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In Town Living28 Years Developing Residential Neighborhoods The Olson Companys Steve Olson Chairman and Founder right with Scott Laurie President and CEOInside Aordable Housing Challenges In California Creating A New Urban Community A Changing Demographic Landscape FallWinterFallWinter 2015-16 Vol. 6Issue 1 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 1 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 2 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 3 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 4 5 Table of Contents 6 The Olson Companys Steve Olson Discusses Affordable Housing Challenges In California 10 Urban Living A QA With The Olson Company President And CEO Scott Laurie 12 The Process And Challenges Of Creating A New Urban Community 14 Cities Reinventing Infrastructure Improvements Drive Change In Local Cities 16 Home Designs For Todays Buyers 18 Sustainable Construction A New Blueprint For Addressing Californias Energy Plan 20 Meeting Californias Challenges Are The Right Jobs Being Created To Support Housing Affordability Demand 22 A Changing Demographic Landscape The Growing Influence Of Millennials 24 Urban Farming Takes Sustainable Living To New Heights 26 In Light Of The Drought Changing Perceptions About Water Conservation And Housing Development 28 Home Builders Connecting With The Evolving Asian American Community 30 Acknowledgements FallWinter 2015 Dear Readers California is experiencing unprecedented transformation on many levels today. Climate change the environment and sustainability are three significant areas of focus for our city and state leaders as well as our staff at The Aquarium of the Pacific. These issues are of particular interest given the current drought the need to mitigate and adapt to climate change and the need to determine our future food sources both from the ocean and from the land. These issues are shared by The Olson Company which has successfully designed and constructed sustainable new home communities for more than 28 years in over 100 cities statewide featuring locations that are walkable to retail dining recreation and services that are affordably priced and are adjacent to public transportation employment centers and other amenities. Utilizing urban reuse sites incorporating sustainable building practices reducing water usage and easing the dependency on personal vehicle use are just a few of the many initiatives that The Olson Company has undertaken to show its commitment to sustainability. The company has been recognized by the U.S. Green Building Council. The Olson Company is aware of the impact it has on its local surroundings the environment and the difference it makes in peoples lives. This unique and informative magazine will give you a glimpse into the many opportunities and challenges that California cities and residents encounter today. You will hear from public and private sector experts who provide insight into a variety of topical subjects that we as Californians experience in our daily lives. Sincerely Jerry R. Schubel PhD President and CEO 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 5 I By GEORGE ECONOMIDES Long Beach Business Journal T he Olson Company has built nearly 10000 homes in more than 100 cities across California over the past 28 years. As an urban pioneer he has a unique perspective on affordable housing issues in the state. We asked Steve to respond to some of our questions about this important issue. QWhy is providing an affordable home such a challenge in California today Is this a crisis or just a normal historical pattern in California A Californias home prices have recovered from the precipitous drop six years ago with the median home price currently for L.A. County at 496000 and for Orange County at 617000 according to Zillow. Southern California home prices have been rising because of lack of inventory and continued growth in household formations. This trend has also impacted renters who can pay well over 50 of their income to afford an apartment in the metropolitan core. Housing starts in the state hover around 100000 units which are 48 lower than peak levels a decade ago with more people living in the state today. Only the State of Hawaii has more expensive housing. Approximately 24 of the homes in Los Angeles and Orange counties are considered affordable for entry level housing compared to national levels of 70. A middle income fam- ily living in Long Beach in 1960 having an inflation adjusted real household income of 52711 adjusted to todays dollars paid 112603 for a 3-bedroom home or 2.16 times household income. Applying todays average household income of 52099 towards the purchase of a comparable house they would have to pay 426220 or 8.2 times household income. In reality a first time buyer securing an FHA loan for such a property requires a minimum household income of 73000 which leaves families with limited choices in the Southern California basin. Many end up either staying renters or moving to the Antelope Valley BeaumontBanning or other more remote locations. The affordability index in Southern California stands at 27.4. QWhat are the issues which inhibit providing affordable housing today A Subsidized state bond measures for affordable housing are inadequate to make even a small contribution towards Californias housing needs. Redevelopment agencies which shouldered the development of many subsidized affordable housing projects in metropolitan areas were closed down in 2012. As a result the least costly housing markets in the state like Bakersfield Fresno and RiversideSan Bernardino are still above national average home prices including apartment rents. There are many complex issues to consider when examining the affordable housing dilemma. The chart at the top of the next page shows how Californias home prices have outpaced the rest of the countrys home prices for over 70 years. Between 1980 and 2014 construction of new homes and apartments has remained low compared to both national and historical standards. During this 34-year period the number of housing units in the typical U.S. metropolitan The Olson Companys Steve Olson Discusses Affordable Housing Challenges In California 6 Steve Olson founded The Olson Company more than 28 years ago. Southern California is home to over 1000 small urban villages each with unique and compelling lifestyles. It is the Companys mission to seek out these locations and provide differentiated neighborhood housing giving homebuyers multiple living choices in the metropolitan core Steve Olson Founder and Chairman The Olson Company 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 6 area grew by 58 compared to Californias 31 growth in the coastal metropolitan markets the housing stock in the greater Los Angeles metro area for example grew only 19 during this period. As a result home prices in the coastal metro markets are now 3.7 times more expensive than the averages for the rest of the country. Land prices have continued to recover from the lows of 2010. Alternative land use has put a floor under land prices in many metropolitan areas. The only way to provide affordable housing in these close-in markets is to increase densities and for local agencies to recognize the magnitude of the crisis. In the greater Los Angeles region for example there is a shortfall of 200000 units. Although density bonuses granted to developers meeting certain agency conditions coupled with some easing of parking requirements could help a legislative fix to the inclusionary housing initiative Palmer decision would create targeted and tailored zoning ordinances that would increase density and streamline processing for affordable housing. Community resistance can be strong against allowing increased densities and frequently local zoning laws and building codes are not conducive to creating more cost efficient housing. On average voters in coastal communities have approved five measures per year limiting housing growth. The Millennials have started to account for a significant part of the workforce and have been left behind in becoming first-time homebuyers. They will be 38 of the adult population in 2020 and most will still reside in rental housing. The problem is significant and if not addressed over the next five years will be a crisis of large proportions. Federal and state subsidies are needed along with strong regional planning to provide shelter for arguably our largest generation that could be left sitting on the sidelines. Q Didnt redevelopment agencies play an important role in creating affordable housing in the past What funding mechanisms are emerging today that could help reconstitute the redevelopment process A There needs to be new funding sources for affordable housing and redevelopment. The creation of Enhanced Infrastructure Financing Districts EIFDs along with Public Financing Authorities PFAs would help fund transit-oriented housing mixed use and other infrastructure projects that have affordable housing associated with them. These are legally constituted government entities which would be governed by a public financing authority capable of issuing bonds. Coupling this with proposed tax increment contributions are important however the maximum period by which tax allocations can occur is 45 years from date of bond issuance. Projects which can be funded include the purchase construction and improvement of tangible property with a useful life of 15 years or greater. The EFID law allows these new districts to overlap the boundaries of former redevelopment districts. State Assembly Bill 35 would in conjunction expand the States Low Income Housing Tax Credit by 500 million which in turn will leverage another 2.8 billion in federal money. This potentially will create an additional 29000 new jobs in the state plus more affordable housing. And finally social impact bonds and health funds might become an additional source of affordable housing funds. Q What are some of the socioeconomic impacts of not providing affordable housing in the important metropolitan markets A Some of the hidden costs to the lack of affordable housing in the states metropolitan areas are as follows Health issues with children currently living in substandard housing conditions Moves which can affect childrens education and social development Not being able to provide affordable housing next to jobs and transportation which support regional growth and competitiveness Leaving a void of future generation homebuyers who normally create a steady demand for homes in a market 200 jobs lost by not constructing one new community of 70 affordable homes Lack of permanent housing increases the usecost of both state and local social services Not meeting the shelter needs of senior move downs who also want to reside in the metropolitan core An unwillingness to recognize that the savings ratio for the bottom 90 percentile of households is zero while it is over 20 for the top decile where most of the income growth has been occurring and Not creating a strong base of affordable homebuyers who eventually will become move-up buyers granting an orderly exit to those move-up homeowners who might want to sell their homes. Many families are challenged to save for a down payment and need the entry level assistance which is frequently provided with affordable housing projects. Q Why dont cities actively work to resolve their affordable housing problems Is it a fiscal issue or more resistance from the local political constituents A The dichotomy in creating a balanced urban environment is that cities recognize the importance of new commercial developments but many times are unwilling to plan for affordable housing to support the labor pool necessary to run these businesses. New retail establishments including restaurants stores auto malls and new hotels all yield high net fiscal benefits to 7 Millennials Are Growing Up Please Continue To Page 8 California Home Prices Have Grown Much Faster Than U.S. Prices Ination-Adjusted Median Home Prices in 2015 Dollars Source California Legislative Analysts Oce California United States 500000 450000 400000 350000 300000 250000 200000 150000 100000 50000 1940 1950 1960 1970 1980 1990 2000 2010 2015 0 Percentage Of Millennials Over 18 Millennials As A Percentage Of Adult Population 2008 2010 2012 2016 2020 BAC Research 2015 90 80 70 60 50 40 30 20 10 The Millennials will be 38 of the adult population in 2020 and most will still reside in rental housing. The problem is significant and if not addressed over the next five years will become a crisis of large proportions Steve Olson Founder and Chairman The Olson Company 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 7 cities. The increased tax revenue generated from these establishments frequently offsets the cities investments. The common perception is that new housing will increase demand for local govern- ments to provide firepolice services additional roads sewage and social services. The other part of the equation however is that the new residents will work at many of the new commercial locations and also are consumers of retail and business services. Q You have remained committed to afford- able housing for many years. Arent there easier ways to make money in real estate A The Olson Company remains committed to provide affordable housing in metropolitan areas by working with cities and transportation agencies to keep home price points down. With land costing 2.0 million per acre or more in the Southern California coastal corridor the Company must work creatively to appropriately increase densities hold costs and provide compelling homes in pedestrian oriented neighborhoods. For those homebuyers who want to remain close to jobs families and local amenities each Olson Company community provides unique architecture with open floor plans. Southern California is home to over 1000 small urban villages each with unique and compelling lifestyles. It is the Companys mission to seek out these locations and provide differentiated neighborhood housing giving home- buyers multiple living choices in the metropolitan core. When you couple this with the highest homeowner satisfaction scores in the nation there is great personal satisfaction in meeting homebuyer needs at affordable prices. Q If you were king for a day how would you change the dialogue concerning affordable housing A Having worked with over 100 cities in California The Olson Company has a unique perspective on meeting todays affordable housing challenge. More homes need to be built along the coastal markets and less inland to reduce traffic improve the environment and enhance the quality of life. The regional Association of Governments along with the state need redistrib- ution plans to encourage infill development and discourage sprawl. Much of the land on the coastal side of the mountains has been built out. The California Legislative Analysts Office suggests the state-mandated zoning changes should encourage up to two- thirds greater densities in metro- politan markets allowing an additional 100000 new homes to be constructed annually that would help abate the steady in- creases in home prices. Much dialogue will continue in future years about what percentage of household income residents are willing to spend on housing. Many metropolitan households spend 40 to 50 today. With a 53 homeownership rate in California compared to the national average of 64 the affordable housing debate should continue to heat up for years to come. The three big areas of change need to be 1 mandated density increases favoring well planned multi-family communities 2 new funding mechanisms for both redevelopment projects and affordable housing subsidies and 3 California needs a vision that continues to embrace the states diverse economic and natural resources while recognizing that its most important resource is its residents and their socioeconomic well being. I 8 Olson Company Executives from left Bill Holford President Olson Communities Steve Olson Founder and Chairman and Scott Laurie President and CEO at Grand Central Market in Los Angeles Household Savings Top 10 Household Savings Bottom 30 60 40 20 0 60 40 20 0 15 10 5 0 -5 -10 15 10 5 0 -5 -10 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Community resistance can be strong against allowing increased densities and frequently local zoning laws and building codes are not conducive to creating more cost efficient housing. Steve Olson Founder and Chairman The Olson Company 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 8 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 9 I By SAMANTHA MEHLINGER Long Beach Business Journal S cott Laurie is the President and Chief Executive Officer for The Olson Company which he joined in 2007. In this interview he discusses the concept of urban living why homebuyers gravitate towards that lifestyle and why it is a priority for The Olson Company. QWhat appeals to todays buyers about urban living The primary appeal with urban living has to do with improving an individuals use of available time something that carries a premium in our busy daily schedules. Urban living can improve your life by reducing commute times having walkable access to local amenities eliminating the constant need for a vehicle improving health through exercise providing more leisure time with family and friends and identifying a lifestyle balance that complements your interests hobbies and even your career. For many people living in an urban community is also about employment providing reduced drive times to and from work and allowing more time to spend in close proximity to your home. When people arrive home from work most individuals do not want to get back into their cars for trips to the market dry cleaners pharmacy or dining. It is nice to be able to walk or get on your bike for exercise and be at your destination in a matter of minutes. Having the ability to open your front door at an Olson community and walk somewhere is very important to our company. This is a primary focus and the reason why every one of our community names ends with Walk which actually contributes to generating high walkability scores for each of them. We want some type of activity happening outside your front door. Its about convenience. Urban living and convenience go hand in hand when done properly. The Millennials our youngest demographic segment are a generation who are driving less and are clearly not dependent on vehicles the way Boomers and other segments are. Since 1995 the share of automotive miles driven by 25-32 year olds has dropped from 20.8 to 13.7 according toA.P.T.A.The recent and continued success of Uber and other driving services as a means of local transportation is testimony to driving trends changing through technology and less reliance on per- sonal automobiles in the urban markets. Those metropolitan areas that have not planned for walking communities will lose future economic opportunities. As I mentioned urban living is not a new phenomenon it dates back to the 1800s in the United States when urban development first took off. Urban living offered the working class an affordable housing option within close proximity to large companies and industries as well as shopkeeper units for small family run businesses. Cities across America including NewYork Chicago Denver Seattle San Francisco and Los Angeles all had developed major in-town urban neighborhood villages such as Queens the Bronx Chinatown the Waterfront and the Fashion District to name a few. Todays coastal population growth coupled with a shortage of available land to develop has set a premium on urban living and the subsequent population growth of these areas. QWhat are the benefits of urban living By improving ones lifestyle there is a direct correlation to health benefits because of the walkability and exercise opportunities that can be found in urban communities and neighborhoods. This can include getting on a bike running or swimming as well as access to amenities right outside your front door. The biggest benefit to urban living is diversity and culture. You have to embrace diversity to enjoy urban living. This includes people but also can include architecture the arts and the expression of history imbedded in local parks and museums. It seems as though there is never enough time to see everything and activities are endless and continually changing. Most urban areas have well known alley districts where cars have become obsolete enhancing the overall walking experience. Olson is also recognizing and benefitting our environment with the reuse of land for the communities we are creating. Most of the land we develop has at one time or another had a previous use such as industrial commercial retail or agricultural. In many cases the land its building or structure has been blighted or vacant and the proposed redevelopment of an Olson community is generally supported by the city and local residents to reinvigorate a specific area. The majority of our communities are LEED-certified and we focus on energy efficiency and conservation from the early entitlement stages. We want to be good stewards of the land and the entitlements we are providing the community for decades to come. Q How do you define urban living To me urban living is clearly defined as a high energy lifestyle that continues to evolve with each generation. Urban living is not a new phenomenon to Southern California. People were living in a very urban environment in Los Angeles in the early 1900s with public transportation retail corridors high density projects and livework housing. I grew up in Los Angeles and have never left having a great appreciation for being in close proximity to numerous amenities including shopping entertainment museums schools and recreation. Today I continue to live work and spend most of my time in an urban environment not far from where I was raised. This provides me the direct access to the services of which I am accustomed to living in the heart of the city.The impact is different now that I have my own family and am able to even further utilize accessibility to all the conven- iences urban living has to offer from public transportation to neighborhood retail. We live in a truly active and walkable neighborhood. There is constant movement and activities in our community which means we walk in our neighborhood ride our bikes to the beach walk the dog and kids to the park shop and dine at local restaurants and live close to friends and family. Urban living means youre in the center of it all. For me its all about four Cs culture change character and convenience. Today we work in a dynamic environment enabled by communicative technologies. People are working longer hours which can also include significantly longer commute times. Urban living allows a walkable reprieve from our auto- 10 Urban Living A QA With Olson Company President CEO Scott Laurie Scott Laurie is President and CEO of The Olson Company. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 10 11 infused lives by having everything in close proximity. A quick walk or bike ride gives substantial access to a variety of amenities within the urban corridor. While not restricted to a specific demographic or age group urban living can also provide numerous health benefits given the walkable nature of most urban neighborhood locations throughout Southern California. Urban living is ultimately being able to have everything at your fingertips. It represents the walkable integration of jobs transportation housing entertainment retail services and other desired amenities. In many cases it is 247 living with the ability to experience a full range of activities around the clock. QWhat sorts of homebuyers are choosing to live in urban communities Urban residents are not classified as one segment of the population. We see a very diverse group of buyers in age ethnicity and household formations. Our buyers are as diverse as the product that is being built in these urban locations. We see younger singles and professional couples young families single parents middle-aged and empty-nester buyers. We cover a broad spectrum in our buyer pool but tend to focus on the Gen X GenY and Boomer demographic categories and design our communities to accommodate their preferences and lifestyle. We encounter some homebuyers in their 20s and early 30s the Millennial buyer who gravitate to urban living and can be supported in the purchase decision and financing in many instances by parents. Recent statistics indicate it is likely we will see more Millennials step into the urban home market once they have identified and connect with a neighborhood location and feel more comfortable after reducing personal debt such as student loans. As Millennials are aging getting married and having children they will become a stronger contributing factor in the home buying market as their lifestyles change. While the urban homebuyer group is very broad in classification the common theme among buyers of all ages categories and ethnicities is the convenience of living in town having immediate access and walkability to be close to every- thing the amenities and the excitement and diversity. Q Do you think there has been a shift over the years in which more homebuyers are prioritizing walkability and access to public transit Yes but the process is still evolving. First off public transit is not a new concept as we had an incredible transit system here in Southern California decades ago with the Red Car that provided connection throughout the region. Pacific Electric known as the Red Car system was a privately owned mass transit system in Southern California consisting of streetcars light rail and buses and was the largest electric railway system in the world in the 1920s. Organized around the urban city centers of Los Angeles and San Bernardino it connected cities in Los Angeles County Orange County San Bernardino County and Riverside County and was utilized for commuters to and from work shopping dining entertainment and of course recreation. With the advent of the freeway in the 1950s and the attrac- tion to personal vehicles local transit lost its mass appeal. Today I see people embracing public transit again in Southern California. Part of that has to do with the expansion and availability of transit routes which will certainly continue. The Gold Line originating in San Gabriel Valley and Pasadena into the Downtown L.A. area is fantastic and has helped with the resurgence of Downtown L.A. and surrounding neighborhoods. The Blue Line can also connect riders into Downtown L.A. Metro Link has done a great job but we need more support more awareness and of course more lines especially in the Orange County area which currently has no connectivity. Over the past 12 months public transit grew to the highest number of rides in its history with total ridership up 39.0 since 1995 according to A.P.T.A. For every 1.00 spent on public transit it generates 4.00 in economic returns. For every 1 billion spent it sustainably supports and creates 20000 jobs. Every 10 million in capital investment in public transit yields 30 million in increased business sales. And most importantly the data suggests home values are 42.0 higher if located within a 2-mile radius of a high frequency transportation center. There is a need for residents throughout the region to recognize the value of not utilizing a vehicle for their local and regional trips by providing riders with convenient and frequent schedules and ensuring transit offers a safe environment. This change in perception requires infrastructure process training aggressive marketing including through social media and word of mouth advertising to all demographic segments that it is cool to ride transit again. I heard a great comment recently In LosAngeles everybody wants everybody else to use public transportation.This makes total sense as Californians have an affinity and love for the automobile . . . we are a car culture. The thing is even people who use mass transit still tend to have a car. What I think has changed is families have fewer cars today and will actually consider the benefit of mass transit. Statistics show that kids today are also not as hard pressed to obtain their drivers license at 16 drive their own car and realize their independence. Unlike kids of my generation who drove as soon as they were legally able to today kids rely on parents friends or other modes of transportation. Q Urban living is often charac- terized in media as largely a lifestyle for younger single gener- ations. What are some reasons families and retirees might choose to live in urban communities I dont necessarily agree that its just younger people who are attracted to an urban lifestyle as you see people in their 40s 50s empty nesters and active retirees who move back to urban neighborhoods for the convenience change and culture part of the 4 Cs. People want to be able to walk go to a favorite restaurant listen to music go to the theatre visit a museum and be in an environment where the action is. Once again Downtown L.A. has been the biggest benefactor of this change in the current real estate cycle. For families one of the primary issues has been the quality of schools. Urban liv- ing and education have not always gone hand in hand but there is evidence of a re- newed focus on schools in urban areas.There certainly is room for improvement. We look at school scores for every community in which we build so we are very aware of what the family buyers are looking for and what their options can be. With more emphasis being placed on education and more jobs being created closer to the coast in California we are seeing a strong desire by potential homebuyers to return to the urban core. This is not a new phenomenon and has been seen for many decades in New York San Francisco and Chicago. Q Is there anything you would like to add Urban living for us at The Olson Company is who we are and what we do . . . its all the things we talked about previously. We are neither entrepreneurial nor opportunistic in where we build but strategic. We spend a tremendous amount of time looking at the key metrics and statistics in each community area looking at household incomes jobs commute times to employment centers transportation school scores crime and inventory. All of those elements play into our consideration process when selecting a community project. Look at our web site and the cities we are building in today. We only develop in three markets the San Gabriel Valley South Bay around LAX and North Orange County. They all have the characteristics mentioned above when we are looking to acquire land. Being fact based we utilize the available metrics we discussed for approving a community. Equally as important is what we build for singles couples families and empty nester buyers. We want to understand where they want to live but also what type of home they desire to purchase. The matching of community and homebuyer profiles is a real skill set of our company. We pride ourselves on our ability to design and build communities that will be in place for many generations. We see tremendous opportunity for the future of urban infill and look forward to our next 28 years building in-town walkable communities. I Increasingly potential homebuyers are returning to the urban core. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 11 I By SAMANTHA MEHLINGER Long Beach Business Journal T he Olson Company has built nearly 10000 homes in more than 100 cities across California in the past 28 years. Few companies have the knowledge about location construction and homebuyer preferences that Olson has. Building a community is a collaborative process a developers final concept reflects its own vision and that of the surrounding community potential residents the governmental entity with jurisdiction over the property and stakeholders. Shaping a vision that meets the needs and desires of these stakeholders takes time research patience communication and a great deal of due diligence. The first step in building a new community finding and purchasing a site often takes the most time according to Todd Olson President of Community Development forThe Olson Company.The greatest challenge in land acquisition is trying to find a piece of property that is in a location we have targeted as an attractive potential residential neighborhood Olson said. The Olson Companys communities incorporate the name Walk in their titles Ivy Walk in Claremont for example because the company is focused on building walkable connected communities. For that reason they seek out sites within existing larger communities that are surrounded by amenities in which to create their new communities. It needs to feel like a vibrant place where people want to live and enjoy the surrounding area Olson said. The Olson Company proactively seeks out locations for new communities working mostly within Los Angeles and Orange Counties. Oftentimes the land the company identifies as an ideal location for a new community is not yet for sale. For that reason finding a willing seller is one of the most challenging aspects in land ac- quisition Olson said. You call and make contact with the property owners and let them know you are interested in buying the site and maybe two years three years 10 years 15 years later they decide they want to sell. It can take that long Olson explained. The Ivy Walk community in the college town of Claremont was one such case. We worked on trying to buy that property for about 12 years before the owner was finally willing to sell Olson said. Another Olson community currently under construction Mission Walk in San Gabriel also took quite a bit of time to acquire. About five years ago Olson drove by the site which at the time was being used to manufacture Sriracha hot sauce and found it ideal for a new community. We reached out to the property owner through mutual connections to see if the land was available. At the time they had no interest in selling he recalled. Despite the landowners disinterest Olson was persistent and continued to touch base every so often to let him know that The Olson Company was still interested in the site. When the property owner decided to relocate his manufacturing facility he called The Olson Company. He immediately called us and said You have been calling Im interested in selling Olson said. And then we got to terms and now we are building Mission Walk not far from the historic San Gabriel Mission. Using this instance as an example Olson said that the key to pursuing a land purchase is measured persistence. You have to be persistent and patient. Once a developer enters into an agreement to purchase a property a great deal of due diligence is required to determine what kind of site plan architecture would be best for the location if the governing entity is amenable to such a plan and whether or not the location has proper infrastructure for new homes. Before designing a new community We do a lot of market research Olson said. We drive around a lot. We spend a lot of time looking at demographics of the area.We take a look at some of the things that have been built in adjoining cities and try to get an understanding of what seems to be working in the market and what seems to be not working he explained. We try to also tailor things to meet not only the demographics but also the planning issues that may be unique to the city Olson said. Your market research may tell you its a townhome market but the planning regulations may say you can only do single family homes he explained. In that situation We have to make some choices as to whether we want to do the project or not or whether we can design a single-family home that functions more like a townhome. During due diligence one of the things we try to confirm is whether the city or any jurisdiction that has The Process And Challenges Of Creating A New Urban Community 12 To work well with a city or other governing body such as a county or water district it is important to develop positive relationships with staff members. Todd Olson President Community Development The Olson Company Todd Olson serves as President of Community Development for The Olson Company 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 12 approval rights of a project is going to be supportive of what we think is a good idea Olson said. Some- times they dont so we dont move forward with the project just based on that. When a jurisdiction is supportive of a project the focus in working with the city becomes more about ensuring the details are all in order that there is proper drainage enough emergency access points and so on. These matters are first assessed during an initial site inspection which takes place after the developer has entered into an agreement with the landowner. We will assign a project manager to orchestrate all of the due diligence Olson said. They will work with a team of consultants or professionals in their respec- tive fields like a geotechni- cal consultant an architect a civil engineer a handful of different types of attorneys and an environmental engineer as well as a title and escrow company. Before applying for permits entitlements and any necessary zoning or city general plan changes The Olson Company works closely with the governing jurisdiction such as a city to determine if it is amenable to the companys vision and to ensure that the company is following correct procedures. To work well with a city or other governing body such as a county or water district it is important to develop positive relationships with staff members Olson stressed. We focus initially on making sure that staff is on board with our concept and that they are comfortable with the way we are designing things and how things are going to look and with the way the infrastructure is going to function Olson said. We will then go and talk to some city policy makers to make sure that were addressing any of the concerns that they may have because ultimately they are going to be making the decision on the project. On average the entitlement process which encompasses all pre-construction preparation work takes anywhere from 12 to 18 months Olson said. After that zoning changes permitting and construction drawings must be com- pleted which typically takes another six months. In all it can take 15 months to two years to begin con- struction on a new community. Due to the detail-oriented time- consuming work involved experi- ence matters a lot when building new communities Olson emphasized. Its an overwhelming process because there are so many people who are providing comments on what it is you want to do and a lot of those comments conflict he said explaining that when approaching a new project different entities involved such as a citys planning and fire departments may have different assessments on certain project elements. Our goal is to design and construct the most compelling community that we can for each neighborhood location in which we work Olson said. I 13 After years of communication with the land seller Ivy Walk in Claremont became a reality. Stylish and affordable homes at Mission Walk in San Gabriel. Our goal is to design and construct the most compelling community that we can for each neighborhood location in which we work. Todd Olson President Community Development The Olson Company 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 13 I By THYDA DUONG Long Beach Business Journal F rom limited public budgets to mounting environmental concerns theres no shortage of external pressures on local cities. Their response Shifting their focus inward on internal improvements. Cities are increasingly reinventing themselves both figuratively and literally in order to navigate a multitude of issues and priorities beginning with economic development. Local city administrators agree that the key to economic growth is having both the physical and social infrastructures necessary to support residents and businesses. You cant do proper economic development unless youve got the infrastructure in place said San Gabriel City Manager Steven Preston. If youve got old street systems old water lines or old sewer lines those things are potential impediments to development. San Gabriel recently completed a strategic plan that outlines the citys five core priorities with building and improving the citys infrastructure landing at the top of that list. This past year in fact San Gabriel invested roughly 14 million in new capital improvements with plans to spend an additional 5 million next year Preston noted. Over the next several years ideally wed like to double the amount of money were spending on infrastructure projects in order to make sure that we will meet the needs of the city well into the future he said. The City of Long Beach meanwhile is also continuing infrastructure investments including improving major corridors throughout the city. If you drive the 52 square miles of our city you see some fantastic corridors that are being reborn in front of our very eyes said Long Beach City Manager Pat West who also pointed to the boutique remodel of the Long Beach Airport as a key investment that creates an attractive entry point to the city. Additionally Long Beach has a revived Economic and Property Development Department and a new Economic Development Commission that is working on new initiatives over the next year West noted. Also in December 2014 the city was selected to receive 3 million over three years to create an i-team focusing on economic development as part of the Bloomberg Philanthropies Innovation Teams program. While economic development is one of its key priorities Long Beach is also placing emphasis on improving the social infrastructure West said. Were not turning a blind eye to our social causes he stressed adding that the city has adopted a Rental Housing Inspection Program a Project Labor Agreement for public works projects to increase opportuni- ties for local hires an aggressive language access plan and a First Source Hiring Program. Weve got a very active mayor and city council who are addressing not only the citys urban fabric but also the social fabric West said noting that the city continues to offer special events and activities that engage community residents. San Gabriel is similarly focusing on community engagement. Were finding ways to take this increasingly diverse community and build civic pride and ownership Preston said. In fact San Gabriels diverse community is one of the keys to its economic growth Preston added. The AsianPacific Islander community accounts for roughly 60 of the citys population which also includes a large Hispanic community and a small but significant Native American population. Part of our effort is to grow the economy in a city where the needs of the residents are changing rapidly he said noting that San Gabriel has capitalized on its demographic shifts. The populations key interests he said have contributed to the citys reputation as one of Southern Californias hot dining destinations attracting visitors from across the region while the populations interest in education has contributed to the emergence of a lighthouse school district one that acts as an educational model for other districts thats highly attractive to potential residents. Offering and maintaining sufficient housing then also becomes an impor- tant consideration for growing cities particularly as California cities are re- quired to adopt housing plans that ad- dress regional housing needs. For instance the City of Cerritos continues to explore opportunities that allow for more efficient building usages within the city including rezoning commercial properties for residential use. We need to look at properties that are under-utilized and are no longer viable Cerritos Mayor Carol Chen told the Business Journal. We encourage re-use and re-tool of some of the existing projects that we have in the city because were 98 built out. We definitely need to look at all the options available to accommodate the population and its need for services as well as the necessary businesses to support it. As a result of limited space some cities are looking to higher-density residential developments. There are areas where land is so expensive that you cant continue to build large-lot single-family homes you have to be able to provide well-planned density said John Reekstin SeniorVice President of Community Development at The Olson Company. In many cases cities are required to rezone prop- erties to provide appropriate housing opportunities for a variety of socioe- conomic and age levels. The Olson Companys Plaza Walk development is in its final phase of selling in the City of Cerritos which also has another 330 residential units currently under development in addition to a 45 million renovation of the former Best Cities Reinventing Infrastructure Improvements Drive Change In Local Cities 14 Part of our effort is to grow the economy in a city where the needs of the residents are changing rapidly. Steve Preston City Manager City of San Gabriel Steve Preston City Manager City of San Gabriel Pat West City Manager City of Long Beach Carol Chen Mayor City of Cerritos Addressing infrastructure needs has become a priority as cities attempt to lure homebuyers. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 14 Plaza shopping center which will add more than a dozen new ten- ants when it re-opens as Plaza 183 later this year. Were looking at increasing our popu- lation as well as spending and gener- ating spending in the city Chen said. In addition the City of Cerritos and cities across California are continuing to transi- tion from the dissolu- tion of the redevelop- ment agency. While Chen said Cerritos is faring better than other cities she noted that redevelopment was a great loss having been instrumental to the development of shopping centers and properties throughout the city. Knowing that tool is no longer available were able to look at encouraging the private sector to step up Chen said. The Olson Companys Reekstin added that public-private sector partnerships are increasingly important to development particularly as cities continue to experience economic pressures. The State of California for over 20 years has been balancing its budget on the backs of local government he explained. What thats forced cities to do on the good side is streamline their operations how they operate and how they manage their budgets. . . . What this means for private developers is that theyve got to really step up their game and be more of an asset to the city . . . because cities simply dont have the resources that they used to have. In some cases maximizing resources is a key component of growth also offering opportunities for innovation. For example San Gabriel is working with the cities of San Marino and South Pasadena to merge their fire department command staffs. There are so many things that each town does in duplication Preston pointed out. So if we bring three cities together . . . we can do it a lot cheaper and a lot more efficiently. The project Preston said is the only one in Los Angeles County and reflects San Gabriels approach to balancing growth with economic challenges. You can cut you can build new programs Preston said or you can try to do things that are innovative and progressive as a means of dealing with issues. I 15 Mission Walk in the City of San Gabriel brings new home options to a vibrant region. Plaza Walk in Cerritos opened in 2014. Knowing that tool redevelopment agencies is no longer available were able to look at encouraging the private sector to step up. Carol Chen Mayor City of Cerritos 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 15 16 I By THYDA DUONG Long Beach Business Journal T he four walls of a building often make a house but some may argue that its the space and place that makes the house a home. And increasingly buyers are looking for homes where space is fluid and flexibility is key. Given the trend toward shrinking home sizes however the challenge lies in how to best optimize space.Alan Scales Principal at KTGY GroupArchitecture Planning observed that home sizes for newer developments generally range between 1100 and 1500 square feet for a three-story home and between 2000 and 2500 square feet for a two-story home while the home itself averages 1200 square feet for a two bedroom 1500 square feet for a three bedroom and roughly 1700 for a three- or four-bedroom home. The design response Scales said is open floor planning and an increased connection between indoor and outdoor spaces that creates fluidity for the buyer. Were seeing much less compartmentalization he said. Privatized open space is huge and thats true at both the lower end of density and at the higher end. . . . While the spaces might be smaller when you create connectivity between the indoor and outdoor spaces it contributes to the livability of the space for years to come. Bill Hezmalhalch founder and President of William Hezmalhalch Architects agreed noting that yards courtyards and decks offer important opportunities to capture open-air spaces for buyers many of whom are also increasingly seeking out progressive design features that create individual identity to their home. I think the majority of people are looking for something thats new and fresh espe- cially within a younger demographic theyre not looking to buy into something that feels like their parentshome or where they grew up Hezmalhalch ex- plained. They want something thats con- temporary and more personalized. . . .Theyre looking for a nice sense of arrival. Still the kitchen remains the heart of the home for many buyers who often gravitate to- ward anchoring islands. The kitchen is really growing in some cases and the dining spaces are less formalized less important especially when you have that outdoor connectivity Scales said. Were finding a large desire to create islands and designs that allow for a bit more flow in and around the kitchen . . . so that youre starting to create more buzz around that island space. As the island gains prominence as the gathering and serving space there is also an increasing trend toward secondary kitchen spaces a butlers or prep kitchen for instance that are more utilitarian in nature said Allison Kunz The Olson Companys Senior Vice President of Design. The main kitchen ends up still being the gathering space but its not the prep area she explained. Now a secondary space is provided that you can really use as your working-horse kitchen. Secondary kitchens arent the only trend however. So are secondary suites which respond to changing demographics and the rise of multi-generational living. As a result bedrooms dont just become secondary spaces but also offer stand- alone living amenities such as an en suite bathroom kitchenette or private entry. Flexible spaces also top the priority list for many buyers. Weve seen in many cases a bedroom going away and becoming more of a loft space or a flex space that can change in time and can grow with the owner Scales said. So where do sustainable features such as solar panels land on the list of buyer priorities The jury may still be out. Its difficult for people to want to spend extra money in this area because theyre fighting affordability issues all the time Hezmalhalch said. But on the flip side of it I think that developers like The Olson Company are providing a lot of sustainable elements as part of the design so that the design is progressive authentic and its right with the environment. So I think sustainability is mainstreaming into projects. With California energy and building codes moving toward net zero standards in which a building must produce as much energy on site as it consumes on an annual basis the design of homes will continue to evolve along with buyer awareness. I think that sustainable features propel buyers forward to be more socially conscious but Im not sure if its a decision-making point like school districts may be Kunz said. But I think its definitely moving in that direction. And while specific features may draw buyers to a home its the design of the overall living environment that keeps them there according to Hezmalhalch. Its not just the unit itself or the home itself he explained. Its the community the neighborhood its that third place that creates opportunities for people to live out- side their home and in their community. . . .These are intangibles that create a lot of value for the homeowner more so than just opening a door and coming into a home. They create a true sense of place. I The kitchen remains the heart of the home for many buyers who often gravitate toward anchoring islands as pictured here at The Olson Companys Coastal Walk community in Huntington Beach. Home Designs For Todays Buyers Its not just the unit itself or the home itself. Its the community the neighborhood its that third place that creates opportunities for people to live outside their home and in their community Bill Hezmalhalch Founder and President William Hezmalhalch Architects Outdoor living at Oakgrove Walk in La Verne. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 16 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 17 I By THYDA DUONG Long Beach Business Journal A s revisions to California building and energy codes are beginning to take shape so too are the opportunities for the design and construction industries to lay the foundation for long-term change in the form of sustainable construction. Updates to the California Building Energy Efficiency Standards commonly referred to as Title 24 include a requirement that all residential buildings be built to a net zero energy consumption standard by 2020 meaning the building must produce as much energy on site as it consumes on an annual basis. All new commercial buildings must be net zero by 2030. For some the changes may also mean a different kind of green in the form of increased costs. This was the most monumental code change since the inception of the energy code in 1978 said John Gillett Chief Operations Officer at Energy Inspectors Inc. which provides energy efficiency and sustainable consulting as well as third-party inspection services to production homebuilders. I think long term theres no question that its going to have a positive effect on the reduction of carbon emissions he said but there is the unintended consequence of increased costs which could have an impact in the short term on the economy. Gillett added that the new provisions could add 2000 to 3000 in costs for an average pro- duction home. A potential savior he noted is the possi- bility of increased long-term solar leasing options for h o m e o w n e r s which could elim- inate a major ex- pense to builders. It could be the white knight that rides in here and saves the day he said. Were just not certain if thats quite what the economics would allow for yet. For some the expenses associated with sustainable building materials must also be weighed with the overall environmental cost. When you build without using renewable resources theres a tremendous cost on our world environment said Dana Cuff founding Director of cityLAB a think tank within UCLAs Department of Architecture and Urban Design. Were developing new strategies for sustainable construction that have new economies built into them both in terms of the actual costs of the materials and in terms of finding more affordable means to develop sustainable construction Cuff added pointing to the emergence of new kinds of large-scale wooden buildings that may be cost-comparable to steel frames as an example. Nevertheless builders are increasingly integrating sustainable elements into new homes. Gillett noted rapid migrations to tankless water heaters enhanced heating and cooling systems that have progressively become 20 to 30 more efficient over the past five years and increased usage of LED lighting as examples. Solar he added will likely become the norm. Within five years youre going to see 80 of new homes have some solar panels installed . . . so were going to see architects having to adjust their roof lines. New Definitions Of Sustainability As builders continue to explore energy-efficient structures and mechanical systems Walker Wells Vice President of Programs at Global Green USA cautions against singular approaches to sustainable building. With these specific mandates on energy and water I think theres a risk that we lose the holistic perspective of green building design Wells explained noting that those looking to reduce heating and cooling needs for example could logically reduce the size of a homes windows. The result however is less natural daylight and more artificial lighting in addition to an unpleasant living environment. It might work well from an energy perspective but from a livability perspective it may actually be significantly worse he said. I think these are the challenges that happen when you break off issues individually and dont look at them in relation to other factors that make up a green building. Similarly Cuff encourages individuals to explore newer definitions of sustainability that take into account neighborhoods communities and ecosystems at large. We have to build sustainable cities at the same time we build sustainable buildings Cuff said. We cant continue to build more sprawl. . . . We need to find ways to improve the quality of life and the environment in the suburbs while also increasing the density there. Cuff points to cityLABs Backyard BIhOME as an example of new strategies to build and live more sustainably. Designed by Kevin Daly Architects and UCLA architecture students the BIhOME is an ultra-modern demonstration project that explores alternative designs for sustainability incorporating a lightweight tubular frame and an Ethylene Tetrafluoroethylene ETFE building envelope with imprinted photovoltaic cells that collect solar energy in addition to serving as a biome by providing habitats for other species. It tries to address a full environmental agenda in a space thats less than a two-car garage Cuff said. For The Olson Company redefining traditional living environments and embracing sustainability have long shaped its approach to building said Senior Director of Operations Thomas Moore. The company specializes in infill developments that re-tool underutilized properties allowing it to avoid disturbing untouched land while creating communities that are pedestrian-and transit-friendly. The company was also an early adopter of Leadership in Energy Environmental Design LEED certification for its properties added Vice President of Purchasing Karen Hoover who noted that all of the companys communities built since 2007 are LEED certified. As an industry homebuilding continues to evolve with changing concepts of sustainability and the statewide requirements shaping the long-range energy plan for California. I think the level of knowledge is increasing and therefore sustainable building feels less disruptive to the standard way of doing business Wells said. The goal would be for every building to be a green building. I 18 Sustainable Construction A New Blueprint For Addressing Californias Energy Plan Solar panel installation is a growing industry within Southern California. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 117 PM Page 18 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 19 I By SAMANTHA MEHLINGER Long Beach Business Journal T he good news for California is that the state is leading the nation in terms of job growth with all but one of the states metropolitan areas that represent 90 to 95 percent of the states total population reporting steady job creation. The problem is that many Californians even those who are employed cannot afford to buy a home or even pay average rental prices for apartments. This situation begs the question are the right kinds of jobs being created to support the cost of living and demand for housing in California According to the California Association of Realtors most recent research only 29 percent of Southern Californians can afford to buy a median-priced single-family home in the state. Today an average California home costs 440000 about twoandahalf times the average national home price 180000 according to a recent report by the California Legislative AnalystsOffice. Also Californias average monthly rent is about 1240 which is 50 percent higher than the rest of the country 840 per month. Housing affordability is always an issue in California said Robert Kleinhenz Chief Economist for the Los Angeles County Economic Development Corporation LAEDC. For example our home ownership rate in California is typically about 10 percentage points lower than the nations as a whole. Thats particularly noteworthy because our median household income is actually a little bit higher here in California compared to the U.S. as a whole. At 6.3 percent Californias unemployment rate April 2015 is now lower than its 15-year average of 7.6 percent according to Kleinhenz. The unemployment rate is considerably below the long run average. It is a sign that the labor market is in much better shape he said. In April the nation added jobs at a rate 2.2 percent higher than in April 2014. California on the other hand added jobs at a rate of 2.9 percent. California has been adding jobs at a faster clip than the nation since 2012 so this is not just a recent phenomenon Kleinhenz pointed out. Were doing fine here in Southern California but for a couple of years now San Franciscos metro area and the San JoseSilicon Valley region have both led the state in terms of percentage of job gains Kleinhenz said. In April San Francisco added jobs year over year at a 4.9 percent rate and Silicon Valley at a 5.5 percent rate he noted explaining that these regions play a strong role in Californias job growth rate outpacing the nations growth rate. Southern California counties also fared well in terms of job growth last year although they didnt keep up with the Bay Area. The Inland Empire which encompasses Riverside and San Bernardino counties led the way with job growth at a 4 percent annual rate in 2014. In Orange County the increase was 3.4 percent. San Diego experienced a job growth rate of 3.1 percent. In L.A. County jobs increased at a rate of 2.5 percent. Every metropolitan area in this state has been adding jobs consistently for quite some time with one exception which is the El Centro MSA Metropolitan Statistical Area down in San Diego County Kleinhenz said. The Bureau of Labor Statistics BLS recently released job growth figures for the year 2014 which illustrate that the five occupation sectors with the highest number of job gains from 2013 to 2014 were in order of most gains to least food preparation and serving-related occupations with 61170 positions gained management occupations with 46360 positions construction and extraction occupations with 35480 positions personal care and service occupations with 33310 positions and business and financial operations occupations with 28070 positions. Only one of these employment sectors also represents one of the five occupation types earning the highest wages as measured by the BLS. In 2014 people with management occupations earned an average median annual wage of 109720 annually. By contrast people working in the sector with the most job gains food prep and serving made the second-to-lowest wage rate among sectors tracked by the BLS at an average annual median rate of 20050. Californians working construction-related jobs in 2014 earned an average annual median salary of 50520. Californians with jobs in personal care or service earned 22510 the third lowest salary rate among the top job growth industries. Those working in business or financial operations earned 71490. Good-paying jobs are critical to help families afford homes Bill Allen President of the LAEDC said. Fortunately we have numerous well-established industry clusters in the L.A. County region that provide well-paying jobs including entertainment aerospace biomedical education international trade and super-sectors such as manufacturing high tech and professional services he noted. Generally these are industries that can export their products and services and at LAEDC we are focused on fostering the growth of these export-oriented industries because they typically provide better wages and increase prosperity for residents. Still Allen admitted some improvements are needed when it comes to job creation generating wages that would support housing affordability and development. Are we creating enough of those well-paying jobs We have work to do on this front he said. We have finally seen employment levels in L.A. County recover from the Great Recession. Thats an important milestone and a factor in demand for housing Allen pointed out. To make sure the right kinds of jobs are being created and retained in the region over the coming years we need regional collaboration and planning he said. For that reason the LAEDC is working to develop a 2016-2020 Strategic Plan for Economic Development he said. Allen concluded That process is underway and broad participation is needed in both the drafting of the goals and in embracing the priorities with action once the plan is finished in January 2016. I 20 With homes built close to light rail workers can leave their car at home. Meeting Californias Challenges Are The Right Jobs Being Created To Support Housing Affordability And Demand 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 20 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 21 I By THYDA DUONG Long Beach Business Journal T he Millennial population is defined as the group of individuals ages 20 to 37. And while the age gap between this population may be large the spaces between them literally arent necessarily so. Thats because a key characteristic of this GenY population is its desire to live connectedly. The concept of connectivity is so important said Tim Sullivan practice leader at Meyers Research LLC. And its not just connectivity through technology its connectivity with your peers. . . . If were talking about a typical Millennial the activity of a commercial mixed-use environment is going to be vital to their lives because of that connectedness that really drives their happiness. In fact a recent Urban Land Institute noted that one-third of Millennials think of themselves as city people though only 13 percent of them live in or near actual downtowns. I believe that urbanis a mindset as much as it is a geographic destination explained Michelle Mace national consumer segmentation specialist and principal of boutique strategic marketing consultancy M3B Inc. Millennials are technology natives and their social media world has them living in a way that feels urban even though they might live in an exurban area. Likewise Sullivan noted strong social influence impacting Millennial decision-making. Millennials are no longer as the boomers would be acknowledging wisdom as the driver of how things should be decided Sullivan said. They appeal to and absolutely listen to the power of the crowd. And that crowd just happens to be the Millennial population itself which now represents the largest generation to date exceeding the Baby Boomers according to Mace. The preferences and interests of this population are therefore particularly poignant especially given the sheer size and resulting influence this generation has and is expected to have as it ages and gains more spending power. They are the largest demographic buying force in America today in terms of population Mace said noting that within the next seven years the first of the Millennials will reach their peak earning years defined as ages 45 to 54. If the Baby Boomers have defined every stage of life that they have moved through because of their sheer size and the spending power that goes with being so big as a generation the Millennials now have that same power. According to data compiled by The Nielsen Company there are 18.3 million Millennial households ages 25 to 34 in the United States making up roughly 15 percent of U.S. households and 15 percent of Southern California households. California is home to 5.6 million Millennials ages 25 to 34 with 3.1 million of those living in Southern California. Mace and Sullivan agreed that different from the baby boomer generation the mindset of Millennials has been influenced by a defining set of social political and economic circumstances that have shaped their decision-making particularly when it comes to home-buying. Theyre old enough to have remembered the recession Sullivan said. If they were in their teens during the recession and maybe a parent lost a job or the family lost their home thats a very defining incident. . . . Those types of economic chal- lenges or economic traumas will influence their behavior the rest of their lives. As a result Mace said Millennials are establishing their own values as a result of what they experienced at the time of the recession. They look at value differ- ently than generations past Mace added. For them value isnt just about price . . . they value living connected. They value living among multiple generations. And they value quality. So its going to change what first-time home- ownership looks like among this generation. Its going to change the standards that this group accepts and wants. And yet affordability is going to be an issue for them for sure but theyre going to hold out for quality. A Changing Demographic Landscape The Growing Influence Of Millennials 22 Millennials are technology natives and their social media world has them living in a way that feels urban even though they might live in an exurban area. Michelle Mace Principal M3B Inc. Mobile connectivity with friends family and career is important to Millennials. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 22 The overarching concern however is whether or not Millennials will buy homes at all. The answer according to Mace is yes. Of those surveyed unequivocally 90 percent want to own homes and they believe that they will Mace explained. The anticipation is that by 2020 70 percent will . . . move into this rite of passage called homeownership. The anticipated influx of new Millennial homeowners is causing the homebuilding industry to take note particularly given the specific set of values that have come to characterize this dominant population. The living connected mindset of Millennials for instance not only translates into an attraction to active dense and mixed-used spaces but also to multigenerational living. The growth in multigenerational households and fami- lies is going to rise and thats going to change the kinds of houses that they buy Mace said noting that as a connected generation that is generally emotionally closer to their parents than the Baby Boomers were with their parents Millennials are not seeking the independence and flight that Boomers had sought. This population has grown up with other generations around them she added. Theyre comfortable with it and they enjoy the energy of it. Sullivan agreed noting This is not a trend its an evolution back to the past. . . . Multigenerational living is not a new concept. Its a concept that our cultures come back to. . . . Everyone lived together and thats just how it was. Part of it was financial but part of it was choice. And I think were moving back there for the same reasons. When it comes to finances and choice there seems to be a clear-cut preference among Millennials when it comes to sustainability in home design. Sustainable features are not just a preference among Millennials theyve become an expectation according to Mace and Sullivan. Absolutely positively it matters Sullivan said of sustainable features noting that homebuilders who dont incorporate sustainable design into their homes may find themselvesin dangerous territory. Likewise Mace noted that Millennials may not neces- sarily pay a premium for sus- tainable features but they may walk away from a home that doesnt meet their expectations. Sustainability practices are a statement about the values of a company Mace said. This Millennial buyer grew up green and they will become increas- ingly engaged and savvy about their home purchase. This vigilant consumer will carry their sourcing prefer- ences and attitudes about fairness into their home- buying years she added. This will require a shift in the homebuilding business model over the next decade as the Millennials start to feel their buying power. I 23 The overarching concern however is whether or not Millennials will buy homes at all. . . . Of those surveyed unequivocally 90 percent want to own homes and they believe that they will. The anticipation is that by 2020 70 percent will . . . move into this rite of passage called homeownership. Michelle Mace Principal M3B Inc. Walking to local amenities such as shopping and dining facilities is important to Millennials. Millennials are seeking nearby entertainment and nightlife options when considering a home purchase. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 23 I By THYDA DUONG Long Beach Business Journal A n urban oasis is how Rickey Smith describes his companys project at the Big Arts Lab in Downtown Los Angeles where a deserted paint factory is being transformed into a food jungle. Smith Founder and Principal of Urban Green LLC a social entrepreneurship founded in 2007 to restore develop and promote green space while evolving food production in the United States recalls the emergence of plants and wildlife back in the urban environment. We started seeing biodiversity come to this very hard harsh metal concrete landscape Smith said of the site where roughly a ton of toxic materials was removed. Today the site is being repurposed as an interactive growing space to promote sustainable food processes. Smiths project part of the roughly 4.7-acre portfolio of urban farms and rooftop gardens that Urban Green operates throughout Greater Los Angeles County is just one example of the various forms of growing occurring in cities which are increasingly viewed as fertile grounds for not only growing local food but developing people communities and economies as well. Theres been a groundswell of interest in urban farming said Robert Puro co-founder of Seedstock a Los-Angeles based company founded in 2011 to foster sustainable and local food systems. Urban agriculture has been around for a long time but its really only started to take off within the last five to six years he added noting that a growing marketplace demand for locally sourced food has contributed to the rise of urban farms. In fact he said local food was a 5 billion market in 2008 and grew to an 11.7 billion market in 2014. Its a growth that parallels the rise of Farmscape an urban farming venture founded in 2009. Today the company operates two offices in Los Angeles and San Francisco and has installed more than 400 urban farms in residential corporate and school settings throughout California including a farm behind centerfield at ATT Park home of the San Francisco Giants and atop the Jonathan Club in Downtown Los Angeles. This is a way for people to know their farmer and to feel more connected to what they eat said Farmscape Principal Lara Hermanson noting that urban gardens are also an important way to enhance food security. I think theres a very likely chance that this trend is going to turn into a mainstay she said. As the weather becomes more intense in the state and our farm crops become more expensive this is going to be a viable option for homeowners. And it looks like the opportunities for growing closer to the urban core are bountiful. Right now only one to two percent of our food is sourced locally Puro said adding that empirical data from the U.S. Department of Agriculture indicates that every 1 million generated from local food sales creates 13 new jobs whereas imported food creates only three new jobs. Theres a real opportunity to grow businesses and take advantage of a marketplace that really is looking for more local food Puro said. Thats going to reduce the carbon footprint its going to benefit local communities its going to benefit the environment and most importantly its going to help grow the economy and create new jobs. Policymakers he added are now beginning to recognize the potential of urban farms. California Assembly Bill 551 the Urban Agriculture Incentive Zones Legislation for instance became effective in January 2014 and allows cities and counties to offer reduced property taxes to landowners who use vacant parcels exclusively for agriculture including for nonprofit community gardens or educational purposes. The City of Los Angeles meanwhile is seeking to increase the number of urban agriculture sites as outlined in its recently released Sustainable City pLAn. There were 493 urban agriculture sites in June 2013 and the pLAn seeks to grow this number by 25 percent by 2025 and by 50 percent by 2035. Strategies include providing access to land at city facilities including the L.A. Public Library for urban agriculture converting parkways and vacant lots for agriculture and gardening and expanding urban agriculture in the citys federally designated Promise Zone. The pLAn will also encourage urban farming through the citys program. And as concerns with the drought and climate change continue to impact California urban farming will continue to evolve Puro said noting that technology will continue to advance the industry. You have hydroponic farms that can produce 20 times the amount of produce on the same footprint as a field farm using 10 percent of the water that these large field farms are using Puro explained. You can place these hydroponic farms on top of buildings or on a vacant lot and you can distribute the food from there and sell it closer to the source. People are starting to close the loop on water usage in urban agriculture Smith added. As the drought continues people will start looking at urban agriculture as a way to deal with the climate change that were experiencing in a positive way. For Smith the physical environment isnt the only consideration in urban farm- ing.The impact on people and communities also drives his vision for these spaces. Theres really something transformative about working with land he said recalling the journey of a young gang member who came to work at Urban Green in 2009 and later transitioned into a healthier more productive lifestyle. We envision urban agriculture as a way to repurpose our cities Smith added. It softens the environment and also opens up and softens the people that come in contact with urban farms. I Urban Farming Takes Sustainable Living To New Heights 24 Rooftop Urban Farming at the Jonathan Club in Downtown Los Angeles provides fresh produce to diners. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 24 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 25 I By SAMANTHA MEHLINGER Long Beach Business Journal A quick online search of the phrases housing development and California drought will turn up articles from the nations most well-known publications speculating that if the historic drought continues housing development may be limited by restrictive legislation or even executive mandates. These speculations come at a time when more housing is needed statewide the states department of housing and community development stated in a 2014 report that housing shortages are persistent in population growth areas throughout California causing affordability issues and impacting job growth. This uneven and slow rebound delays the economic multiplier benefits of more robust new housing construction to the state and regional economies according to the report. The California Legislative Analysts Office recently released findings that in order to meet demand 100000 more units per year than what are currently being produced are necessary. Local and regional water wholesalers and retailers in Los Angeles and Orange Counties building industry leaders and even some state legislators agree that limiting housing construction at a time when it could harm the states economy is not the answer. That doesnt mean however that developers wont face changes as statewide perceptions about water use change. To encourage housing development while minimizing impacts to the water supply Assemblymember Ed Chau head of the California Legislatures Housing Committee is working on legislation to encourage infill developments housing developments lo- cated in densely populated and typically built-out areas. Oftentimes these infill developments are done on smaller lots Chau said. As such they will create less demand for water. He explained that infill developments are hooked up to existing water supply infrastructure with shorter pipes thereby reducing the risk of water being wasted. Assembly Bill 744 is a piece of legislation I am working on that would allow for a density bonus he said referring to incentives such as relaxed parking requirements for infill developments. I think developers ought to work closely with local governments to make sure that we are cognizant he said. We need to be very conscious of water conservation and in light of the situation we developers and legislators need to work very closely. Chau pointed out that the question of how residential water use impacts supplies warrants a closer look. We want to look at the existing housing situation and ask the question How do we make the existing housing more water efficient Getting state and federal legislators and politicians to examine Californias existing housing supply for opportunities for water conservation has been one of the priorities of the California Building Industry Association CBIA a Sacramento-based trade association representing builders statewide. In recent written testimony to the U.S. Senate Committee on Energy and Natural Resources Dave Cogdill CEO of the CBIA wrote that two out of three homes in California were built before building provisions related to water conservation were in place. These homes he wrote can use up to two or three times more water than newly built homes which are regulated by the California Green Building Standards Code. If every existing home in California were retrofitted with the most recent building and plumbing building standards over 300 billion gallons of water could be saved annually he wrote. The CBIA is advocating for more rebate programs and incentives to be offered by the federal and state governments as well as municipal- ities counties and water districts. The CBIA estimates it would cost only about 1500 per home to install water-efficient appliances and fixtures. Certain government agencies like the Los Angeles District of Water and Power LADWP already offer such programs. We offer free showerheads faucet aerators and pre-rinse spray In Light Of The Drought Changing Perceptions About Water Conservation And Housing Development 26 We need to utilize landscaping that is drought tolerant. People over-irrigate their lawns. Mike Markus General Manager Orange County Water District Drought tolerant plants are becoming more popular with homeowners and developers throughout California. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 26 nozzles for our customers David Pettijohn LADWP Director of Water Resources said. The DWP also offers incentives for installing water-efficient toilets appliances and irrigation infrastructure. In a phone interview Cogdill pointed out that new housing construction is minimal in comparison to the existing housing stock. There are about 13.6 million residential units both single-family and multi-family in the State of California right now and were building at the current pace of about 100000 new units a year he said. You can see that is a very small fraction. In addition to finding ways to improve water conservation among the existing hous- ing stock Cogdill and the CBIA support ad- ditional measures to promote water conservation in new construction. While new homes are roughly twice as water-efficient as homes built in 1980 that is largely to do with measures implemented inside homes Cogdill said. The next area that everyone is focusing on is outdoor ornamental landscaping he noted. Governor Jerry Browns statewide water conservation mandate issued in April 2015 prohibits new homes from using potable water to irrigate landscaping except with certain water-efficient systems. According to Kevin Wattier General Manager of the Long Beach Water Department who has more than 20 years of industry experience lawn watering accounts for about half of household water consumption in the state. Wattier said that new homes do not increase water demand at all if they are properly designed with efficient inside plumbing. Reducing lawn watering stands to make a bigger impact. The CBIA and local water agencies are partnering with Brown to develop a model landscape ordinance which would outline best practices for California-friendly landscaping and outdoor irrigation. We need to utilize landscaping that is drought tolerant Mike Markus General Manager of the Orange County Water District OCWD emphasized. When asked what the biggest source of water waste is in California he responded People over-irrigate their lawns. We really havent seen water demands go up over the last 20 years Markus said. It has been pretty flat and thats because we have done a nice job so far in putting in low-flush toilets low-flow showerheads and those types of fixtures inside the house. But what we have ignored is what we have done outside the house. The Orange County Los Angeles and Long Beach water departments all offer incentive programs for residents to replace their lawns with drought-friendly landscaping for that reason. Whether or not housing development will be restricted in California may be determined based upon access to water. Long Beach for example has groundwater rights as well as rights to water supplies from the Metropolitan Water District that essentially ensure housing development wont be hindered according to Wattier. Also the city recently hit its lowest demand for water since 1958 due to educational outreach he noted. But not all water districts have such benefits. Markus noted that the OCWDs basin is about 80 percent empty. Still thanks to the districts innovative water recycling program he is confident the OCWD can continue to supply water retailers serving Orange County cities. Markus was matter-of-fact about whether or not a continuing drought would affect developers. I think that there will be an impact on development he said. The drought itself is already causing billions of dollars in economic impact so we dont need to exacerbate that Cogdill cautioned. Restricting housing develop would hold back an industry that provides 200000 jobs statewide and generates close to 40 billion in economic activity he said. Cogdill pointed out that 40 percent of the states water is used for agricultural purposes while only 10 percent is designated for residential use. The remaining 50 percent is used for environmental purposes such as rivers and wetlands. It might be prudent he suggested to determine whether or not we need to make some adjustments there that could provide some relief for human consumption on the other end of it. I 27 The Aquarium of the Pacific in Long Beach recently added drought resistance plants at its entrance. This photograph at Lake Mead is a reminder of the water crisis impacting California. If every existing home in California were retrofitted with the most recent building and plumbing building standards over 300 billion gallons of water could be saved annually. Dave Cogdill CEO California Building Industry Association 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 27 I By GERD-ULF KRUEGER Chief Economist C alifornias ethnic and cultural diversity has always influenced its housing market lifestyle and its business investments. A great example of this is the increasing Asian American influence in demand for new housing in the Los Angeles Basin. Historically Southern California home builders have shown a proclivity towards building in the suburbs which used to be culturally conservative and broadly middle-class. However since at least the early 1980s things began to change. The Great Recession accelerated these trends. Old home building conventions were no longer working with the same emphatic certainty. Some builders felt that perhaps homebuyers would be willing to embrace smart growth concepts and make similar tradeoffs in order to live in smaller denser units to maintain closer proximity to job centers retail entertainment and walkable spaces within their communities. The Olson Company Olson is a home builder with a longstanding In-Town tradition and expertise. Early in the current housing cycle Olson discovered what other urban residential developers were hoping for their buyers were committed to staying close to the urban core even as they proceeded through marriage forming households having children and retirement. This trend was most pronounced in areas with highly rated schools safe communities and proximal recreational amenities. While these overarching needs were expected what was not expected was the revelation that along the path of smart growth and more by chance than by design the majority of its buyers were Asian American. After many years of hard work Asian Americans are now an integral part of the U.S. economy. Many have good jobs above-average incomes and some have become wealthy in the United States. In the process Asian Americans have become a prominent buyer group in the emerging urban infill and suburban housing markets of Southern California. The courtship of Asian American buyers by builders such as The Olson Company has resulted in a productive dialogue with a new middle class profile. Olson has actively engaged this community by accommodating new tastes needs and ancient Asian design principles such as Feng Shui. This article uses information on the overall ethnic composi- tion of 15 Olson communities. This database is unique in the homebuilding industry because of the detail in which it provides a wealth of demo- graphic income mortgage and geographical information. The findings are remarkable 62 of the total buyers in the examined Olson communities were Asian. To be specific this population was Pan-Asian composed of the following breakdown 32 of the buyers had Chinese surnames 16 Vietnamese 7 Indian 5 Korean 2 Japanese and 1 Filipino. The general characteristics of the observed information indicate that the Asian buyers of homes built by The Olson Company are Asian-American and not recent newly-wealthy homebuyers from Mainland China or other Pacific Rim Nations. Rather they are first-and second-generation Asian Americans. They typically work in STEM Science Technology Engineering and Math jobs in various mid-level business functions own businesses and often work in academia and medicine. Their main motivation to buy is ownership prox- imity to jobs and a desire for better schools and neighborhoods. There is a surprisingly large percentage of first-time homebuyers and very few investors. The vast majority of buyers used conventional financing with most buyers being from cities in the same submarkets in which they were buying their Olson homes. Many buyers also worked in cities located in the same submar- kets of the homes they purchased. This article has shown that Asian-American buyers have become a major demand source for the Southern California urban new home market. This represents a change from the traditional practice of suburban new housing developments which feature large homes and backyards in the outer fringes of Southern California. Instead a fresh dynamic is emerging in which a new style of home building based on smart growth principles and closeness to urban job cores has become accepted both by home builders and a major sophisticated consumer group. Furthermore good relationship building with local business and community leaders can help in the search process for residential projects and help gain approval for entitlements. It is important to recognize that this new dynamic is driven by Americans who are firmly rooted in both Asian and American experiences creating a very innovative framework for doing business together. This may be just the beginning of an urban renaissance which will bring about new styles and practices of conducting research new product design new marketing techniques and ways of relating to the customer. Gerd-Ulf Krueger is President and Chief Economist of a housing and economic consult- ing firm. He has served in economic advisory roles for the California Department of Finance and the California State Controllers office. This article is based on a re- search paper authored by Krueger and Olson Company President and CEO Scott Laurie that was published in the Cornell Real Estate Review of the Cornell University Baker Program in Real Estate Vol. 13 June 2015. I Home Builders Connecting With The Evolving Asian American Community 28 The courtship of Asian American buyers by builders such as The Olson Company has resulted in a productive dialogue with a new middle class profile. Olson has actively engaged this community by accommodating new tastes needs and ancient Asian design principles such as Feng Shui. Economist Gerd-Ulf Krueger claims Asian Americans have become a prominent buyer group in the emerging urban infill and suburban housing markets of Southern California. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 28 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 29 30 Acknowledgements Board Of Directors Stephen E. Olson FounderChairman The Olson Company Daryl J. Carter Chairman CEO Avanath Capital Management LLC Donald Clark President CEO Clark Trevithick James C. Hankla Principal JCH Fulcrum LLC Murray Hutchison Former Chairman Texas Eastern Product Pipeline Geoff Le Plastrier President Le Plastrier Development Consulting A.J. Richard Senior Director TIAA-CREF Andrew A. Talley Managing Partner Talley Company Financial Affiliations State of Michigan Retirement Funds City National Bank Moelis Company Oaktree Capital Management TIAA-CREF Wells Fargo Bank Zelman Associates Legal Counsel Clark Trevithick Cox Castle Nicholson Dzida Carey Steinman Gallagher Moore Haynes Boone OMelveny Meyers Payne Fears Auditors Ernst Young LLP Thank You Advertisers Ashbrook-Clevidence Inc. Insurance Brokers CV Consulting Inc. Clark Trevithick Attorneys Dzida Carey Steinman Attorneys Green Hall Attorneys at LawA Professional Corporation Newmeyer Dillion LLP Attorneys at Law Oaktree Capital Management L.P. Payne Fears Wells Fargo Mortgage William Hezmalhalch Architects Inc. Willis Client List Cities County of Alameda City of Alhambra City of Anaheim City of Benicia City of Brea City of Buellton City of Buena Park City of Burbank City of Camarillo City of Carlsbad City of Carson City of Cerritos City of Chula Vista City of Claremont City of Compton City of Concord Community of Corona del Mar City of Costa Mesa City of Covina City of Cypress City of East Palo Alto City of El Monte City of El Segundo City of Emeryville City of Fairfield City of Fountain Valley City of Fullerton City of Garden Grove City of Gardenia City of Glendale City of Glendora City of Hayward Community of Highland Park City of Huntington Beach City of Irwindale City of La Habra City of La Mesa City of La Mirada City of La Palma City of La Verne City of Lakewood City of Lomita City of Long Beach City of Los Alamitos County of Los Angeles City of Los Angeles City of Malibu City of Montebello City of Monterey Park City of National City City of Newport Beach City of Oakland City of Orange City of Oxnard City of Pacifica City of Paramount City of Pasadena City of Pittsburg City of Placentia Community of Playa Vista City of Pleasant Hill City of Pomona City of Port Hueneme City of Rancho Mirage City of Richmond City of Riverside City of San Diego City of San Dimas City of San Gabriel City of San Jose City of San Juan Capistrano Community of San Lorenzo City of San Marcos Community of San Pedro City of Santa Ana City of Santa Clarita City of Santa Fe Springs City of Simi Valley Community of Sylmar City of Temple City City of Torrance City of Tustin City of Upland Community of Valencia Community of Valinda Community of Van Nuys City of Ventura City of Vista City of Walnut Community of Walnut Park City of Watsonville City of West Covina Community of Westchester City of Westminster City of Whittier City of Yorba Linda School Districts Alhambra Unified School District Ventura Unified School District Fountain Valley School District Pacifica School District Centralia School District La Palma Santa Ana Unified School District Universities California State Polytechnic University Pomona Pepperdine University University of California Santa Barbara Water Districts Suburban Water Company Golden State Water District Rancho Dominguez Water District Transit Authorities Bay Area Rapid Transit System MetroLink Metropolitan Transportation Authority Alameda-Contra Costa Transit District About In Town Living In Town Living is produced by the Long Beach Business Journal. Copyright 2015 by South Coast Publishing Inc. a California Corporation. Editorial content is prepared by Business Journal staff writers and a contributing writer. The FallWinter edition focuses on The Olson Companys role in Californias new housing market following the elimination of redevelopment agencies. The Business Journal staff wishes to thankThe Olson Company based in Seal Beach California for its assistance in the preparation of the editorial content and the selection of photographs.Any reproduction in whole or in part is strictly prohibited unless written authorization has been granted by the President of South Coast Publishing. The Long Beach Business Journal is located at 2599 E. 28th St. Suite 212 Signal Hill CA 90755. Phone 562988-1222 e-mail Office hours M-F 830 a.m. to 530 p.m. The Olson Company Oakgrove Walk features 66 single-family homes within an existing Oak Grove in the heart of La Verne. 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 30 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 31 2015_OlsonCompanyInTownLiving_PortAnniversary 8815 118 PM Page 32