Our Palo Alto project received another award.  Custom Home Magazine awarded our project its Grand Award for a Custom Home more than 5,000SF.  This Palo Alto infill project struck me as one of the last great houses of the 20th Century, and probably the best built example of Architects Steven Ehrlich, Takashi Yanai and Alec Whitten.

Ryan Associates was our general contractor and raised the bar on cast in place architectural concrete.

Engineered Environments was our AV design/builder and I recommend them highly.

Depp Glass fabricated the glass for the main stair--they did the Apple stores--and were real pros to work with.

Pacific Pools was the pool contractor and, well they stuck with it until they got the job done. 

Great team, exacting job, glad to see it get some press.

California is the 12th largest emitter of greenhouse gases in the world--the second largest user of transportation fuels--and the largest user if you look at it on a per capita basis.  If you are looking at the problem through a greenhouse gas lens, our problems are sprawl development, and a very high percentage of car use.

My focus here is whether building form is influenced, or follows, energy demand--I'm going to leave the car problem to the smarter folks.

My basic thesis is that we will not conserve our way out of the problem--we need to develop for a world where energy is expensive.  This will get the numbers working in the right direction, and then focus on delivering clean, cheap power as part of the solution.  Why isn't conservation the answer?  This is what happens when energy is cheap:

Every new home we add, every new apartment we build, every new office building developed--increases the demand for energy.  If we are generating electricity from carbon based fuels, it increases the carbon loading of the atmosphere.

The average Californian requires about 7,500 kWh per year:

This is a little more than half of the national average, but we add 400,000 people per year in population.  Part of the reason why our usage is so low is that we are blessed with a wonderful Mediterranean climate in our coastal regions.  The problem is that the majority of these new arrivals will live in the interior of the state, where the summer heat is intense, and AC loads drive a "peaky" electrical demand curve.  And no one wants a new power plant next to them.

Every new office building requires about 13 kWh per square foot per year to operate when fully occupied.

New data centers are being designed at 400 watts per square foot or 1600 kWh/SF/yr, more than 100 times your typical commercial office building.  And data center demands are increasing, not decreasing as Google, Netflix, and Amazon becoming a more familiar part of our lives.

The value of the asset we create is diminished by the energy costs necessary to operate it, and augmented by its value to its occupants.

Our demand for power is becoming increasingly "peak-y" due to building more in the Central Valley--peak demand is very sensitive to temperature variations:

The rising cost of petroleum and natural gas as a feedstock increases awareness of how much, and what type, of energy is used, in our daily activities.  Understanding energy flows can, and should, inform the design of our built environment. 

How do I practice Form follows Energy development?

The most basic form of energy is the sun--so Form flows with the Sun--

Start by understanding the energy flows of the site.   reflected in what is needed to be captured, deflected, or redirected.  Think daylighting, cross ventilation, night flushing, pre-chilling, and thermal cycling.

Intervening--reflecting, redirecting, and catching the energy flows.  Think shades, reflective roofs, and occupancy patterns.

Harvesting--solar electric--photovoltaics, and solar thermal--solar hot water and adsorptive chillers for air conditioning.  Harvesting on an inefficient building is a dumb idea--like trying to row a leaky boat.  Do you row faster, or fix the leak?

Methinks the answer is:

• more compact development patterns--ULI is already looking at this,
• net zero energy buildings--CPUC wants all new residential at net zero by 2020 and commercial by 2030,
• a revolution in how we fuel transportation,
• distributed electricity generation--think smart grid, solar, and wind, and
• a fuel tax/carbon tax/credit process to motivate us to do the right thing.

Creating incentives, building awareness, putting a cost to using energy unnecessarily.  This is a "wetware" problem--the people, economics, and politics--putting the skills to work.  We have won the hearts and minds, now we need to execute. 

Form following energy, indeed.

Along with Dongtan City in China, this new zero-carbon community designed by Sir Norman Foster is setting the bar for triple bottom line development.

This new city is seeded by a US$15B investment from the Abu Dhabi Emirate, and is located 10km from the center of the city.

Scheduled to be complete by 2016, this new 640 hectare [ 1,700 acre] home for alternative energy industries and research will be home to 50,000 people, create 70,000 jobs, and 1500 companies.  Passive solar design and energy efficient design will result in a community that

• uses 80% less energy,
• 50% less water--a big deal when all your water is produced by desalinization, and
• 1% of the waste going to landfill

than current community needs.

Green design principles will enable this community to save over $2B in oil consumption over the next 25 years, and add an estimated 2% to the GDP of Abu Dhabi.  A streamlined regulatory environment and a unique enabling environment, and a location in the trendsetting UAE completes the feasibility picture.

A Chicago architecture firm recently won the commission for the headquarters--using a positive energy, mixed use program.

A great example of developing like you give a Damn.

The California Public Utilities Commission, through its “Big Bold Energy Efficiency Strategies,” has adopted three programs designed to move all new residential and commercial construction to a zero net energy standard. The goal of this program is to reach zero net energy in residential construction by 2020 and in commercial construction by 2030.

Another interesting point was the mandatory solar--so that it could be included in the T24 calc.

Mandatory solar isn't the way to go.  Shading, tilt and azimuth is a major issue in greater than 50% of residential sites, so we would end up with systems that don't pay for themselves quickly enough.  The report did admit that feed-in tariffs--the way they do it in Germany and Spain--are the way to go.  And this would promote higher performance design.

Price grid power high enough vs self generation--we think the curves have already crossed in PG&E territory and on the Big Island of Hawaii--add a feed in tariff, and the market will take care of the rest.  Or do what Marin did, and cap residential energy use at the equivalent of a 3,500SF home, and the owner or builder needs to compensate for any additional usage through greater efficiency, or the use of pv to self generate the difference.

The CPUC came out last Friday recommending that all new residential buildings developed after 2020 be net zero energy.

Time to get to work...

• you and the water, the light, the air
• you and quality of what you can touch
• you and other people
• you and what you need--food, solving a problem, finding a solution--and
• you and the architecture.

Leveraging how you choose to live a life.

His sale of EOP at what looks like now as the top of the office cycle is recent proof that he hasn't lost his touch.

I recommend you take the time to read this article.  My takeaways:

he is constantly trying to "shut out the noise of conventional wisdom.  While it may not be wrong, it is rarely profitable."

"Look, business is easy.  If you've got a low downside and big upside, you go do it.  If you've got a big downside and low upside, you run away.  The only time you have any work to do is when you have a big downside and a big upside."

"...when you invest in emerging markets, you are trading growth for the rule of law, so it is critical to find the right local partner and build a strong personal relationship.  You're making a marriage."

Now to go do it...

Well, we can't exactly build our way out of it, but how we build, and where we build will have a lot to do with the changes afoot.  The built environment can be a significant part of the solution--one of the largest opportunities embedded within the climate change crisis.

The IPCC Fourth Assessment Report is out.  Rising temperatures, rising sea levels [the area in light blue is what is likely to be under water in the Bay Area], and long term changes already well underway are described within the report.

We need a new way of valuing what we develop, and where.  The good news is that, after transportation, changes in our built environment have the greatest mitigation potential on climate change.

Where do you start?  Ask yourself if you are building the right thing in the right place.  Ask yourself if you are building it to thrive in a high cost energy world.  And start being the change...

The port needs $1B to cover the gap in its operating and cap exp budgets, and it is using the ground lease of this site as a way to cover a significant part of this shortfall. 

The Port is counting on $8 to $10M in rent, which translates into about $250 PSF in residual value. My guess is you need an FAR of about 3 to make this work.  From the Mission Bay Standards, this looks achievable.

Opportunities/Constraints?

• LEED Gold or better.
• 2.57 acre China Basin Park to be developed as part of the plan.
• No height restriction.
• residential allowed as a potential use--unique for a waterfront location.
• close to UCSF Med Center
• Bayfront location.
• Replace all infrastructure, including Terry Francois boulevard.
• classic path of development play.

The math:

About 1.2MSF of buildable, at $750PSF TDC means this is a ~$1B total build out. 

Uses? 

Hotel--long term obviously, although this is a remote location for the next ten years.  There is a 500 room hotel use permitted across Third Street from this site. ADR hasn't accelerated to the point where you are seeing much new product.

Destination--some interesting options, but how much ground rent can be paid?

Office--subject to Prop M, and the Hines/Pelli Transbay project has the potential to tie up all the City's office space entitlements for roughly ten years.

Retail--the old "half a trade area" problem, the other half of the trade area being residents of San Francisco Bay and not huge shoppers.

Condos--the late saviour of the commercial construction market is oversupplied right now.  There are several condo sites being quietly offered, and no takers.  The fact that this site is groundleased means that condos are not a real option.

Rental housing--obvious use, but can it pay $100K/door?  You need $6 PSF rents to do that.  You have a few units on Craigslist pushing $5, so this is probably a 4 cap on trended rents.

The site used to be the old H&H Ship Service Company's tank farm, so you don't want to excavate much at all.  The Giants want 2000 spaces of ballpark parking--actually not much for a major league park.

Chase costs will be significant--any deal requires approval by the State Lands commission, and amendments by BCDC, but this is a marquee site in one of the world's greatest cities.

Oh ye gods, why do you tempt me so?

The impending green wave, coupled with cap rate expansion, gave me the distinct impression that the crowd was bifurcated into two groups--heretics and dinosaurs. 

Participants were either expounding the benefits of a greener planet--and acting dumbfounded why everyone else didn't see it, or you were thinking green--and LEED in particular--is a racket conjured up by a bunch of consultants.

What a lot of people didn't seem to see was that green offers a new way to crush an opponent when your asset is developed, operated, and positioned ethically and theirs isn't.

I mentioned to a couple of young Columbia MSRED students that I find the real estate industry is often the last group to realize an impending inflection point--too focused on making a cheaper buggy whip.  What an amazing opportunity for professionals just starting their careers. 

What is it going to take for the rest of us to get it?

Condo guys sweating bullets,

Risk being priced as risk again--not opportunity,

Quality is king,

The dollar debauched,

Financiers explaining why the punchbowl went away, and 

Everyone trying to figure out whether "green" is risk in drag--or a new world.

Economically sustainable is environmentally sustainable.

I don't see any other option--getting the numbers to work environmentally makes for a more attractive project, and is the right thing to do.

Buildings contribute over 60% of total carbon dioxide emissions during their lifecycle.  Learning how to build and operate for a minimal environmental footprint is essential. As a builder and developer, I see no other way to build.  You are creating a more attractive asset--for neighbors, investors, tenants, and owners. 

I am now more deeply grateful for Alan Greenspan's contributions. This book deftly handles the story of his life while not preening over his accomplishments.

Economics can oft times make for dreadfully boring reading--but not here.  This is the story of an extremely interesting character.

Here is the Economist's review of the book--succinctly captures what this 544 page tome is about.

One thing I did not fully appreciate was how influential Ayn Rand was on his life.

Here is the Chairman's interview on Jon Stewart--

Our conversation went back to basic principles.  The most important thing on the job is safe, quality construction.  The next most important element is how you define what the final product is, so you can tell if what you are getting is what you contracted for.  The third most important element is paying promptly for what you contracted for.

Supervision falls under a contractor's right to determine its means and methods of producing what you contracted for.  Specifying who, or what constitutes competent supervision is either done in division one of the project manual, by change ordering in supervisory requirements if they are not in the project manual, or by rejecting work that has not met contracting requirements.

What are the signs of competent supervision?  A clean job site.  Tradesmen with the proper safety equipment.  A schedule on the job trailer wall that is current.  A team that understands the critical path and what the next three tasks are.  Organized layout and coordination of workflows.  And communicating with the Owner where you are in construction. 

Materiality was the major advance in this show--that and the understanding that green building is an easy choice.  Suppliers are scrambling to fill the gap.  It used to cost more to build green, prices now seem at par with custom home prices.

Standards are in flux--degrees of greenness abound--LEED for Homes and Build It Green are the two big ones. 

Momentum is impressive, and understanding of what it means to be green--without materially compromising what is important--is occurring.

Press coverage has been ample--increasing both understanding and demand.

Next steps?  Getting banks on board with green mortgages, and jurisdictions requiring energy upgrades at time of sale.

My action item?  Getting much better at practicing  sustainable real estate development.