WEBAIC Newsletter

March 24, 2011

Protected Industrial Space - The Issue:
Please Attend:  Protected Industrial Space On The Table at City Council March 29th
      March 29th, 7:15, City Council Chambers - 2134 Martin Luther King Jr. Way (between Center & Allston)

Why the Future Availability of Affordable Space for Manufacturing, Warehouse, Wholesale Trade, Arts & Crafts, Recycling, Contracting, & Retailing Is At Stake and What This Means

At their February meeting, the City Council took a 5 to 4 sense vote to open up ALL Protected Industrial Wholesale Trade and Warehouse space (an unverified 2 million sq ft) to Research and Development (R&D).  WEBAIC has proposed opening up a smaller subset of this space (100,000 sq ft) so as not to create destructive displacement pressure on valuable industrial & arts enterprises and good jobs and more closely match projected R&D demand. 

On April 29th the City Council will discuss this issue, public comment will be taken, and Council may direct staff to write actual zoning language that would open a Council-directed amount of protected industrial space to R&D.  Whatever the amount, this directive will have far reaching consequences for the future viability of industry and arts, the sustainability of our economy and culture, and the economic equity and ethnic diversity of our community and region.  WEBAIC has been in discussions with City Council members on this issue over the last 2 months.  Your presence on the 29th provides the best chance of a positive resolution to this issue for our companies, studios, jobs, and for Berkeley.

The Core Question:  How do we equitably balance support for our sustainable industrial and arts economy and culture and the good jobs these sectors provide for the large portion of our population without a college education with providing adequate space for Research & Development activities, particularly start up companies coming out of Lawrence Berkeley Lab.
WEBAIC Position:
WEBAIC believes that as a city we are in the ideal position of being able to accomplish the positive goal of providing more (than adequate) space for R&D activity without setting in motion a destructive displacement of our robust industrial and artistic enterprises and the good, family wage blue and green collar jobs they provide. 

This can be done by

1.) providing six Master Use Permits (MUP) that will allow the industrially protected space on approximately 30 acres to be used for R&D and

2.) allowing an additional 100,000 sq ft of protected Wholesale Trade & Warehouse space (in the MM and MULI zones) to be opened up to R&D.  The MUP sites can provide at least 3 million sq ft for R&D in addition to the existing 3.5 million sq ft of unprotected space now available to be permitted for this use.  Additionally, another .5-1 million sq ft of protected space is allowed to be converted to R&D under present zoning.  These figures reveal that well over half of all West Berkeley built space will soon be available for R&D, an amount way beyond any party’s most optimistic projections for R&D demand.

Points In Brief:
 •  Enough Space for R&D:  The MUP sites plus 100,000 sq ft of protected Wholesale Trade and 

   Warehouse space outside the MUPs provide more than adequate space for all known projected R&D
   demand now and in the foreseeable future.

•  Opening up All Protected Wholesale and Warehouse space will result unnecessary and destructive displacement

   pressure on all manufacturing, warehousing, arts, crafts, recycling, contracting, and retail companies and their 
   good blue and green collar jobs occupying this protected space, threatening our local serving economy and culture.

•  R&D capitalization will result in displacement of industry & arts:  Real estate statistics and on the ground

   research reveal that R&D can pay significantly more for space than protected uses and will displace them.

•  Opening up All Protected Wholesale & Warehouse space violates the West Berkeley Plan & General Plan’s: 

   Goals & policies to maintain a diverse economy by installing the industrial protections to mitigate market forces.
   Goals and Policies intended to protect Wholesale Trade and Warehouse uses and jobs.
   Goals and Policies intended to maintain the ethnic and economic diversity of our city and region,

•  The West Berkeley Project did not study the opening up of All Protected Wholesale and Warehouse space

    for its environmental impacts and is therefore inadequate.

Points in Detail:

The Question of Now - How do we provide R&D space until the Master Use Permit properties develop?

•  25% of all industrially protected space in the MULI & MM zones  (.5 – 1 million square feet) is allowed to  
   be converted to R&D space under existing zoning.

•  Approximately 3.5 million square feet of unprotected space now exists in West Berkeley, a large

   percentage of which can be converted to R&D uses under existing zoning.

•  A large percentage of the City-identified “legacy” Master Use Permit sites are now unprotected, allowing

   them to be developed now for R&D now without having to go through the MUP process.

•  25% of all industrially protected property on the City-identified “legacy” Master Use Permit sites (i.e.

   50,000 sq ft on Peerless site) can be converted to R&D use under existing zoning.

•  Over 40 West Berkeley scientific companies are presently engaged in R&D and production activity,

    revealing that these companies are able to locate in West Berkeley now.

 Facts - Demand for R&D start-up space:

•  Providing space for start-up spin offs from LBL (particularly clean tech) has been given as the primary

   reason to open up now-protected industrial space throughout the West Berkeley Project. Throughout the
   process WEBAIC has agreed that this is an important goal.

•  It makes economic sense to closely match space provided for R&D in reasonable proportion to its  

   projected demand.  Otherwise the City risks the loss of important economic activity and good jobs.

•  Michael Cohen, Director of UC Berkeley Office of IP & Industry Research Alliances has made several

   presentations showing that on average 15 spin-offs come out of LBL each year.  He details the present
   “Squandering” scenario that shows existing efforts at attraction and retention, plus natural attrition, result in just
   two of these companies remaining in the East Bay Green Corridor (Richmond to Fremont) after five years.  He
   also details a “Leveraging” scenario showing that with cities doing everything right to attract and retain spin-
   offs, 27 of them would remain here after 5 years.  With these companies occupying 1500 to 3000 square feet
   and having 6-7 employees, this LBL study shows that the entire East Bay Green Corridor, not just Berkeley, 
   can expect less than 100,000 sq ft of space demand and under 200 jobs created from LBL spin-offs by 2016.

•   R&D is dependent upon the ups and downs of government and venture capital funding climates that

   historically have seen great swings.  The West Berkeley Plan’s emphasis on a diverse economy has  
   served the City well in buffering it from the wild economic swings that result from too great a dependence
   on any one particular sector. 

Facts - Availability of Space For R&D:
•  The City’s Environmental Impact report projects a total of 3.8 million sq ft of development over the next 
   20 years in West Berkeley.
•  WEBAIC has agreed with the City and developers that all industrially-protected property on six Master
   Use Permit sites on at least 30 acres be allowed to be used for R&D.  At the City-proposed Floor Area Ratio
   of 3 (FAR) this would allow 3.9 million square feet of development.  Allowing for parking requirements and
   setbacks, etc. three million sq ft of development for R&D on these sites is possible and reasonable. 
•  There now exists approximately 3.5 million sq ft of unprotected space in West Berkeley available to be  
    permitted for R&D while another .5 -1 million sq ft of protected space is allowed to be converted to R&D
    under present zoning.  This is well over half of all West Berkeley built space available for R&D.

Facts - Why Industry and Arts need protected industrial space:
•  Industry and arts can typically afford to pay a similar amount for space, approximately 60 cents to $1.00 per 
   sq ft, depending on space size.  Anomalies exist, but these are the averages.
•  Real estate figures and on the ground research show that R&D typically pays significantly more for space. 
   Cassidy Turley BT Commercial lists R&D as paying on average $2.30 per sq ft.
•  Real estate is based on the concept that the “highest and best use”, the use able to pay the most for space, will  
   ultimately occupy available space if market forces are unmitigated.  Economic history has shown this to be true.
•  Of the four R&D companies the City has sited as examples of R&D it would like to see in West Berkeley,
   three of the four are in West Berkeley. The fourth was here but appears to now be out of business. All four
   cite either successful private equity offerings of government and VC funding of between 1 and 10 million
   dollars.  Industry and arts do not regularly receive this type of capitalization.

Facts - Why Protected Wholesale Trade and Warehouse space is also critically important to 
          Manufacturing, Arts & Crafts, Recycling, Contracting, and Retail uses:    
•  All Protected Industrial space is intended as a pool of flexible space to provide habitat for Manufacturing,   
   Warehouse, Wholesale Trade, Arts & Crafts, Recycling, & Contracting uses to locate and expand into.  Many 
   industrial and arts companies are here only because protected Warehouse and Wholesale Trade space was
   available when they looked to locate or expand in West Berkeley.  Beyond industry and arts, numerous Berkeley
   retail companies also rely on their West Berkeley warehouses to operate economically and efficiently.

Facts – The West Berkeley Plan view of R&D and its relation to industrial and arts uses.  How allowing 
                R&D into protected space violates West Berkeley Plan and Berkeley General Plan Goals & Policies:
•  The West Berkeley Plan is clear on the need to specifically locate R&D outside of the Protected Uses category:  
  “While support for advanced
services (research laboratories) ...is also important, these sectors are generally 
  supported, rather
than threatened, by market developments. Thus, the policy structure for these sectors
  should be different.  The Plan clearly acknowledges that, unmitigated by the Protections, R&D’s more highly
  capitalized structure would result in the displacement of protected uses over time (Land Use – “Market forces
  ...strongly support the development of advanced services (e.g. research laboratories)”.   The Protected Uses
  category is also meant to protect jobs for those without advanced education while the Plan recognizes that
  “...research activities generally provide jobs
solely for the highly trained...” – Economic Goal 4.

Facts-  The West Berkeley Plan and Berkeley General Plan are unequivocal in their language and
              policies intended to maintain an ethnically and economically diverse population and economy:
•  Berkeley General Plan: 
   General Plan Economic Element Objectives:  7. Increase social and economic equity in land use decisions.
   Economic Development and Employment Element - Policy Background:  ...skyrocketing property values and   
   rents...threaten(ing) the economic, social, and cultural diversity that distinguishes Berkeley life
•  Goal #2:  To maintain Berkeley’s unique character and quality of life, Berkeley must strive to maintain the cultural,
   social, and economic diversity that is such an important aspect of the character of Berkeley. If Berkeley is to
   remain a diverse community with a wide range of races, incomes, cultures, and ideas, Berkeley must take steps
   to maintain… a range of jobs, and a variety of local goods and services.  One major threat to Berkeley’s character
   and to its diversity is gentrification.
•  West Berkeley Plan: The broadest Purposes of the Plan: Maintain the ethnic and economic diversity of
   West Berkeley's resident population.
II.  The Economic Rationale of the Plan -  A. The Rationale Overall:  The City's
 economic policy must seek to create

   and maintain jobs for its citizens, most importantly for its citizens who would have the most difficulty obtaining jobs.
   Goal 5:  Continue to create employment opportunities, especially for Berkeley and West
Berkeley residents. It is    
   particularly important to find these
opportunities for economically disadvantaged Berkeley and W. Berkeley residents.