MESSAGE FROM OUR CEO, RON GRANVILLE, CPM®
Welcome to Woodmont Real Estate Services Spring 2021 Newsletter. It has been more than a year since we published a newsletter to our industry contacts, clients, and service providers in large part because of what we have collectively experienced this past year. So, for starters, I would like to thank our phenomenal 350+ employees who performed so well under pressure and continued to provide high-quality service to clients, commercial tenants, and residents alike. And as importantly, an abundance of care to the thousands of residents living in communities we manage and thousands more tenants and visitors in commercial properties we manage. It was a stressful year for everyone, including the people reading these words now, and we are grateful to see the light at the end of the tunnel as more vaccines become available and case counts continue to drop.
During the past year we learned a great deal and evolved our operations to meet the changed circumstances of doing business during the pandemic. We expect that many of the changes will continue to be a part of how we do business in the long term. The rental market for all types of properties suffered a major setback both due to the economic impacts of the virus, but also due to the expansion of remote working. As the virus comes under control, we do not expect business operations to snap back, but we believe the market will recover over time. Most likely some hybrid of remote work and in-office work is in the future for many people. As effective as virtual meetings may be, nothing really replaces in-person interaction.
MARKETING MANAGER CHRISTINA RODRIQUEZ ELECTED CHAIR OF VALLEJO’S HOUSING & COMMUNITY DEVELOPMENT COMMISSION
Christina Rodriguez (Marketing Manager, Marketing & Education Department) was recently elected as the new Chair of Vallejo’s Housing & Community Development Division (HCDD). Previously she served the city as Vice-Chair of the HCDD, which coordinates City services for the homeless and also coordinates the application and implementation of grants provided by the U.S. Department of Housing and Urban Development (HUD), namely the Community Development Block Grant Program, as well as numerous other initiatives to support Vallejo’s housing policies, provide housing security for its residents and educate the public on housing issues. The HCDD is overseen by the City Manager’s Office.
Born and raised in San Francisco and now a resident and homeowner in Vallejo (with her husband and two children), Christina’s work in Woodmont’s Marketing and Education department focuses on supporting marketing and training efforts for the company as well as the properties the firm manages. She is responsible for developing, facilitating and implementing marketing materials for individual properties as well as managing success-oriented programs designed to meet clients’ business objectives.
Christina is passionate about housing and educational matters including making others aware of the career opportunities associated with the housing industry. She joined Woodmont in 2015 with a background in onsite property management. In spring 2017, she received her MBA in marketing from Notre Dame de Namur and is currently studying for her PhD at Mills College (she is completing her first year and pursing a Doctorate in Educational Leadership). Christina is also the founder of Latinas With Masters (https://www.latinaswithmasters.com/), which has a mission to inspire, empower and educate the Latina community and future generations of leaders with equitable pathways, academic achievement and professional growth in a safe, positive and supportive environment. Latinas With Masters champions diversity, equity, inclusion and belonging in spaces we work, live and learn all while embracing and preserving Latina culture.
SCOTT PRITCHETT, CPM® NAMED BOMA SILICON VALLEY’S MEMBER OF THE YEAR
Scott Pritchett, CPM® was named BOMA Silicon Valley’s 2020 Principal Member of the Year in recognition of his exceptional service and contributions to the organization this year in organizing and moderating two broker panels on the current state of the Silicon Valley commercial real estate market. Pritchett, President of Woodmont Real Estate Services Commercial Operations, is a long-time member and former President of the regional chapter of Building Owners and Managers Association (BOMA), which is dedicated to professional property management and provides its members with legislative advocacy, industry information and education.
WOODMONT LANDS ICONIC DOWNTOWN SAN JOSE MANAGEMENT ASSIGNMENT
The Commercial Operations of Woodmont recently won a competition to manage the offices at Tower 55 in Downtown San Jose, aka The Gold Building, located in the heart of downtown San Jose and one of the first Class A office towers built in the downtown.
Owned by Denver-based data center REIT, CoreSite, the iconic, 15-story tower located at 55 S. Market Street is comprised of 100,000 square feet of data center facilities on the lower floors and 230,000 square feet of multi-tenanted office space in the rest of the building. Woodmont was retained to manage the office space and parking garage only, after CoreSite – which typically manages its own facilities, determined it would be more efficient to have a third-party management company service the rentable offices throughout the building. Woodmont is responsible for managing the physical assets and aspects of the property (janitorial, parking facilities, service vendors), while the owner will continue to handle all accounting, rent collections and related matter with the office tenants.
According to Scott Pritchett, CPM® President of Commercial Operations, the feedback he got from his new client on winning the assignment was because his team’s proposal was the most thorough and the owner/asset manager felt confident and comfortable with the onsite collaboration that would be required to co-manage the facilities. CoreSite has an in-house team of data center facility managers to manage the data center. CoreSite has two other data centers in the region, according to its website, in Santa Clara and Milpitas.
WOODMONT’S MULTIFAMILY OPERATIONS STABILIZED ASSETS DURING THE TEETH OF THE PANDEMIC
Most everyone’s job was made harder by the pandemic as we adjusted to remote business operations for daily communications and services for existing community residents as well as prospective residents wanting to relocate to new residences. Despite the challenges, new Woodmont multifamily lease-up communities experienced success. In Santa Cruz, Menlo Park and San Jose, four new communities were stabilized, and the company moved a new community in Morgan Hill to mid-field (in terms of occupancy). At the same time, Woodmont added a portfolio of apartments and mixed-use space in Palo Alto and Los Altos.
NANDA ON PACIFIC
Nanda, Santa Cruz’s latest new apartment community, is a mix of 78-apartments with ground floor retail. The community achieved 99% occupancy in recent months, with rents ranging from $2150 for studios to $2450 for one bedrooms while two bedrooms start at $3350.
Nanda’s site is noteworthy as the last property in Santa Cruz to be redeveloped after the earlier structure was destroyed nearly 32 years ago during the 1989 Loma Prieta Earthquake, which was centered in nearby The Forest of Nicene Marks State Park. The 6.9 magnitude quake struck at 5:04 pm on October 17 just as a national broadcast of the World Series featuring the San Francisco Giants and Oakland A’s commenced.
Comprised of 268 apartment homes in the Midtown area of San Jose, Silver reached 93% occupancy earlier this year. The pet-friendly community offers a large courtyard lounge, pool+spa, and outdoor grilling and dining area and onsite fitness center as well as plentiful on-site parking.
Easily one of the most unique and luxurious multifamily community among boutique portfolios managed by the company, Woodmont achieved 100% occupancy late last year at Six50Live, which is a few blocks off Menlo Park’s downtown area on Santa Cruz Blvd. With modern architecture—such as concrete walls combined with paneled wood and glass deck railings, the apartments exude a cool vibe that appealed to discerning consumers during lease-up as much as the proximity to Menlo’s restaurants and shopping.
Another downtown property managed by Woodmont, Sparq expresses the epitome of San Jose’s emergence as an urban mecca and is fast-approaching becoming a 24-hour city. Located in the city’s SoFA District, Sparq’s neighborhood offers live music (well, it will again soon), theaters, a myriad array of food choices, coffee bars and more (including a WalkScore of 93!). Sparq’s studios, one and two-bedroom apartment amenities appeal to a wide demographic and feature the latest technology, including keyless entries, digital package lockers, a Klaus car-stacker system as well as features that are decidedly non-technical yet equally as desired and in fact, primal: outdoor pizza ovens and fire pits.
SUNSWEET LUXURY APARTMENTS
Located in the center of the ultra-quaint downtown of Morgan Hill, which locals proudly call the crown jewel of Silicon Valley, Sunsweet is a few-minute walk from the Caltrain station stop with services to San Jose 10 miles north, and over a dozen excellent restaurants, boutiques, and shops. A one month-free incentive is currently being offered for a 13-month lease, with studios starting in the high-$2300s, one bedrooms at $2800 and two-bedrooms starting in the mid-$3500s at the 86-unit community, which also features desirable onsite amenities and services. Sunsweet recently reached 50% occupancy.
The Sunsweet apartments were built at a former California prune and apricot dried-fruit packing house operated by Sunsweet from 1917 until 1964. The Morgan Hill facility was called Plant 2 and was one of over 30-such packing houses operated by the California Prune and Apricot Growers Association—a farm co-operative that collectively operated as Sunsweet. The fruit-packing plants were located as far south as Hollister to Red Bluff near the northern border of the state, with most of them in San Jose, which gave birth to San Jose’s pre-Silicon Valley nickname as the Prune Capital of the World.
COMMUNITY SERVICE AND SUPPORT
From inception Woodmont Real Estate Services has engaged and embraced community service and support, and in 2020 and through the first quarter of 2021, we are proud to announce continued support of programs and agencies with which we have had long-associated and serviced, as well as some new programs that emerged and were made more urgent by the pandemic. They are:
- California Fire Foundation (calfirefoundation.org): Needless to say, the 2020 California fire season was epic in nature, and this foundation provides critical support to victims, firefighters and communities affected by wildfire and disaster throughout California.
- NAACP Legal Defense and Educational Fund: An incorporated law firm based in New York City and nationwide civil rights organization, the LDF (its acronym) is America’s top legal firm fighting for racial justice. Given the events of 2020, Woodmont is pleased to have contributed to this vital organization.
- Meals for Heroes Program in Morgan Hill: Started by volunteers in Morgan Hill, the program helps both restaurants and the healthcare community stay afloat and provide needed services. Monies raised are 100% percent distributed in the local community by buying 60-90 meals at a time (at full retail price) from local Morgan Hill restaurants and delivered to a regional hospital and related healthcare facilities to express the community’s gratitude for their service and professionalism during these stressful times.
- Samaritan House: One of the agencies we have supported for years, the funds donated helped support families with Covid-relief and related services.
- Housing Industry Foundation (HIF): Woodmont is an ongoing supporter of the important work HIF does to serve and support families with housing and social services programs that help maintain and support stable housing.
In late February Woodmont’s Scott Pritchett, CPM® President of Commercial Operations, moderated a Building Owners and Managers Association-Silicon Valley Broker Panel – just as he had a year earlier. The 2021 version featured Josh Shumsky, Managing Director with Newmark (San Jose) and a retail real estate expert, Todd Husak, Managing Director with CBRE (Palo Alto) and an office market specialist, and Travis Durfee, Senior VP, Market Officer with San Francisco-based Prologis, the world’s largest industrial and logistics facilities real estate company. Here are a few highlights from that 90-minute program.
Shumsky reported that the pandemic has struck the restaurant industry very unevenly. As mom and pop eateries and finer dining establishments with limited abilities to create pop-up parks outside of their restaurants, restaurants in Mountain View, Palo Alto and Santa Row were doing 120% of pre-Covid sales because they had the street space to move many and in some cases most of their tables outside.
Even so, the Golden Gate Restaurant Association estimates that 50% of San Francisco restaurants would close with another relief package and 80% would without one.
As widely reported grocery retail, medical and home improvement-related retail has thrived during the pandemic, while apparel and luxury-brand retail has suffered the greatest in the past year.
Shumsky offered that retail vacancy rates have largely stabilized though attributed much of that to eviction moratoriums. His final slide in his presentation, a conclusion called The Way Forward, asserts that retail will survive as we a) get past eviction moratoriums, b) provide sufficient lead times for businesses to re-open and c) drive retail occupancy by asking cities to be more flexible in types of allowable uses without restrictive zoning codes and conditional use permits.
Husak confirmed reports of the Bay Area exodus are real, as well as the fact that Austin, Texas, is the largest recipient of Bay Area migrants, by saying he personally knew 10 families that had moved to Austin in the past year.
He reviewed details that are the most-often talked about elements of the region’s office market – the surge in sublease space and the work-from-home phenomenon. Approximately 9 million square feet of office sublease space has hit the market in San Francisco in recent months, making up about 50% of availability. On the peninsula – the least impacted submarket in this regard, 2 million square feet of sublease space came on the market, or 30% of all available peninsula office space, while in Silicon Valley 6 million square feet of sublease space was released, equaling about 20% of availability.
Husak said that 90% of companies are paying rent on time though most of their offices remain unoccupied, and also companies are leaning toward letting their leases expire as they figure out office occupancy strategies which will likely feature different combinations of hybrid onsite and work-from-home models. He said many companies are seeking short-term leases in these dynamic times and that landlords, which are usually averse to shorter leases, are happy to do them (the thinking is ‘do them or lose them’).
Durfee offered some insight that the press has largely left out in its coverage of industrial real estate. While noting that industrial demand was much greater than all other property verticals during the pandemic, “there are sectors of our business that have been devastated, such as caterers and other service-and-entertainment-based companies that typically occupy large chunks of industrial space to run their back-end operations.”
He shared that Prologis has approximately 27 million square feet of industrial inventory in the Bay Area spread over 275 buildings with 700+ corporate customers (tenants). During the early stages of the pandemic the company had about 250 rent relief requests – most of which were not critical for those companies to remain viable, and ultimately Prologis extended 40-50 relief packages featuring deferred rent and other measures to help their clients get through the economic rough patch caused by the pandemic.
Durfee noted that certain service-oriented tenants in their portfolio did thrive last year, such as suppliers of granite, kitchen and bath cabinets and other home building-related businesses, and that the East Bay, with a concentration of institutional distribution companies, food distributors and consumer essentials for the greater Bay Area, outperformed other submarkets in the region. Of interest and counter to the exodus narrative taking place, he said many of his company’s customers are looking to relocate to Tracy and the Central Valley (from inner Bay Area locations) rather than out-of-state. Prologis is experiencing rental rate growth in 2021 as the economy begins to recover and the company continues to look for land buying opportunities throughout the Bay Area.