By David M. Greenwald
A guest commentary on Saturday advanced the idea that Davis can meet its commercial needs without DISC, at least for now. And they put forward the idea that infill is the better choice. While I agree with the idea that Davis needs to update its General Plan, at the same time the criticism overlooks the extensive community engagement efforts ten years ago through DSIDE (Designing a Sustainable and Innovative Davis Economy), the Innovation Park Task Force, the Studio 30 report and a number of public city council meetings.
But mostly my problem here is that the analysis the opponents of DISC provide to make their point is limited, at some points inaccurate, or taken out of context.
Here I will go point by point to clarify some of the issues raised.
“A 200-acre business park like DISC is not an objective in the City of Davis’ General Plan.”
That is true—the 200-acre research park did not emerge out of the two-decade-old General Plan. That need arose a decade later out of talks at DSIDE, as the city was in the middle of the Great Recession and hammered by the loss of revenue from the hit to the real estate market and a modest decline in sales tax.
In examining the available land, Studio 30 writes: “The current isolated and dispersed sites that are available and appropriately zoned are not adequate in terms of size, location, or configuration (and related constraints) to address the emerging market need of an Innovation Center.”
Studio 30 concluded that the city needs at least 200 acres for development and expansion over at least a 20-year time horizon and set as a reasonable buildout of 90 to 150 thousand square feet a year—which would largely fill DISC over the project’s 20 to 30 year build out period.
“The City, however, is not seriously considering meeting its commercial needs with infill of existing parcels, despite the fact that a 2019 City study enumerates 124 acres of vacant parcels inside the city limits.”
As we have pointed out—the first time in January 2019—the 124 acres identified by the city is a bit limited.
Immediately 33.5 of those acres are eliminated because they are set aside as extensions of medical facilities—Sutter-Davis and Kaiser. Another 25 to 30 acres off of Second Street are currently the Frontier Fertilizer Superfund Site, which is expected to be unavailable for development for at least the next 20 years.
Removing those parcels, you end up with about half that 124 acres—and with the exception of the 15 acres located on Chiles and Cowell, which was proposed for a 225,000 square foot office/ R&D Park in Davis.
However, Jim Gray, who represented the family who owns the property, told the Vanguard in early 2019 that the prospects for near term development there are not good.
That leaves somewhere between 45 and 50 acres, some of which is tied up in six- to seven-acre parcels, but many are much smaller.
The bottom line: there is some available commercial property, but it is nowhere near 124 acres, and a cursory examination by the authors would have shown that.
“Regarding the argument that the existing vacant parcels are not contiguous and some are small, one of the vacant sites is 27 acres, which would accommodate 26% of the proposed R&D and manufacturing sq. ft. from DISC.”
They ignored that the 27-acre parcel is owned by Sutter-Davis and they are holding onto it for medical expansion.
“In justifying the conversion of 3820 Chiles Rd. from commercial zoning to residential in 2017, the City’s economic consultant EPS, who also did the economic analysis for DISC, stated ‘If the proposed Project is approved to accommodate multifamily residential development and 7.4 acres are removed from the office and R&D/Flex land supply, the City is estimated to have a 41- to 65-year land supply, all other assumptions held equal.’ This could be even longer if this infill space was developed at a greater than traditional low densities.”
EPS arrives at their supply estimate based on current rates of absorption which they find to be 39,000 square feet per year.
That is a good deal lower than what the Studio 30 report estimated: 90 to 150 thousand square feet per year.
Studio 30 believes that, with adequate supply, the city could build perhaps three times that—a rate which several commercial real estate brokers believe is reasonable for Davis.
One told us that most years Davis could build out 100,000 square feet, and they could average about 1 million over a ten-year period.
Why is the number so low?
For one thing, lack of space for larger projects. That was the crux of the conclusion of the Studio 30 report. And that was also, incidentally, the conclusion of the EPS report.
In a note, EPS acknowledges, “This analysis estimates future absorption is similar to historical, long-term absorption unless a large-scale project, such as the potential Nishi or Mace Ranch Innovation Center is approved.”
They continue: “If such ‘game-changing’ projects are approved, the City could experience substantially higher absorption of office/R&D space…”
They also at the same time acknowledge that “the city will soon face a limited supply of shovel-ready land and should engage with the public regarding methods to accommodate future office/R&D uses beyond a 20-year horizon.”
“That story is that with the advent of the COVID pandemic, commercial spaces in Davis are rapidly showing up as vacant. The pictures are current as of October 1, 2020 … a total of 33 commercial vacancies with signs, and who knows how many without signs.”
There are all sorts of problems with this level of analysis. For one thing, Matt Williams acknowledged to me that he simply drove around and took photos of the signs believing that they spoke for themselves. He never attempted to talk to the commercial real estate brokers.
There are a range of different situations here that are lumped in together. Some of the signs are for companies that no longer exist and therefore are probably not being actively marketed.
Some of the space is very small. A lot of the existing office in town is older and thus inadequate for the demands of high tech companies of the sort that DISC is attempting to attract. Moreover, DISC is looking primarily at providing space to larger companies who might be moving here from out of town, or looking for a move up but want to remain in Davis.
Simply taking photos around town does not allow us to have a full appreciation of the situation.
The authors note that “the 2017 EPS report stated ‘As of the fourth quarter of 2016, the City’s R&D/Flex market experienced a vacancy rate of about 14 percent,’ and that was before COVID. Reducing that vacancy rate to a more-healthy level of 5% or below is one of the business fundamentals that Davis needs to address with or without DISC.”
But the statement from the 2017 EPS report is simply lifted out of context. The problem, as EPS lays out in the very next sentence, is: “In the City, much of the vacant space reportedly is substandard construction quality or located on the second floors of structure. In the latter case, such spaces are less appealing to users because of increased cost and inconvenience, with these users often seeking ground floor space.”
So the real problem here is not lack of demand, but rather a lack of quality supply.
It is worth noting the comments made by Mark Friedman during the recent item on the URP’s mixed-use project.
Friedman told the council that “there’s good demand in Davis for research tenancies… We’re 98 percent leased.”
Someone asked about the dispersed innovation strategy, and when I asked about that a year ago, the city said that remains the policy. The idea behind it was to make use of existing land and space.
But as the Studio 30 report concluded, the existing spaces “are not adequate in terms of size, location, or configuration” to meet our needs. That is why we have a high vacancy rate—not because of the lack of demand, but because we have inadequate supply.
And all the reports here point in the same direction. If our goal is to continue as we have with limited space and opportunity, then we will fill out at a rate of 39,000 square feet per year and have little to worry about. However, if we expand our space to accommodate companies that are growing and want to stay, or companies that we want to move here, then the estimated ability to absorb 90,000 to 150,000 square feet per year is reasonable.
This was similar point that Danielle Casey of Greater Sacramento made last year at our panel discussion. I asked her what she is hearing about Davis from large companies looking to move here, and she said nothing, because Davis lacks space for them—they aren’t even looking at Davis right now. But that would change if a project like DISC were built.
—David M. Greenwald reporting
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