they’ve cited that as a reason why they are reluctant to come to Davis.  What’s your basis for believing that to be fake?

        10. Matt Williams

          Ron said . . . The property is 7.4 acres.  There aren’t many businesses which need more than that.

          Ron you are thinking much too narrowly.

          FMC Schilling has clearly stated they want 40 acres.  HM Clause currently has well in excess of 7.4 acres and continues to expand.  Monsanto has well in excess of 7.4 acres.  Bayer Biologics left because they  couldn’t get enough land in Davis.  They added a 5.5 acre extension in 2015 to their 4 acre campus opened in September 2014, and probably have added more since then. DMG Mori currently has something on the order of 7.4 acres and will be looking to expand in the coming years.

          Those are four examples that pop to mind without thinking.  If you perused the list of companies funding UCD’s agricultural research efforts, that list of four would probably be multiplied at least fivefold.

        11. Ron

          Craig:  Why are you talking to companies?

          Matt: I recall that Bayer got a sweet deal, in West Sacramento. (I believe that Don noted this, previously.)

          It could be that Davis is not the best place in the region for companies looking for a lot of land. Regardless, I wouldn’t count on approval.

          Have to run for awhile.

        12. Craig Ross

          I’m not important at all, I’m a shlump.  I just did a term paper on what it would take to get companies to come to Davis.  And the barriers to getting them here.

    1. Craig Ross

      That’s not my read of the Vanguard’s position.  Perhaps David can elaborate.  My position is that Davis has a lot of needs including workforce housing.

  2. Rik Keller

    Greenwald stated “The need for workforce housing is real in Davis.  It was a point that was made by some in opposition to building student housing.  IT was a point made by opponents to WDAAC.  And they are right about the need for workforce housing – even if they perhaps have overlooked a number of other needs.”

    One of the reasons I previously wrote this article “What Are “Internal Housing Needs” in Davis?” https://www.davisvanguard.org/2018/09/guest-commentary-internal-housing-needs-davis/ is because of the Davis Vanguard continuing to ignore the City of Davis’ policy history and context and pushing projects that don’t address our primary housing needs.

    As will be demonstrated in the following, the phrase “internal housing need” as used in City of Davis policy framework, documents, and studies actually refers primarily to low and moderate income workforce housing, and indeed that category is the only one specifically mentioned and for which specific policies have been crafted to meet the need.

    However, despite the clear definition of the phrase “internal housing need” when we look at the City’s General Plan for which Measure R is designed to “further” and “implement,” there are some who have either forgotten this recent history or are hoping that we forget this recent history as they seek citizen approval to convert agricultural lands on the periphery of the city. These proposals should be evaluated carefully to determine whether they are truly addressing the policy language and intent in Measure R, the General Plan, and supporting documents.

    Related to this, Councilmember Dan Carson in his advocacy for WDAAC used the suspect logic that statistics showing a large increase in senior households in Davis since 2000 demonstrated that we need even more senior housing, when it clear that those stats actually demonstrate that senior households were able to find lots of housing in Davis (or retain their existing housing and successfully “aged in place”). Meanwhile, he ignored significant losses in households from ages 25-54 over that same time period. See (pp. 35-36) “State of the City Report 2017” https://cityofdavis.org/home/showdocument?id=7985

  3. Rik Keller

    Ron said “The property is 7.4 acres.  There aren’t many businesses which need more than that.” Matt said “Ron you are thinking much too narrowly.”

    Perhaps let’s look at real-life examples of other research parks? For example, the University Research Park in Madison WI has been discussed as a model. Here are summary stats for this park established in 1984:
      – 260 acres developed (out of 350 originally set-aside)
    – 37 buildings w/ 1.8 million sq. ft. floor area
    – $183.3 million valuation ($705K/acre)
    – 121 tenants
    – 3,800+ employees
    https://universityresearchpark.org/the-property/park-statistics/

    A few things we can glean from this:
     – average of 2.14 acres gross site area and ~15,000 sq. ft. floor area per tenant
    – average of ~31 employees/tenant and ~500 sq.ft. floor area per employee

    That would seem to indicate that, at least in that type of ecosystem, the required site area for a vast majority of the tenants is much less than 7.4 acres.

    We can also use those stats to assess how much this type of development would affect local jurisdiction revenues
    For example, if we plunked down this Research Park in Davis right now, it would provide about $367,000 in annual property tax revenue to the City (assuming total annual property tax at 1% of total valuation and the City receiving 20% of the property tax).

    In other words, even a huge project like this that was developed over decades would provide a tiny fraction of the revenue (<5%) to address the City of Davis’ budget deficit figure that has been reported as $8 million (and, of course this brief back-of-the-envelope calculation doesn’t address the additional annual costs the City would have to provide services). Given this, one wonders why the Davis Vanguard keeps publishing article after article on “economic development” and pushing research parks as a key component of a solution.

    Keep in mind also, that presumably Davis would want to maintain its jobs-housing balance. A development this size with 3,800 jobs would mean another 3,200 households at about the current ratio of 1.2 jobs/household, which would mean a population increase of 8,000 at 2.5 persons/household.

    Another way to look at the small scale of the budgetary impact is that it would take about 22 of these Research Parks at about 5,700 acres or 9 square miles to reach $8 million in new City property tax revenue. This would be about 83,000 new employees, and, to maintain the current 1.2 jobs-housing ratio: 69,000 new households, and 172,500 new people at 2.5 persons/household.

    1. David Greenwald Post author

      “Given this…”

      There is no “given this” – your analysis doesn’t comport with Studio 30 or the City’s Innovation Task Force report or EPS from 2015.

      1. Rik Keller

        Greenwald: in the onslaught of the campaign material you have been producing you have not provided much in the way of actual $ figures.

        I had to do your work for you. Now we know why you have been so reluctant to provide actual “analysis” (despite the title of your article).

        1. David Greenwald

          You didn’t do my work because you didn’t do it even remotely accurately.  There are three existing documents that have estimates in them, none of them close to where your estimate is.  I would if I were you, look at EPS, it’s too conservative an estimate, Matt Williams agrees, but it gets you into the discussion.

          1. Don Shor

            “Development of the MRIC project is estimated to generate an annual net fiscal surplus of about $2.2 million for the City’s General Fund” at buildout.
            https://cityofdavis.org/home/showdocument?id=3953
            Economic and Fiscal Impact Analysis
            of Proposed Innovation Centers in Davis
            Prepared for: City of Davis
            Prepared by: Economic & Planning Systems, Inc. (EPS)

        2. Rik Keller

          Greenwald: my “estimate” is not an estimate. It’s what the facts are for the University of Wisconsin-Madison Research Park.

          You told us before to listen to Barry Broome, and he told us we should use Madison as an example of what we should be doing. And now you are telling us to ignore their actual results.

        3. Rik Keller

          Greenwald: have you actually read that report?

          If you had read it, you would know (and inform your readers) that a very large portion of the projected revenue for MRIC is from the ancillary hotel and retail uses, not the research park component.

          1. David Greenwald Post author

            I wrote an analysis of it a few years ago – even if you assume a hotel is a huge part of the revenue and you remove it from consideration – the numbers are still a lot higher than you’re stating. AND, as I have stated, EPS’ estimate, I believe is low irrespective of the hotel.

        4. Rik Keller

          Don: take away the hotel and almost exactly 25% of the projected annual budget revenue goes away: $1.966 million down to $1.469 million.

          Are you and Greenwald only just now realizing these details?

          I’ll let you calculate what the revenue decline is if you take away the housing and the retail components…

           

          1. Don Shor

            Are you and Greenwald only just now realizing these details?

            No, Rik, I first read this report a couple of years ago. The hotel is an important part of the business park. The retail component is small but retail is always a good revenue generator for the city. Housing was not part of the statistic that I cited (the gross revenue). That is addressed elsewhere in the report, and housing reduces the city’s net revenues. That’s one of the reasons I do not support housing at this project.
            Business parks generate revenues from lots of things. Licenses and fees, property taxes on the land, property taxes on the improvements and equipment, sales tax, business-to-business sales tax, etc. Just focusing on any one of those things doesn’t show the whole fiscal benefit.
            I suppose they could just build a hotel and some freeway retail on the site, and the city could get the financial benefits from those, but that sort of ignores the other purposes and benefits of these business (‘innovation’) parks.

          2. David Greenwald Post author

            Rik – even if the number were $1.47 million, you wouldn’t be talking about needing 5700 acres

        5. Rik Keller

          Correction: the previous revenue drop without the hotel was from the scenario with hotel + housing.  From the base scenario (no housing), removing the hotel reduces net annual City revenue 33% ($2.201 million down to $1.469 million).

          Keep in mind also that the total projected building floor area is at 2.725 million sq. ft., which is more than 50% more than the University Research Park in Madison, if we are going to compare apples to apples.

          1. Don Shor

            But there is no reason to “remove” the hotel from the revenue projections for MRIC. It’s part of the plan (and housing isn’t, as of right now).
            So the bottom line is that the EPR report projects total net revenues to the city, at buildout, of about $2.2 million annually from a variety of sources. That is much more than just the property tax component. How that total revenue compares to the total revenue URP provides in Madison, I don’t know. $2.2 million annually would help reduce our city’s fiscal shortfall.

          2. David Greenwald Post author

            And it’s still a very conservative estimate. Part of the problem is that Rik is just jumping into this issue now, and many of us have been talking about this stuff for 5, 6 and in some cases 8 years. Back in 2013-15, it was the belief that a 200-250 acre park could generate upwards of $5 million in net revenue at build out. And if they wanted to do a $2 per sf CFD, it could be higher than that.

    2. Matt Williams

      Rik, I have no argument with your numbers, but I believe you are comparing apples and oranges. Specifically an individual 7.4 acre non-contiguous parcel is not the same as an aggregate 260 acre parcel that provides a wealth of contiguous synergies for companies looking to be part of a collective, with available services for the company’s employees and visitors.

      With that said, the point Ron made was that there was an absence of demand for parcels larger than 7.4 acres.  The examples I provided addressed that specific point of Ron’s … without any implications regarding either the presence or absence of companies whose demand is for a parcel smaller than 7.4 acres.  Your Madison example appears to confirm that belief of both mine and Ron ‘s.

  4. John Hobbs

    “Who is Craig anyway?

    LMAO!   Who is Keith O anyway????

    Looking forward to Jan 1…”

    Couldn’t have said it better, not before Don censors it anyways.

     

    1. Howard P

      John… remember I’m semi-anon… after all, as Ron, Keith and others have pointed out, I’m just a “troll”…

      You have to ‘discount’ anything I post.

      BTW John, have a wonderful evening and weekend… no need to ‘discount’ that!

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