Google Takes Power Position

Los Angeles Business Journal | By Daina Beth Solomon

Google owns more than a dozen data centers around the world – giant warehouses buzzing with servers that let internet users download Beyoncé videos, email puppy photos, or look for the nearest gas station on their smartphone.

Most of these centers sit in far-flung, sparsely populated places such as The Dalles, Ore., and Council Bluffs, Iowa. But as demand grows for rapid data access, Google is making strides to cover the gaps through leased space, with downtown Los Angeles one of its latest targets.The Mountain View tech giant last month signed a deal to house servers and consume up to 1 megawatt of power in space leased by Zayo Group Holdings Inc. at One Wilshire, according to industry sources.

Google’s desire for a local power boost suggests more major companies might follow as a burst of consumer demand outweighs downtown’s high costs compared with smaller cities, according to data center development professionals.

There are 2.3 million square feet of leasable data space in Los Angeles, charged up with 210 megawatts of power, according to real estate company Jones Lang LaSalle. An additional 20,000 square feet were under construction in Los Angeles County at the end of last year, set to provide 3 megawatts more. (The energy generated by 1 megawatt would be enough to power about 1,000 U.S. homes for a year.)

Nationwide, leasable data centers in major markets occupy at least 41.5 million square feet, consuming 3,560 megawatts, or enough to power 3.6 million homes.

“People are taking more space and more power to get the internet of things and the delivery of services and applications closer to the user,” said Marc Gittleman, senior vice president at downtown’s Rising Realty Partners, which owns a data center just west of downtown. “Whether it’s Google or Microsoft or Amazon Web Services, … we will be seeing more groups like that with higher density downtown.”

Bulking up

Denver-based Zayo zoomed into downtown last month, announcing it had signed a lease with One Wilshire owner GI Partners to take 24,215 square feet with access to 2 megawatts of power.

The deal is part of Zayo’s aim to expand its Southern California network of co-location sites – spaces that provide businesses the equipment, space, power, cooling systems, security, and networking abilities to store and share vast amounts of data.

“As we looked at California, there are some key interconnection facilities, and arguably the most important is One Wilshire,” said TJ Karklins, senior vice president of the company’s Zayo co-location business segment. “We tether our remote data centers into that facility and make them more capable to provide solutions at lower latency speeds.”

Businesses can lease space for their servers by the cabinet, which typically measure 25 to 27 square feet. Karklins said Zayo was marketing itself to media, cloud, and software companies and those providing data services in fields such as health care and manufacturing.

He wouldn’t confirm Google’s tenancy at One Wilshire.

Google representatives declined to comment.

Zayo said in a press release that strong customer demand in Los Angeles drove its expansion, including an agreement with a major web company as an anchor tenant.

One Wilshire, at Wilshire Boulevard and Grand Avenue, was built as a traditional office in 1966 and was updated for telecommunications uses beginning in the 1990s. San Francisco-based private equity firm GI bought it in 2013 for almost $438 million, a downtown record. On the heels of Zayo’s lease, GI announced it would add 9 megawatts of power to the building by summer 2018, bringing the building’s total supply to 30 megawatts.

Zayo’s space in the 30-story tower is a raw shell. Karklins said data center construction runs from $7 million to $10 million a megawatt, meaning Zayo’s space could cost up to $20 million to build out.

The company said it planned to begin construction this summer and open in the fall.

Michael Siteman, national accounts manager at internet infrastructure provider Internap, said that despite the expensive construction costs, Zayo should be poised to keep control over its space and fetch high rents from subtenants who are clamoring for an L.A. presence.

“It allows (Zayo) to make more profit,” Siteman said. “There are a lot of Google customers here. The closer they get to the edge where those customers are, the faster they’re able to deliver content and information.”

Costly business

Lease rates for co-location companies typically range from $125 to $195 a kilowatt, Siteman said, putting Zayo’s monthly rent for 2 megawatts at One Wilshire as much as $390,000. Although data centers calculate rates based on power, not square footage, the 24,000-square-foot lease would amount to roughly $16 a square foot. Asking rents for traditional office space in downtown are $3.55 a square foot, according to first-quarter data from JLL.

The building also provides power and cooling, which would add an additional $14 a square foot to Zayo’s costs, bringing its monthly rent to total roughly $717,000, or about $29 a square foot. That’s roughly $86 million over a 10-year term.

Zayo will take space in One Wilshire alongside co-location competitor CoreSite, a longtime building occupant that says it hosts more than 60 cloud and IT service providers within its 149,000 square feet. CoreSite also leases 425,000 square feet space at the Terminal Annex building at 900 N. Alameda St., where the company says it hosts more than 350 network, cloud, and IT providers.

Rising’s Gittleman said few office investors have the skills and resources to convert entire buildings to data centers, meaning downtown’s existing data centers will remain valuable. The company’s West Seven Center, purchased last year for $210 million, has 9 megawatts available of its 22-megawatt supply.

Gittleman said he expects rates to rise as supply tightens across downtown, given the growing importance of the market.

“You could have a Ferrari, but if you pinch the fuel line, you’re not going to get the performance out of it,” he said. “That’s the effect of being far away from a data center.”

Artificial Intelligence and Office Space

There is a lot of talk about Artificial Intelligence (AI) today and many articles that have been written proclaiming its impending effect on our economy. For example, Tony Room of Recode wrote about Treasury Secretary Steven Mnuchin claim that robots are at least 50 years away. This article follows a theme about AI centered around its potential impact on manufacturing and other blue-collar industries. But as technology is constantly advancing, it’s important to understand virtually no industry is safe from disruption. In fact, recently, Pedro Nicolaci da Costa of Business Insider wrote an article which focused not on the impact that AI will have on blue collar jobs, rather it focused on AI and white collar jobs.

In Downtown, Street Artists Find a Surprising New Patron: Developers

In Downtown, Street Artists Find a Surprising New Patron: Developers

DTLA - Say hello to Downtown’s newest Instagram bait: A mural at Eighth and Hope streets, on the back of the mixed-use complex The Bloc, pairs a splashy set of angel wings with the words, “You are a goddess living in a city of angels.” It has appeared hundreds of times on social media, tagged with #DTLA.

Art Deco Los Angeles

The architectural treasures scattered throughout the city are no skyscrapers, but they still soar.

California’s broad landscape suggests endless possibility, a chance to realize your dreams. You can backpack in the Klamath National Forest within Siskiyou County. You can find a slice of Denmark in the Santa Ynez Valley. Or you can immerse yourself in the glittery landscape of the Hollywood hills, the place that has applied a practicality to its dreams by making an industry of them.

Sweetgreen Finally Lands in Downtown LA

By Eddie Kim | Downtown News

Sweetgreen has earned a huge following in the fast-casual dining world for serving up custom salads and grain bowls using local produce, with an eye for chef-y flavor combinations and seasonal treats.

Lucky for those who live and work in the Financial District, Downtown L.A.’s first Sweetgreen is headed to Fifth Street right across from the Central Library.

The location will be opening in the summer in the former home of the popular Thai restaurant Esaan and an adjacent Coffee Bean & Tea Leaf, at 601 W. Fifth Street in the street-retail portion of the newly renovated CalEdison office structure.

The Sweetgreen will fill about 2,300 square feet of space to serve up creations like the Pesto Portabello bowl with warm quinoa or the Spicy Sabzi salad with spinach and roast tofu.

“We are thrilled to welcome Sweetgreen to The CalEdison DTLA as they expand their presence in the Los Angeles market.” said Tyson Strutzenberg, chief operating officer of CalEdison owner Rising Realty Partners. “We were able to connect a brand that focuses on passion and purpose with a historic location in one of the most desirable areas in the city.”

Rising Realty is continuing work on the CalEdison, including restoring outdoor patios to the 1931 structure and modernizing office spaces.

‘A Different Los Angeles’: The City Moves to Alter Its Sprawling Image

By Lauren Herstik | The New York Times

Los Angeles conjures a particular image in the popular imagination: sprawling and spacious, dotted with single-family homes and riddled with traffic. But Angelenos have signaled that they are ready for a change, most recently by voting down a measure that would have slowed new construction for two years.

The effort to slow construction, known as Measure S or the Neighborhood Integrity Initiative, was financed mainly by Michael Weinstein, the president of the Hollywood-based AIDS Health Foundation. Mr. Weinstein’s office is on the 21st floor of a Hollywood skyscraper with a view of the hills, next to the future site of two 28-story mixed-use residential towers.

Mr. Weinstein said that kind of development was out of character for the neighborhood. He and other supporters of Measure S have contended that new luxury developments can contribute to rising rents.

The Measure S campaign pitted slow-growth factions, who called the city’s planning process corrupt, against a coalition of public officials, developers, labor groups and others who conceded that while reform was necessary, so was growth.

Now that the pro-growth group has prevailed, the question is: How does the city move forward? Can it overhaul the planning process, allow innovation and still please the disparate stakeholders within its 503 square miles?

Measure S, which was defeated last month, was the third in a trio of transformative local ballot measures. In November, Angelenos approved a $1.2 billion bond to build affordable housing, along with a half-cent sales tax increase to pay for mass transit.

Taken together, the votes are “a very clear statement from the voters that they’re interested in a different Los Angeles,” said Christopher Hawthorne, who teaches urban and environmental policy at Occidental University and is the architecture critic for The Los Angeles Times.

The city’s mayor, Eric M. Garcetti, who was swept into a second five-and-a-half-year term last month by 80 percent of the voters, heard the statement. He is empowered by these votes, with billions of dollars at the city’s disposal to address homelessness and improve infrastructure. But the vocal minority who fought to curtail development with Measure S still remains and he cannot ignore them.

“That’s L.A.’s biggest and most exciting challenge: How do you harness the momentum, the investment and even the disruption in a way that still addresses social needs?” Mr. Garcetti said.

Mr. Hawthorne has put forth the notion of a “Third L.A.,” a redefined vision of the city. The “First L.A.” was marked by the arrival of water in the 1880s and the city’s first population and real estate booms; it was a city of great civic ambition, public architecture and great experimental multifamily housing.

But it is the “Second L.A.” that is most enduring: the post-World War Two modernist mecca, a patchwork of single-family homes crossed by freeways and defined by the car. It is the city of Julius Shulman’s iconic photos of glass Case Study Houses overlooking suburban sprawl, and David Hockney’s paintings of backyard swimming pools.

“The dream or ambition embodied by the Second L.A. begins to break down into the ’80s and ’90s,” Mr. Hawthorne said.

The city began to fracture along racial and economic lines, leading to the 1992 Rodney King riots, which decimated much of South Los Angeles and Koreatown.

It is those neighborhoods that are now the focal point of the emerging Third L.A.

Koreatown is well served by mass transit: Three metro stops along Wilshire Boulevard link it to downtown Los Angeles.

“It’s denser and people are choosing to live there because they want to give up some square footage in exchange for more,” Mr. Hawthorne said. That’s more time, access to transit and a pedestrian culture.

Successful development in Koreatown has, in turn, increased interest nearby, said Marqueece Harris-Dawson, councilman for South Los Angeles.

“In a place like South L.A., which investors have systematically avoided, the red lines are just now falling away,” Mr. Harris-Dawson said. “Investors are enthusiastic, bullish, excited about mass transit coming through South L.A., about the opportunities along the main corridor, and excited about the untapped potential.”

Had it passed, the Measure S two-year building moratorium threatened to shut down new opportunity for South Los Angeles and neighborhoods like it. But in simply running the campaign, “S” proponents may have expanded that opportunity, by effectively starting the conversation about how to make Los Angeles’ planning process more transparent and effective.

The mayor signed an executive directive on March 9 establishing a planning task force, banning closed-door communications between planning commissioners and developers, and setting up programs at City Hall to guide development around transit and affordability.

Mr. Garcetti said he planned to eliminate regulations that stymie innovation, “whether it’s the size of units, or the connectivity of transportation modes.”

“We’re writing the rules as we go,” the mayor said, acknowledging “that can be very disruptive to people.” But, he added, “We need to get with it.”

All of this signals a move toward building that Third L.A.

“I see a series of many urban centers along the transportation corridors,” said Nelson Rising, chief executive of Rising Realty Partners, which has worked extensively in downtown Los Angeles.

“Anything near a transit stop will become viable and attractive,” Mr. Rising said. He pointed to specific hubs of density along the purple line, which currently links downtown to Koreatown and is set to extend all the way to Santa Monica with the passage of the transit measure. He also pointed to the Expo Line, which runs parallel to Interstate 10 and connected downtown to Santa Monica in May 2016.

The city planning department has laid the groundwork for these changes. Last year it enacted a mobility plan to diversify transportation modes by 2035, and created a new industrial live-work zone in response to demand from commercial and residential sectors for that kind of multiuse development.

Mr. Hawthorne speculated that the Third L.A. might be a city in which pockets of the First and Second L.A. peek through.

Mayor Garcetti is thinking hard about the look of the city.

“People entrust and elect leaders to take some risks and to be big and bold about the projects we do,” he said.

He said he hoped to turn an eye to the streetscape, to engage Angelenos at street level in a way the city never had to when the car was king.

It is why he has pursued large projects like a stretch of the Los Angeles River planned by the local “starchitect” Frank Gehry, the visually stunning Broad Museum and a forthcoming $1 billion museum by the filmmaker George Lucas. It is also why he is considering bringing in a chief design officer.

Mr. Garcetti said he envisions “a guru who can marshal the forces of the city and look at every bus stop, curb, utility box, every facade, every subway portal: These are moments to inspire and connect.” He added, “We should seize that moment.”

Glimpses into the Future of Workplace Culture with Chris Rising

There's no doubt about it - big changes are coming.

New technologies like artificial intelligence and automation will fundamentally alter the way we work. But what will that look like, and how should companies adapt?

This week on the show co-host Sean Spear interviews Chris Rising, the Founder and President of Rising Realty. Chris is a 19-year veteran of the real estate business, and someone who’s always been ahead of the curve in terms of building spaces that support how the most innovative companies work.

We loved this conversation because it brought together so many of the big ideas that we care about on this show - everything from office space and its relationship to culture, to personal habits and productivity, to the big technological changes poised to transform our economy and the workplace.

Sean met with Chris at Rising’s dramatic HQ in the heart of downtown Los Angeles. In this episode, Chris dives into his personal journey - including the lessons learned from his Jesuit education and his experience as a college football standout at Duke University - shares his daily habits, and explains why he thinks offices aren’t going away anytime soon.

This one runs a littler longer than most, but be sure to listen to the end to hear a challenge that should have a big impact on your energy and performance.

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Nelson Rising's Economic Outlook February 2017

Nelson Rising's Economic Outlook February 2017

There is a Chinese proverb: “May you live in interesting times”. Whether it is the consistent drip of 140 character tweets from our new President or the ever changing rumors of how the Republican-led Congress will deal with a change in tax code, there is no doubt that we are now living in interesting times. However, as a veteran of over 40 years of investing and operating real estate, there are some things that I look to consistently which help me feel like I have a little more control over our investment decisions. In the spirit of trying to use facts as we know them, rather than conjecture and hyperbole, I outline sources that I look to for information and give you my take in this quarterly Economic Outlook.